What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-04-07 compared with 2024-05-24 · 2196 added, 217 removed, 201 unchanged (92% of the section changed)

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

You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and related notes included elsewhere in this Form 10-K, with KIN’s consolidated financial statements included in its annual report on Form 10K/A for the year ended December 31, 2022, as filed with the SEC on April 21, 2023, and the annual report of Legacy CXApp included as an exhibit in the Form 8-K, as filed with the SEC on March 20, 2023.

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 year ended, December 31, 2023, for the predecessor and successor

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, 2024, and the period March 15, 2023 to December 2023.

Overview of Our Business

The CXApp SaaS platform offers a suite of leading-edge technology workplace experience solutions including an enterprise employee application, indoor mapping, on-device positioning, augmented reality technologies and an AI-based analytics platform, targeting the emerging hybrid workplace market to provide enhanced experiences across people, places, and things.

CXApp creates a connected workplace by reducing app overload, data fragmentation, and complex workflows and streamlines all capabilities through The Workplace SuperApp.

All features, services, and integrations are housed in one easy-to-access platform allowing businesses to deliver a more holistic employee experience in a hybrid workplace.

Prior to the closing of the Business Combination, CXApp and subsidiaries were wholly owned subsidiary of Inpixon (“Inpixon”) and the Company’s financial statements consist of Design Reactor, Inpixon Canada, Inpixon Philippines and select assets, liabilities, revenues and expenses of Inpixon and Inpixon India (collectively the “Company,” “we,” “us” or “our”), show the historical combined carve-out financial position, results of operations, changes in net investment and cash flows of the Company and should be read in conjunction with the accompanying notes thereto.

Executive Overview

At CXApp, we are redefining the modern workplace through AI-powered solutions that enhance employee experience, operational efficiency, and workplace intelligence.

As a leader in this rapidly evolving market, our strategic vision is to drive innovation, scale our enterprise customer base, and achieve long-term financial sustainability through disciplined execution.

In fiscal year

2024, we focused on three key priorities:

Expanding AI-Driven Capabilities – Creating a Generative AI based analytics platform designed to revolutionize the workplace environment, allowing organization to analyze large datasets, generate actionable insights and make real time decisions.

Strengthening Market Position “Land and Expand”– Growing our footprint in the Fortune 1000 and expanding offerings to existing clients.

Enhancing Financial Discipline – Driving cost efficiency while investing in strategic growth initiatives.

As we look ahead, our leadership team remains committed to balancing innovation with financial discipline, ensuring CXApp is positioned for sustainable, profitable growth in the years to come.

Financial Performance Summary

Revenue Growth and Customer Expansion

Fiscal year 2024 recurring revenue

increased to 87% from 78%.

Our customer base continues to expand across key industries, including financial services, healthcare, and technology.

The transition to a recurring revenue model has strengthened revenue predictability and long-term growth prospects.

Operational Efficiencies and Cost Management

Total operating expenses decreased to $19,598 thousand compared to $58,204 during the year ended December 31, 2023, reflecting cost optimization initiatives that have improved margins.

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

Cash Flow and Liquidity Position

As of year-end, cash and cash equivalents was $4,880 thousand with access to an additional $3,500 thousand from a Securities Purchase Agreement the Company entered into on May 22, 2024, later bolstered by an additional $20,000 thousand secured on March 25, 2025, ensuring flexibility to support future growth.

Ongoing investments in AI innovation and product enhancements are aligned with our long-term financial strategy.

Strategic Growth Initiatives

Product Innovation:

Expanding our AI-native capabilities, enhancing analytics, and integrating with key enterprise platforms.

Market Expansion:

Targeting new verticals, strengthening partnerships with cloud providers, and scaling international operations.

Operational Excellence:

Optimizing cost structures, improving customer retention, and driving sales efficiency.

Competitive Positioning and Market Outlook

The global employee experience market is projected to grow at 20% CAGR, presenting strong tailwinds for CXApp’s expansion.

Our AI-driven platform differentiates us from traditional workplace management solutions, enabling scalable, data-driven decision-making.

Despite macroeconomic uncertainties, enterprise demand for hybrid workplace solutions remains strong, positioning CXApp for continued momentum.

As we move forward, our leadership team remains committed to executing on our strategic vision, leveraging AI to redefine employee experiences, and delivering long-term value for our stakeholders.

We believe CXApp’s AI-first approach, financial discipline, and customer-centric strategy position us well for sustained growth.

Business Description

Company Overview

(“CXAI”) is an AI-first employee experience platform that is redefining the employee experience market.

Our mission is to put the employee first by delivering an intuitive and intelligent solution that seamlessly integrates the physical and digital workplace.

With headquarters in the San Francisco Bay Area and satellite hubs in Toronto and Manila, we operate globally across more than 50 countries, serving Fortune 1000 companies in highly regulated industries such as financial services, healthcare, and technology.

Prior to the closing of the Business Combination on March 14, 2023, CXApp and subsidiaries were wholly owned subsidiary of Inpixon (“Inpixon”) and the Company’s financial statements consist of Design Reactor, Inpixon Canada, Inpixon Philippines and select assets, liabilities, revenues and expenses of Inpixon and Inpixon India (collectively the “Company,” “we,” “us” or “our”), show the historical combined carve-out financial position, results of operations, changes in net investment and cash flows of the Company and should be read in conjunction with the accompanying notes thereto.

The Company’s combined carve-out financial statements do not necessarily reflect what the results of operations, financial position, or cash flows would have been had the Company been a separate entity nor are they indicative of future results of the Company.

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Management believes the assumptions underlying our combined carve-out financial statements are reasonable.

Nevertheless, our combined carve-out financial statements may not include all of the actual expenses that would have been incurred had we operated as a standalone company during the periods presented and may not reflect our results of operations, financial position and cash flows had we operated as a standalone company during the periods presented.

Actual costs that would have been incurred if we had operated as a standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure.

We also may incur additional costs associated with being a standalone, publicly listed company that were not included in the expense allocations and, therefore, would result in additional costs that are not reflected in our historical results of operations, financial position and cash flows.

Market Opportunity

The employee experience market is experiencing rapid transformation driven by the shift to hybrid work environments and the demand for AI-driven solutions that optimize employee engagement and operational efficiency.

According to industry research from Gartner and Forrester, the global market for employee experience software is projected to grow significantly as organizations seek solutions that enhance employee productivity and satisfaction.

We believe CXAI is uniquely positioned to capitalize on this trend by providing an AI-native platform designed to address the evolving needs of the modern workplace.

Products and Services

Our flagship product, the CXAI Platform (pronounced “ Sky”) , provides a comprehensive suite of tools designed to empower employees and enable organizations to create smarter workplaces.

Key components of the platform include:

A multi-platform suite of applications (iOS, Android, and web) offering AI-driven, personalized workflows for employees, enhancing productivity and engagement.

CXAI BTS (Behind the Scenes):

The core AI engine that powers automation, content management, and security compliance for enterprise-wide deployments.

A generative AI analytics platform that provides actionable insights into workplace utilization, employee engagement, and productivity, allowing real-time decision-making.

CXAI’s solutions are available through leading cloud marketplaces, including AWS, Google Cloud, and Microsoft Azure, offering seamless procurement and deployment options for enterprise customers.

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.

Pass through beacons delivered to the customers.

Revenue Breakdown by Product Category

Professional services

Total revenue

With 87% 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—ensuring 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

The Business Combination

On September 25, 2022, an

Agreement and Plan of Merger (the “Merger Agreement”), was entered into by and among Inpixon, KINS Technology Group Inc.,

a Delaware corporation (“KINS”), CXApp Holding Corp., a Delaware corporation and newly formed wholly owned subsidiary of Inpixon

(“CXApp”), and KINS Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of KINS (“Merger Sub”),

pursuant to which KINS acquired Inpixon’s enterprise apps business (including its workplace experience technologies, indoor mapping,

events platform, augmented reality and related business solutions) (the “Enterprise Apps Business”) in exchange for the issuance

of shares of KINS capital stock valued at $69,928 thousand (the “Business Combination”).

The transaction closed at the end

of business on March 14, 2023.

Immediately prior to the Merger

at the end of business on March 14, 2023 and pursuant to a Separation and Distribution Agreement, dated as of September 25, 2022, among

KINS, Inpixon, CXApp and Design Reactor, (the “Separation Agreement”), and other ancillary conveyance documents, Inpixon,

among other things and on the terms and subject to the conditions of the Separation Agreement, transferred the Enterprise Apps Business,

including certain related subsidiaries of Inpixon, including Design Reactor, to CXApp (the “Reorganization”).

Following the

Reorganization, Inpixon distributed 100% of the common stock of CXApp, par value $0.0001, to certain holders of Inpixon securities as

of the record date (the “Spin-Off”).

Immediately following the Spin-Off, in accordance with and subject to the terms and conditions of the Merger Agreement, Merger Sub merged with and into CXApp (the “Merger”), with CXApp continuing as the surviving company and as a wholly-owned subsidiary of KINS.

The Merger Agreement, along

with the Separation and Distribution Agreement and the other transaction documents entered into in connection therewith, provided for,

among other things, the consummation of the following transactions:

(i) Inpixon transferred the Enterprise Apps Business (the “Separation”)

to its wholly-owned subsidiary, CXApp, and contributed approximately $4,000 thousand in additional cash so that CXApp would have a minimum

of $10,000 thousand in cash and cash equivalents as of the closing of the Business Combination before deduction of expenses (the “Cash

Contribution”), (ii) following the Separation, Inpixon distributed 100% of the shares of CXApp Common Stock to Inpixon securityholders

by way of the Distribution and (iii) following the completion of the foregoing transactions and subject to the satisfaction or waiver

of certain other conditions set forth in the Merger Agreement, the parties consummated the Merger.

The Separation, Distribution and Merger

were intended to qualify as “tax-free” transactions.

At the time the Business Combination was effected (the “Closing”), the outstanding shares of CXApp Common Stock after the Distribution and immediately prior to the effective time of the Merger were converted into an aggregate of 7,035,000 shares of KINS Common Stock which was issued to Inpixon securityholders, subject to adjustment.

Each holder’s aggregate merger consideration consisted of approximately 22% KINS Class A Common Stock and approximately 78% KINS Class C Common Stock.

Accounting Treatment for the Business Combination

The Business Combination was accounted for using the acquisition method (as a forward merger), with goodwill and other identifiable intangible assets recorded in accordance with GAAP, as applicable.

Under this method of accounting, CXApp is treated as the “acquired” company for financial reporting purposes.

KINS has been determined to be the accounting acquirer because KINS maintains control of the Board of Directors and management of the combined company.

2023 Warrant Transactions

In June 2023, 613,138

public warrants, with fair value of approximately $549 thousand, were surrendered for a cashless exercise in exchange for 49,608 shares

of Class A Common Stock.

The Company recorded this transaction in the third quarter of 2023.

On July 13, 2023, warrant

holders exercised 435 thousand public warrants at an exercise price of $11.50, for a total of $5,002 thousand of cash proceeds to the

On July 14, 2023, the Company entered into a Warrant Exchange

Agreement (the “Agreement”) with third party investor (the “Warrant Holder”) with respect to warrants to purchase

an aggregate of 2,000 thousand shares of its common stock, par value $0.0001 per share (the “Common Stock”) initially issued

by the Company in its initial public offering on December 15, 2020 (the “Public Warrants”).

Pursuant to the Agreement,

the Company issued an aggregate of 600 thousand shares of Common Stock to the Warrant Holder in exchange for the surrender and cancellation

of the Public Warrants held by such holder.

This resulted in an additional paid in capital of $4,914 thousand in a non-cash transaction

and resulted in a $3,900 thousand loss on the warrant conversion, which is included in change in fair value of derivative liability in

the statement of operations.

December 2023 Note Purchase Agreement and Promissory Note

On December 15, 2023, we entered into a note purchase agreement with Streeterville Capital, LLC (the “Holder”), pursuant to which we agreed to issue and sell to the Holder an unsecured promissory note (the “December 2023 Note”) in an aggregate initial principal amount of $3,885 thousand, which is payable on or before the date that is 12 months from the issuance date.

The initial principal amount includes an original issue discount of $870 thousand and $15 thousand that we agreed to pay to the Holder to cover the Holder’s legal fees, accounting costs, due diligence, monitoring and other transaction costs.

Net proceeds from the December 2023 Note is $3,000 thousand.

Interest on the December 2023 Note accrues at a rate of 10% per annum and is payable on the maturity date or otherwise in accordance with the December 2023 Note.

We may pay all or any portion of the amount owed earlier than it is due.

Beginning on the date that is 6 months from the issuance date and at the intervals indicated below until the December 2023 Note is paid in full, the Holder shall have the right to redeem up to an aggregate of 1/6th of the initial principal balance of the December 2023 Note plus any interest accrued thereunder each month by providing written notice delivered to us;

provided, however, that if the Holder does not exercise any monthly redemption amount in its corresponding month then such monthly redemption amount shall be available for the Holder to redeem in any further month in addition to such future month’s monthly redemption amount.

Upon receipt of any monthly redemption notice, we shall pay the applicable monthly redemption amount in cash to the Holder within five (5) business days of the Company’s receipt of such monthly redemption notice.

The December 2023 Note includes customary event of default provisions, subject to certain cure periods, and provides for a default interest rate of 22%.

Upon the occurrence of a Change in Control, and without further notice to Holder, all unpaid principal, plus all accrued interest, original issue discount, and other amounts due hereunder, shall become immediately due and payable.

As of May 15, 2024, the outstanding principal of the note is $4,050 thousand.

The unamortized original issue discount and unamortized financing cost amounts to $508 thousand and $9 thousand, respectively, as of May 15, 2024.

December 2023 Note Exchanges

During the period from July 15, 2024, to December 26, 2024, the Company exchanged $3,428 thousands of the outstanding balance of the Note for approximately 2,012,107 shares of the Company’s Class A Common Stock at exchange prices between $1.47 and $2.23 per share.

Pursuant to the Exchange Agreements, the Lender will surrender the Partitioned Note in exchange for the Exchange Shares, which will be issued free of any restrictive securities legend.

Other than the surrender of the Partitioned Note, no consideration of any kind shall be given by Lender to the Company in connection with this Agreement.

Upon surrendering, the Partitioned Notes shall be cancelled, and all obligations of Borrower under the Partitioned Notes shall be deemed fulfilled.

The Company analyzed the exchange of principal under the note as an extinguishment and compared the net carrying value of the debt being extinguished to the reacquisition price (shares of common stock being issued) and recorded an approximately $1,052 thousand loss on the exchange of debt for equity as a separate item in the other income (expense) section of the consolidated statements of operations for the year ended December 31, 2024.

As of January 17, 2025, the Company paid down the entire December 2023 Note.

Interest expense for the December 2023 Note recognized on the consolidated statements of operations and comprehensive loss were approximately $1,204 thousand and $53 thousand for the year ended December 31, 2024, and for period from March 15, 2023, to December 31, 2023, respectively.

Convertible Debt Conversion

On May 22, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”), pursuant to which Streeterville Capital, LLC wants to purchase up to $10,000 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 $2,625 thousand and Lender gave consideration of $2,480 thousand, reflecting original issue discount of $125 thousand and Lender’s transaction cost of $20 thousand.

During the year ended December 31, 2024, the Company has issued 1,683,104 shares of the Company’s Class A Common Stock pursuant to multiple purchase notices for an exchange amount of $2,100 thousand.

Key Factors Affecting CXApp’s Results of Operations

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Customer Base

Our customer base is currently operating within approximately 5 different industries, including approximately 28% in Technology, 14% in Financial Services, 30% in Consumer, 9% in Healthcare and 19% in Media & Entertainment.

Approximately 85% of our customers are headquartered in the United States;

with over 397 customer campuses built out across approximately 217 cities and over 59 countries throughout the world.

Our management uses key metrics such as total revenue growth, recurring and non-recurring revenue, existing customer expansion rates, number of customer campuses (which management believes is a more meaningful metric to measure performance than total number of customers), and churn rates to measure customer growth and market penetration.

The CXApp carve-out financials show that our revenue has decreased from approximately $8,470 thousand for the twelve-month period ending December 2022 (Predecessor) to approximately $1,620 thousand for the period January 1, 2023 to March 14, 2023 (Predecessor) and $5,746 thousand for the period from March 15, 2023 to December 31, 2023 (Successor) for a total of $7,366 thousand for the year ended December 31, 2023.

Approximately 78% of the Company’s revenue was recurring in 2023 and approximately 65% was recurring in 2022.

Approximately 17% of our customers have expanded to add additional revenue opportunities with new campuses, features, or integrations within twelve months of initial deployment and we have an average quarterly customer churn rate of less than 3% for the year ended December 31, 2023.

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.

Our top three customers accounted for approximately 22% and 27% of our gross revenue during each of the years ended December 31, 2023 and 2022, respectively.

One customer accounted for 12% of our gross revenue in 2023 and a separate customer accounted for 11% in 2022;

however, each of these customers may or may not continue to be a significant contributor to revenue in 2024.

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.

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;

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.

We believe that there is significant opportunity to expand our customer base by making investments in sales, marketing, and brand awareness.

Our ability to attract new customers will depend on several factors, including our success in recruiting, training, retaining, and scaling our sales and marketing organization, as well as our ability to capitalize on the competitive dynamics of our target markets.

Sales force expansion will be necessary to cover a wider array of markets that are currently underserved.

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, 2024, 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 2024, approximately 87% of our revenue was recurring, reflecting a significant increase from 78% in 2023.

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 24% of our gross revenue in 2024, compared to 22% in 2023.

Acquisitions and Investments

CXApp has not completed any mergers or acquisitions from March 14, 2023, to date;

however, we continually evaluate strategic opportunities that align with our growth objectives and enhance our AI-driven employee experience platform.

Our acquisition strategy focuses on expanding our product capabilities, entering new markets, acquiring top-tier talent, and achieving operational synergies.

We take a disciplined approach to potential acquisitions and investments, ensuring alignment with our strategic goals and financial performance.

Opportunities may be pursued through cash, stock, or a combination of both, depending on market conditions and strategic fit.

While organic growth remains our priority, strategic acquisitions and partnerships are expected to play a key role in accelerating our expansion and strengthening our market position.

There is no guarantee that we will pursue or complete any transactions, but we remain open to opportunities that we believe drive long-term value for our stakeholders.

Research and Development

During the year , the Company added resources dedicated for developing the Artificial Intelligence (AI) based Augmented Reality (AR) which will provide digital transformation in CXApp SaaS platform.

The management believes that this investment in research and development will maintain a competitive position and create opportunities for the Company.

Pandemic and World Environment

Our business has been impacted by the COVID-19 pandemic and general macroeconomic conditions and may continue to be impacted.

While we have been able to continue operations remotely, we have and continue to experience impact in the demand of certain products and delays in certain projects and customer orders either because of customer facilities being partially or fully closed during the pandemic or because of the uncertainty of the customer’s financial position and ability to invest in our technology.

If we are unable to successfully respond and manage the impact of the pandemic, and the resulting responses to it, our business, operations, financial condition and results of operations could be adversely impacted.

During the year , 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

Year Ended December 31, 2024, compared to the Year Ended December 31, 2023

For the purposes of the

analysis of the results presented herein, the Company is presenting the combined results of operations for the period March 15, 2023

to December 31, 2023 of the Successor Company with the period January 1, 2023 to March 14, 2023 of the Predecessor Company.

this presentation is not in accordance with accounting principles generally accepted in the United States, the Company believes

presenting and analyzing the combined results allows for a more meaningful comparison of results for the twelve-month period ended

December 31, 2023 to the year ended December 31, 2022.

The following selected data from our audited consolidated statements of

operations and other supplementary data should be referred to while reading the results of operations discussion that follows (dollars

in thousands) :

For the purposes of the analysis of the results presented herein, the Company is presenting the combined results of operations for the period March 15, 2023, to December 31, 2023, of the Successor Company with the period January 1, 2023 to March 14, 2023 of the Predecessor Company.

Although this presentation is not in accordance with generally accepted accounting principles in the United States, the Company believes presenting and analyzing the combined results allows for a more meaningful comparison of results for the year ended December 31, 2024, to the full twelve-month period ended December 31, 2023.

The following selected data from our audited consolidated statements of operations and other supplementary data should be referred to while reading the results of operations discussion that follows (in thousands) :

Non-GAAP Combined

March 15, 2023, to

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Loss from operations

Interest income

Income tax benefit (expense)

Interest income (expense)

Income tax benefit

Change in fair value of derivative liability

Loss on debt extinguishment

Other income (expense)

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Accordingly, calculations in this item, which may be rounded to the nearest hundred thousand, may not produce the same results.

The Company derives revenue from software as a service, design, deployment and implementation services for its enterprise apps business.

Non-GAAP combined revenue for the year ended December 31, 2023 were $7,366 thousand, compared to $8,470 thousand for the comparable period in the prior year for a decrease of approximately $1,104 thousand, or approximately 13%.

The decrease was due to a decline in Professional Services revenue.

Professional services are related to integration works and other services that may be requested by the customer, wherein 78% of our recognized revenue is subscription revenue, and as such the decline in revenue is attributable to the professional services revenue because the Company has moved to a full SaaS model versus one-time professional fees.

The Company derives revenue from software-as-a-service (SaaS), design, deployment, and implementation services for its enterprise apps business.

There is a pass through of $142 thousand for beacons that are deployed at our customer’s sites.

Revenue for the year ended December 31, 2024, was $7,142 thousand, compared to non-GAAP combined revenue of $7,366 thousand for the year ended December 31, 2023, reflecting a decrease of approximately $225 thousand, or 3%.

This decline was primarily driven by a reduction in Professional Services revenue, which includes integration work and other customer-requested services.

