What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-11-12 compared with 2025-08-13 · 898 added, 527 removed, 750 unchanged (66% of the section changed)

5 unchanged sentences

(in thousands, except share and per share data)

September 30,

Current Assets

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200,000,000 shares authorized;

21,441,162 shares issued and outstanding as of June 30, 2025, and 19,221,090 shares issued and outstanding as of December 31, 2024

25,850,177 shares issued and outstanding as of September 30, 2025, and 19,221,090 shares issued and outstanding as of December 31, 2024

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Total Stockholders’ Equity

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AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

(Unaudited, in

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Three Months Ended

September 30,

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Cost of Revenues

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AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

(Unaudited, in thousands, except share data)

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Stockholders’

Balance at January 1, 2025

at January 1, 2025

Stock-based compensation

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Common shares issued for vested RSUs

Taxes withheld for stock-based compensation

Taxes withheld on stock based

Cumulative translation adjustment

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Stock-based compensation

Common shares issued for repayment of debt

Common shares issued for commitment shares

Taxes withheld for stock-based compensation

Common shares issued for extinguishment of debt

Common shares issued as commitment shares

Taxes withheld on stock based

Cumulative translation adjustment

Balance at June 30, 2025

Stock-based compensation

Common shares issued for extinguishment of debt

Taxes withheld on stock based compensation

Cumulative translation adjustment

at September 30, 2025

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

EQUITY - continued

(Unaudited, in thousands, except share data)

Comprehensive

Stockholders’

Balance at January 1, 2024

at January 1, 2024

Stock-based compensation

Cumulative translation adjustment

Balance at March 31, 2024

at March 31, 2024

Stock-based compensation

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Balance at June 30, 2024

Stock-based compensation

Common shares issued for extinguishment of debt

Cumulative translation adjustment

at September 30, 2024

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

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(Unaudited, in thousands)

Six Months Ended

Nine Months Ended

September 30,

Operating activities

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Loss on contract to issue common stock

Loss on asset disposal

Change in operating assets and liabilities:

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Net cash used in operating activities

Investing activities

Purchases of property and equipment

Net cash used in investing activities

Financing activities

Proceeds from issuance of convertible debt, net of issuance costs

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Effect of exchange rate changes on cash and cash equivalents

Net decrease in cash and cash equivalents

Net increase / (decrease) 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

disclosures of cash flow information

Cash paid for taxes

Cash paid for interest

Supplemental schedule of noncash investing and financing activities

schedule of noncash investing and financing activities

Financing of Director and Officer Insurance

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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 workplace 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 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.

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 workplace 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.

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.

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 U.S.

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.

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, 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 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.

NOTE 2 – Summary of Significant Accounting Policies

As of June 30, 2025, the Company had a working capital deficiency of approximately $ 1,415 thousand and cash and cash equivalents of approximately $ 4,854 thousand.

For the three and six months ended June 30, 2025, the Company incurred net losses of approximately $ 3,139 thousand and $ 4,755 thousand, respectively.

During the six months ended June 30, 2025, the Company used approximately $ 3,991 thousand of cash for operating activities.

As of September 30, 2025, the Company had a working capital deficiency of approximately $ 711 thousand and cash and cash equivalents of approximately $ 5,088 thousand.

For the three and nine months ended September 30, 2025, the Company incurred net losses of approximately $ 3,157 thousand and $ 7,912 thousand, respectively.

During the nine months ended September 30, 2025, the Company used approximately $ 6,750 thousand of cash for operating activities.

The Company cannot assure that it will ever earn revenues sufficient to support their operations, or that it will ever achieve profitable operations.

The Company’s recurring losses and utilization of cash in its operations are indicators of substantial doubt that the entity can continue as a going concern;

however, with the Company’s current liquidity position the Company has taken the following steps to achieve efficient operations:

On March 26, 2025, the Company entered into a Securities Purchase Agreement (“SPA”) with Avondale Capital, LLC, under which the Company may issue and sell one or more Pre-Paid Purchase Agreements for up to an aggregate of $20,000 thousand in exchange for shares of its common stock.

The initial Pre-Paid Purchase, in the principal amount of $4,200 thousand, closed on April 8, 2025, with the Company receiving net proceeds of approximately $3,990 thousand.

As of June 30, 2025, approximately $15,800 thousand remained available under this agreement.

The Company’s recurring losses and cash utilization raise doubt about its ability to continue as a going concern.

However, management

believes these conditions have been mitigated for at least twelve months from the issuance date of these condensed consolidated financial

statements, due to the Company’s recent financing arrangements and expense reduction initiatives.

Based on current operating plans and

available liquidity, management estimates available cash and committed funding will sustain operations through Q4 2026.

On March 26, 2025, the Company entered into a Securities Purchase Agreement (“SPA”) with Avondale Capital, LLC, under which the Company may

issue and sell one or more Pre-Paid Purchase Agreements for up to an aggregate of $20,000 thousand in exchange for shares of its common

The initial Pre-Paid Purchase, in the principal amount of $4,200 thousand, closed on April 8, 2025, with the Company received net

proceeds of approximately $3,990 thousand.

A second tranche was received on August 7, 2025, with a principal amount of $3,150 thousand

and net proceeds of approximately $3,000 thousand.

As of September 30, 2025, approximately $12,650 thousand remained available under this

Additionally, under the SPA with Streeterville Capital, LLC, entered into on May 22, 2024, the Company had access to up to $10,000 thousand in funding.

As of June 30, 2025, the Company had $3,520 thousand in remaining available funding under this agreement.

The Company believes that these financing efforts can mitigate any going concern indicators for a period of at least one year from the date these financial statements are issued.

The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement its business plan.