As 87% of our recognized revenue now comes from recurring subscription revenue, the decrease reflects the Company’s strategic shift towards a full SaaS model, reducing reliance on one-time professional fees to prioritize scalable, recurring revenue streams.

Cost of revenues includes the direct costs to deliver the services including labor, overhead, hardware and shipping and freight costs.

Non-GAAP combined cost of revenues for the year ended December 31, 2023 were $1,751 thousand compared to $2,064 thousand for the comparable period in the prior year.

Cost of revenue for the year ended December 31, 2024, is $1,285 thousand compared to $1,751 thousand non-GAAP combined cost of revenues for the comparable period in the prior year.

This decrease in cost of revenues of approximately $466 thousand, or approximately 27%, was attributable to the decrease in professional services revenue related costs.

Gross profit, calculated as revenues less costs of revenues, may vary between periods and is primarily affected by various factors including average selling prices, product costs, product mix, customer mix, and production volumes.

The gross profit margin for the year ended December 31, 2023 was 76% (Non-GAAP combined) compared to 76% for the year ended December 31, 2022.

The gross profit margin for the year ended December 31, 2024, was 82% compared to 76% for the year ended December 31, 2023 (Non-GAAP combined).

Operating Expenses

Operating expenses consist

primarily of research and development costs, sales and marketing costs, and general and administrative costs.

Non-GAAP combined operating

expenses for the year ended December 31, 2023 were $58,204 thousand and $35,431 thousand for the comparable period ended December 31,

This increase of $22,773 thousand is primarily attributable to increase in impairment of goodwill of $30,516 thousand and a decrease

of $7,743 thousand in other operating expenses as an effect of management reduction effort post-business combination.

Operating expenses consist primarily of research and development costs, sales and marketing costs, and general and administrative costs.

Operating expenses for the year ended December 31, 2024, were $19,598 thousand and non-GAAP combined $58,204 thousand for the comparable period ended December 31, 2023.

This decrease of $38,606 thousand is primarily attributable to impairment of goodwill of $36,056 thousand and a decrease of $2,550 thousand in other operating expenses as an effect of management reduction effort post-business combination.

Loss From Operations

Non-GAAP combined loss from

operations for the year ended December 31, 2023 was $52,589 thousand as compared to $29,025 thousand for the comparable period in the

This increase in loss of $23,564 thousand is primarily attributable to increased operating expenses as detailed above plus

the decreased gross profit of approximately $791 thousand.

Loss from operations for the year ended December 31, 2024, was $13,741 thousand compared to the non-GAAP combined loss from operations of $52,589 thousand for the year ended December 31, 2023.

This decrease in loss of $38,848 thousand is primarily attributable to impairment of goodwill, decreased operating expenses as detailed above plus the increased gross profit margin of approximately $242 thousand.

Other Income (Expense)

Other income (expense) consists primarily of change in fair value of derivative liabilities.

Change in fair value of derivative liabilities for the year ended December 31, 2023 is a loss of approximately $4,714 thousand.

Other income (expense) for the year ended December 31, 2024, was $6,302 thousand expense compared to $4,601 thousand expense for the year ended December 31, 2023.

The increase in other expense of $1,701 thousand is primarily attributable to change in fair value of derivative liabilities of approximately $1,562 thousand plus the increase in interest expense of $1,822 thousand, loss on debt extinguishment of $1,052 thousand and other expenses of $389 thousand.

Provision for Income Taxes

There was an income tax benefit of $3,572 thousand for the year ended December 31, 2023 (Non-GAAP combined) and an income tax loss of approximately $153 thousand for the year ended December 31, 2022.

The net income tax benefit for the year ended December 31, 2023 is primarily a result of the release of valuation allowance attributable to acquired intangible assets from the Business Combination on March 14, 2023.

Non-GAAP combined net loss

for the year ended December 31, 2023 was $53,618 thousand, compared to $29,175 thousand for the comparable period in the prior year.

increase in loss of approximately $24,443 thousand was primarily attributable to the increase in operating expenses of $22,773 thousand,

change in fair value of derivative liabilities of $4,714 thousand, and other income of $110 thousand, the lower gross margin of $791 thousand,

offset by a lower income tax benefit of approximately $3,725 thousand.

For the year ended December 31, 2024, the Company recorded an income tax benefit of approximately $637 thousand, compared to an income tax benefit of $3,572 thousand for the period March 15, 2023 to December 31, 2023 (on a Non-GAAP combined basis).

The income tax benefit for 2024 (Successor) primarily resulted from the partial release of the valuation allowance associated with deferred tax assets recognized on intangible assets acquired in the Business Combination completed on March 14, 2023.

Specifically, the benefit reflects the reversal of deferred tax liabilities attributable to those acquired intangible assets.

However, the Company has concluded that the negative evidence outweighs the positive evidence regarding the realization of its deferred tax assets.

As a result, it is more likely than not that the benefits of certain deferred tax assets will not be realized in the foreseeable future.

Accordingly, a valuation allowance has been recorded as of December 31, 2024.

Net loss for the year ended December 31, 2024, was $19,408 thousand compared to the $53,618 thousand non-GAAP combined net loss for the year ended December 31, 2023.

This decrease in loss of approximately $34,210 thousand was primarily attributable to the decrease in operating expenses of $38,606 thousand, change in fair value of derivative liability of $1,562 thousand and increase in interest expense of $1,822 thousand, loss on extinguishment of $1,052 thousand and other income of $389 thousand plus higher gross margin of $242 thousand offset by a lower income tax benefit of approximately $2,937 thousand.

Non-GAAP Financial information

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January 1, 2023, to

Interest and other income

Tax expense (benefit)

Interest expense (income) and other income

Income tax benefit

Depreciation and amortization

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Acquisition transaction/financing costs

Earnout compensation expense/(benefit)

Changes in fair value of warrant liabilities

Changes in fair value of derivative liabilities

Loss on debt extinguishment

Unrealized (gains) losses

Impairment of goodwill

Unrealized gains on notes, loans, investments

Gain/Loss on contract to issue common stock

Stock-based compensation compensation and related benefits

Severance costs

Adjusted EBITDA

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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 acquisition transaction and financing costs, earnout compensation expense, professional service fees, goodwill impairment, unrealized gains, stock-based compensation, severance costs, interest income and expense, and income tax benefit.

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 acquisition transaction and 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;

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As of December 31, 2024, the Company has a working capital deficit of approximately $4,496 thousand and cash of approximately $4,880 thousand.

For the period from March 15, 2023 to December 31, 2023 (Successor) the Company incurred net loss of approximately $49,238 thousand.

For the period March 15 to December 31, 2023 (Successor) the Company used approximately $12,766 thousand of cash for operating activities, of which $5,876 thousand was from a reduction in accrued liabilities, primarily paying merger related transaction liabilities.

The Predecessor Company used approximately $5,144 thousand and $18,895 thousand cash for operating activities for period January 1, 2023 to March 14, 2023 and year ended December 31, 2022, respectively.

The Management believes that

the current liquidity position, including the cash raised under the promissory note of $3,000 thousand dollars payable by December 2024, and the equity line financing agreement we entered into on May 22, 2024 for up to $10,000 thousand, with an initial draw of $2,500 thousand

in the second quarter of 2024,

has the ability to mitigate any going concern indicators for a period of at least one year from the date these financial statements are

For the period ended December 31, 2024 (Successor), the Company incurred net loss of approximately $19,408 thousand.

For the ended December 31, 2024 (Successor), the Company used approximately $7,325 thousand of cash for operating activities, of which $453 thousand was from a reduction in accounts payable, primarily from paying vendors and consultants.

For the period from March 15, 2023, to December 31, 2023 (Successor), the Company used approximately $12,766 thousand cash for operating activities.

The Predecessor Company used approximately $5,144 thousand cash for operating activities for period January 1, 2023, to March 14, 2023.

Management believes that the current liquidity position, including under 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, with $3,000 thousand still available to withdraw and with additional $20,000 thousand equity line of credit signed on March 25, 2025, has the ability to mitigate any going concern indicators for a period of at least one year from the date these financial statements are issued.

Liquidity and Capital Resources as of December 31, 2024, Compared with December 31, 2023

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Effect of foreign exchange rate changes on cash

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents

Working capital surplus (deficit)

Working capital deficit

Operating Activities for the years ended December 31, 2024, and 2023

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Net change in operating assets and liabilities

The non-cash expenses were approximately $40,813 thousand, $1,200 thousand, and $10,133 thousand for the period from March 15, 2023 to December 31, 2023 (Successor), period from January 1, 2023 to March 14, 2023 (Predecessor), and year ended December 31, 2022 (Predecessor), respectively:

Net cash used in operating activities

The non-cash expenses were approximately $11,802 thousand, $40,813 thousand, and $1,200 thousand for the year ended December 31, 2024 (Successor), period from March 15, 2023, to December 31, 2023 (Successor), and period from January 1, 2023, to March 14, 2023 (Predecessor), respectively:

Depreciation and amortization

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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) or loss on change in fair value of derivative liability

Loss on change in fair value of derivative liability

Deferred income taxes

Unrealized loss on note

Loss on debt extinguishment

Impairment of goodwill

Earnout payment expense

(Gain) loss on foreign currency transactions

(Gain) Loss on contract to issue common stock

Total non-cash expenses

The net cash used in the change

in operating assets and liabilities were approximately $4,341 thousand and $1,964 thousand for the period from March 15, 2023 to December

31, 2023 (Successor) and January 1, 2023 to March 14, 2023 (Predecessor), respectively.

The net cash provided by change in operating assets

and liabilities for the year ended December 31, 2022 (Predecessor) is approximately $147 thousand:

The net cash used in the change in operating assets and liabilities were approximately $281 thousand, $4,341 thousand and $1,964 thousand for the year ended December 31, 2024 (Successor), period from March 15, 2023, to December 31, 2023 (Successor) and January 1, 2023, to March 14, 2023 (Predecessor), respectively:

Changes in Operating Assets and Liabilities

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Deferred revenue

Net cash (used in) provided by the changes in operating assets and liabilities

Net cash used in the changes in operating assets and liabilities

Cash Flows from Investing Activities for the years ended December 31, 2024, and December 31, 2023

Net cash flows provided by investing activities during the period from March 15, 2023 to December 31, 2023 (Successor) was approximately $9,946 thousand compared to net cash flows used in investing activities for the period from January 1, 2023 to March 14, 2023 (Predecessor) and during the year ended December 31, 2022 (Predecessor) of approximately $54 thousand and $482 thousand, respectively.

Net cash flows used in investing activities during the year ended December 31, 2024 (Successor) was approximately $30 thousand compared to net cash flows provided by investing activities for the period March 15, 2023, to December 31, 2023 (Successor) and cash flows used in investing activities for the period from January 1, 2023, to March 14, 2023 (Predecessor) of approximately $9,946 thousand and $54 thousand, respectively.

Cash flows related to investing activities during the year ended December 31, 2024 (Successor) is attributable to the purchases of property and equipment.

Cash flows related to investing activities during the period from March 15, 2023, to December 31, 2023 (Successor) include $57 thousand for the purchase of property and equipment, and $10,003 thousand for cash acquired in connection with the Business Combination.

Cash flows related to investing activities during the period from January 1, 2023, to March 14, 2023 (Predecessor) include $9 thousand for the purchase of property and equipment, and $45 thousand for the investment in capitalized software.

Cash flows related to investing activities during the year ended December 31, 2022 (Predecessor) include $88 thousand for the purchase of property and equipment, and $394 thousand for investment in capitalized software.

Cash Flows from Financing Activities for the years ended December 31, 2024, and December 31, 2023

Net cash flows provided by

financing activities during period from March 15, 2023 to December 31, 2023 (Successor) was $7,620 thousand compared to net cash flows

provided by financing activities for the period from January 1, 2023 to March 14, 2023 (Predecessor) and during the year ended December

31, 2022 (Predecessor) of approximately $8,892 thousand and $20,728 thousand, respectively.

During the period from March 15, 2023 to December

31, 2023 (Successor), the Company paid $328 thousand in cash outflows from a repayment of a related party promissory note, received $3,000

thousand from the issuance of a promissory note, received $5,002 thousand of cash proceeds for exercise of 435 public

warrants and paid $54 thousand of issuance cost.

During the period from January 1, 2023 to March

14, 2023 (Predecessor), the Company received $9,089 thousand in incoming cash flows from parent, and paid $197 thousand in cash outflows

from a payment of an acquisition liability.

During the year ended December 31, 2022 (Predecessor), the Company received $25,967 thousand

in incoming cash flows from parent, and paid $104 thousand and $5,135 thousand in cash outflows from taxes paid related to share based

compensation and from a payment of an acquisition liability, respectively.

Net cash flows provided by financing activities during the year ended December 31, 2024 (Successor) was approximately $5,980 thousand compared to net cash flows provided by financing activities for the period from March 15, 2023, to December 31, 2023 (Successor) and for the period from January 1, 2023, to March 14, 2023 (Predecessor) of approximately $7,620 thousand and $8,892 thousand, respectively.

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.

During the period from March 15, 2023 to December 31, 2023 (Successor), the Company paid $328 thousand in cash outflows from a repayment of a related party promissory note, received $3,000 thousand from the issuance of a promissory note, received $5,002 thousand of cash proceeds for exercise of 435 public warrants and paid $54 thousand of issuance cost During the period from January 1, 2023 to March 14, 2023 (Predecessor), the Company received $9,089 thousand in incoming cash flows from parent, and paid $197 thousand in cash outflows from a payment of an acquisition liability.

Off-Balance Sheet Arrangements

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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 and acquisition liabilities that are included in our balance sheet.

Our contractual obligations consist of operating lease liabilities that are included in our balance sheet.

As of December 31, 2024, the total obligation for operating leases is approximately $473 thousand, of which approximately $376 thousand is expected to be paid in the next twelve months.

As of December 31, 2024, we owed approximately $603 thousand under a promissory note with the Lender.

See Note 9 of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

In addition, as of December 31, 2024, we have a liability for outstanding warrants, of $5,048 thousand.

Each warrant is immediately exercisable for one share of Common Stock and will expire on March 15, 2028, or earlier upon redemption or liquidation.

See Notes 2 and 10 of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

On May 22, 2024, the Company entered into the SPA which the Lender desires to purchase shares of the Company’s Common Stock, pursuant to which the Company issued unsecured convertible Pre-Paid Purchases #1, #2, and #3 to the Lender.

As of December 31, 2024, we owe a total of approximately $4,512 thousand under the Pre-Paid Purchases which accrues interest on the outstanding balance at 5% per annum.

See Note 12 of the Notes to Consolidated Financial Statements included elsewhere in this Annual Report.

Financing Obligations and Requirements

As of May 15, 2024, the Company

owed approximately $3,885 thousand in principal and accrued interest payable of $165 thousand payable within the next nine months.

interest rate is 10%.

See Note 10 of the Notes to Consolidated Financial Statements.

Net cash used in operating

activities during the period March 15, 2023 to December 31, 2023 (Successor) of $12,766 thousand consists of net loss of $49,238 thousand

offset by non-cash adjustments of approximately $40,813 thousand less net cash changes in operating assets and liabilities of approximately

$4,341 thousand.

Although the Company has sustained significant losses during the period March 15, 2023 to December 31, 2023 (Successor),

we raised net proceeds of approximately $5,002 thousand and $3,000 thousand from the warrant exchange transaction and from issuance of

promissory note, respectively.

We also entered into an equity line financing agreement on May 22, 2024 for up to $10,000 thousand, with

an initial draw of $2,500 thousand in the second quarter of 2024.

Given our current cash balances and budgeted cash flow requirements,

the Company believes such funds are sufficient to satisfy its working capital needs, capital asset purchases, debt repayments and other

liquidity requirements associated with its existing operations for the next 12 months from the issuance date of the financial statements.

The Company may continue to pursue strategic transactions and may raise additional capital as needed, using our equity securities and/or

cash and debt financings in combinations appropriate for each acquisition.

Net cash used in operating activities for the year ended December 31, 2024 (Successor) of $7,325 thousand consists of net loss of $19,408 thousand offset by non-cash adjustments of approximately $11,802 thousand less net cash changes in operating assets and liabilities of approximately $281 thousand.

Although the Company has sustained losses during the year ended December 31, 2024 (Successor), we raised net proceeds of approximately $6,480 thousand of the $10,000 thousand available from the SPA entered into by the Company on May 22, 2024.

Given our current cash balances, budgeted cash flow requirements, and financing capability of up to $20,000 thousand, the Company believes such funds are sufficient to satisfy its working capital needs, capital asset purchases, debt repayments and other liquidity requirements associated with its existing operations for the next 12 months from the issuance date of the financial statements.

The Company may continue to pursue strategic transactions and may raise additional capital as needed, using our equity securities and/or cash and debt financings in combinations appropriate for each acquisition.

Critical Accounting Policies and Estimates

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Revenue Recognition

The Company recognizes revenue when control is transferred of the promised products or services 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 and other professional services for work performed in conjunction with its cloud based software.

The Company recognizes revenue, in accordance with 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.

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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

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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 period ended March 15, 2023 to December 31, 2023 (Successor), for the period ended January 1, 2023 to March 14, 2023 (Predecessor) and for the year ended December 31, 2022 (Predecessor).

Based on our evaluation we did not record a charge for impairment related to long-lived assets for the year ended December 31, 2024 (Successor), for the period ended March 15, 2023, to December 31, 2023 (Successor), and for the period ended January 1, 2023 to March 14, 2023 (Predecessor).

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.

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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 period ended March 14, 2023 (Predecessor), for the period ended March 15, 2023 to December 31, 2023 (Successor), and the year ended December 31, 2022 (Predecessor), which would indicate a revision to the remaining amortization period related to any of our long-lived assets.

We have determined that there were no events or circumstances during the year ended December 31, 2024 (Successor), for the period from March 15, 2023, to December 31, 2023 (Successor), and for the period from January 1, 2023 to March 14, 2023 (Predecessor), 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.

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Due to the variables inherent in our estimates of fair value, differences in assumptions may have a material effect on the result of our impairment analysis.

Based on its assessments,

the Company has recorded impairment of goodwill of $36,056 thousand for the period from March 15, 2023 to December 31, 2023 (Successor)

and $5,540 thousand for the year 2022 (Predecessor).

Based on its assessments, the Company has recorded impairment of goodwill of $0 thousand and $36,056 thousand for the year ended December 31, 2024 (Successor) and for the period from March 15, 2023, to December 31, 2023 (Successor), respectively.

Deferred Income Taxes

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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 three months ended December 31, 2023 (Successor), based upon certain economic conditions and historical losses through December 31, 2023.

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, 2023 (Successor) and December 31, 2022 (Predecessor), and no liability for unrecognized tax benefits was required to be reported.

(ii) tax planning strategies and (iii) the adequacy of future income as of and for the year ended December 31, 2024 (Successor), based upon certain economic conditions and historical losses through December 31, 2024.

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, 2024 (Successor) and December 31, 2023 (Successor), 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 three months ended December 31, 2023 (Successor), the period from March 15, 2023 to December 31, 2023 (Successor), the period ended March 14, 2023 (Predecessor), the three months ended December 31, 2022 (Predecessor) or the year ended December 31, 2022 (Predecessor).

No interest or penalties were recorded during the year ended December 31, 2024 (Successor), for the period from March 15, 2023, to December 31, 2023 (Successor), and for the period from January 1, 2023 to March 14, 2023 (Predecessor).

Business Combinations

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Section 107 of the JOBS Act provides that our decision not to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Quantitative and Qualitative Disclosure About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

Consolidated Financial Statements and Supplementary Data.

This information appears following Item 15 of this Report and is included herein by reference.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2024.

Based on this evaluation, management concluded that our disclosure controls and procedures were not effective as of that date due to the material weaknesses in internal control over financial reporting described below.

Material Weaknesses Identified

During the year ended December 31, 2024, management identified the following material weaknesses:

Tax Accounting Controls :

The Company did not maintain effective controls to ensure the completeness and accuracy of income tax accruals, particularly related to state tax liabilities.

Expense Accrual Process :

A significant year-end adjustment for legal fees revealed deficiencies in our period-end accrual processes and related management review controls.

Value Election for Financial Instruments :

Managements lack of identification of the embedded derivatives requirement bifurcation

and measurement at fair value.

The Company did not appropriately assess or document the fair value option for a financial instrument, resulting in an adjustment to the

financial statements

a result of these material weaknesses, the Company concluded that previously issued interim financial statements for the quarters

ended June 30, 2024 and September 30, 2024 required restatement.

These issues reflect deficiencies in internal control over

financial reporting that impacted our disclosure controls and procedures.

The material weakness as of

December 31, 2023 related to the impairment of goodwill has been remediated.

Despite the identified weaknesses, management believes that the consolidated financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, our financial position, results of operations, and cash flows in accordance with U.S.

generally accepted accounting principles.

Remediation Plan

To address these material weaknesses, the Company has developed and implemented the following remediation initiatives:

Tax Provision Process :

Partnered with third-party tax advisors to assist with state and local income tax reporting and nexus evaluations.

Legal Expense Accrual Process :

Introduced real-time legal invoice tracking with automated accrual calculations.

Added multi-level review of significant legal expenses during period-end close.

Financial Instrument Accounting :

Appointed the CFO to oversee technical accounting for complex and judgmental transactions.

Engaged technical accounting support and engaged third-party valuation specialists for equity-linked instruments.

Cross-functional Improvements :

Enhanced month-end close workflows, including standardized documentation, checklists, and approval protocols.

Engaged external advisors semiannually to review valuation, tax, equity-linked instruments, and disclosures.

Management, under the oversight of the Audit Committee, is monitoring the effectiveness of these remediation efforts.

We expect to complete testing of the remediated controls during fiscal year 2025.

Management’s Report on Internal Control Over Financial Reporting

As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, management is responsible for establishing and maintaining adequate internal control over financial reporting.

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements in accordance with U.S.

Internal control over financial reporting includes those policies and procedures that:

Pertain to the maintenance of records that accurately and fairly reflect transactions and dispositions of company assets.

Provide reasonable assurance that transactions are recorded to permit preparation of financial statements in accordance with GAAP, and receipts and expenditures are made only in accordance with management and director authorizations;

Provide reasonable assurance regarding prevention or timely detection of unauthorized use or disposition of assets that could have a material effect on the financial statements.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024, using the criteria set forth in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on this assessment, management concluded that internal control over financial reporting was not effective as of December 31, 2024.

Changes in Internal Control Over Financial Reporting

As the material weaknesses described above were identified subsequent

to December 31, 2024, there were no changes in our internal control over financial reporting.

Limitations on Effectiveness of Controls

Our disclosure controls and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives.

Because of inherent limitations, internal controls may not prevent or detect all errors or fraud.

Moreover, the design of any control system must consider the risk that controls may become inadequate due to changing conditions or that compliance with policies and procedures may deteriorate over time.

Other Information.

Insider Trading Arrangements and Policies

During the year ended December 31, 2024, no director or officer of CXApp notified CXApp of the adoption, modification or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspection.

Not applicable.

Directors, Executive Officers and Corporate Governance.

Our officers and directors are as follows:

Khurram Sheikh

Chairman, Chief Executive Officer and Director

Chief Financial Officer

Di-Ann Eisnor

Camillo Martino

George Mathai

Khurram Sheikh has served as the Founder, Chairman and Chief Executive Officer of KINS since its inception and Chief Financial Officer from August 2020 until August 2024.

Sheikh has been at the forefront of innovation in the technology, mobile, semiconductor, telecom and media industries for the past 25 years with CEO and CTO roles at leading technology companies.

Since March 2020, Mr.

Sheikh has been the Founder, Executive Chairman & CEO of Aijaad, a boutique strategic advisory firm where he advises both large private equity firms as well as boards of public companies on the future of 5G, IoT, Edge Computing and AI technologies and is actively involved in M&A, technology strategy and market development.

From 2016 to early 2020, Mr.

Sheikh was the CEO of Kwikbit, a private company building a “network as a service” solution using gigabit radios, edge compute, virtualization, and artificial intelligence.

Prior to kwikbit, in 2014, Mr.

Sheikh was appointed as the Chief Strategy and Technology Officer for Silicon Image (SIMG) and the President/CEO of its millimeter wave/5G subsidiary SiBEAM.

SIMG was acquired by Lattice Semiconductor (Nasdaq:LSCC) in 2015 for $600 million after which Mr.

Sheikh was appointed the Chief Strategy and Technology Officer of the combined company responsible for corporate strategy, roadmap, M&A and technology development and was there until 2016.

From 2007 onwards, he was the CTO for Powerwave Technologies, a large wireless infrastructure vendor.

Powerwave filed for Chapter 11 bankruptcy protection in January 2013, and in April 2013 Mr.

Sheikh was appointed as the CEO of Powerwave to help with the sale of the company.

Later that year, Mr.

Sheikh successfully facilitated the sale of approximately 1,400 patents owned by Powerwave to private equity firm Gores Group.

From 2005 to 2007, Mr.

Sheikh was Vice President, Wireless Strategy and Development at Time Warner Cable leading the cable company’s entry into the wireless space.

From 1996 to 2005, Mr.

Sheikh held senior technology roles at Sprint including CTO Mobile Broadband responsible for deploying the world’s first 4G system and acquisition of multi-billion-dollar spectrum assets at 2.5GHz.

Sheikh holds a Bachelor of Science degree in Electrical Engineering with highest honors from the University of Engineering & Technology in Pakistan, as well as a Master of Science degree in Electrical Engineering from Stanford University.

Sheikh is well qualified to serve as Chairman of our board because of his extensive experience advising boards of directors of public and private companies and his extensive professional experience.

Joy Mbanugo is currently the Chief Financial Officer and joined CXAppp in August 2024.

Before joining CXApp, Ms.

Mbanugo was the Chief Financial Officer at ServiceRocket.

Mbanugo led the Finance, Accounting, Workforce Planning, and People teams while overseeing strategic finance, forecasting, budgeting, treasury management, tax, compensation planning, and more.

With over 20 years of experience in audit, tax, business operations, financial services, and financial planning/analysis across diverse industries and markets, Ms.

Mbanugo is a seasoned professional.

Before her role at ServiceRocket, Ms.

Mbanugo spent five years at Google, where she played a crucial role in evaluating Google Cloud Partnerships and Solutions, organizing Alphabet’s financial data in Controllership, and optimizing the management of over $100 billion in cash in Treasury and Tax.

Her extensive experience also includes a three-year stint at BlackRock, where she led the taxation of financial instruments, securities lending, information reporting, and withholding, among other responsibilities.

During her 12-year tenure at EY, she further honed her expertise, offering tax and audit services to clients in international tax, financial services, and capital markets.

Mbanugo holds a Juris Doctor from Cleveland State and a Master of Accountancy from Case Western Reserve University.

She also has a double bachelor’s degree in accounting and Black World Studies from Miami University of Ohio.

Di-Ann Eisnor has served as a member of our board of directors since August 2020.

Since November 2019, Ms.

Eisnor has served as Co-Founder and CEO of Core, a venture-backed construction labor marketplace.

Before that, from February 2019 until October 2019, she was an executive of The We Company, a part of the We Work Companies, where she was responsible for development of their city’s platform.

Prior to that, Ms.

Eisnor served as Director of Urban Systems at Google, from June 2018 until February 2019.

Previously, Ms.

Eisnor was with Waze, Inc., a crowd-sourced navigation and real-time traffic application owned by Alphabet, Inc., for 10 years, most recently serving as the VP Platform and Director of Growth.

Prior to joining Waze, Ms.

Eisnor was co-founder and Chief Executive Officer of Platial Inc., a collaborative, user-generated cartographic website.

Eisnor currently serves on the board of Saia Inc.

SAIA) and Gray Area Foundation for the Arts.

She is a venture partner at Obvious Ventures and is co-founder with Lupe Fiasco of Neighborhood Start Fund, a neighborhood-based micro-fund in underserved urban neighborhoods.

She holds a bachelor’s degree in Studio Art and Business Administration from New York University.

She is a 2014 Henry Crown Fellow of the Aspen Institute and a member of the Aspen Global Leadership Network.

Eisnor is well qualified to serve on our board because of her extensive experience advising boards of directors of public and private companies and her extensive professional experience.

Camillo Martino has served as a member of our Board of Directors since August 2020.

Martino was a senior global semiconductor company executive and now serves as a board member and executive advisor to many global technology companies.

Prior to his current board roles, Mr.

Martino was a chief executive officer and C-suite executive of a number of high technology companies worldwide.

He is currently Chair of the Board of Directors of Magnachip Semiconductor (NYSE:

MX) and has served on this Board since August 2016.

Since 2018, he has also served on the Board of Directors at Sensera (ASX:

Martino also serves on the Board of Directors at multiple privately held companies, including VVDN Technologies (fastest growing ODM based in India with a focus on Wireless, Networking & IoT) and Sakuu Corporation (multi-material, multi-process Additive Manufacturing platform).

Martino’s prior board service includes serving on the boards of Cypress Semiconductor from June 2017 through the sale of the company to Infineon in April 2020 and Moschip Technologies (BOM:

532407) from April 2017 to May 2019.

As an operating executive, Mr.

Martino served as Chief Executive Officer of Silicon Image, Inc.

(where he also served as a director) from 2010 until the completion of its sale to Lattice Semiconductor Corporation (Nasdaq:

LSCC) in March 2015, Chief Operating Officer of SAI Technology Inc.

from January 2008 to December 2009 (where he also served as director from 2006 to 2010), and Chief Executive Officer of Cornice Inc.

from 2005 to 2007 (where he also served as a director).

From August 2001 to July 2005, Mr.

Martino served as the executive vice president and chief operating officer at Zoran Corporation, a global SoC semiconductor company.

Prior to that, Mr.

Martino held multiple positions with National Semiconductor Corporation for a total of nearly 14 years.

Martino holds a Bachelor of Applied Science from the University of Melbourne and a Graduate Diploma (in Digital Communications) from Monash University in Australia.

Martino is well qualified to serve on our board because of his extensive experience advising boards of directors of public and private companies and his extensive professional experience.

George Mathai has enjoyed decades working, consulting, and investing in early stage and small businesses at the crossroads of distinct technologies, multiple industries and novel markets.

A technically trained business professional, his early experience in bridge design and infrastructure repair was at Edwards & Kelcey in New York, now Jacobs Engineering.

In January 1993, Mr.

Mathai transitioned to managing renovations projects and gaining strong communications and project execution skills, while driving revenue and profitability, at a small New York construction company.

As a founder, he later parlayed his prior management and technical expertise in leading the biosensor development program at GenoRx in June 2000, an early stage, venture-backed concern in Hayward, California.

His team accomplished a manufacturable process for detecting DNA electronically on a silicon biochip with the eventual sale of the technology to Bridger Technologies in April 2011.

Thereafter, Mr.

Mathai helped raise financing for an innovative antibiotic skin care start-up and worked to fundraise for an early-stage immune-mediated cancer therapeutic while at a boutique brokerage firm Objective Equity LLC.

Overlapping these endeavors, were local business interests in retail, as well as due diligence consulting for mergers and acquisitions.

The above broad and varied interests are also reflected in his educational history which includes bachelors and masters in civil engineering from University of California, Berkeley (May 1989) and City College of New York (June 1992), respectively, as well as, most recently upskilling at CalTech’s cybersecurity program (December 2020).

Mathai’s extensive experience in several diverse industries, markets and customer types will bring a unique and inestimable resource to the board.

Shanti Priya has been the CFO of Maxfield Enterprises, Inc., a luxury retail company based in Los Angeles and has been leading the organization’s finance and operations since February 2018.

Prior to that, Ms.

Priya worked for over 12 years in corporate finance at Gap Inc.

with her last role at the company as the Global Director of FP&A and Control overseeing the North American, European, and Asian markets.

Before transitioning into a career in finance, Ms.

Priya worked as a Producer managing content creation at a tech start-up, Knowledge Kids Network, an online educational media site.

She holds a Bachelor of Arts in Honors English Literature with a minor in Biology from Scripps College.

In addition, she holds a Master of Arts in Print Journalism and a Master of Business Administration both from the University of Southern California.

Priya also serves on the board and as treasurer of Secular Student Alliance, a non-profit organization that educates high school and college students regarding secularism and scientific reasoning.

She has previously served on the board of Sequoyah School, a non-profit private school serving the ages from K-8.

Priya is well qualified to serve on our board of directors because of her substantial financial and operations experience.

Family Relationships

There are no family relationships between any of our directors and executive officers.

Director Independence

Our board consists of five members.

Our directors, other than Mr.

Sheikh, are independent directors in accordance with the listing requirements of Nasdaq.

The Nasdaq independence definition includes a series of objective tests, including that the director is not, and has not been for at least three years, one of our employees and that neither the director nor any of his, her or their family members has engaged in various types of business dealings with us.

There are no family relationships among any of our directors or executive officers.

Classified Board of Directors

Our board is divided into three classes with staggered, three-year terms, in accordance with the terms of the Charter.

At each annual meeting of stockholders, the directors whose terms then expire will be eligible for reelection until the third annual meeting following reelection.

The directors are divided among the three classes as follows:

the Class I directors is Di-Ann Eisnor, and her term will expire at our 2027 annual meeting of stockholders;

the Class II directors are Camillo Martino and Shanti Priya, and their terms will expire at our 2025 annual meeting of stockholders;

the Class III directors are Khurram P.

Sheikh and George Mathai, and their terms will expire at our 2026 annual meeting of stockholders.

The Charter provides that the authorized number of directors may be changed only by resolution of our board.

Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.

The division of our board into three classes with staggered three-year terms may delay or prevent a change of our board or a change in control of us.

Our directors may be removed only for cause by the affirmative vote of the holders of at least two-thirds of our outstanding voting stock then entitled to vote in an election of directors.

Board Leadership Structure

Our board does not anticipate implementing a policy requiring the positions of the Chairman of the Board and Chief Executive Officer to be separate or held by the same individual.

Any further determination to create such a policy is expected to be based on circumstances existing from time to time, based on criteria that are in our best interests and the best interests of our stockholders, including the composition, skills and experience of our board and its members, specific challenges faced by us or the industry in which it operates, and governance efficiency.

We elected Mr.

Sheikh as Chairman of the Board because of Mr.

Sheikh’s strategic vision for the business, his in-depth knowledge of our operations, and his experience in capital markets make him well qualified to serve as both Chairman of the board and Chief Executive Officer.

Combining the roles of Chairman and Chief Executive Officer will help provide strong and consistent leadership for the management team and our board.

However, our board may decide in the future to separate the roles of Chairman and Chief Executive Officers if it determines that such structure provides better and more effective oversight and management.

If our board convenes for a meeting, it is expected that the non-management directors will meet in one or more executive sessions, if the circumstances warrant it.

Our board may also consider appointing a lead independent director if the circumstances warrant it.

Committees of the Board of Directors

Our board of directors has three standing committees:

an audit committee, a compensation committee and a nominating and corporate governance.

Role of Board in Risk Oversight Process

Our board has responsibility for the oversight of our risk management processes and, either as a whole or through its committees, will regularly discuss with management our major risk exposures, their potential impact on our business and the steps we take to manage them.

The risk oversight process will include receiving regular reports from board committees and members of senior management to enable our board to understand our risk identification, risk management and risk mitigation strategies with respect to areas of potential material risk, including operations, finance, legal, regulatory, strategic and reputational risk.

The audit committee reviews information regarding liquidity and operations and oversees our management of financial risks.

Periodically, the audit committee reviews our policies with respect to risk assessment, risk management, loss prevention and regulatory compliance.

Oversight by the audit committee includes direct communication with our external auditors, and discussions with management regarding significant risk exposures and the actions management has taken to limit, monitor or control such exposures.

The compensation committee is responsible for assessing whether any of our compensation policies or programs has the potential to encourage excessive risk taking.

The nominating and corporate governance committee manages risks associated with the independence of our board, corporate disclosure practices and potential conflicts of interest.

While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire board will be regularly informed through committee reports about such risks.

Matters of significant strategic risk will be considered by our board as a whole.

Audit Committee

The audit committee’s main function is to oversee our accounting and financial reporting processes and the audits of our financial statements.

This committee’s responsibilities are set forth in a charter that include, among other things:

assisting board oversight of (1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements, (3) our independent auditor’s qualifications and independence, and (4) the performance of our internal audit function and independent auditors;

the appointment, compensation, retention, replacement, and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by us;

pre-approving all audit and permitted non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures;

reviewing and discussing with the independent auditors all relationships the auditors have with us in order to evaluate their continued independence;

setting clear hiring policies for employees or former employees of the independent auditors;

setting clear policies for audit partner rotation in compliance with applicable laws and regulations;

obtaining and reviewing a report, at least annually, from the independent auditors describing (i) the independent auditor’s internal quality-control procedures and (ii) any material issues raised by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues;

meeting to review and discuss our annual audited financial statements and quarterly financial statements with management and the independent auditor;

reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction;

reviewing with management, the independent auditors, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.

The members of our audit committee are Shanti Priya, Camillo Martino and Di-Ann Eisnor.

Shanti Priya serves as the chair of the committee.

All members of our audit committee are independent directors and meet the requirements for financial literacy under the applicable rules and regulations of the SEC and Nasdaq.

Shanti Priya is an “audit committee financial expert” as defined by applicable SEC rules and has the requisite financial sophistication as defined under the applicable Nasdaq listing standards.

Compensation Committee

The compensation committee’s main function is to oversee our policies relating to compensation and benefits of our officers and employees.

This committee’s responsibilities are set forth in a charter that include, among other things:

reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation;

reviewing and approving on an annual basis the compensation of all of our other officers;

reviewing on an annual basis our executive compensation policies and plans;

implementing and administering our incentive compensation equity-based remuneration plans;

assisting management in complying with our proxy statement and annual report disclosure requirements;

approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees;

if required, producing a report on executive compensation to be included in our annual proxy statement;

reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors

The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and is directly responsible for the appointment, compensation and oversight of the work of any such adviser.

However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.

The members of our compensation committee are Camillo Martino, Di-Ann Eisnor, and George Mathai.

Di-Ann Eisnor serves as the chair of the committee.

Each of Camillo Martino, Di-Ann Eisnor, and George Mathai is independent under the applicable Nasdaq listing standards and is a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act.

Nominating and Corporate Governance Committee

The nominating and corporate governance committee is responsible for assisting our board in discharging the board of directors’ responsibilities regarding the identification of qualified candidates to become board members, the selection of nominees for election as directors at our annual meetings of stockholders (or special meetings of stockholders at which directors are to be elected), and the selection of candidates to fill any vacancies on our board and any committees thereof.

In addition, the nominating and corporate governance committee is responsible for overseeing our corporate governance policies, reporting and making recommendations to our board concerning governance matters and oversight of the evaluation of our board.

The charter also provides that the nominating and corporate governance committee may, in its sole discretion, retain or obtain the advice of, and terminate, any search firm to be used to identify director candidates, and will be directly responsible for approving the search firm’s fees and other retention terms.

The members of our nominating and corporate governance committee are Camillo Martino, Di-Ann Eisnor, and Shanti Priya.

Camillo Martino serves as the chair of the committee.

All members of our nominating and corporate governance committee are independent directors under the applicable Nasdaq listing standards.

Compensation Committee Interlocks and Insider Participation

No member of the compensation committee serves or served during the fiscal year ended December 31, 2024, as a member of our board or compensation committee of a company that has one or more executive officers serving as a member of the board of directors or compensation committee.

Board Composition

Our nominating and corporate governance committee is responsible for reviewing with our board, on an annual basis, the appropriate characteristics, skills and experience required for our board as a whole and its individual members.

In evaluating the suitability of individual candidates (both new candidates and current members) for election or appointment, the nominating and corporate governance committee and our board take into account many factors, including the following:

personal and professional integrity, ethics and values;

experience in corporate management, such as serving as an officer or former officer of a public company;

experience as a board member or executive officer of another public company;

strong finance experience;

wide range of expertise and experience in substantive matters pertaining to our business relative to other board members;

variety of background and perspectives, including, but not limited to, with respect to place of residence and specialized experience;

experience relevant to our business industry and with relevant social policy concerns;

relevant academic expertise or other proficiency in an area of our business operations.

Our board evaluates, each individual in the context of the board of directors as a whole, with the objective of assembling a group that can best maximize the success of the business and represent stockholder interests through the exercise of sound judgment using its wide range of experience in these various areas.

Insider Trading Policy

The Company has insider trading policies and procedures that govern the purchase, sale, and other dispositions of its securities by directors, officers, employees, and contractors, as well as by the Company itself.

We believe these policies and procedures are reasonably designed to promote compliance with insider trading laws, rules and regulations and applicable listing standards.

A copy of our Insider Trading Policy is filed as Exhibit 19.1 to this Annual Report.

Code of Ethics

We have adopted a written code of business conduct and ethics that applies to its directors, officers and employees, including its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.

Our code of business conduct and ethics is available under the Corporate Governance section of our website at www.cxapp.com.

In addition, we intend to post on its website all disclosures that are required by law or the listing standards of Nasdaq concerning any amendments to, or waivers from, any provision of the code.

The reference to our website address does not constitute incorporation by reference of the information contained at or available through its website, and you should not consider it to be a part of this Annual Report.

Executive Compensation.

This section discusses the material components of the executive compensation program for CXApp’s executive officers who are named in the “Summary Compensation Table” below.

As an emerging growth company, CXApp complies with the executive compensation disclosure rules applicable to “smaller reporting companies,” as such term is defined in the rules promulgated under the Securities Act, which for 2024 require compensation disclosure for CXApp’s executive officers.

The form and amount of the compensation to be paid to each of our directors and executive officers were determined by our board.

Each executive officers’ compensation were established by our compensation committee which is comprised solely of independent directors in accordance with Nasdaq listing standards.

The following tables disclose compensation received by our executive officers.

Summary Compensation Table

The following table provides certain information regarding the compensation earned by the named executive officers from their services to CXApp, as applicable, during the fiscal years ended December 31, 2024, and 2023.

Name and Principal Position

Chief Executive Officer

Chief Financial Officer

Narrative Disclosure to the Summary Compensation Table

Sheikh, our chief executive officer, received (i) a salary of $325,000 and a bonus of $255,938 as compensation during the fiscal year ended December 31, 2024, and (ii) a salary of $254,375 and a bonus of $97,500 as compensation for his services to CXApp during the period March 15, 2023 to December 31, 2023;

Joy Mbanugo, our Chief Financial Officer, received (i) a salary of $92,948 and a bonus of $8,485 as compensation for her services during the fiscal year ended December 31, 2024.

Outstanding Equity Awards at Fiscal Year-End

Other than as set forth below, there were no outstanding unexercised options, unvested stock, and/or equity incentive plan awards issued to our Named Executive Officers as of December 31, 2024.

Option Awards

unexercisable

Equity Incentive

Market value of

This option vests in two years with 50% of it vesting in the first year of anniversary.

This option vests in four years with 50% vesting in the second year of anniversary, and 25% in the third year of anniversary, and 25% on its fourth year of anniversary

This option vests in three years with 1/3 vesting in the first year of anniversary, then monthly for the following two years

Executive Compensation Arrangements

We have entered into an employment agreement with Khurram Sheikh who serves as our Chief Executive Officer for a term commencing on the consummation of the Business Combination and will continue until terminated by us or the employee or in accordance with the terms of the employment agreement.