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.

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 next 12 months.

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.

As of September 30, 2025, the Company had $3,520 thousand in remaining available funding under this agreement.

On August 11, 2025, the Company filed a shelf

registration statement on Form S-3 with the Securities and Exchange Commission (“SEC”), authorizing the future offering and

sale of up to $150,000 thousand of various securities.

Concurrently, the Company filed a prospectus supplement allowing for the issuance

of up to $7,959 thousand of common stock under this registration.

This amount is included within the total aggregate offering authorized.

The Company believes that these financing efforts

can mitigate any going concern indicators for a period of at least one year from the date these unaudited condensed consolidated financial

statements are issued.

The ability of the Company to continue as a going concern is dependent upon the Company’s ability to further implement

its business plan.

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis,

which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business.

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 next 12 months.

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

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Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with U.S.

GAAP for interim financial information and the requirements of the Securities and Exchange Commission (the “SEC”) for interim reporting.

Accordingly, since they are interim statements, they do not include all of the information and disclosures required by U.S.

The accompanying unaudited condensed consolidated

financial statements have been prepared in accordance with U.S.

GAAP for interim financial information and the requirements of the Securities

and Exchange Commission (the “SEC”) for interim reporting.

Accordingly, since they are interim statements, they do not include

all of the information and disclosures required by U.S.

GAAP for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the three and six months ended June 30, 2025, are not necessarily indicative of the results that may be expected for other quarters or the year ending December 31, 2025.

The condensed consolidated balance sheet as of December 31, 2024 has been derived from the audited financial statements as of that date.

For more complete financial information, these condensed consolidated financial statements and the notes thereto should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on April 7, 2025.

In the opinion of management, all adjustments

(consisting of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the

three and nine months ended September 30, 2025, are not necessarily indicative of the results that may be expected for other quarters

or the year ending December 31, 2025.

The condensed consolidated balance sheet as of December 31, 2024 has been derived from the audited

financial statements as of that date.

For more complete financial information, these condensed consolidated financial statements and

the notes thereto should be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K for

the year ended December 31, 2024, which was filed with the SEC on April 7, 2025.

Principles of Consolidation

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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.

has not realized any losses relating to its cash, cash equivalents, and accounts receivable.

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 accounts receivable.

However, a material loss resulting from the

failure of one or more financial institutions, or from a significant default in accounts receivable, could have a substantial adverse

effect on the Company’s liquidity, financial position, and operating results.

Given the concentration of these financial instruments,

any unexpected credit event could impair the Company’s ability to meet its short-term obligations and fund ongoing operations.

Emerging Growth Company

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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 at the time of purchase.

As of June 30, 2025, the Company held approximately $ 4,365 thousand in cash equivalents, consisting of certificates of deposit held at multiple banks, each limited to $ 250 thousand per bank and with durations of 90 days or less.

As of December 31, 2024, the Company held approximately $ 4,353 thousand in cash equivalents.

As of September 30, 2025, the Company held approximately $ 4,653 thousand in cash equivalents, consisting of certificates of deposit held at multiple banks, each limited to $ 250 thousand per bank and with durations of 90 days or less.

As of December 31, 2024, the Company held approximately $ 4,353 thousand in cash equivalents, consisting of certificates of deposit held at multiple banks, each limited to $ 250 thousand per bank and with durations of 90 days or

Accounts Receivable 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 receivables are not overstated due to un-collectability.

Allowance for credit losses are 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 experience.

An additional reserve 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.

The Company has no allowance for credit losses as of June 30, 2025 and December 31, 2024, respectively.

Other receivables as presented within “unbilled

and other receivables” includes mainly sales tax recoverables from tax authorities.

These are recognized when the underlying transaction

occurs and reviewed periodically for collectibility.

As of June 2025 and December 2024, sales tax receivables were $ 78 thousand and $ 67

Accounts receivables are stated at the amount

the Company expects to collect.

The Company recognizes an allowance for credit losses to ensure accounts receivables are not overstated

due to un-collectability.

Allowance for credit losses are 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 experience.

An additional reserve 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.

The Company has no allowance for credit losses as of

September 30, 2025 and December 31, 2024.

Other receivables as presented within “unbilled and other receivables” includes mainly unbilled receivables and sales tax recoverable

from tax authorities.

These are recognized when the underlying transaction occurs and reviewed periodically for collectability.

September 30, 2025 and December 31, 2024, sales tax receivables were $ 77 thousand and $ 67

thousand, respectively.

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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 not incur any impairment charges for the three and six months ended June 30, 2025 and June 30, 2024.

Based on its assessments, the Company did not incur any impairment charges for the three and nine months ended September 30, 2025 and September 30, 2024.

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.

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

The Company completed a qualitative goodwill impairment assessment as of June 30, 2025, and determined that no impairment was necessary.

No goodwill impairment was recognized for the year ended December 31, 2024, based on the annual goodwill impairment evaluation performed as of November 30, 2024 for the year ended December 31, 2024.The Company based 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 any impairment for the three and six months ended June 30, 2025 and June 30, 2024.

The Company completed a qualitative as well as

quantitaive goodwill impairment assessment as of September 30, 2025, and determined that no impairment was necessary.

No goodwill impairment

was recognized for the year ended December 31, 2024, based on the annual goodwill impairment evaluation performed as of November 30,

2024 for the year ended December 31, 2024.

The Company based 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 any impairment for the three and nine months ended September 30, 2025 and September 30, 2024.

Leases and Right-of-Use Assets and Liabilities

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denominated transactions with customers that operate in functional currencies other than the U.S.