Sheikh will be paid an annualized base salary of $325,000, as revised periodically by us, as well as an annual bonus with a target amount of $325,000 for each complete calendar year.

The employment agreement contains provisions regarding non-solicitation, confidentiality of information and arbitration of disputes.

Sheikh may terminate his employment by giving advance written notice to us.

We may also terminate the employment agreement for cause, as defined in the employment agreement, a copy of which is attached hereto as Exhibit 10.5 and is also incorporated herein by reference.

In connection with Mrs.

Mbanugo’s appointment as Chief Financial Officer, the Company entered into a letter agreement with Mrs.

Mbanugo (the “CFO Offer Letter”).

Pursuant to the CFO Offer Letter, Mrs.

Mbanugo will receive (i) an annual base salary of $250,000 and (ii) a total annual bonus of $100,000 to be paid in quarterly installments subject to achievement of certain performance goals.

Pursuant to the CFO Offer Letter, Mrs.

Mbanugo will also receive a one-time sign-on cash bonus of $25,000 and an option award to purchase 230,000 shares of the Company’s Class A common stock (the “Stock Options”).

The Stock Options (i) will be subject to the terms and conditions of the Company’s 2023 Equity Incentive Plan and a stock option agreement, (ii) are subject to the approval of the Company’s compensation committee, and (iii) will vest with one-third becoming vested on the first anniversary of the grant date, and the remaining two thirds vesting in equal monthly installments over the next 24 months.

2023 Equity Incentive Plan

At the special meeting held on March 10, 2023, the KINS stockholders considered and approved, among other things, the CXApp Inc.

2023 Equity Incentive Plan (the “Incentive Plan”).

The Incentive Plan was previously approved, subject to stockholder approval, by KINS’ board of directors.

The Incentive Plan became effective immediately upon the Closing.

Pursuant to the terms of the Incentive Plan, there are 2,110,500 shares of CXApp Class A common stock available for issuance under the Incentive Plan, which is equal to 15% of the aggregate number of shares of CXApp common stock issued and outstanding immediately after the Closing (giving effect to the redemptions).

This description is qualified in its entirety by reference to the text of the Incentive Plan, a copy of which is attached hereto as Exhibit 10.7 and also is incorporated herein by reference.

Director Compensation

The following table provides certain summary information concerning compensation awarded to, earned by or paid to our Directors in the year ended December 31, 2024, except Khurram Sheikh whose aggregate compensation information has been disclosed above.

Incentive plan

Camillo Martino

Di-Ann Eisnor

George Mathai

The fair value of director restricted stock unit granted are valued using the closing price of the Company’s common stock on the date of grant.

Directors are entitled to reimbursement of ordinary and reasonable expenses incurred in exercising their responsibilities and duties as a director.

On August 26, 2024, the Board decided to maintain the current compensation structure and approved a grant of $200,000 restricted stock units to each director.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth the beneficial ownership of our common stock as of March 31, 2025, by the following persons:

each person who is known to be the beneficial owner of more than 5% of shares of our common stock;

each of our current named executive officers and directors;

all our current executive officers and directors as a group.

Except as indicated in the footnotes to the following table, subject to applicable community property laws, each stockholder named in the table has sole voting and investment power.

Shares of common stock subject to options, warrants, or other rights currently exercisable or exercisable within 60 days of March 31, 2025, are deemed to be beneficially owned and outstanding for computing the share ownership and percentage of the stockholder holding the options, warrants or other rights, but are not deemed outstanding for computing the percentage of any other stockholder.

The information provided in the following table is based on our records, information filed with the SEC, and information furnished by our stockholders.

Name of and Address of Beneficial Owner

Amount held by

5% of More Stockholders

BlackRock, Inc.

Directors and Executive Officers

Camillo Martino

Di-Ann Eisnor

George Mathai

All directors and executive officers as a group (6 individuals)

Represents beneficial ownership of less than 1%

Based on 19,805,784 shares outstanding as of March 31, 2025.

Includes (i) sole voting power over 1,202,021 of Common Stock and (ii) sole dispositive power over 1,708,224 shares of Common Stock as reported in the Schedule 13G/A filed with the SEC on February 13, 2024.

The principal address of BlackRock, Inc.

is 55 East 52nd Street, New York, NY 10055.

Includes (i) sole voting power over 1,309,129 of Common Stock and (ii) sole dispositive power over 1,309,129 shares of Common Stock as reported in the Schedule 13G filed with the SEC on September 11, 2023.

The principal address of 3AM LLC is 555 Bryant St., #590, Palo Alto, CA, 94301.

Includes (i) sole voting power over 1,044,938 of Common Stock and (ii) sole dispositive power over 1,044,938 shares of Common Stock as reported in the Schedule 13G filed with the SEC on September 9, 2023.

The principal address of Inpixon is 2479 E.

Bayshore Road, Suite 195, Palo Alto, CA 94303.

Includes (i) sole voting power over 909,800 of Common Stock and (ii) sole dispositive power over 909,800 shares of Common Stock as reported in the Schedule 13G filed with the SEC on February 13, 2025.

The principal address of TD Securities (USA) LLC is 1 Vanderbilt Avenue, New York, New York 10017.

Certain Relationships and Related Transactions, and Director Independence.

Agreements with Inpixon

CXApp and Inpixon operate separately, each as a public company.

In connection with the Separation, Legacy CXApp has entered into various agreements to effect the Separation and provide a framework for CXApp’s relationship with Inpixon after the Separation, including the Separation and Distribution Agreement, an Employee Matters Agreement, a Tax Matters Agreement and a Transition Services Agreement.

These agreements provide for the allocation between Legacy CXApp and Inpixon of Inpixon’s assets, employees, liabilities and obligations (including its property and employee benefits and tax-related assets and liabilities) attributable to periods prior to, at and after Legacy CXApp’s separation from Inpixon and will govern certain relationships between CXApp and Inpixon after the Separation.

The following summaries of each of the agreements listed above are qualified in their entirety by reference to the full text of the applicable agreements which are filed as exhibits to this Annual Report.

Separation and Distribution Agreement

On September 25, 2022, in connection with the execution of the Merger Agreement, Inpixon, Legacy CXApp, Design Reactor and KINS entered into the Separation and Distribution Agreement which sets forth the principal actions to be taken in connection with the Separation.

The Separation and Distribution Agreement identifies assets to be transferred, liabilities to be assumed and contracts to be assigned to each of Inpixon and Legacy CXApp as part of the internal reorganization described therein and requires an Inpixon contribution to be made to Legacy CXApp.

The Separation and Distribution Agreement also sets forth other agreements that govern certain aspects of Legacy CXApp’s relationship with Inpixon following the Business Combination.

In connection with the Separation and Distribution Agreement and related ancillary agreements, Legacy CXApp issued additional shares of Legacy CXApp common stock to Inpixon.

Inpixon distributed on a pro rata basis all of the outstanding shares of Legacy CXApp common stock to the Inpixon securityholders as of March 6, 2023 by delivering to the distribution agent a book-entry authorization representing the shares of Legacy CXApp common stock being distributed for the account of Inpixon securityholders.

The distribution agent held such book-entry shares for the account of Legacy CXApp’s stockholders (as of immediately after consummation of the Distribution) pending the Merger.

On the date of the Distribution, Inpixon distributed on a pro rata basis all of the outstanding shares of Legacy CXApp common stock to the holders of Inpixon common stock and certain other holders of its securities as of March 6, 2023.

The Distribution was effected by Inpixon delivering to the distribution agent a book-entry authorization representing the shares of Legacy CXApp common stock being distributed in the Distribution for the account of Inpixon securityholders.

The distribution agent held such book-entry shares for the account of Legacy CXApp’s stockholders (as of immediately after consummation of the Distribution) pending the Merger.

The shares of Legacy CXApp common stock were not transferrable prior to the exchange of such shares for the shares of KINS common stock pursuant to the Merger.

Employee Matters Agreement

Prior to the Distribution, KINS, Inpixon, Legacy CXApp and Merger Sub entered into the Employee Matters Agreement, which set forth the terms and conditions of certain employee-related matters in connection with the transaction, including allocation of benefit plan assets and liabilities between Inpixon and Legacy CXApp, treatment of incentive equity awards in the Distribution and the Business Combination and related covenants and commitments of the parties.

Tax Matters Agreement

Prior to the Distribution, KINS, Legacy CXApp and Inpixon entered into the Tax Matters Agreement that governs each party’s respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and certain other matters regarding taxes.

In general, KINS and Legacy CXApp are liable for all U.S.

federal, state, local and foreign taxes (and any related interest, penalties or audit adjustments) that are (i) imposed with respect to tax returns that include both Legacy CXApp and Inpixon, to the extent such taxes are attributable to Legacy CXApp or the Enterprise Apps Business, or (ii) imposed with respect to tax returns that include Legacy CXApp but not Inpixon, in each case, for tax periods (or portions thereof) beginning after the Distribution.

Notwithstanding the foregoing, KINS and Legacy CXApp may be liable for certain taxes resulting from the restructuring transactions undertaken to effectuate the Distribution.

The Distribution, together with certain related transactions, is intended to qualify as a reorganization under Sections 355 and 368(a) (1)(D) of the Code.

If the Distribution does not so qualify, the difference between the fair market value and the tax basis of the Legacy CXApp shares distributed by Inpixon to the Inpixon stockholders will be taxable income to Inpixon.

Even if the contribution and distribution, taken together, otherwise qualify as a transaction described in Sections 355 and 368(a)(1) (D) of the Code, the Distribution is still taxable to Inpixon (but not to Inpixon stockholders) pursuant to Section 355(e) of the Code if one or more persons acquire a 50% or greater interest (measured by vote or value) in the stock of Inpixon or Legacy CXApp, directly or indirectly (including through acquisitions of our stock), as part of a plan or series of related transactions that includes the Distribution.

For purposes of this test, the Merger is treated as part of a plan that includes the Distribution, but the Merger standing alone did not cause the Distribution to be taxable to Inpixon under Section 355(e) of the Code because holders of Legacy CXApp common stock own more than 50% of our common stock.

Per the terms of the Sponsor Support Agreement, the Sponsor has agreed to exchange up to 1 million shares of KINS Class B common stock for such number of shares of KINS Class A common stock as shall be necessary to ensure that the number of shares of KINS common stock issued as aggregate merger consideration to the holders of Legacy CXApp common stock exceeds 50% by at least one share than the number of shares of KINS common stock owned by all other holders of KINS common stock.

Pursuant to the Sponsor Support Agreement, the Sponsor and related parties have agreed, subject to the limitation set forth therein, to forfeit 22,224 shares of KINS common stock (as of immediately prior to the consummation of the Merger).

The Tax Matters Agreement requires KINS and Legacy CXApp to comply with the representations made in the materials submitted to RSM US LLP in connection with a distribution tax opinion that Inpixon received regarding the intended tax treatment of the Distribution and certain related transactions.

The Tax Matters Agreement also includes covenants restricting Legacy CXApp’s and KINS’ ability to take or fail to take any action if such action or failure to act could reasonably be expected to adversely affect the intended tax treatment.

In particular, in the two years following the Distribution, such restrictive covenants will generally prevent KINS and Legacy CXApp from (i) entering into any transaction which could, when combined with other transactions (including the Merger), result in a 45% or greater change in ownership of KINS’ or Legacy CXApp’s equity as part of a plan or series of related transactions that includes the Distribution, (ii) ceasing the active conduct of certain of Legacy CXApp’s businesses, (iii) voluntarily dissolving or liquidating KINS or Legacy CXApp and (iv) causing, permitting, or agreeing to the sale, transfer, or disposal of assets of Legacy CXApp that, in the aggregate, constitute more than 30% of the consolidated gross assets of Legacy CXApp, in each case, unless Legacy CXApp obtains a private letter ruling from the IRS, an unqualified opinion of a nationally recognized tax advisor that such action will not cause a failure of the intended tax treatment, or Inpixon consents to the undertaking of such action.

Notwithstanding receipt of such ruling, opinion or consent, in the event that such action causes a failure of the intended tax treatment, KINS and Legacy CXApp could be responsible for all taxes arising therefrom.

Director Independence

For information on director independence, see Item 10.

Directors, Executive Officers and Corporate Governance .

Principal Accountant Fees and Services.

WithumSmith+Brown, PC

(“Withum”) acts as our independent registered public accounting firm.

Withum acted as the independent registered public

accounting firm for the year ended December 31, 2024 (Successor) and for the period from March 15, 2023 to December 31, 2023

Marcum LLP (“Marcum”) acted as the independent registered public accounting firm the period from

January 1, 2023 to March 14, 2023 (Predecessor).

For the year ended December 31, 2024 (Successor) and for the period from March 15, 2023 to December 31, 2023 (Successor), fees were approximately $319,000 and $235,000, respectively, for the services Withum performed in connection with the audits of our annual financial statements in our Annual Reports on Form 10-K and for reviews of the quarterly financial statements included in the Company’s Quarterly Reports on Form 10 Q.

For the period from January 1, 2023 to March 14, 2023 (Predecessor), fees were approximately $92,885 for the services Marcum performed in connection with the audit of our December 31, 2023 consolidated financial statements included in this Annual Report on Form 10-K.

Audit-Related Fees.

For the year ended December 31, 2024 (Successor), period from March 15, 2023 to December 31, 2023 (Successor), and period from January 1, 2023 to March 14, 2023 (Predecessor), our independent registered public accounting firms did not render assurance and related services related to the performance of the audit or review of consolidated financial statements.

For the year ended December 31, 2024 (Successor) period from March 15, 2023 to December 31, 2023 (Successor), and period from January 1, 2023 to March 14, 2023 (Predecessor), fees for our independent registered public accounting firm, Withum, were approximately $38,000, $9,000, and $3,000 respectively, for preparation of the Company’s federal and state tax returns.

All Other Fees.

For the year ended December 31, 2024 (Successor) and for the period from March 15, 2023 to December 31, 2023 (Successor), fees for the services performed by Withum related to our Form S-1 filing were approximately $25,000 and $0, respectively.

For the period from January 1, 2023 to March 14, 2023 (Predecessor), fees for the services performed by Marcum related to our Form S-1 filing was approximately $12,000.

Pre-Approval Policy

Consistent with SEC policies regarding auditor independence and the Audit Committee’s charter, the Audit Committee has responsibility for engaging, setting compensation for and reviewing the performance of the independent registered public accounting firm.

In exercising this responsibility, the Audit Committee pre-approves all audit and permitted non-audit services provided by any independent registered public accounting firm prior to each engagement.

Exhibits, Financial Statement Schedules

The following documents are filed as part of this Annual Report:

Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm - Predecessor

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Financial Statement Schedules:

We hereby file as part of this Annual Report the exhibits listed in the attached Exhibit Index.

Exhibits which are incorporated herein by reference can be inspected and copied at the public reference facilities maintained by the SEC, 100 F Street, N.E., Room 1580, Washington, D.C.

Copies of such material can also be obtained from the Public Reference Section of the SEC, 100 F Street, N.E., Washington, D.C.

20549, at prescribed rates or on the SEC website at www.sec.gov.

AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm - Predecessor

Consolidated Financial Statements:

Consolidated Balance Sheets

Consolidated Statements of Operations and Comprehensive Income (Loss)

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

and Subsidiaries:

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheets of CXApp Inc.

and Subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated

statements of operations and comprehensive income (loss), consolidated statements of stockholders’ equity, and consolidated statements

of cash flows for the year ended December 31, 2024 and the period from March 15, 2023 to December 31, 2023, and the related notes

(collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements

present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its

operations and its cash flows for the year ended December 31, 2024 and the period from March 15, 2023 to December 31, 2023 in conformity

with accounting principles generally accepted in the United States of America.

We have also audited the adjustments to the consolidated

financial statements for the period from January 1, 2023 to March 14, 2023, to retrospectively adjust the disclosures and apply the

change in accounting for the adoption of ASU 2023-07 in 2024, as discussed in Notes 2 and 16 to the consolidated financial statements.

In our opinion, such retrospective adjustments are appropriate and have been properly applied.

However, we were not engaged to audit,

review, or apply any procedures to the consolidated financial statements of the Company for the period from January 1, 2023 to March 14,

2023, other than with respect to these retrospective adjustments and, accordingly, we do not express an opinion or any other form of assurance

on the consolidated financial statements for the period from January 1, 2023 to March 14, 2023, taken as a whole.

Emphasis of a Matter ― Restatement of

Unaudited Interim Financial Statements

As discussed in Note 21 to the consolidated financial

statements, the unaudited interim financial statements as of and for the three and six months ended June 30, 2024 and the three and nine

months ended September 30, 2024 have been restated to correct certain misstatements.

Basis for Opinion

These consolidated financial statements are the

responsibility of the Company’s management.

Our responsibility is to express an opinion on these financial statements based on our

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")

and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated

financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we

engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s

internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess

the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures

that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the

consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by

management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide

a reasonable basis for our opinion.

/s/ WithumSmith+Brown, PC

We have served as the Company’s auditors

Philadelphia, PA

April 7, 2025

PCAOB ID Number 100

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

FIRM - PREDECESSOR

To the Shareholders and Board of Directors of

CXApp Holdings Corp.

(f/k/a Design Reactor Inc.

and Subsidiaries)

Opinion on the Financial Statements

We have audited, before the effects of the retrospective adjustment for the adoption of ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”) discussed in Note 2 and Note 16 to the consolidated financial statements, the accompanying combined carve-out balance sheet of CXApp Holdings Corp.

(f/k/a Design Reactor Inc.

and Subsidiaries) (Predecessor) (the “Company”) as of March 14, 2023, the related combined carve-out statements of operations and comprehensive loss, and the combined carve-out statement of changes in parents’ net investment and cash flows for the period January 1, 2023 to March 14, 2023, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the carve-out financial statements as of March 14, 2023 and for the period January 1, 2023 to March 14, 2023, before the effects of the retrospective adjustment for the adoption of ASU 2023-07 discussed in Note 2 and Note 16 to the financial statements, present fairly, in all material respects, the financial position of the Company as of March 14, 2023, and the results of its operations and its cash flows for the period ended March 14, 2023, in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to audit, review, or apply any procedures to the retrospective adjustment for the adoption of ASU 2023-07 discussed in Note 2 and Note 16 to the consolidated financial statements, and accordingly, we do not express an opinion or any other form of assurance about whether such retrospective adjustments are appropriate and have been properly applied.

Those retrospective adjustments were audited by other auditors.

Explanatory Paragraph – Going Concern

The accompanying combined carve-out financial statements have been prepared assuming that the Company will continue as a going concern.

As more fully described in Note 2, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 2.

The combined carve-out financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s combined carve-out financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined carve-out financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Marcum llp

We have served as the Company’s auditor from 2012 through August 29, 2024.

PCAOB ID Number 688

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

Current Assets

Cash and cash equivalents

Accounts receivable, net of allowance for credit losses of $ 0 and $ 2 , respectively

Unbilled and other receivables

Prepaid expenses and other current assets

Total current assets

Property and equipment, net

Intangible assets, net

Operating lease right-of-use asset, net

Liabilities and Stockholders’ Equity

Current Liabilities

Accounts payable

Accrued liabilities

Deferred revenue

Warrant liability

Operating lease obligation, current

Promissory note, net

Total current liabilities

Operating lease obligation, noncurrent

Convertible debt

Deferred tax liability

Total Liabilities

Stockholders’ Equity

Class A Common Stock, $ 0.0001 par value;

200,000,000 shares authorized;

19,221,090 shares issued and outstanding as of December 31, 2024 and 15,254,389 shares issued and outstanding as of December 31, 2023

Class C Common Stock, $ 0.0001 par value;

10,000,000 shares authorized, no shares issued or outstanding as of December 31, 2024 and December 31, 2023

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive income (loss)

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

The accompanying notes are an integral part of these consolidated financial statements.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except share and per share data)

Cost of Revenues

Operating Expenses

Research and development

Sales and marketing

General and administrative

Acquisition related costs

Amortization of intangible assets

Impairment of goodwill

Total Operating Expenses

Loss from Operations

Other Income (Expense)

Interest income (expense), net

Change in fair value of derivative liability

Loss on debt extinguishment

Other income (expense)

Total Other Income (Expense)

Net Loss, before tax

Income tax benefit

Unrealized foreign exchange gain/(loss) from cumulative translation adjustments

Comprehensive Loss

Basic and diluted weighted average shares outstanding, Class A common stock

Basic and dilutive net loss per share, Class A common stock

Basic and diluted weighted average shares outstanding, Class C common stock

Basic and dilutive net loss per share, Class C common stock

The accompanying notes are an integral part of these consolidated financial statements.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

comprehensive

income (loss)

Shareholders’

Balance at January 1, 2023

Stock-based compensation allocated from parent

Net investment from parent

Cumulative translation adjustment

Balance at March 14, 2023

Other Comprehensive

Stockholders’

Income (Loss)

Balance at March 15, 2023

Shares issued in connection with Business Combination

Stock-based compensation

Warrant exchange and exercise

Warrant exercise - cashless

Mandatory conversion from Class C common stock to Class A common stock

Common stock issuance – non-cash compensation

Stock issuance cost

Cumulative translation adjustment

Balance at December 31, 2023

Stock-based compensation

Net exercise of options

Common shares issued for extinguishment of debt

Common shares issued for vested restricted stock units

Taxes withheld on stock-based compensation

Common shares issued as commitment shares

Cumulative translation adjustment

Balance at December 31, 2024

The accompanying notes are an integral part of these consolidated financial statements.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

March 15, 2023 to

January 1, 2023 to

Operating activities

Adjustments to reconcile net loss to net cash used in operating activities

Depreciation and amortization

Amortization of intangible assets

Amortization of right-of-use asset

Amortization of debt discount and deferred financing cost

Accrued interest expense

Accrued monitoring fee

Deferred income taxes

Provision for credit loss expense

Stock-based compensation expense

(Gain) loss on foreign currency transactions

Loss on change in fair value of derivative liability

Loss on debt extinguishment

Gain on contract to issue common stock

Impairment of goodwill

Change in operating assets and liabilities:

Accounts receivable and other receivables

Prepaid expenses and other current assets

Accounts payable

Accrued liabilities

Operating lease liabilities

Deferred revenue

Net cash used in operating activities

Investing activities

Purchases of property and equipment

Investment in capitalized software

Cash acquired in connection with Business Combination

Net cash provided by (used in) investing activities

Financing activities

Proceeds from issuance of pre-paid purchase, net of issuance cost

Net equity investment from parent

Repayment of CXApp acquisition liability

Net proceeds from issuance of promissory note

Repayment of related party promissory note

Warrant exercise – net

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Net increase in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Supplemental disclosures of cash flow information

Cash paid for taxes

Cash paid for interest

Supplemental schedule of noncash investing and financing activities

Right of use asset obtained in exchange for lease liability

Noncash investment from parent

Class A Common Stock and Class C Common Stock issued in connection with Business Combination

Financing of Director and Officer Insurance

Common shares issued for debt extinguishment

Common shares issued as commitment shares

Warrant exercise – cashless

Warrant exchange to Class A common stock

The accompanying notes are an integral part of these consolidated financial statements.