Aggregate foreign currency

net transaction loss was approximately $ 301

thousand and $ 302

thousand, for the three months and six months ended June 30, 2025 and net gains of $ 22

thousand and $ 76

thousand for the three months and six months ended June 30, 2024, respectively.

The aggregate foreign

currency net transaction gain was approximately $ 98

thousand, and loss of $ 204

thousand, for the three and nine months ended September 30, 2025 and net loss of $ 42

thousand and net gain of $ 34

thousand for the three and nine months ended September 30, 2024, respectively.

Convertible Debt

The Company issued convertible debt in the form of Pre-Paid Purchases during December 2024 and March 2025 (Settlement date April 2025) and evaluated such instruments to determine whether they contain features that qualify as embedded derivatives in accordance with ASC 815 “ Derivatives and Hedging” (“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 “Financial Instruments” (“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 Condensed Consolidated Statements of Operations and Comprehensive 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 loss on changes in the estimated fair value of the convertible debt of approximately $ 382 thousand and $ 500 thousand for the three and six months ended June 30, 2025, respectively, and $ 0 for the three and six months ended June 30, 2024.

Company issued convertible debt in the form of Pre-Paid Purchases during December 2024 and March 2025 (Settlement date April 2025)

and evaluated such instruments to determine whether they contain features that qualify as embedded derivatives in accordance with

ASC 815 “Derivatives and Hedging” (“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 “Financial Instruments” (“ASC

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 Condensed Consolidated Statements of Operations and Comprehensive 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 net gain on changes in the estimated fair value of the convertible debt of

approximately $ 887 thousand

and $ 387 thousand

for the three and nine months ended September 30, 2025, respectively, and loss of $ 67 thousand

and $ 17 thousand for the three and nine months ended September 30, 2024.

Debt Issuance Costs

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

Note Conversion

Convertible notes that are exchanged for equity pursuant

to their original contractual terms are accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options .

Convertible notes that are exchanged for equity

pursuant to their original contractual terms are accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options.

Upon conversion, the carrying amount of the convertible debt is reclassified to equity.

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the conversion is executed under the original terms of the instrument.

If the debt is settled under modified terms, the transaction

is accounted for in accordance with ASC 470-50, Debt – Modifications and Extinguishments .

In such cases, a gain or

loss is recognized equal to the difference between the reacquisition price and the net carrying amount of the extinguished debt.

If the debt is settled under modified terms,

the transaction is accounted for in accordance with ASC 470-50, “Debt - Modifications and Extinguishments” (“ASC 470-50”).

In such cases, a gain or loss is recognized equal to 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 “Revenue from Contracts with Customers” (“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 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 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.

The Company recognizes revenue in accordance 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.

The Company recognizes revenue, in accordance

with ASC 606 “Revenue from Contracts with Customers” (“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 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 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.

The Company recognizes revenue in accordance with

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.

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.

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Anticipated losses are recognized as soon as they become known.

For the three and six months ended June 30, 2025 and June 30, 2024, the Company did not incur any such losses.

For the three and nine months ended September

30, 2025 and September 30, 2024, the Company did not incur any such losses.

These amounts are based on known and estimated factors.

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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 $ 2,532 thousand and $ 2,683 thousand as of June 30, 2025 and December 31, 2024, 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 $ 787 thousand and $ 1,778 thousand, $ 842 thousand and $ 1,872 thousand, that was included in the contract liability balance at the beginning of the period, for the three and six months ended June 30, 2025 and June 30, 2024, respectively.

The Company had deferred revenue of approximately $ 1,573 thousand and $ 2,683 thousand as of September 30, 2025 and December 31, 2024, respectively, related to customer invoices rendered in advance for software licenses and professional services provided by the Company’s technical staff.

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 $ 547

thousand and $ 2,325

thousand, that was included in the contract liability balance at the beginning of the period, for the three and nine months ended

September 30, 2025 and $ 487

thousand and $ 2,359

thousand, that was included in the contract liability balance at the beginning of the period, for the three and nine months ended September 30,

2024, respectively.

Costs to Obtain a Contract

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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.

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.

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

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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.

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 on the condensed consolidated statements of operations amounting to $ 1,262

thousand and $ 3,576

thousand, for the three months and six months

ended June 30, 2025, respectively.

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 on

the condensed consolidated statements of operations amounting to $ 0 and $ 3,576 , for the three and nine months ended September 30, 2025,

respectively.

Changes in the estimated fair value of the warrants are recognized as a non-cash loss on the condensed consolidated statements

of operations amounting to $ 1,051 thousand and $ 2,523 thousand for the three months and six months ended June 30, 2024, respectively.

of operations amounting to $ 1,052 thousand and $ 3,575 thousand for the three and nine months ended September 30, 2024, respectively.

The Company utilized the Public Warrant quoted market price as the fair value of the Warrants as of each relevant date.

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Diluted earnings per share are similarly calculated with the inclusion of dilutive common stock equivalents.

For the three and six months ended June 30, 2025 and June 30, 2024, basic and dilutive net 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 three and six months ended June 30, 2025 and June 30, 2024.

For the three and nine months ended September 30, 2025 and September 30, 2024, basic and dilutive net 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 three and nine months ended September 30, 2025 and September 30, 2024.

Schedule of anti-dilutive shares

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Three Months Ended

September 30,

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Stock options

6 unchanged sentences

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.

value measurements discussed herein are based upon certain market assumptions and pertinent information available to management.

fair value of the warrants has been measured based on the listed market price of such warrants, a Level 1 measurement.

For the three

and six months ended June 30, 2025, the Company recognized, in the consolidated statements of operations and comprehensive loss,

unrealized gain of $ 1,262

thousand and $ 3,576

thousand, respectively.

The Company recognized

unrealized loss of $ 1,051

thousand and $ 2,523

thousand for the three and six months ended June 30, 2024, respectively.

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 three and nine months ended September 30, 2025, the Company

recognized, in the consolidated statements of operations and comprehensive loss, unrealized gain of $ 0 and $ 3,576 , respectively.

recognized unrealized loss of $ 1,052 thousand and $ 3,575 thousand for the three and nine months ended September 30, 2024, respectively.

The following table presents information about

the Company’s financial liabilities that were measured at fair value on a recurring basis as of June 30, 2025 and December 31, 2024

the Company’s financial liabilities that were measured at fair value on a recurring basis as of September 30, 2025 and December 31, 2024,

and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

Schedule of financial liabilities measured at fair value

As of June 30, 2025

September 30, 2025

Quoted price in

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Significant other

Significant other unobeservable input

Significant other unobservable input

Convertible Note

-Streetervile Prepaid Purchase #3

-Avondale Prepaid Purchase #1

-Avondale Prepaid Purchase #2

Quoted price in

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Significant other

Significant other unobeservable

Significant other unobservable

Convertible Note

-Streetervile Prepaid Purchase #1

-Streetervile Prepaid Purchase #2

-Streetervile Prepaid Purchase #3

-Streeterville Prepaid Purchase #1

-Streeterville Prepaid Purchase #2

-Streeterville Prepaid Purchase #3

The Company accounts for its public and private warrants as a derivative liability initially measured at its fair values and remeasured in the condensed consolidated statements of operations at the end of each reporting period.

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Change in fair value of derivative instruments

Warrant liability – June 30, 2025

liability – June 30, 2025

Change in fair value of derivative instruments

Warrant liability – September 30, 2025

Warrant liability – January 1, 2024

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Change in fair value of derivative instruments

Warrant liability – June 30, 2024

The Company accounts for convertible debt under the fair value option election using Level 3 inputs.

For the three and six months ended June 30, 2025 and June 30, 2024, the Company recognized an unrealized loss in the Consolidated Statements of Operations and Comprehensive Loss of $ 303 thousand and $ 421 thousand, $ 0 respectively, which are presented as a change in fair value of derivative liability.

See additional details within Note 11, Convertible debt .

liability – June 30, 2024

Change in fair value of derivative instruments

Warrant liability – September 30, 2024

The Company accounts for convertible debt under

the fair value option election using Level 3 inputs.

For the three and nine months ended September 30, 2025, the Company recognized

an unrealized gain in the Consolidated Statements of Operations and Comprehensive loss of $ 887

respectively.

For the three and nine months ended September 30, 2024, the Company recognized an unrealized loss in the Consolidated

Statements of Operations and Comprehensive loss of $ 67

thousand and $ 17

respectively, which are presented as a change in fair value of derivative liability.

See additional details within Note 11,

Convertible debt .

Under ASC Topic 820-10, the convertible debts

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value of the convertible note is valued by an independent valuer using a probability-weighted scenarios model with the following significant

Streeterville

Pre-Paid Purchase #1

Schedule of valuation models

September 30,

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

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Risk free rate

Streeterville

Pre-Paid Purchase #3

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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:

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 three and six months ended June 30, 2025 and June 30, 2024.

(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;

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

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 three and nine months ended September 30, 2025 and September 30, 2024.

Recently Issued Accounting Standards Not Yet Adopted

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“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 amendment requires companies to apply a preexisting contract

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 of this standard on our condensed consolidated financial statements.

adoption permitted for entities that have adopted the amendments in ASU 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 ASU 2020-06.

We are currently evaluating the impact of this standard

on our condensed consolidated financial statements.

NOTE 3 – Disaggregation of Revenue

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Subscription revenue

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended

Six Months Ended

Revenue recognized over time (1)(2)

Revenue recognized at point in time (3)

September 30,

Nine Months Ended

September 30,

recognized over time (1)(2)

recognized at point in time (3)

Professional services are also contracted on the fixed fee and time and materials basis.

6 unchanged sentences

Schedule of property and equipment

September 30,

Computer and office equipment

3 unchanged sentences

Total Property and Equipment, Net

Depreciation and amortization expense were approximately

Depreciation expense was approximately

thousand and $ 35

thousand for the three and six months ended June 30, 2025, respectively.

Depreciation and amortization expense were approximately $ 22 thousand and $ 44 thousand for the three and six months ended June 30, 2024, respectively.

thousand for the three and nine months ended September 30, 2025, respectively.

Depreciation expense was approximately $ 20 thousand and $ 64 thousand for the three and nine months ended September 30, 2024, respectively.

NOTE 5 – Goodwill and Intangible Assets

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 June 30, 2025 and December 31, 2024, was $ 8,737 thousand.

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 was $ 8,737 thousand as of September 30, 2025 and December 31, 2024.

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.

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For the quantitative test, we calculate the estimated fair value using a weighting of the income and market approaches.

The Company completed a qualitative goodwill impairment assessment as of June 30, 2025 and determined that no impairment was necessary.

The Company completed a qualitative as well as quantitative goodwill impairment assessment as of September 30, 2025, and determined that no

impairment was necessary.

No goodwill impairment was recognized for the year ended December 31, 2024 based on the annual goodwill impairment evaluation as of November 30, 2024 for the year ended December 31, 2024.