NOTE 1 – Organization, Nature of Business and Basis of Presentation

and its subsidiaries (“CXApp” or the “Company”) is in the business of delivering intelligent enterprise employee experiences.

The CXApp SaaS platform is anchored on the intersection of customer experience (CX) and artificial intelligence (AI) providing digital transformation for the physical workplace for enhanced experiences across people, places and things.

The CXApp SaaS platform offers a suite of leading-edge technology employee experience solutions including an enterprise employee application, indoor mapping, on-device positioning, augmented reality technologies, generative AI applications and an AI-based analytics platform, targeting the emerging hybrid workplace market.

CXApp creates a connected workplace by reducing app overload, data fragmentation, and complex workflows and streamlines all capabilities through our platform.

All features, services and integrations are housed in one easy-to-access platform allowing businesses to deliver a more holistic employee experience in a hybrid workplace.

On September 25, 2022, an Agreement and Plan of Merger (the “Merger Agreement”) was entered into by and among Inpixon, KINS, CXApp, and KINS Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of KINS (“Merger Sub”), pursuant to which KINS acquired Inpixon’s enterprise apps business (including its employee experience technologies, indoor mapping, events platform, augmented reality and related business solutions) (“Legacy CXApp”) in exchange for the issuance of shares of KINS capital stock (the “Business Combination”).

As a result of the Business Combination, KINS changed their name to CXApp Inc.

The shares are now trading on the Nasdaq using the ticker CXAI.

The transaction closed on March 14, 2023.

See Note 3 for more details.

Unless the context otherwise requires, “we,” “us,” “our,” “CXApp” and the “Company” refer to CXApp Inc., a Delaware corporation, and its consolidated subsidiaries following the Business Combination (as defined below).

Unless the context otherwise requires, references to “KINS” refer to KINS Technology Group Inc., a Delaware corporation (“KINS”), prior to the Business Combination.

All references herein to the “Board” refer to the board of directors of the Company.

“Legacy CXApp” refers to CXApp Holding Corp., a Delaware corporation and a wholly owned subsidiary of the Company, which the Company acquired through the Business Combination.

Prior to the Separation (as defined below), Legacy CXApp was a wholly owned subsidiary of Inpixon, a Nevada corporation (“Inpixon”).

The Business Combination was accounted for using the acquisition method (as a forward merger), with goodwill and other identifiable intangible assets recorded in accordance with GAAP, as applicable.

Under this method of accounting, the “Enterprise Apps Business” (formerly known as CXApp) is treated as the “acquired” company for financial reporting purposes.

KINS (now known as CXApp Inc.) has been determined to be the accounting acquirer because KINS maintains control of the Board of Directors and management of the combined company.

Restatement of Unaudited Consolidated Financial Information (Unaudited)

During the preparation of its consolidated financial statements for the year ended December 31, 2024, the Company identified an error in its previously issued unaudited consolidated financial statements for the quarter ended September 30, 2024.

The error related to an under accrual of legal expenses.

the third quarter of 2024, the Company recorded an accrual for legal expenses based on estimates available at the time.

fourth quarter of 2024, upon receipt of the final invoice from legal counsel for services rendered throughout the year, management

identified that the previously recorded accrual was understated and subsequently made an adjustment to reflect the actual amount

As a result, the Company determined that the September 30, 2024 accrual was understated.

After further review of related

legal expenses and invoices, the Company recorded an adjustment to reflect and restate the correct accrual for legal fees incurred

in the third of 2024.

Furthermore, during the fourth quarter of 2024, the Company identified an error in the application of U.S.

GAAP in the calculation of its convertible debt liability.

Specifically, the Company did not account for the embedded derivatives requiring bifurcation from the debt host liability to be accounted for at fair value under ASC 815.

The Company has revised its accounting treatment at inception of the convertible debt liability to account for the instrument in its entirety under the fair value option election allowed under ASC 825.

In addition, the Company did not correctly account for the commitment shares required to be issued to the lender under the Stock Purchase Agreement.

The Company should have established a liability at inception of the Stock Purchase Agreement and relieved such liability in October 2024 when the shares were issued to the lender.

Accordingly, the Company has restated its previously issued unaudited consolidated financial statements as of and for the periods ended June 30, 2024 and September 30, 2024.

The Company has also restated impacted amounts within the notes to the consolidated financial statements, as applicable.

The restated unaudited consolidated financial information is disclosed in Note 21, Quarterly Financial Information (Unaudited).

Amounts included in the previously issued consolidated financial statements for the period March 15, 2023 to December 31, 2023 (Successor) and for period January 1, 2023 to March 14, 2023 (Predecessor) and were not impacted.

NOTE 2 – Summary of Significant Accounting Policies

As of December 31, 2024, the Company had a working capital deficiency of approximately $ 4,496 thousand and cash and cash equivalents of approximately $ 4,880 thousand.

For the year ended December 31, 2024, the Company incurred net losses of approximately $ 19,408 thousand.

During the year ended December 31, 2024, the Company used approximately $ 7,325 thousand of cash for operating activities.

During 2024, the Company secured additional funding through convertible Pre-Paid Purchases under the equity line agreement, receiving net proceeds of $2.48 million, $1.0 million, and $3.0 million in June, September, and December, respectively.

These financing efforts reflect the Company’s proactive approach to maintaining adequate liquidity to support operational needs and strategic growth initiatives.

The Company’s quarterly cash operating expenses are approximately $3.5 million, resulting in a cash run rate of approximately three quarters based on current liquidity and the additional financing secured.

Management believes that the recent funding initiatives provide sufficient capital to address near-term operational requirements and mitigate uncertainties about the Company’s ability to continue as a going concern.

On March 26, 2025, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Avondale Capital, LLC (“Avondale”), pursuant to which the Company may (i) issue and sell one or more pre-paid purchase agreements, in the form substantially similar to the exhibit attached thereto (each, a “Pre-Paid Purchase”), up to an aggregate purchase amount of $20,000,000.00 (the “Commitment Amount”) for shares of our common stock, par value $0.0001 per share (the “Common Stock”), on the terms and subject to the limitations and conditions set forth in each Pre-Paid Purchase, (ii) issue and sell the initial Pre-Paid Purchase in the principal amount of $4,200,000.00 (the “Initial Pre-Paid Purchase”), and (iii) deliver 80,000 shares of Common Stock (the “Commitment Shares”) to Avondale at closing.

Under the Purchase Agreement, each Pre-Paid Purchase consists of a principal balance upon which Avondale, at its option, may require the Company to issue shares of Common Stock (“Purchase Shares”), from time to time, in satisfaction of all or part of the outstanding balance of such Pre-Paid Purchase.

The Company will deliver these Purchase Shares at a per-share purchase price set forth in the Pre-Paid Purchase (the “Purchase Share Purchase Price”), subject to a defined floor price and other conditions.

Each Pre-Paid Purchase is a separate instrument with its own outstanding balance and holding period.

The access to the $20,000 thousand is expected to provide sufficient capital to fund customer growth initiatives and ensure long-term sustainability.

Management remains focused on executing cost management strategies to optimize the Company’s expense structure and enhance operational efficiency.

The Company is committed to expanding its customer base, introducing monetizable features, and driving recurring revenue growth in fiscal year 2025.

By leveraging its current cash position, financing agreements, and strategic initiatives, management is confident in CXAI’s ability to meet its obligations and support its operations for at least the next 12 months.

While there are no guarantees, the Company’s robust financing pipeline and operational strategies provide a solid foundation for long-term financial stability.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“U.S.

GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during each of the reporting periods.

Actual results could differ from those estimates.

The Company’s significant estimates consist of:

the valuation of stock-based compensation;

the valuation of warrant liabilities;

the allowance for credit losses;

the valuation allowance for deferred tax assets;

impairment of long-lived assets and goodwill.

Basis of Presentation

The accompanying consolidated financial statements are presented in U.S.

dollars and have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.

GAAP”) and pursuant to the accounting and disclosure rules and regulations of the Securities and Exchange Commission (the “SEC”).

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.

All intercompany balances have been eliminated in consolidation.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents, and trade receivables.

The Company’s cash is placed with high-credit-quality financial institutions, which periodically exceed federally insured limits.

The Company’s cash equivalents are certificates of deposit held by a number of banks limited to $ 250 thousand per bank with a duration of 90 days or less.

The Company has not realized any losses relating to its cash, cash equivalents, and trade receivables.

Emerging Growth Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.

The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable.

The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.

This may make comparison of the Company’s consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash, checking accounts, money market accounts, temporary investments and certificates of deposit with maturities of three months or less when purchased.

As of December 31, 2024, the Company had cash equivalents of approximately $4,353 thousand of certificates of deposit held by a number of banks limited to $250 thousand per bank with a duration of 90 days or less.

As of December 31, 2023, the Company had cash equivalents of approximately $5,584 thousand of certificates of deposit.

Accounts Receivable, net and Allowance for Credit Losses

Accounts receivables are

stated at the amount the Company expects to collect.

The Company recognizes an allowance for credit losses to ensure accounts

receivable are not overstated due to uncollectability.

Allowance for credit losses is maintained for various customers based on a

variety of factors, including the length of time the receivables are past due, significant one-time events and historical

An additional allowance for credit losses for individual accounts is recorded when the Company becomes aware of a

customer’s inability to meet its financial obligation, such as in the case of bankruptcy filings, or deterioration in such

customer’s operating results or financial position.

If circumstances related to a customer change, estimates of the

recoverability of receivables would be further adjusted.

Accounts receivable, net of allowance, totaled approximately $ 1.7

million and $ 2.0

million as of December 31, 2024 and December 31, 2023, respectively.

The Company’s allowance for credit losses as of

December 31, 2024 is approximately $ 0

thousand and $ 2

thousand as of for the period March 15, 2023 to December 31, 2023.

Accounts receivable as of March 15, 2023 totaled $ 2.2 million.

Property and Equipment, net

Property and equipment are recorded at cost, less accumulated depreciation and amortization.

The Company depreciates its property and equipment for financial reporting purposes using the straight-line method over the estimated useful lives of the assets, which range from 5 to 10 years.

Leasehold improvements are amortized over the lesser of the useful life of the asset or the initial lease term.

Expenditures for maintenance and repairs, which do not extend the economic useful life of the related assets, are charged to operations as incurred, and expenditures, which extend the economic life, are capitalized.

When assets are retired, or otherwise disposed of, the costs and related accumulated depreciation or amortization are removed from the accounts and any gain or loss on disposal is recognized.

Depreciation expense related to property and equipment is not included as part of cost of revenues, but as part of operating expenses.

Intangible Assets

Intangible assets primarily consist of developed technology, customer lists/relationships, non-compete agreements, intellectual property agreements, export licenses and trade names/trademarks.

They are amortized ratably over a range of 5 to 10 years, which approximates customer attrition rate and technology obsolescence.

The Company assesses the carrying value of its intangible assets for impairment annually, or more frequently if an event or other circumstances indicates that the Company may not be able to recover the carrying amount of the assets.

Based on its assessments, the Company did no t incur any impairment charges for the year ended December 31, 2024 (Successor), period from March 15, 2023, to December 31, 2023 (Successor), and for the period from January 1, 2023 to March 14, 2023 (Predecessor).

The Company tests goodwill for potential impairment at least annually, or more frequently if an event or other circumstance indicates that the Company may not be able to recover the carrying amount of the net assets of the reporting unit.

The Company has determined that the reporting unit is the entire company, due to the integration of all of the Company’s activities.

In evaluating goodwill for impairment, the Company may 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 a reporting unit is less than it carrying amount.

If the Company bypasses the qualitative assessment, or if the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then the Company performs a quantitative impairment test by comparing the fair value of a reporting unit with its carrying amount.

The Company calculates the estimated fair value of a reporting unit using a weighting of the income and market approaches.

For the income approach, the Company uses internally developed discounted cash flow models that include the following assumptions, among others:

projections of revenues, expenses, and related cash flows based on assumed long-term growth rates and demand trends;

expected future investments to grow new units;

and estimated discount rates.

For the market approach, the Company uses internal analyses based primarily on market comparables, including public company method, guideline transaction method, and market price method.

The Company bases these assumptions on its historical data and experience, third party appraisals, industry projections, micro and macro general economic condition projections, and its expectations.

Based on its assessments, the Company did no t incur impairment for the year ended December 31, 2024 (Successor).

The Company incurred impairment charge of $ 36,056 thousand for the period from March 15, 2023, to December 31, 2023 (Successor) and did no t incur impairment for the period from January 1, 2023 to March 14, 2023 (Predecessor).

Leases and Right-of-Use Assets and Liabilities

The Company determines if an arrangement is a lease at its inception.

Operating lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

The Company generally uses their incremental borrowing rate based on the information available at the lease commencement date in determining the present value of future payments, because the implicit rate of the lease is generally not known.

Right-of-use assets related to the Company’s operating lease liabilities are measured at lease inception based on the initial measurement of the lease liability, plus any prepaid lease payments and less any lease incentives.

The Company’s lease terms that are used in determining their operating lease liabilities at lease inception may include options to extend or terminate the leases when it is reasonably certain that the Company will exercise such options.

The Company amortizes their right-of-use assets as operating lease expense generally on a straight-line basis over the lease term and classify both the lease amortization and imputed interest as operating expenses.

The Company does not recognize lease assets and lease liabilities for any lease with an original lease term of less than one year.

The Company accounts for income taxes using the asset and liability method.

Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statements carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in the tax rate is recognized in income or expense in the period that the change is effective.

Income tax benefits are recognized when it is probable that the deduction will be sustained.

A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will either expire before the Company is able to realize the benefit, or that future deductibility is uncertain.

Comprehensive Income (Loss) and Foreign Currency Translation

The Company reports comprehensive income (loss) and its components in its consolidated financial statements.

Comprehensive loss consists of net loss and foreign currency translation adjustments, affecting stockholders’ equity that, under GAAP, are excluded from net loss.

Assets and liabilities related to the Company’s foreign operations are calculated using the Philippine Peso and Canadian Dollar and are translated at end-of-period exchange rates, while the related revenues and expenses are translated at average exchange rates prevailing during the period.

Gains or losses resulting from transactions denominated in foreign currencies are included in other income (expense) in the consolidated statements of operations.

The Company engages in foreign currency denominated transactions with customers that operate in functional currencies other than the U.S.

Aggregate foreign currency net translation gain or loss were approximately $ 301 thousand gain, $ 85 thousand loss, and $ 28 thousand loss for the year ended December 31, 2024 (Successor), for the period from March 15, 2023, to December 31, 2023 (Successor), and the period from January 1, 2023 to March 14, 2023 (Predecessor), respectively.

Convertible Debt

The Company issued convertible debt in the form of Pre-Paid Purchases in May 2024 (settlement date June 2024), September 2024, and December 2024 and evaluated such instruments to determine whether they contain features that qualify as embedded derivatives in accordance with ASC 815.

Embedded derivatives must be separately measured from the host contract if all the requirements for bifurcation are met.

The assessment of the conditions surrounding the bifurcation of embedded derivatives depends on the nature of the host contract and the features of the derivatives.

In accounting for the issuance of the convertible debt, the Company elected the fair value option under ASC 825.

Under the fair value option election, the convertible debt is initially measured at its issuance date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis.

The estimated fair value adjustment is presented within change in fair value of derivative liability in the Consolidated Statements of Operations and Comprehensive Income (Loss).

The Company classifies its convertible debt that are being valued under the fair value option election as Level 3 due to the lack of relevant observable market data over fair value inputs, such as the probability weighting of the various scenarios that can impact settlement of the arrangement.

The Company recognized a gain on the changes in the estimated fair value of the convertible debt of approximately $ 213 thousand for the year ended December 31, 2024 (Successor).

Debt Issuance Cost

Under the fair value option election, costs directly associated with the borrowing are expensed as incurred.

Debt Extinguishment

The note exchanges are accounted for under ASC 470-50 on Modifications and Extinguishments.

This standard requires the recognition of a gain or loss on the difference between the reacquisition price and the net carrying amount of the extinguished debt.

Revenue Recognition

The Company recognizes revenue, in accordance with ASC 606, when control is transferred of the promised products or services 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 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.

CXApp has done an analysis of its revenue recognition process and found that the same steps taken by the Company agrees with ASC 606 – Revenue from Contracts with Customers.

The standard’s core principle is that an entity will recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.

The new standard is a principles-based standard intended to better match the accounting for the transaction with the economics of the transaction.

This requires entities to use more judgment and make more estimates than under previous revenue standards.

The standard introduces a five-step model for revenue recognition that replaces the four criteria for revenue recognition under previous GAAP.

The five steps are shown below:

Identify the contract with a customer;

Identify the performance obligations in the contract;

Determine the transaction price;

Allocate the transaction price to performance obligations;

Recognize revenue when (or as) the entity satisfies a performance obligation

License Subscription Revenue Recognition (Software As A Service)

With respect to sales of the Company’s license agreements, customers generally pay fixed annual fees in advance in exchange for the Company’s software service provided via electronic means, which are generally recognized ratably over the license term.

Some agreements allow the customer to terminate their subscription contracts before the end of the applicable term, and in such cases the customer is generally entitled to a refund pro-rata but only for the elapsed time remaining at the point of termination, which would approximate the deferred revenue at such time.

The Company’s performance obligation is satisfied over time as the electronic services are provided continuously throughout the service period.

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.

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.

Renewals or extensions of licenses are evaluated as distinct licenses and revenue attributed to the distinct service is not recognized until:

(1) the entity provides the distinct license (or makes the license available) to the customer and (2) the customer is able to use and benefit from the distinct license.

Renewal contracts are not combined with original contracts, and, as a result, the renewal right is evaluated in the same manner as all other additional rights granted after the initial contract.

The revenue is not recognized until the customer can begin to use and benefit from the license, which is typically at the beginning of the license renewal period.

The Company recognizes revenue resulting from renewal of licensed software over time.

Professional Services Revenue Recognition

The Company provides integration and software customization professional services to its customers.

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.

Professional services are also contracted on the fixed fee and in some cases on a time and materials basis.

Fixed fees are paid monthly, in phases, or upon acceptance of deliverables.

The Company’s time and materials contracts are paid weekly or monthly based on hours worked.

Revenue on time and material contracts is recognized based on a fixed hourly rate as direct labor hours are expended.

Materials, or other specified direct costs, are reimbursed as actual costs and may include markup.

The Company has elected the practical expedient to recognize revenue for the right to invoice because the Company’s right to consideration corresponds directly with the value to the customer of the performance completed to date.

For fixed fee contracts provided by in house personnel, the Company recognizes revenue evenly over the service period using a time-based measure because the Company is providing continuous service.

Because the Company’s contracts have an expected duration of one year or less, the Company has elected the practical expedient in ASC 606-10-50-14(a) to not disclose information about its remaining performance obligations.

Anticipated losses are recognized as soon as they become known.

For the year ended December 31, 2024 (Successor), for period from March 14, 2024, to December 31, 2023 (Successor) and for the period from January 1, 2023 to March 14, 2023 (Predecessor), the Company did not incur any such losses.

These amounts are based on known and estimated factors.

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.

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.

Contract Balances

The timing of the Company’s revenue recognition may differ from the timing of invoicing to and payment by its customers.

The Company records an unbilled receivable when revenue is recognized prior to invoicing and the Company has an unconditional right to payment.

Alternatively, when invoicing a customer precedes the Company providing of the related services, the Company records deferred revenue until the performance obligations are satisfied.

The Company had deferred revenue of approximately $ 2,683 thousand and $ 2,878 thousand as of December 31, 2024, and December 31, 2023, respectively, related to customer invoices rendered in advance for software licenses and professional services provided by the Company’s technical staff.

The Company expects to satisfy its remaining performance obligations for the deferred revenue associated with professional services, and recognize the deferred revenue related to licenses generally over the remaining contract term which is generally twelve months following the commencement of the license.

The Company recognized revenue in the reporting period of $ 2,606 thousand, $ 2,163 thousand, and $ 865 thousand, that was included in the deferred revenue at the beginning of the period, for the year ended December 31, 2024 (Successor), for the period from March 15, 2023 to December 31, 2023 (Successor), and for the period from January 1, 2023 to March 14, 2023 (Predecessor), respectively.

Costs to Obtain a Contract

The Company recognizes eligible sales commissions as an asset within prepaid expenses and other current assets as the commissions are an incremental cost of obtaining a contract with the customer and the Company expects to recover these costs.

The capitalized costs are amortized over the expected contract term.

Cost to Fulfill a Contract

The Company incurs costs to fulfill their obligations under a contract once it has obtained the contract.

These costs are generally not significant and are recorded to expense as incurred.

Multiple Performance Obligations

The Company enters into contracts with customers for its technology that include multiple performance obligations.

Each distinct performance obligation was determined by whether the customer could benefit from the good or service on its own or together with readily available resources.

The Company allocates revenue to each performance obligation based on its relative standalone selling price.

The Company’s process for determining standalone selling price considers multiple factors including the Company’s internal pricing model and market trends that may vary depending upon the facts and circumstances related to each performance obligation.

Sales and Use Taxes

The Company presents transactional taxes such as sales and use tax collected from customers and remitted to government authorities on a net basis.

Shipping and Handling Costs

Shipping and handling costs are expensed as incurred as part of cost of revenues.

These costs were deemed to be de minimis during each of the reporting periods.

Research and Development

Research and development (“R&D”) costs are expensed when incurred.

R&D expenses consist primarily of personnel and related headcount costs, costs of professional services associated with the ongoing development of the Company’s technology, and allocated overhead.

Business Combinations

The Company accounts for business combinations under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805 “Business Combinations” using the acquisition method of accounting, and accordingly, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition.

The excess of the purchase price over the estimated fair value is recorded as goodwill.

All acquisition costs are expensed as incurred.

Upon acquisition, the accounts and results of operations are included as of and subsequent to the acquisition date.

The Company and its Chief Executive Officer (“CEO”), acting as the Chief Operating Decision Maker (“CODM”) determines its reporting units in accordance with FASB ASC 280, “Segment Reporting” (“ASC 280”).

The Company evaluates a reporting unit by first identifying its operating segments under ASC 280.

The Company then evaluates each operating segment to determine if it includes one or more components that constitute a business.

If there are components within an operating segment that meet the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reporting units.

If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated.

The Company has one operating segment and reporting unit.

The Company is organized and operated as one business.

Management reviews its business as a single operating segment, using financial and other information rendered meaningful only by the fact that such information is presented and reviewed in the aggregate.

Stock-Based Compensation

The Company measures the cost of employee and non-employee services received in exchange for an award of equity instruments based on the grant date fair value of the award.

The Company has issued stock-based compensation awards in the form of options and restricted stock units.

The grant date fair value is recognized over the requisite service period during which an employee and non-employee is required to provide service in exchange for the award.

The grant date fair value of options is estimated using the Black-Scholes option pricing model based on the average of the high and low stock prices at the grant date for awards under the CXApp Inc.

2023 Equity Incentive Plan (the “Incentive Plan”).

The risk-free interest rate assumptions were based upon the observed interest rates appropriate for the expected term of the equity instruments.

The expected dividend yield is assumed to be zero as the Company has not paid any dividends since its inception and does not anticipate paying dividends in the foreseeable future.

The Company uses the simplified method to estimate the expected term.

The grant date fair value for restricted stock units is valued using the closing price of the Company’s common stock on the date of grant.

The Company estimates forfeitures at the time of grant and revises these estimates in subsequent periods if actual forfeitures differ from those estimates.

Derivative Warrant Liabilities

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”) and ASC 815, “Derivatives and Hedging” (“ASC 815”).

The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification.

This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

The Company currently has two sets of warrants outstanding, known as the Private Placement Warrants and the Public Warrants, which are both classified as a liability.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance or modification.

For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance as a warrant liability and adjusted to the then fair value in each balance sheet date thereafter.

Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the consolidated statements of operations and amounted to approximately $ 3,365 thousand of a loss for the year ended December 31, 2024 (Successor) and $ 4,714 thousand of a loss for the period from March 15, 2023, to December 31, 2023 (Successor).

The Company utilized the Public Warrant quoted market price as the fair value of the Warrants as of each relevant date.

Earnings Per Share

The Company computes basic and diluted earnings per share by dividing net income by the weighted average number of common shares outstanding during the period.

Diluted earnings per share are similarly calculated with the inclusion of dilutive common stock equivalents.

For the year ended December 31, 2024, basic and dilutive net income (loss) per common share were the same since the inclusion of common shares issuable pursuant to the exercise of options, warrants, and vesting of restricted units in the calculation of diluted net loss per common shares would have been anti-dilutive.

The following table summarizes the number of common shares and common share equivalents excluded from the calculation of diluted net loss per common share for the year ended December 31, 2024 and for the period from March 15, 2023, to December 31, 2023.

Schedule of antidilutive shares

(in thousands)

Stock options

Restricted stock units

Fair Value Measurements

FASB ASC 820, “Fair Value Measurements” (“ASC 820”), provides guidance on the development and disclosure of fair value measurements.

The Company follows this authoritative guidance for fair value measurements, which defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles in the United States, and expands disclosures about fair value measurements.

The guidance requires fair value measurements be classified and disclosed in one of the following three categories:

Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities.

Observable prices that are based on inputs not quoted on active markets but corroborated by market data.

Unobservable inputs which are supported by little or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

Fair value measurements discussed herein are based upon certain market assumptions and pertinent information available to management.

The fair value of the warrants has been measured based on the listed market price of such warrants, a Level 1 measurement.

For the year ended December 31, 2024, and for the period from March 15, 2023 to December 31, 2023, the Company recognized an unrealized loss in the Statements of Operations and Comprehensive Income of $ 3,365 thousand and $ 4,714 thousand, respectively, which are presented as changes in fair value of derivative liability.

The Company accounts for its public and private warrants as a derivative liability initially measured at its fair values and remeasured in the consolidated statements of operations at the end of each reporting period.

When the warrants are exercised, the corresponding derivative liability is de-recognized at the underlying fair value of the Class A common stock that is issued to the warrant holder less any cash paid in accordance with the warrant agreement.

Upon either cash or cashless exercise, the de-recognized derivative liability results in an increase in additional paid in capital equal to the difference between the fair value of the underlying Class A common stock and its par value.

A cashless exercise results in the warrant holder surrendering Class A common stock equal to the stated warrant exercise price based on the contractual terms in the warrant agreement that governs the cashless conversion.

The following table shows the changes in fair value of the liabilities during the period ended December 31, 2024:

Schedule of changes in fair value of the liabilities

Warrant liability - January 1, 2024

Change in FV of derivative instruments

Warrant liability – December 31, 2024

Warrant liability - March 15, 2023

Change in FV of derivative instruments

FV of Warrants exchanged for Class A common stock (see Note 10 - Warrants)

FV of Warrants exercised for Class A common stock (see Note 10 - Warrants)

Warrant liability - December 31, 2023

The Company accounts for convertible debt under the fair value option election using Level 3 inputs.

For the year ended December 31, 2024, and for the period from March 15, 2023 to December 31, 2023, the Company recognized an unrealized gain in the Consolidated Statements of Operations and Comprehensive Income (Loss) of $ 213 thousand and $ 0 thousand, respectively, which are presented as change in fair value of derivative liability.

See additional details within Note 12, Convertible debt .

The significant inputs in the valuations models for each of the three issuances were as follows:

Pre-Paid Purchase #1

Schedule of valuation models

Valuation method

Scenario based analysis

Equity dividend yield

Expected term (years)

Discount rate

Risk free rate

Pre-Paid Purchase #2

September 30,

Valuation method

Scenario based analysis

Equity dividend yield

Expected term (years)

Discount rate

Risk free rate

Pre-Paid Purchase #3

Valuation method

Scenario based analysis

Equity dividend yield

Expected term (years)

Discount rate

Risk free rate

Fair Value of Financial Instruments

Financial instruments consist of cash and cash equivalents, accounts receivable, unbilled and other receivables and accounts payable.

The Company determines the estimated fair value of such financial instruments presented in the financial statements is equal to its carrying value due to their short-term nature.

Carrying Value, Recoverability and Impairment of Long-Lived Assets

The Company follows FASB ASC 360 “Property, Plant, and Equipment” (“ASC 360”) for its long-lived assets.

Pursuant to ASC 360-10-35-17, an impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value.

The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group).

That assessment shall be based on the carrying amount of the asset (asset group) at the date it is tested for recoverability.

An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value.

Pursuant to ASC 360-10-35-20, if an impairment loss is recognized, the adjusted carrying amount of a long-lived asset shall be its new cost basis.

For a depreciable long-lived asset, the new cost basis shall be depreciated (amortized) over the remaining useful life of that asset.

Restoration of a previously recognized impairment loss is prohibited.

Pursuant to ASC 360-10-35-21, the Company’s long-lived asset (asset group) is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.

The Company considers the following to be some examples of such events or changes in circumstances that may trigger an impairment review:

(a) significant decrease in the market price of a long-lived asset (asset group);

(b) a significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition;

(c) a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator;

(d) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group);

(e) a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group);

and (f) a current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.

The Company tests its long-lived assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.

Based on its assessments, the Company recorded no impairment charges on long-lived assets for the year ended December 31, 2024 (Successor), for the period from March 15, 2023, to December 31, 2023 (Successor), and for the period from January 1, 2023, to March 14, 2023 (Predecessor).

Recently Adopted Accounting Pronouncement

In November 2023, the FASB issued ASU No.

2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures”.

The disclosure requirements are required on an annual and interim basis and are applicable to entities with a single reportable segment.

The amendments in the ASU require disclosures to include significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), a description of other segment items by reportable segment, and any additional measures of a segment’s profit or loss used by the CODM when deciding how to allocate resources.

ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods for fiscal years beginning after December 31, 2024, with early adoption allowed.

We adopted this guidance as of January 1, 2024, on a retrospective basis and the adoption did not have a material impact on our consolidated financial statements.

See Note 16, Segment Information , in the accompanying notes to the consolidated financial statements for further detail.

Recently Issued Accounting Standards Not Yet Adopted

In March 2024, the FASB issued ASU 2024-01, “Compensation—Stock Compensation (Topic 718):

Scope Application of Profits Interest and Similar Awards,” which clarifies how an entity determines whether a profits interest or similar award is within the scope of Topic 718 or is not a share-based payment arrangement and therefore within the scope of other guidance.

ASU 2024-01 adds an example with multiple fact patterns and illustrates how an entity evaluates common terms and characteristics of profits interests and similar awards to reach a conclusion about whether an award meets the conditions in Topic 718.

It also amends certain language in the “Scope” and “Scope Exceptions” sections of Topic 718 to improve its clarity and operability without changing the guidance.

ASU 2024-01 is effective for the Company for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years.

Entities may apply the guidance either retrospectively to all periods presented in the financial statements or prospectively to profits interest and similar awards granted or modified on or after the date of adoption.

We are currently evaluating the impact of this standard on our consolidated financial statements.

In March 2024, the FASB issued ASU 2024-02 “Codification Improvements—Amendments to Remove References to the Concept Statements”, which amends the Codification to remove references to various FASB Concepts Statements and impacts a variety of Topics in the Codification.

The amendments apply to all reporting entities within the scope of the affected accounting guidance, but in most instances the references removed are extraneous and are not required to understand or apply the guidance.

Generally, the amendments in ASU 2024-02 are not intended to result in significant accounting changes for most entities.

ASU 2024-02 is effective for the Company for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years.

Entities may apply the guidance either retrospectively to the beginning of the earliest comparative period presented or prospectively to all new or modified transactions recognized on or after the date of adoption.

We are currently evaluating the impact of this standard on our consolidated financial statements.

In November 2024, the FASB issued ASU No.

2024-03 “Disaggregation of Income Statement Expenses”.

The amendment requires more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation, amortization, and depletion) included in certain expense captions presented on the face of the income statement.

This ASU is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

The amendments may be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements.

We are currently evaluating the impact this ASU will have on our disclosures.

In November 2024, the FASB issued ASU No.

2024-04 “Debt—Debt with Conversion and Other Options (Subtopic 470-20)”.

The amendment requires companies to apply a preexisting contract approach.

Under this approach, a settlement qualifies for induced conversion accounting if the inducement offer preserves the form of consideration and results in an amount of consideration that is no less than that issuable pursuant to the preexisting conversion privileges.

The ASU is effective for all entities in annual and interim reporting periods in fiscal years beginning after December 15, 2025.

Early adoption permitted for entities that have adopted the amendments in Update 2020-06.

The amendments may be applied either (1) prospectively to any settlements of convertible debt instruments that occur after the effective date of this ASU or (2) retrospectively to all prior periods that occurred after the adoption of the amendments in Update 2020-06.

We are currently evaluating the impact this ASU will have on our disclosures.

NOTE 3 – Business Combination

On March 14, 2023, the Company completed the Agreement and Plan of Merger (the “Merger Agreement”), by and among KINS, Inpixon, CXApp, and KINS Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of KINS (“Merger Sub”), pursuant to which KINS combined with Legacy CXApp, Inpixon’s enterprise apps business (including its employee experience technologies, indoor mapping, events platform, augmented reality and related business solutions) (the “Enterprise Apps Business”).

In exchange for the aggregate purchase price of approximately $ 69,928 thousand, the Company acquired all of the related assets and liabilities of Legacy CXApp.

The consideration transferred in connection with the Business Combination consisted of 1,547,700 shares of the Company’s Class A Common Stock and 5,487,300 shares of the Company’s Class C Common Stock valued at a price of $ 9.94 per share.

The preliminary estimated goodwill of approximately $ 44,200 thousand arising from the Business Combination consists of an acquired workforce, as well as synergies expected from combined operations of KINS and the CXApp.

The Company has authorized Class A and Class C common stock.

Class A common stock and New CXApp Class C common stock are identical in all respects, except that New CXApp Class C common stock is not listed and will automatically convert into New CXApp Class A common stock on the earlier to occur of (i) the 180 th day following the closing of the Merger which has expired and (ii) the day that the last reported sale price of New CXApp Class A common stock equals or exceeds $12.00 per share for any 20 trading days within any 30-trading day period following the closing of the Merger.

The Business Combination is being accounted for as a business combination in accordance with ASC 805.

The Company has determined preliminary fair values of the assets acquired and liabilities assumed in the Business Combination.

The Company allocated the purchase price of the Business Combination to the assets acquired and the liabilities assumed as of the closing date.

The following table summarizes the purchase price allocations relating to the Business Combination (in thousands):

Schedule of assets acquired

Purchase Price

Assets acquired:

Cash and cash equivalents

Accounts receivable

Notes and other receivables

Prepaid assets and other current assets

Operating lease right of use asset

Property and equipment, net

Developed technology

Customer relationships

Trade names and trademarks

Total assets acquired

Liabilities assumed:

Accounts payable

Accrued liabilities

Deferred revenues

Operating lease obligation, current

Operating lease obligation, noncurrent

Deferred tax liability

Total liabilities assumed

The value of the intangible assets were calculated by a third party valuation firm based on projections and financial data provided by management of the Company.

Goodwill represents the excess fair value after allocation to the intangible assets.

The calculated goodwill is not deductible for tax purposes.

Total acquisition-related costs for the Business Combination were approximately $3,543 thousand.

Of the total acquisition-related costs, approximately $ 3,000 thousand were incurred by KINS prior to the close of the Business Combination.

These costs are included in the opening retained earnings of the Company on March 15, 2023.

The remaining $543 thousands of acquisition-related costs were recorded as expense in the successor period and are included in acquisition related costs on the statements of operations for the period from March 15, 2023 to December 31, 2023 (Successor).

Measurement Period

The purchase price allocations for the acquisitions described above are based on initial estimates and provisional amounts.

In accordance with ASC 805-1025-13, if the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the acquirer shall report in its financial statements’ provisional amounts for the items for which the accounting is incomplete.

During the measurement period, acquirer shall adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date.

The Company continued to refine its inputs and estimates inherent in (i) the valuation of intangible assets, (ii) deferred income taxes, (iii) realization of tangible assets and (iv) the accuracy and completeness of liabilities through March 14, 2024, when the purchase price allocation was finalized.

CXApp Pro Forma Financial Information

The following pro forma financial information presents the consolidated balance sheet and results of operations of the Company for the year ended December 31, 2023, as if the acquisition had occurred as of the beginning of the first period presented (January 1, 2023).

The pro forma information does not necessarily reflect the results of operations that would have occurred had the entities been a single company during those periods.

AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS

(in thousands)

Schedule of proforma financial information

Current assets

Noncurrent assets

Current liabilities

Noncurrent liabilities

Total liabilities

Stockholders’ equity

Total stockholders’ equity

Total liabilities and equity

AND SUBSIDIARIES

UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS)

(in thousands)

NOTE 4 – Disaggregation of Revenue

The Company derives revenue from software as a service, design and implementation services for its enterprise apps solutions systems, professional services for work performed in conjunction with its systems, and sale of hardware.

Revenues consisted of the following (in thousands):

Schedule of disaggregation of revenue

March 15, 2023, to

January 1, 2023, to

Subscription revenue

Total subscription revenue

Non-subscription revenue

Professional services

Total non-subscription revenue

Total revenue

March 15, 2023, to

January 1, 2023, to

Revenue recognized over time (1)(2)

Revenue recognized at a point in time (3)

Professional services are also contracted on the fixed fee and time and materials basis.

Fixed fees are paid monthly, in phases, or upon acceptance of deliverables.

The Company has generally elected the practical expedient to recognize revenue for the right to invoice because the Company’s right to consideration corresponds directly with the value to the customer of the performance completed to date.

Software As a Service Subscription Revenue’s performance obligation is satisfied evenly over the service period using a time-based measure because the Company is providing continuous access to its service and service is recognized over time.

Hardware revenue is recognized at a point in time when the control over the goods transfers to the customer - upon delivery to the customers.

NOTE 5 – Property and Equipment, net

Property and equipment consisted of the following (in thousands):

Schedule of property and equipment

Computer and office equipment

Furniture and fixtures

Leasehold improvements

accumulated depreciation and amortization

Total Property and Equipment, Net

Depreciation and amortization expense was approximately $ 79 thousand, $ 75 thousand, and $ 19 thousand for the year ended December 31, 2024 (Successor), for the period from March 15, 2023, to December 31, 2023 (Successor), and for the period from January 1, 2023 to March 14, 2023 (Predecessor), respectively.

NOTE 6 – Goodwill and Intangible Assets, net

The Company reviews goodwill for impairment on a reporting unit basis annually on November 30 (beginning with fiscal year 2024) and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

The carrying amount of goodwill as of December 31, 2024, was $ 8,737 thousand, which is attributable to the business combination noted in Note 3.

We first assess qualitative factors, such as macroeconomic conditions, changes in the business environment, and reporting unit-specific events, to determine whether it is more likely than not that the fair value of a reporting unit is less than it carrying amount.

If we bypass the qualitative assessment or conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying value, we perform a quantitative impairment test by comparing the fair value of the reporting unit with its carrying amount.

For the quantitative test, we calculate the estimated fair value using a weighting of the income and market approaches.

2024 Impai rment Assessment

For the year ended December 31, 2024, we completed our annual goodwill impairment evaluation as of November 30, 2024.

No impairment loss was recognized for the year ended December 31, 2024.

The value of goodwill as of December 31, 2024, remains consistent with the post-impairment balance reported as of December 31, 2023.

2023 Impairment Assessment

For the period from March 15, 2023, to December 31, 2023 (Successor), the Company recognized a goodwill impairment loss of $ 36,056 thousand.

This impairment resulted from declines in market capitalization, revised cash flow projections, and adverse changes in market conditions impacting the recoverability of goodwill.

For the period January 1, 2023, to March 14, 2023 (Predecessor), the Company recognized a goodwill impairment loss of $ 0 thousand.

Goodwill consisted of the following (in thousands):

Schedule of goodwill

Balance as of March 15, 2023

Acquisition of Legacy CXApp

Measurement Period Adjustments

Balance as of December 31, 2023

Intangible assets consisted of the following (in thousands):

Schedule of intangible assets

December 31, 2024

December 31, 2023

Trade Name/Trademarks

Customer Relationships

Developed Technology

Patents and Intellectual Property

Future amortization expense on intangible assets as of December 31, 2024, is anticipated to be as follows (in thousands):

Schedule of future amortization expense

For the Years Ending December 31,

2030 and thereafter

NOTE 7 – Deferred Revenue

Deferred revenue consisted of the following (in thousands):

Schedule of deferred revenue

Deferred Revenue - January 1, 2024

Revenue recognized

Revenue deferred

Deferred Revenue - December 31, 2024

Deferred Revenue - March 15, 2023

Revenue recognized

Revenue deferred

Deferred Revenue - December 31, 2023

Deferred Revenue - January 1, 2023

Revenue recognized

Revenue deferred

Deferred Revenue - March 14, 2023

Deferred revenues were approximately $ 2,683 thousand and $ 2,878 thousand as of December 31, 2024, and December 31, 2023, respectively.

The fair value of the deferred revenue approximates the services to be rendered.

NOTE 8 – Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

Schedule of accrued Liabilities

Accrued expenses and reimbursements

Accrued compensation and benefits

Accrued bonus and commissions

Accrued sales and other indirect taxes payable

Accrued insurance premium and interest

Accrued transaction costs

Income Tax Payables

Accrued liabilities

Financed Director & Officers Insurance

The Company entered into a Directors & Officers (“D&O”) insurance agreement with Oakwood D&O Insurance, effective on March 14, 2024.

The agreement states that the Company will pay a total of $310 thousand in premiums at an annual percentage rate of 9.5%.

The first of ten monthly separate installment payments begin on April 14, 2024.

The Company paid a down payment on the policy of $ 85 thousand.

As of December 31, 2024, the Company currently owes $ 23 thousand on the D&O insurance policy.