1 unchanged sentence

Schedule of intangible assets

June 30, 2025

September 30, 2025

December 31, 2024

Weighted Average

Remaining Useful

Accumulated Amortization

3 unchanged sentences

Patents and Intellectual Property

Future amortization expense on intangible assets as of June 2024 is anticipated to be as follows (in thousands):

Future amortization expense on intangible assets as of September 2025 is anticipated to be as follows (in thousands):

Schedule of future amortization expense

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Advance from customer

Deferred Revenue – June 30, 2025

Deferred Revenue – September 30, 2025

License Agreements

4 unchanged sentences

Deferred Revenue – December 31, 2024

Deferred revenues were approximately $ 2,532 thousand and $ 2,683 thousand at June 30, 2025 and December 31, 2024, respectively.

Deferred revenues were approximately $ 1,573 thousand and $ 2,683 thousand as of September 30, 2025 and December 31, 2024, respectively.

The fair value of the deferred revenue approximates

5 unchanged sentences

Schedule of accrued liabilities

September 30,

Accrued expenses and reimbursements

11 unchanged sentences

The Company made a down payment of $ 70 thousand on the policy.

As of June 30, 2025 and December 31, 2024, the Company owed $ 168 thousand and $ 23 thousand, respectively, on the D&O insurance policy.

As of September 30, 2025 and December 31, 2024, the Company owed $ 96 thousand and $ 23 thousand, respectively, on the D&O insurance policy.

NOTE 8 – Promissory Note

1 unchanged sentence

Schedule of promissory note

September 30,

Principal amount

16 unchanged sentences

As of January 17, 2025, the Company paid down the entire Streeterville note.

Interest expense recognized on the condensed consolidated statement of operations and comprehensive loss were approximately $ 0 and $ 2 thousand, $ 322 thousand, and $ 642 thousand for the three and six months ended June 30, 2025 and June 30, 2024, respectively.

Interest expense recognized on the condensed consolidated statement of operations and comprehensive loss were approximately $ 0 and $ 2 thousand, $ 317 thousand, and $ 958 thousand for the three and nine months ended September 30, 2025 and September 30, 2024, respectively.

NOTE 9 – Warrants

Public Warrants

As of June 30, 2025 and December 31, 2024, there were 10,751,862 Public Warrants outstanding.

As of September 30, 2025 and December 31, 2024, 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.

4 unchanged sentences

Private Warrants

As of June 30, 2025, and December 31, 2024, there were 10,280,000 Private Placement Warrants outstanding.

As of September 30, 2025 and December 31, 2024, 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.

1 unchanged sentence

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 periods ended June 30, 2025 and December 31, 2024, there were no exercises or exchanges made in relation with the Company’s Warrants.

For the three and nine months ended September 30, 2025 and September

30, 2024 there were no exercises or exchanges made in relation with the Company’s Warrants.

NOTE 10 – Stock Option Plan and Stock-Based Compensation

23 unchanged sentences

The fair value of the common stock as of the grant date utilized in the Black-Scholes options valuation model was $ 1.00 per share.

See below the summary of stock options granted under the Incentive Plan as of June 30, 2025 and December 31, 2024.

See below the summary of stock options granted under the Incentive Plan as of September 30, 2025 and December 31, 2024.

Schedule of stock option activity

Number of Options

Weighted average

exercise price

Weighted average remaining contractual term

Weighted average

at Grant date

Intrinsic Value

(in thousand)

Options outstanding at January 1, 2025

Options outstanding at June 30, 2025

Options exercisable at June 30, 2025

Number of Options

Options outstanding at September 30, 2025

Options exercisable at September 30, 2025

Weighted average

exercise price

Weighted average remaining contractual term

Weighted average

contractual term

Weighted average

at Grant date

Intrinsic Value

(in thousand)

Options outstanding at January 1, 2024

4 unchanged sentences

Three Months Ended

September 30,

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Research and development

2 unchanged sentences

Total non-cash stock compensation

As of June 30, 2025, the remaining unrecognized stock compensation expense totaled approximately $ 545 thousand.

As of September 30, 2025, the remaining unrecognized stock compensation expense totaled approximately $ 489 thousand.

This amount will be recognized as expense over the weighted average remaining term of 2.28 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 for the six months ended June 30, 2025 and the year ended December 31, 2024 were as follows:

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 for the nine months ended September 30, 2025 and the year ended December 31, 2024 were as follows:

Schedule of assumptions used

September 30,

Risk-free interest rate

12 unchanged sentences

There was no other activity related

to restricted stock units for the six months ended June 30, 2025.

The following summarizes our RSUs transaction activity for six months ended June 30, 2025 and year ended December 31, 2024:

to restricted stock units for the nine months ended September 30, 2025.

The following summarizes our RSUs transaction activity

for nine months ended September 30, 2025:

Schedule of RSUs transaction

1 unchanged sentence

Outstanding at January 1, 2025

Outstanding at June 30, 2025

Outstanding at September 30, 2025

Weighted Average

2 unchanged sentences

The total fair value of RSUs vested was $ 1,309 thousand

and $ 905 thousand, during the three and six months ended June 30, 2025, respectively.

The total fair value of RSUs vested was $ 889 thousand

for three and six months ended June 30, 2024.

Non-cash stock-based compensation expenses related to restricted stock units for the six months ended June 30, 2025 and June 30, 2024 were recorded in the financial statements as summarized below:

and $ 2,214 thousand, during the three and nine months ended September 30, 2025, respectively.

The total fair value of RSUs vested was $ 2,318 thousand for three and nine months ended September 30, 2024.

Non-cash stock-based compensation expenses related

to restricted stock units for the three and nine months ended September 30, 2025 and September 30, 2024 were recorded in the financial

statements as summarized below:

Schedule of non-cash stock-based compensation expenses related to restricted stock units

Three Months ended

Six Months ended

September 30,

Nine Months ended

September 30,

Three Months ended

Six Months ended

September 30,

Nine Months ended

September 30,

Research and development

2 unchanged sentences

Total non-cash stock compensation

As of June 30, 2025 and June 30, 2024, the Company has approximately $ 914 thousand and $ 721 thousands of unrecognized restricted stock unit compensation to be expensed over a weighted average period of 0.86 year and 1.51 years, respectively.