NOTE 9 – Promissory Note

Promissory note consisted of the following (in thousands):

Schedule of promissory note

Principal amount

Unamortized original issue discount

Unamortized debt issuance cost

Accrued monitoring fee

Extinguishment

December 2023 Promissory Note

On December 15, 2023, the Company entered into a note purchase agreement with Streeterville Capital, LLC (the “Lender”), pursuant to which we agreed to issue and sell to the Lender an unsecured promissory note (the “Note”) in an aggregate initial principal amount of $ 3,885 thousand, which is payable on or before the date that is 12 months from the issuance date.

The initial principal amount includes an original issue discount of $870 thousand and $15 thousand that we agreed to pay to the Lender to cover the Lender’s legal fees, accounting costs, due diligence, monitoring and other transaction costs.

The net proceeds of the Note are $ 3,000 thousand.

Interest on the Note accrues at a rate of 10 % per annum and is payable on the maturity date.

A monitoring fee of 10% of the outstanding balance will be charged starting six (6) months from the issuance of the Note to cover Lender’s accounting, legal and other costs incurred in monitoring.

The foregoing fee shall automatically be added to the outstanding balance on the applicable date without any further action by either party.

The Lender shall have the right to redeem up to an aggregate of 1/6th of the initial principal balance of the Note plus any interest accrued thereunder each month by providing written notice delivered to us;

provided, however, that if the Lender does not exercise any monthly redemption amount in its corresponding month then such monthly redemption amount shall be available for the Lender to redeem in any further month in addition to such future month’s monthly redemption amount.

Upon receipt of any monthly redemption notice, we shall pay the applicable monthly redemption amount in cash to the Lender within five (5) business days of the Company’s receipt of such monthly redemption notice.

The Note includes customary event of default provisions, subject to certain cure periods, and provides for a default interest rate of 22%.

Upon the occurrence of an event of default, interest would accrue on the outstanding balance beginning on the date the applicable event of default occurred at an interest rate equal to the lesser of twenty-two percent (22%) or the maximum rate permitted under applicable law.

Note Exchanges

During the period from July 15, 2024, to December 26, 2024, the Company exchanged $ 3,428 thousand of the outstanding balance of the Note for approximately 2,012,107 shares of the Company’s Class A Common Stock at exchange prices between $ 1.47 and $ 2.23 per share.

The Company analyzed the exchange of principal under the note as an extinguishment and compared the net carrying value of the debt being extinguished to the reacquisition price (shares of common stock being issued) and recorded an approximately $ 1,052 thousand loss on the exchange of debt for equity as a separate item in the other income (expense) section of the consolidated statements of operations for the year ended December 31, 2024.

As of January 17, 2025, the Company paid down the entire December 2023 Note.

Interest expense for the December 2023 Note recognized on the consolidated statement of operations and comprehensive loss were approximately $ 1,069 thousand and $ 53 thousand for the year ended December 31, 2024, and period from March 15, 2023 to December 31, 2023 (Successor), respectively.

NOTE 10 – Warrants

Public Warrants

As of December 31, 2024, and December 31, 2023, there were 10,751,862 Public Warrants outstanding.

Each whole warrant entitles the holder thereof to purchase one share of the Company’s Class A common stock at a price of $ 11.50 per share, subject to adjustments described in the Company’s registration statement on Form S-1 (Registration No.

333-249177) filed in connection with its initial public offering.

The Public Warrants is exercisable and will expire on March 15, 2028, or earlier upon redemption or liquidation.

Public Warrants may only be exercised for a whole number of shares.

No fractional warrants will be issued upon separation of the units and only whole warrants will trade.

On July 13, 2023, warrant holders exercised 435,000 public warrants at an exercise price of $ 11.50 , for a total of $ 5,002 thousands of cash proceeds to the Company.

On July 14, 2023, the Company entered into a Warrant Exchange Agreement (the “Agreement”) with an unaffiliated third party investor (the “Warrant Holder”) with respect to warrants to purchase an aggregate of 2,000 thousand shares of its common stock, par value $ 0.0001 per share (the “Common Stock”) initially issued by the Company in its initial public offering on December 15, 2020 (the “Public Warrants”).

Pursuant to the Agreement, the Company issued an aggregate of 600 thousand shares of Common Stock to the Warrant Holder in exchange for the surrender and cancellation of the Public Warrants held by such holder.

This resulted to an additional paid in capital of $ 4,914 thousand in a non-cash transaction and resulted in a $ 3,900 thousand loss on the warrant conversion, which is included in change in fair value of derivative liability in the statement of operations.

In June 2023, about 613,138 public warrants to purchase Class A common stock were exercised on a cashless basis for approximately 50 thousand shares of common stock and are no longer outstanding.

Private Warrants

As of December 31, 2024, and December 31, 2023, there were 10,280,000 Private Placement Warrants outstanding.

The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the shares of Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until April 14, 2023, subject to certain limited exceptions.

Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable, except as described above, so long as they are held by the initial purchasers or their permitted transferees.

If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

For the year ended December 31, 2024, there were no exercises or exchanges made in relation with the Company’s Warrants.

The number of outstanding Public and Private Warrants as of December 31, 2024, is the same as that of December 31, 2023.

Public and private warrant exercise activity and underlying Common Stock issued or surrendered for the period from March 15, 2023 to December 31, 2023 (Successor) and for the period from January 1, 2023, to March 14, 2023 (Predecessor), is:

Schedule of public and private warrant exercise activity

January 1, 2023

Warrants exchanged

Warrants exercised – cash

Warrants exercised – cashless

December 31, 2023

NOTE 11 – Stock Option Plan and Stock-Based Compensation

2023 Equity Incentive Plan

At the special meeting held on March 10, 2023, the KINS stockholders considered and approved, among other things, the Incentive Plan.

The Incentive Plan was previously approved, subject to stockholder approval, by KINS’ board of directors.

The Incentive Plan became effective immediately upon the closing of the Business Combination.

Pursuant to the terms of the Incentive Plan, there are 2,110,500 shares of CXApp Class A Common Stock available for issuance under the Incentive Plan, which is equal to 15% of the aggregate number of shares of CXApp common stock issued and outstanding immediately after the closing of the Business Combination (giving effect to the redemptions).

Employee Stock Options

To calculate the stock-based compensation resulting from the issuance of options, the Company uses the Black-Scholes option pricing model, which is affected by the Company’s fair value of its stock price as well as assumptions regarding a number of subjective variables.

These variables include, but are not limited to, the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors.

On February 6, 2024, a total of 665,000 stock options to purchase the Company’s common stock were granted to employees and consultants of the Company.

These options vest over a 4 -year period.

The options have a life of 10 years and an exercise price of $ 1.20 per option.

The stock options were valued using the Black-Scholes option valuation model and the weighted average fair value of the awards granted during the period was determined to be $0.78 per option on the grant date.

The fair value of the common stock as of the grant date utilized in the Black-Scholes option valuation model was $ 1.21 per share.

In June 2024, the Company received a notice for a net exercise of 70,350 options to purchase shares of common stock resulting in the issuance of 12,570 shares of the Company’s Class A Common Stock with par value $0.0001 per share.

In accordance with the terms of the Incentive Plan, 51,012 shares were withheld by the Company to cover the exercise price, and 6,768 shares were withheld in satisfaction of the taxes required to be paid in connection with the exercise.

On August 26, 2024, the Board approved the award of 230,000 options to purchase common stock pursuant to the 2023 Equity Incentive Plan to Joy Mbanugo, the Chief Financial Officer of the Company.

The option has an exercise price of $2.40 per share.

The options expire on August 26, 2034.

The stock options were valued using the Black-Scholes option valuation model and the fair value of the awards granted was determined to be $ 1.49 per option on the grant date.

The fair value of the common stock as of the grant date utilized in the Black-Scholes option valuation model was $ 2.40 per share.

See below for a summary of the stock options granted under the Incentive Plan:

Schedule of stock options activity

Fair Value at

(In thousands)

Options outstanding at January 1, 2024

Options outstanding at December 31, 2024

Options exercisable at December 31, 2024

Fair Value at

Options outstanding at January 1, 2023

Options outstanding at December 31, 2023

Options exercisable at December 31, 2023

Non-cash stock-based compensation expenses related to stock option were recorded in the financial statements as summarized below:

Non-cash stock-based compensation expense

March 15, 2023, to

January 1, 2023, to

Research and development

Sales and marketing

General and administrative

Total non-cash stock compensation

As of December 31, 2024, the remaining unrecognized stock compensation expense totaled approximately $ 574 thousand.

This amount will be recognized as an expense over the weighted average remaining term of 2.55 years.

The fair value of each employee option grant is estimated on the date of the grant using the Black-Scholes option-pricing model.

Key weighted-average assumptions used to apply this pricing model during the year ended December 31, 2024 (Successor) were as follows:

Schedule of assumptions used

Risk-free interest rate

3.66 % - 4.03 %

Expected life of option grants

6 – 6.25 years

Expected volatility of underlying stock

65.17 % - 65.97 %

Dividends assumption

Restricted Stock Units

The grant date fair value for Restricted Stock Units (RSU) are valued using the closing price of the Company’s common stock on the date of grant.

On January 2024, a total of 47,000 restricted stock units of the Company’s common stock were granted to employees of the Company under the Incentive Plan at various dates.

On August 29, 2024, a total of 473,935 restricted stock units of the Company’s common stock were granted to directors of the Company under the 2023 Equity Incentive Plan.

The fair value of the common stock as of the various grant dates was determined to be $ 1.25 to $ 2.11 per restricted stock unit, for a weighted average fair value of $ 2.04 per restricted stock unit.

There was no other activity related to restricted stock units for the year ended December 31, 2024.

The following summarizes our RSUs transaction activity for the year ended December 31, 2024:

Schedule of RSUs transaction

Weighted Average

Outstanding at January 1, 2024

Outstanding at December 31, 2024

Weighted Average

Outstanding at March 15, 2023

Outstanding at December 31, 2023

The total fair value of RSUs vested during the year ended December 31, 2024, was $ 2,331 thousand.

There was no RSUs vested during the year ended December 31, 2023.

Non-cash stock-based compensation expenses related to restricted stock units recorded in the financial statements is summarized below:

Schedule of non-cash stock-based compensation expenses related to restricted stock units

March 15, 2023, to December 31,

Research and development

Sales and marketing

General and administrative

Total non-cash stock compensation

As of December 31, 2024, and December 31, 2023, the Company has approximately $ 1,016 thousand and $ 1,796 thousands of unrecognized restricted stock unit compensation to be expensed over a weighted average period of 0.91 year and 1.42 years, respectively.

NOTE 12 – Convertible Debt

On May 22, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”), pursuant to which the Lender desires to purchase up to $10,000,000 shares of the Company’s Common Stock and the Company issued an unsecured convertible Pre-Paid Purchase #1 to Streeterville Capital, LLC (“Lender”).

The SPA required 40,000 common shares of the Company’s Class A Common Stock to be issued as of closing date (May 22, 2024).

The Company recorded a liability of $130,400 on May 22, 2024, for the shares to be issued within contract to issue common stock.

The Company issued the Class A Common Stock on October 10, 2024, and recorded a gain of $68 thousand on settlement of the contract to issue common stock.

The convertible Pre-Paid Purchase #1 has the original principal amount of $ 2,625 thousand and Lender gave consideration of $ 2,480 thousand, reflecting original issue discount of $ 125 thousand and Lender’s transaction cost of $ 20 thousand.

On June 3, 2024, the Company received the net proceeds from the Lender.

The convertible Pre-Paid Purchase #1 accrues interest on the outstanding balance at 5% per annum.

The Lender may redeem all or any part of the outstanding balance of the convertible Pre-Paid Purchase #1, at any time following earlier of six months from the purchase price date and the effectiveness of the Initial Registration Statement by providing a written notice, in cash or converting into shares of the Company’s common stock at a price equal to the lower of (a) Fixed Price of $3.996 and (b) Market Price which is 91% multiplied by the lowest daily volume weighted average price (“VWAP”) during the ten (10) consecutive trading days immediately prior to the written notice date, but in any event not lower than the Floor Price of $0.666, subject to certain adjustments and ownership limitations specified in the convertible Pre-Paid Purchase.

The Pre-Paid Purchase #1 was recorded at its initial fair value of $ 2,562 thousand and the Company recognized an unrealized gain on change in fair value of convertible debt of $ 63 thousand.

As of December 31, 2024, Pre-Paid Purchase #1 is recorded at fair value of $ 543 thousand and is within convertible debt on the accompanying consolidated balance sheets.

For the twelve months ended December 31, 2024, the Company recognized an unrealized loss on change in fair value of Pre-Paid Purchase #1 of $ 18 thousand.

On September 30, 2024, the Company issued an unsecured convertible Pre-Paid Purchase #2 to the Lender, pursuant to the SPA.

The convertible Pre-Paid Purchase #2 has the original principal amount of $ 1,050 thousand and Lender gave consideration of $ 1,000 thousand, reflecting original issue discount of $ 50 thousand.

On September 30, 2024, the Company received the net proceeds from the Lender.

The convertible Pre-Paid Purchase #2 accrues interest on the outstanding balance at 5% per annum.

The Lender may redeem all or any part of the outstanding balance of the convertible Pre-Paid Purchase #2, at any time following earlier of six months from the purchase price date and the effectiveness of the Initial Registration Statement by providing a written notice, in cash or converting into shares of the Company’s common stock at a price equal to the lower of (a) Fixed Price of $1.992 and (b) Market Price which is 91% multiplied by the lowest daily volume weighted average price (“VWAP”) during the ten (10) consecutive trading days immediately prior to the written notice date, but in any event not lower than the Floor Price of $0.332, subject to certain adjustments and ownership limitations specified in the convertible Pre-Paid Purchase.

The Pre-Paid Purchase #2 was recorded at its initial fair value of $ 1,045 thousand and the Company recognized an unrealized gain on change in fair value of convertible debt of $ 5 thousand.

As of December 31, 2024, Pre-Paid Purchase #2 is recorded at fair value of $ 1,028 and is within convertible debt on the accompanying consolidated balance sheets.

For the twelve months ended December 31, 2024, the Company recognized an unrealized gain on change in fair value of Pre-Paid Purchase #2 of $ 23 thousand.

On December 9, 2024, the Company issued an unsecured convertible Pre-Paid Purchase #3 to the Lender, pursuant to the SPA.

The convertible Pre-Paid Purchase #3 has the original principal amount of $ 3,150 thousand and Lender gave consideration of $ 3,000 thousand, reflecting original issue discount of $ 150 thousand.

On December 9, 2024, the Company received the net proceeds from the Lender.

The convertible Pre-Paid Purchase #3 accrues interest on the outstanding balance at 5% per annum.

The Lender may redeem all or any part of the outstanding balance of the convertible Pre-Paid Purchase #3, at any time following earlier of six months from the purchase price date and the effectiveness of the Initial Registration Statement by providing a written notice, in cash or converting into shares of the Company’s common stock at a price equal to the lower of (a) Fixed Price of $1.987 and (b) Market Price which is 91% multiplied by the lowest daily volume weighted average price (“VWAP”) during the ten (10) consecutive trading days immediately prior to the written notice date, but in any event not lower than the Floor Price of $0.331, subject to certain adjustments and ownership limitations specified in the convertible Pre-Paid Purchase.

The Pre-Paid Purchase #3 was recorded at its initial fair value of $ 2,986 thousand.

The Company recognized an unrealized gain on change in fair value of Pre-Paid #3 of $ 164 thousand.

As of December 31, 2024, Pre-Paid Purchase #3 is recorded at fair value of $ 2,942 and is within convertible debt on the accompanying consolidated balance sheets.

For the twelve months ended December 31, 2024, the Company recognized an unrealized gain on change in fair value of Pre-Paid Purchase #3 of $ 208 thousand.

The following table presents changes in convertible debt measured at fair value for the twelve months ended December 31, 2024.

There was no convertible debt for the period from March 15, 2023, to December 31, 2023 (Successor) and for the period from January 1, 2023, to March 14, 2023 (Predecessor).

Schedule of changes convertible debt measured at fair value

Convertible debt

Balance as of December 31, 2023

Settlement (1)

Fair value measurement adjustments

Balance as of December 31, 2024

During the year ended December 31, 2024, the Company has issued 1,683,104 shares of the Company’s Class A Common Stock pursuant to multiple purchase notices related to Pre-Paid Purchase #1.

The shares issued have a total exchange amount of $2,100 thousand with exchange prices ranging from $1.18 to $1.41.

NOTE 13 – Common Stock

In March 2023, the Company issued 100,000 shares of Class A Common Stock as a compensation to BTIG, LLC (BTIG) for the strategic and capital markets advisory services to be provided to the Company effective on the business day following the Business Combination.

Following the Business Combination, the Company’s Class C Common Stock is subject to transfer restrictions and will automatically convert into the Company’s Class A Common Stock on the earlier to occur of (i) the 180th day following the closing of the Merger and (ii) the day that the last reported sale price of the New CXApp Class A Common Stock equals or exceeds $12.00 per share for any 20 trading days within any 30-trading day period following the closing of the Merger.

On September 10, 2023, the Company’s 5,487,300 shares of Class C Common Stock were automatically converted into an aggregate of 5,487,300 shares of the Company’s Class A Common Stock, par value $ 0.0001 per share.

On October 10, 2024, the Company issued 40,000 shares of the Company’s Class A Common Stock as part of the Securities Purchase Agreement.

The issued shares serve as the commitment shares of the agreement.

During the year ended December 31, 2024, the Company issued 246,220 shares of Class A Common Stock, net of 69,445 shares of Class A Common Stock to cover the withholding tax, for the 315,665 vested Restricted Stock Units.

During the year ended December 31, 2024, the Company issued total of 3,695,211 shares of Class A Common Stock for paying off the promissory note and the convertible debt.

See Note 9, Promissory Note and Note 12, Convertible Debt , in the accompanying notes to the consolidated financial statements for further detail.

NOTE 14 – Income Tax

The Company’s net deferred tax assets/(liabilities) consisted of the effects of temporary differences attributable to the following:

Schedule of company’s net deferred tax assets

(In thousands)

Organizational costs/startup expenses

Deferred revenue

Section 174 - software development cost

Stock based compensation

Research credits

Other accruals

Net operating loss carryforward

Total deferred tax asset

Valuation allowance

Deferred tax asset, net of valuation allowance

Property, plant & equipment

Capitalized research

Total deferred tax liabilities

Net Deferred Tax Asset (Liability)

The income tax provision consists of the following for the years ended December 31, 2024, and 2023:

Schedule of income tax provision

March 15, 2023 to December 31,

January 1, 2023 to

State and Local

Change in valuation allowance

Income tax expense/(benefit)

As of December

31, 2024, the Company has U.S.

federal and state net operating loss carryover of approximately $ 7,494

thousand and $ 4,424

thousand respectively and Canada net operating loss carryover of approximately $ 11,353

The federal NOLs generated through 2017 which if unutilized will expire by the year 2037 and the federal NOLs generated

after 2017 will be carried forward indefinitely whereas the state NOLs if unutilized will expire based on the state statutes.

The Canada NOLs which if able

to be utilized will be carried forward through 2042.

The Income Tax Act (Canada), or the “Canadian Tax Act”, and equivalent

provincial income tax legislation may restrict the Company’s ability to carry forward non-capital losses from preceding tax years

upon an acquisition of control.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

In assessing the realization of deferred tax assets, management considers, whether it is “more likely than not”, that some portion or all of the deferred tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible.

Deferred income tax is presented under noncurrent liabilities and in other assets in the consolidated balance sheet as of December 31, 2024, and 2023, respectively.

In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all the deferred tax assets will not be realized.

Management considers the projected future taxable income and availability of taxable temporary differences in making this assessment.

After consideration of all the information available, management believes that positive evidence does not outweighs the negative evidence and thus it is more likely than not that the benefit from deferred tax asset may not be realized in foreseeable future.

In view of this, valuation allowance has been created as at December 31, 2024.

The Company’s policy for recording interest and penalties associated with unrecognized tax benefits is to record such interest and penalties as interest expense and as a component of income tax expense.

There were no amounts accrued for interest or penalties for the years ended December 31, 2024, and 2023.

Management does not expect any material changes in its unrecognized tax benefits in the next year.

A reconciliation of the federal income tax rate to the Company’s effective tax rate for the years ended December 31, 2024, and 2023 are as follows:

Schedule of reconciliation of the federal income tax rate to the Company’s effective tax rate

March 15, 2023 to

January 1, 2023 to

Statutory federal income tax rate

Incentive stock options

Change in fair value of derivative warrant liabilities

Goodwill impairment loss

US-Foreign income tax rate difference

Permanent difference

Cancellation of debt income

Rate differential on foreign earnings

State taxes, net of federal tax benefit

Current federal tax true-up

Provision to return adjustments

Deferred only adjustment

Valuation allowance

Income tax provision

The Company files income tax returns in the U.S.

federal jurisdiction in various state and local jurisdictions as well as in foreign jurisdictions and is subject to examination by the various taxing authorities.

The Company recorded an income tax benefit/expense of approximately $ 637 thousand for the year ended December 31, 2024 (Successor).

The effective tax rate for the year ended December 31, 2024 (Successor) was 3.17%.

The income tax benefit for the year ended December 31, 2024 (Successor) is a result of the reversal of deferred tax liability attributable to acquired intangible assets from the Business Combination.

The company believes that positive evidence does not outweighs the negative evidence and thus it is more likely than not that the benefit from deferred tax asset may not be realized in foreseeable future.

In view of this, valuation allowance has been created as of December 31, 2024.

Uncertain Tax Positions

The Company records tax positions as liabilities and adjusts these liabilities when its judgment changes because of the evaluation of new information not previously available.

Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the recognized tax benefit liabilities.

These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available.