As of September 30, 2025, the Company has approximately

thousand of unrecognized restricted stock unit compensation to be expensed over a weighted average period of 0.71

NOTE 11 – Convertible Debt

8 unchanged sentences

Avondale may redeem all or any part of the outstanding balance of the Avondale 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 $1.106 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 $0.1843, subject to certain adjustments and ownership limitations specified in the Avondale convertible Pre-Paid Purchase #1.

As of June 30, 2025, Pre-Paid Purchase #1 is recorded at fair value of $ 4,388 thousand and is within convertible debt on the accompanying condensed consolidated balance sheets.

For the three months and six months ended June 30, 2025, the Company recognized an unrealized loss on change in fair value of Pre-Paid Purchase #1 of $ 195 thousand.

As of September 30, 2025, Pre-Paid Purchase #1 is recorded at fair value of $ 3,564 thousand and is within convertible debt on the accompanying condensed consolidated balance sheets.

For the three and nine months ended

September 30, 2025, the Company recognized an unrealized gain on change in fair value of Pre-Paid Purchase #1 of $ 831 thousand and $ 636 thousand, respectively.

On August 7, 2025, the Company issued an unsecured

convertible Pre-Paid Purchase #2 to Avondale, pursuant to the SPA.

The convertible Pre-Paid Purchase #2 has the original principal amount

of $ 3,150 thousand and Avondale gave consideration of 3,000 thousand, reflecting original issue discount of $ 150 thousand.

2025, the Company received the net proceeds from Avondale.

The Avondale convertible Pre-Paid Purchase #2

accrues interest on the outstanding balance at 5% per annum.

Avondale may redeem all or any part of the outstanding balance of the Avondale

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 $1.0957 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 $0.1826, subject to certain adjustments and ownership limitations specified in the Avondale convertible

Pre-Paid Purchase #2.

As of September 30, 2025, Pre-Paid Purchase #2

is recorded at fair value of $ 2,974 thousand and is within convertible debt on the accompanying condensed consolidated balance sheets.

For the three and nine months ended September 30, 2025, the Company recognized an unrealized gain on change in fair value of Pre-Paid

Purchase #2 of $ 176 thousand.

Securities Purchase Agreement with Streeterville Capital LLC

On May 22, 2024, the Company entered into a Securities Purchase Agreement (the “SPA”) with Streeterville Capital, LLC (“Streeterville”), pursuant to which Streeterville desired 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.

On May 22, 2024, the Company entered into a Securities

Purchase Agreement (the “SPA”) with Streeterville Capital, LLC (“Streeterville”), pursuant to which Streeterville

desired 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.

The SPA required 40,000 common shares of the Company’s Class A Common Stock to be issued as of closing date (May

The Company recorded a liability of $ 130 thousand 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 Streeterville gave consideration of $ 2,480 thousand, reflecting original issue discount of $ 125 thousand and Streeterville’s transaction cost of $ 20 thousand.

The Company recorded a liability of $ 130 thousand on May 22, 2024, for the shares to be issued within contract to issue common

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 Streeterville gave consideration of $ 2,480 thousand, reflecting original issue discount of $ 125

thousand and Streeterville’s transaction cost of $ 20 thousand.

On June 3, 2024, the Company received the net proceeds.

The convertible Pre-Paid Purchase #1 accrues interest on the outstanding balance at 5% per annum.

Streeterville 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.

For the three months and six months ended June 30, 2025, the Company recognized an unrealized loss on change in fair value of Pre-Paid Purchase #1 of $ 19 and $ 52 thousand, respectively.

As of June 30, 2025, the entire outstanding balance of Pre-Paid Purchase #1 is converted into equity.

Accordingly, no fair value measurement is required or presented on the accompanying condensed consolidated balance sheet as of June 30, 2025.

On September 30, 2024, the Company issued an unsecured convertible Pre-Paid Purchase #2 to Streeterville, pursuant to the SPA.

The convertible Pre-Paid Purchase #2 has the original principal amount of $ 1,050 thousand and Streeterville gave consideration of $ 1,000 thousand, reflecting original issue discount of $ 50 thousand.

On September 30, 2024, the Company received the net proceeds from Streeterville.

September 30, 2025 and December 31, 2024, Pre-Paid Purchase #1 is recorded at fair value of $ 0 and $ 543 thousand respectively and is within

convertible debt on the accompanying condensed consolidated balance sheets.

For the three and nine months ended September 30, 2025, the

Company recognized an unrealized loss on change in fair value of Pre-Paid Purchase #1 of $ 0 and $ 52 thousand, respectively.

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.

As of September 30, 2025 and December 31, 2024, Pre-Paid

Purchase #2 is recorded at fair value of $ 0 and $ 1,028 thousand respectively and is within convertible debt on the accompanying condensed

consolidated balance sheets.

For the three and nine months ended September 30, 2025, the Company recognized an unrealized loss on change

in fair value of Pre-Paid Purchase #1 of $ 0 and $ 55 thousand, respectively.

On December 9, 2024, the Company issued an unsecured convertible Pre-Paid Purchase #3 to Streeterville, pursuant to the SPA.

1 unchanged sentence

On December 9, 2024, the Company received the net proceeds from Streeterville.

The convertible Pre-Paid Purchase #3 accrues interest on the outstanding balance at 5% per annum.

Streeterville 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 convertible Pre-Paid Purchase #3 accrues

interest on the outstanding balance at 5% per annum.

Streeterville 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 June 30, 2025, Pre-Paid Purchase #3 is recorded at fair value of $ 3,139 thousand and is recognized under convertible debt on the accompanying condensed consolidated balance sheets.

For the three months and six months ended June 30, 2025, the Company recognized an unrealized loss on change in fair value of Pre-Paid Purchase #3 of $ 145 thousand and $ 197 thousand, respectively.

The following table presents changes in convertible debt measured at fair value for the six months ended June 30, 2025 and for the year ended December 31, 2024.

For the three months and nine months ended September 30, 2025, the Company recognized an unrealized loss on change in fair value of

Pre-Paid Purchase #3 of $ 120 thousand

and $ 317 thousand,

respectively.

As of September 30, 2025, the entire outstanding balance of Pre-Paid Purchase #3 was converted into equity.

Accordingly, no fair value

measurement is required or presented on the accompanying condensed consolidated balance sheet as of September 30, 2025.

The following table presents changes in convertible

debt measured at fair value for the nine months ended September 30, 2025 and for the year ended December 31, 2024.

Schedule of company’s net deferred tax assets

Convertible Debt

Balance as of December 31, 2024

as of December 31, 2024

Settlement (1)

Fair value measurement adjustments

Balance as of June 30, 2025

Balance as of September 30, 2025

Convertible Debt

Balance as of December 31, 2023

of December 31, 2023

Settlement ( 2 )

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Balance as of December 31, 2024

During the six months ended June 30, 2025, the Company have issued 1,797,869 shares of the Company’s Class A Common stock pursuant to purchase notices related to Pre-Paid Purchase#1 and Pre-Paid Purchase#2.

The shares issued have a total exchange amount of $1,677,755 thousand with exchange price of $0.75 to $1.44.

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.

During the nine months ended September 30, 2025, the Company has issued 6,206,884 shares of the Company’s Class A Common stock pursuant

to purchase notices related to Pre-Paid Purchase#1 and Pre-Paid Purchase#2.

The shares issued have a total exchange amount of $4,937 thousand

with exchange prices ranging from $0.59 to $1.44.

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 12 – Common Stock

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On March 31, 2025, the Company issued total of 554,274 shares of Class A Common Stock to satisfy obligations due under the promissory note and convertible debt.

In April 2025, the company issued total of 971,213 shares of the company’s Class A Common stock to satisfy obligations due under the convertible debt.

During April 2025, the company issued total of 971,213

shares of the company’s Class A Common stock to satisfy obligations due under the convertible debt through multiple issuances.

On May 8, 2025, the Company issued 80,000 shares of the Company’s Class A Common Stock as part of the Security Purchase Agreement with Avondale.

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On May 21, 2025, the company issued 112,192 shares of the company’s Class A Common stock to satisfy obligations due under the convertible debt.

In June 2025, the company issued total of 471,973 shares of the company’s Class A Common stock to satisfy obligations due under the convertible debt.

During six months ended June 30, 2025, the Company issued total of 2,109,652 shares of Class A Common Stock to satisfy obligations due under the promissory note and convertible debt.

During June 2025, the company issued total of 471,973

shares of the company’s Class A Common stock to satisfy

obligations due under the convertible debt through multiple issuances.

During July 2025, the company issued total of

834,762 shares of the company’s Class A Common stock to satisfy obligations due under the convertible debt through multiple issuances.

During August 2025, the company issued total of

2,074,223 shares of the company’s Class A Common stock to satisfy obligations due under the convertible debt through multiple issuances.

During September 2025, the company issued total

of 1,500,030 shares of the company’s Class A Common stock to satisfy obligations due under the convertible debt through multiple issuances.

During nine months ended September 30, 2025, the Company issued total of 6,206,884 shares of Class A Common Stock to satisfy obligations due under the promissory note and convertible debt.

See Note 8, Promissory Note and Note 11, Convertible Debt, in the accompanying notes to the consolidated financial statements for further detail.

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annual effective tax rate method would not provide a reliable estimate of the quarterly income tax provision.

The Company recorded an income tax expenses of approximately $ 1 thousand and provision of $ 159 thousand, for the three months ended June 30, 2025 and 2024 respectively, income tax expense of approximately $ 1 thousand and provision of $ 366 thousand for the six months ended June 30, 2025 and 2024, respectively.

The effective tax rate for three and six months ended June 30, 2025 and 2024 was ( 0.03 % ) and ( 0.02 % ), ( 2.94 % ) and ( 3.39 % ), respectively.

The Company recorded an income tax expenses of

approximately $ 0

thousand and $ 1

thousand, for the three and nine months ended September 30, 2025, respectively and income tax benefits of approximately

thousand and $ 513

thousand for the three and nine months ended September 30, 2024, respectively.

The effective tax rate for the three months ended

and for the nine months ended September 30, 2025 were 0.00% and 0.01%, respectively.

The effective tax rate for the three months ended

and for the nine months ended September 30, 2024 were (2.86)% and (3.22)%, respectively.

The effective tax rate differs from the U.S.

Federal statutory rate primarily due to recording a valuation allowance against deferred tax assets in the foreign jurisdictions and the significant permanent differences including impairment of goodwill and change in fair value of derivative warrant liabilities.

Federal statutory rate primarily due to recording a valuation allowance against deferred tax assets in the foreign jurisdictions and the

significant permanent differences including impairment of goodwill and change in fair value of derivative warrant liabilities.

The Company continues to evaluate the realizability

of its deferred tax assets and has maintained a valuation allowance on its deferred tax assets as of June 30, 2025.

of its deferred tax assets and has maintained a valuation allowance on its deferred tax assets as of September 30, 2025.