As of December 31, 2024, and the period March 15, 2023, to December 31, 2023 (Successor) the Company has not recorded any liabilities for uncertain tax positions in its consolidated financial statements.

The Company records

interest and penalties related to unrecognized tax benefits in the provision for income taxes.

As of December 31, 2024 and the

period March 15, 2023 to December 31, 2023 (Successor), no accrued interest or penalties are recorded on the balance sheets, and the Company

has not recorded any related expenses.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it

In the normal course of business, the Company is subject to examinations by federal, foreign, and state and local

jurisdictions, where applicable.

There are currently no pending tax examinations.

The Company’s tax years currently open under

statute range from 2021 to the present in the U.S.

and from 2020 to the present in its foreign operations.

To the extent the Company has tax attribute carryforwards, the tax years in which those attributes were generated may remain subject to

adjustment upon examination by the Internal Revenue Service, state and local tax authorities, and non-U.S.

tax authoritiesincluding

those in Canada and the Philippinesif and when the attributes are utilized in a future period.

Following the acquisition, the Company transitioned its Canadian operations

from a client-facing business to a cost center.

A formal transfer pricing study between the U.S.

and Canada has not been performed, and

as such, there may be a potential for a Canadian tax liability.

However, based on currently available information, management believes that

any such liability would not be material to the financial statements as a whole.

NOTE 15 – Credit Risk and Concentrations

Financial instruments that

subject the Company to credit risk consist principally of trade accounts receivable and cash and cash equivalents.

performs certain credit evaluation procedures and does not require collateral for financial instruments subject to credit risk.

Company believes that credit risk is limited because the Company routinely assesses the financial strength of its customers and,

based upon factors surrounding the credit risk of its customers, establishes an allowance for credit losses and, consequently,

believes that its accounts receivable credit risk exposure beyond such allowances is limited.

The Company maintains cash deposits with financial institutions, which, from time to time, may exceed federally insured limits.

Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows.

Cash is also maintained at foreign financial institutions for its Canadian and Philippines subsidiaries.

Cash in foreign financial institutions as of December 31, 2024, was $ 166 thousand.

Cash in foreign financial institutions as of December 31, 2023, was $ 300 thousand.

The Company has not experienced any losses and believes it is not exposed to any significant credit risk from cash.

However, any loss incurred or lack of access to such funds could have a significant impact on the Company’s financial condition, results of operations, and cash flows.

Our top three customers accounted for approximately 24 % and 22 % of our gross revenue during the years ended December 31, 2024 and the period March 15, 2023 to December 31, 2023 (Successor).

One customer accounted for 10% of our gross revenue in 2024, and a separate customer accounted for 12% of our gross revenue in 2023;

however, each of these customers may or may not continue to be a significant contributor to revenue in 2023.

Significant customers or projects in any one period may not continue to be significant customers or projects in other periods.

Furthermore, as of December 31, 2024, the Company had a concentration

of credit risk with respect to accounts receivable.

Three customers represented a significant portion of the Company’s total outstanding

accounts receivable balance.

Three customers represented a approximately 82% of the Company’s total outstanding accounts receivable

The Company continually monitors

the creditworthiness of its customers and maintains an allowance for doubtful accounts based on historical experience and specific customer

The Company does not require collateral from its customers.

Management does not believe the concentration of credit risk

represents a significant risk of loss based on current knowledge and collection history.

NOTE 16 – Segment Information

The Company has determined that it operates as a single operating segment.

The Company offers a vertical software-as-a-service (or SaaS) platform for the enterprise.

The flagship product, the CXAI Platform (pronounced

“Sky”), provides a comprehensive suite of tools designed to empower employees and enable organizations to create smarter workplaces.

The Company’s Chief Executive Officer is the Chief Operating Decision Maker (“CODM”).

The CODM allocates resources and

makes operating decisions based on consolidated net income.

The CODM does not evaluate

profitability below the level of the consolidated company.

The Company uses net income (loss) as the primary measure of financial performance.

However, in evaluating operating results on a budget versus actual basis, the Company focuses on cash-based operating expenses as a more

cost of revenue, professional services, marketing, research and development, and other general and administrative expenses—to be

In contrast, the Company does not place significant emphasis on stock-based compensation, amortization of intangibles, change

in fair value of warrant liabilities, loss on debt extinguishment, and other non-cash adjustments in its internal analysis of period-over-period

operating results.

The following table presents selected financial information with respect to the Company’s single operating segment:

Schedule of segment Information

(In thousands)

Revenue Licenses

Revenue Professional Services

Revenue Hardware

Cost of revenue

Research and development

Sales and marketing

General and administrative

Other noncash expenses (1)

Interest expense (income), net

Loss on warrant liabilities

Loss on debt extinguishment

Other expense/(income), net

Income tax benefit

Other for the year ended December 31, 2024, includes $2.83 million of stock compensation and related expenses, $2.73 million of intangible amortization expense.

Other for the period from March 15, 2023, to December 31, 2023 (Successor), includes $1.08 million of stock compensation expenses, $36.06 millions of goodwill impairment loss, 0.54 million of acquisition related cost, and $2.16 million of intangible amortization expense.

NOTE 17 – Foreign Operations

The Company’s operations are located primarily in the United States, Canada, and the Philippines.

Revenues by geographic area are attributed by country of domicile of the Company’s subsidiaries.

The financial data by geographic area are as follows (in thousands):

Schedule of financial data by geographic area

For the Year Ended December 31, 2024 (Successor)

Revenues by geographic area

Operating loss by geographic area

Net loss by geographic area

For the Period from March 15, 2023, to December 31, 2023 (Successor) :

Revenues by geographic area

Operating income (loss) by geographic area

Net income (loss) by geographic area

For the Period from January 1, 2023, to March 14, 2023 (Predecessor) :

Revenues by geographic area

Operating income (loss) by geographic area

Net income (loss) by geographic area

As of December 31, 2024 (Successor)

Identifiable assets by geographic area

Long lived assets by geographic area

Goodwill by geographic area

As of December 31, 2023 (Successor)

Identifiable assets by geographic area

Long lived assets by geographic area

Goodwill by geographic area

NOTE 18 – Leases

The Company has operating leases for administrative offices in Canada, the Philippines, and the United States.

The Manila, Philippines office lease expires in May 2025, the Canada lease expires in May 2026, and the United States office lease expires in April 2026.

The Company has no other operating or financing leases with terms greater than 12 months.

Lease expense for operating leases recorded on the balance sheet is based on the future minimum lease payments recognized on a straight-line basis over the term of the lease plus any variable lease costs.

Operating lease expenses, inclusive of short-term and variable lease expenses, recognized in the Company’s consolidated statement of operations for the year ended December 31, 2024 (Successor), for the period from March 15, 2023, to December 31, 2023 (Successor), and for the period from January 1, 2023 to March 14, 2023 (Predecessor) was approximately $ 439 thousand, $ 345 thousand, and $ 57 thousand, respectively.

Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term.

In determining the present value of lease payments, the Company used its incremental borrowing rate based on the information available at the date of adoption of ASC 842 “Leases” (“ASC 842”).

As of December 31, 2024, the weighted average remaining lease term is 1.1 years, and the weighted average discount rate used to determine the operating lease liabilities was 8.0 % .

As of December 31, 2023, the weighted average remaining lease term is 1.4 years, and the weighted average discount rate used to determine the operating lease liabilities was 8.0 % .

Schedule of operating leases

(in thousand)

Total lease payments

Imputed interest

Present value of lease liabilities

NOTE 19 – Commitments and Contingencies

Risks and Uncertainties

Various social and political circumstances in the United States and around the world (including wars and other forms of conflict, including trade tensions between the United States and China, and other uncertainties regarding actual and potential shifts in the United States and foreign, trade, economic, tariffs, and other policies with other countries, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes and global health epidemics) may also contribute to increased market volatility and economic uncertainties or deterioration in the United States and worldwide.

In response to the conflict between Russia and Ukraine, the United States and other countries have imposed sanctions or other restrictive actions against Russia.

Any of the above factors, including sanctions, export controls, tariffs, trade wars and other governmental actions, could have a material adverse effect on the Company and the value of the Company’s securities.

Management continues to evaluate the impact of these types of risks and has concluded that while it is reasonably possible that these risks and uncertainties could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these consolidated financial statements.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Certain conditions may exist as of the date the financial statements are issued which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur.

The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.

In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements.

If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability and an estimate of the range of possible losses, if determinable and material, would be disclosed.

Loss contingencies considered remote are generally not disclosed, unless they involve guarantees, in which case the guarantees would be disclosed.

There can be no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

NOTE 20 – Supplementary Financial Information

Quarterly Financial Information (unaudited)—The quarterly results for the years ended December 31, 2024, and 2023 are summarized below (in thousands, except per share amounts):

Schedule of supplementary financial information

Basic and diluted weighted average shares outstanding, Class A common stock

Basic and diluted net loss per share, Class A common stock

Basic and diluted weighted average shares outstanding, Class C common stock

Basic and diluted net income (loss) per share, Class C common stock

January 1, 2023, to

Net Income / (Loss)

Basic and diluted weighted average shares outstanding, Class A common stock

Basic and diluted net income (loss) per share, Class A common stock

Basic and diluted weighted average shares outstanding, Class C common stock

Basic and diluted net income (loss) per share, Class C common stock

NOTE 21 – Restatement of Quarterly Financial Information (Unaudited)

As further described in Note 1, the previously reported unaudited consolidated financial information for the three and six months ended June 30, 2024, and the three and nine months ended September 30, 2024 are required to be restated.

The as-restated interim financial information for each relevant period is included in the tables that follow.

As part of the restatement, the Company recorded adjustments to correct the misstatements in the impacted interim periods.

Consolidated Balance Sheets

The following unaudited consolidated balance sheet tables present the impacts of the restatement adjustments as of the periods ended June 30, 2024, and September 30, 2024.

Schedule of consolidated balance sheets

June 30, 2024

(in thousands)

As Previously

Contract to issue common stock

Convertible debt

Total Liabilities

Stockholders’ Equity

Accumulated deficit

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

September 30, 2024

(in thousands)

As Previously

Accrued liabilities

Contract to issue common stock

Convertible debt

Total Liabilities

Stockholders’ Equity

Accumulated deficit

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

Consolidated Statements of Operations and Comprehensive Loss

The following unaudited consolidated statements of operations and comprehensive loss tables present the impacts of the restatement adjustments for the three and six months ended June 30, 2024, and the three and nine months ended September 30, 2024.

Schedule of consolidated statements of operations and comprehensive Loss

Three Months Ended

June 30, 2024

(in thousands)

As Previously

Interest income (expense), net

Change in fair value of derivative liability

Total Other Income (Expense)

Net Loss, before tax

Comprehensive Loss

Basic and diluted net loss per share, Class A common stock

Six Months Ended

June 30, 2024

(in thousands)

As Previously

Interest income (expense), net

Change in fair value of derivative liability

Total Other Income (Expense)

Net Loss, before tax

Comprehensive Loss

Basic and diluted net loss per share, Class A common stock

Three Months Ended

September 30, 2024,

(in thousands)

As Previously

General and administrative

Total Operating Expenses

Interest income (expense), net

Change in fair value of derivative liability

Total Other Income (Expense)

Net Loss, before tax

Comprehensive Loss

Basic and diluted net loss per share, Class A common stock

Nine Months Ended

September 30, 2024,

(in thousands)

As Previously

General and administrative

Total Operating Expenses

Interest income (expense), net

Change in fair value of derivative liability

Total Other Income (Expense)

Net Loss, before tax

Comprehensive Loss

Basic and diluted net loss per share, Class A common stock

Consolidated Statements of Stockholders’ Equity

The following unaudited consolidated statements of stockholders’ equity tables present the impacts of the restatement adjustments for the three months ended June 30, 2024, and September 30, 2024.

Schedule of consolidated statements of stockholders’ equity

Stockholders’

Equity (Deficit)

As Previously Reported

Balance at March 31, 2024

Balance at June 30, 2024

Adjustments to Debt

Balance at March 31, 2024

Balance at June 30, 2024

Balance at March 31, 2024

Balance at June 30, 2024

(in thousands)

Stockholders’

Equity (Deficit)

As Previously Reported

Balance at March 31, 2024

Balance at June 30, 2024

Balance at September 30, 2024

Adjustments to Debt

Balance at March 31, 2024

Balance at June 30, 2024

Balance at September 30, 2024

Adjustments to Accrued Legal Fees

Balance at March 31, 2024

Balance at June 30, 2024

Balance at September 30, 2024

Balance at March 31, 2024

Balance at June 30, 2024

Balance at September 30, 2024

Consolidated Statements of Cash Flows

The following unaudited consolidated statements of cash flow tables present the impacts of the restatement adjustments for the six months ended June 30, 2024, and the nine months ended September 30, 2024.

Schedule of consolidated statements of cash flows

Six Months Ended

June 30, 2024

(in thousands)

As Previously

Operating activities

Adjustments to reconcile net loss to net cash used in operating activities

Amortization of debt discount and deferred financing cost

Accrued interest expense on promissory note and convertible debt

Change in fair value of derivative liability

Net cash used in operating activities

Nine Months Ended

September 30, 2024,

(in thousands)

As Previously

Operating activities

Change in operating assets and liabilities:

Accrued liabilities

Adjustments to reconcile net loss to net cash used in operating activities

Amortization of debt discount and deferred financing cost

Accrued interest expense on promissory note and convertible debt

Change in fair value of derivative liability

Net cash used in operating activities

NOTE 22 – Subsequent Events

Note Exchanges

During the period from January 1, 2025, to January 29, 2025, the Company exchanged $ 605 thousand of the outstanding balance of the December 2023 Note for approximately 311,783 shares of the Company’s Class A Common Stock at exchange prices between $ 1.79 and $ 2.03 per share.

The loss on the exchange is approximately $ 48 thousand.

Convertible Debt Conversion

In January 31, 2025, the Company has issued 242,491 shares of the Company’s Class A Common Stock related to Purchase Notice dated January 28, 2025, for an exchange amount of $ 297 thousand.

Securities Purchase Agreement with Avondale Capital, LLC

Securities Purchase Agreement with Avondale Capital

On March 26, 2025, the Company entered into a Securities Purchase Agreement (“SPA”) with Avondale Capital, LLC (“Investor”), pursuant to which the Company may issue and sell up to $20,000 thousand of Pre-Paid Purchase agreements (“Pre-Paid Purchases”) in tranches over time.

The initial tranche included a $4,200 thousand Pre-Paid Purchase, structured with a $200 thousand original issue discount (“OID”) and $10 thousand in transaction-related fees, resulting in net proceeds of $4,000 thousand.

In connection with the initial closing, the Company issued 80,000 commitment shares to the Investor.

Under the terms of the SPA, the Investor may, at its discretion and with approval of Management, convert outstanding balances into shares of the Company’s common stock at predefined fixed or formula-based prices.

These conversion prices are subject to customary adjustments for stock splits, reverse splits, reclassifications, dilutive issuances, and similar corporate actions.

The agreement contains mandatory repayment provisions, including:

A Floor Price Trigger, requiring monthly cash repayments of $500 plus accrued interest if the Company’s volume-weighted average price (“VWAP”) remains below a specified Floor Price for 5 out of 7 consecutive trading days.

An Exchange Cap Trigger, which obligates repayment if the Company reaches 90% of the maximum share issuance allowed under Nasdaq Listing Rule 5635(d), unless stockholder approval is obtained.

Failure to meet these obligations or other covenant breaches would constitute an Event of Default, triggering immediate repayment of the outstanding balance plus a 10% penalty and default interest at 18% per annum.

For accounting purposes, the Pre-Paid Purchases are recorded as liabilities, due to the potential for cash settlement.

The embedded conversion features and other repayment features, including the Beneficial Conversion Feature and variable-price reset mechanisms, are derivatives under ASC 815-15.

The liability is remeasured each reporting period, with changes in fair value recognized in earnings.

The Company is required to maintain an effective registration statement (Form S-1) for the resale of shares issuable under the SPA and obtain stockholder approval by May 31, 2025, to issue shares beyond the Exchange Cap.

Failure to obtain such approval would require the Company to settle all remaining obligations in cash.

These financing arrangements may impact the Company’s liquidity, shareholder dilution, and introduce non-cash earnings volatility related to periodic fair value adjustments of derivative instruments.

Additional Pre-Paid Purchases.

So long as certain conditions set forth in the Purchase Agreement are satisfied, including minimum trading volume thresholds and the receipt of shareholder approval to exceed applicable Nasdaq limitations, we may request one or more additional Pre-Paid Purchases.

Each subsequent Pre-Paid Purchase will have (i) an original issue discount of five percent (5%) of the requested amount, (ii) no additional transaction expense beyond that initial $10,000.00, (iii) a floor price equal to 20% of the applicable Minimum Price, and (iv) a “fixed price” component capped at 120% of the Minimum Price on the closing day for such Pre-Paid Purchase.

The Company retains the discretion to draw or to forego any Pre-Paid Purchases beyond the initial closing.

Nasdaq Listing Rule 5635(d) Limitation.

Notwithstanding anything to the contrary, unless and until the Company obtains requisite stockholder approval as required by Nasdaq Listing Rule 5635(d), the total cumulative number of shares of Common Stock that may be issued to Avondale under all Pre-Paid Purchases cannot exceed the numerical threshold required by that rule (the “Exchange Cap”).

If we do not obtain such approval at our upcoming annual meeting or any adjournment or postponement thereof, any remaining outstanding balance above the Exchange Cap under any Pre-Paid Purchase must be satisfied in cash.

The Purchase Agreement also contains standard beneficial ownership limitations preventing Avondale from exceeding 9.99% beneficial ownership of our outstanding Common Stock.

Registration Obligations.

The Company has agreed to file a registration statement covering the resale of at least 10,000,000 shares (including the Commitment Shares and those potentially issuable under the Initial Pre-Paid Purchase) within 30 days following the initial closing.

Additional registration obligations may be triggered if the Company elects to draw any subsequent Pre-Paid Purchases, such that the full $20,000,000.00 of the Commitment Amount (including all shares issuable thereunder) is registered for resale.

This summary specifically covers the Commitment Shares and the shares underlying the Initial Pre-Paid Purchase.

Any subsequent Pre-Paid Purchase or shares issuable thereunder will be registered pursuant to new or amended registration statements if and when such Pre-Paid Purchases occur.

Use of Proceeds.

We intend to use the net proceeds from any Pre-Paid Purchases primarily for working capital and general corporate purposes, as detailed in the applicable registration statement and in accordance with the terms of the Purchase Agreement.

The Company is not obligated to request any Pre-Paid Purchase beyond the initial one.

Potential Dilutive Effects.

Depending on market conditions and other factors, issuances of Common Stock under the Pre-Paid Purchases may result in substantial dilution to existing shareholders.

The amount of dilution will depend on various factors, including the number of shares ultimately issued and the applicable Purchase Share Purchase Price at the time of each conversion.

No additional issuance of Common Stock under the Purchase Agreement would occur if it would exceed the Exchange Cap under Nasdaq Listing Rule 5635(d) absent the required stockholder approval.

The Company has committed to seeking this approval on or before May 31, 2025, and if not obtained, it will continue seeking such approval every 90 days until the approval is secured, or the Pre-Paid Purchase outstanding balance is otherwise satisfied in accordance with the Purchase Agreement.

This description is qualified in its entirety by reference to the text of the Purchase Agreement, a copy of which is attached hereto as Exhibit 10.14 and also is incorporated herein by reference.

The exhibits listed in the accompanying index to exhibits are filed or incorporated by reference as part of this Annual Report.

Agreement and Plan of Merger, dated as of September 25, 2022, by and among KINS Technology Group Inc., Inpixon, CXApp Holding Corp.

and KINS Merger Sub Inc.

Separation and Distribution Agreement, dated as of September 25, 2022, by and among KINS Technology Group Inc., Inpixon, CXApp Holding Corp.

and Design Reactor, Inc.

Sponsor Support Agreement, dated as of September 25, 2022, by and among KINS Capital LLC, KINS Technology Group Inc., Inpixon and CXApp Holding Corp.

Amended and Restated Certificate of Incorporation of the Company.

Amended and Restated Bylaws of the Company.

Warrant Agreement, dated as of December 14, 2020, by and between KINS and Continental Stock Transfer & Trust Company, as warrant agent (incorporated herein by reference from Exhibit 4.1 on KINS’ Form 8-K, filed December 21, 2020).

Specimen CXApp Inc.

Class A Common Stock Certificate.

Specimen CXApp Inc.

Class C Common Stock Certificate.

Specimen Warrant Certificate of the Company.

Description of the Company’s securities.

Employee Matters Agreement, dated March 14, 2023, by and among KINS, KINS Merger Sub Inc., Inpixon, and Legacy CXApp.

Tax Matters Agreement, dated March 14, 2023, by and among KINS, Inpixon, and Legacy CXApp.

Transition Services Agreement, dated March 14, 2023, by and between Inpixon and Legacy CXApp.

Consulting Agreement, dated March 14, 2023, by and between Design Reactor, Inc.

and 3AM, LLC.

Employment Agreement, dated as of January 9, 2023, by and between Design Reactor, Inc.

and Khurram Sheikh.

(incorporated by reference to the Company’s Current Report on Form 8-K filed on March 31, 2023).

Offer Letter, dated as of July 18, 2024, by and between Joy Mbanugo and CXApp Inc.

(incorporated by reference to the Company’s Current Report on Form 8-K filed on August 20, 2024).

2023 Equity Incentive Plan.

Securities Purchase Agreement, dated as of May 22, 2024, by and between CXApp Inc.

and Streeterville Capital, LLC (incorporated herein by reference from Exhibit 10.8 on CXApp’s Form 10-K filed May 24, 2024).

Exchange Agreement, dated as of June 25, 2024, by and between CXApp Inc.