On July 4, 2025, the One Big Beautiful Bill (“OBBB”)

was enacted into law.

Among its provisions, the reinstatement of full expensing for research and development expenditures is applicable

to the Company.

While further regulatory guidance is anticipated regarding the treatment of prior periods, the Company expects that the

previously recognized deferred tax asset related to Section 174 will be reversed, resulting in an increase in net operating loss carryforwards.

The Company is currently evaluating potential other impacts of the passage of OBBB.

NOTE 14 – Credit Risk and Concentrations

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Cash is also maintained at foreign financial institutions for its Canadian and Philippine subsidiaries.

Cash in foreign financial institutions as of June 30, 2025 and December 31, 2024 was $ 127 thousand and $ 166 thousand, respectively.

The Company has not experienced any losses and believes it is not exposed to any significant credit risk from cash for the six months ended June 30, 2025 and June 30, 2024.

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.

Cash in foreign financial institutions as of September 30, 2025 and December 31, 2024, was $ 73 thousand and $ 166 thousand, respectively.

The Company has not experienced any losses and

believes it is not exposed to any significant credit risk from cash for the nine months ended September 30, 2025 and September 30,

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.

NOTE 15 – Segment Information

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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:

The following table presents selected financial

information with respect to the Company’s single operating segment (in thousands):

Schedule of segment Information

Three Months Ended

September 30,

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Revenue - Licenses

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Other noncash expenses (1)

Other for the three and six months ended June 30, 2025 includes $754 thousand and $1,378 thousand of stock compensation and related expenses, $683 thousands and $1,366 thousand of intangible amortization expense.

Other for the three and six months ended June 30, 2024 includes $835 thousand and $1,436 thousand of stock compensation expenses, $683 thousand and 1,366 thousand of intangible amortization expense.

Other for the three and nine months ended September 30, 2025 includes $872 thousand and $2,250 thousand of stock compensation and related

expenses, $683 thousand and $2,049 thousand of intangible amortization expense.

Other for the three and nine months ended September 30,

2024 includes $909 thousand and $3,028 thousand of stock compensation expenses, $683 thousand and $1,366 thousand of intangible amortization

NOTE 16 – Foreign Operations

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United States

For the Three Months Ended June 30, 2025 :

For the Three Months Ended September 30, 2025 :

Revenues by geographic area

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Net income (loss) by geographic area

For the Six Months Ended June 30, 2025 :

For the Nine Months Ended September 30, 2025 :

Revenues by geographic area

1 unchanged sentence

Net income (loss) by geographic area

For the Three Months Ended June 30, 2024 :

For the Three Months Ended September 30, 2024 :

Revenues by geographic area

1 unchanged sentence

Net income (loss) by geographic area

For the Six Months Ended June 30, 2024 :

For the Nine Months Ended September 30, 2024 :

Revenues by geographic area

1 unchanged sentence

Net income (loss) by geographic area

of June 30, 2025 :

of September 30, 2025 :

Identifiable assets by geographic area

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NOTE 17 – 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.

The Company has operating leases for administrative

offices in Canada, the Philippines, and the United States.

The lease for the Company’s office premises in Manila, Philippines expired

The Company elected not to renew the lease and has since entered into a new lease agreement within the Philippines at a

T he 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 condensed consolidated 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 unaudited condensed consolidated statement of operations and comprehensive loss for the three and six months ended June 30, 2025 and June 30, 2024 was approximately $ 106 thousand and $ 213 thousand, $ 109 thousand, and $ 222 thousand, respectively.

Operating lease expenses, inclusive of short-term and variable lease expenses, recognized in the Company’s unaudited condensed consolidated statement of operations and comprehensive loss for the three and nine months ended September 30, 2025 and September 30, 2024 was approximately $ 106 thousand and $ 317 thousand, $ 109 thousand, and $ 331 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 June 30, 2025, the weighted average remaining lease term is 1.2 years, and the weighted average discount rate used to determine the operating lease liabilities was 8.0 % .

As of September 30, 2025, the weighted average remaining lease term is 1.0 years, and the weighted average discount rate used to determine the operating lease liabilities was 8.0 % .

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 % .

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The condensed 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 condensed consolidated 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 19 – Subsequent Events

The Company evaluated subsequent events and transactions that occurred after June 30, 2025, through the date the condensed consolidated financial statements were issued.

Based upon this review, the Company identified the following subsequents events:

Big Beautiful Bill

July 4, 2025, the One Big Beautiful Bill (“OBBB”) was enacted into law.

Among its provisions, the reinstatement of full expensing

for research and development expenditures is applicable to the Company.

While further regulatory guidance is anticipated regarding the

treatment of prior periods, the Company expects that the previously recognized deferred tax asset related to Section 174 will be reversed,

resulting in an increase in net operating loss carryforwards.

The Company is currently evaluating potential other impacts of the passage

Streeterville

the quarter ended June 30, 2025, the Company converted a portion of its outstanding Streeterville Prepaid Purchase #3 Convertible Notes

into Class A common stock.

These conversions were part of the Company’s ongoing efforts to reduce debt and strengthen its equity

the transactions occurred after the reporting date, they are classified as non-recognized subsequent events.

In total, the Company issued

approximately 1,994,072 shares of Class A common stock in connection with these conversions.

from Avondale Pre-Paid Purchase

August 7, 2025, the Company received net cash proceeds of $ 3,000 thousand from the second tranche of the Pre-Paid Purchase Agreement

with Avondale, as per the SPA entered into on August 7, 2025.

The second tranche was structured with a principal amount of $ 3,150 thousand,

less a $ 150 thousand OID, resulting in the net cash proceeds mentioned above.

Registration Filing in Form S-3

the quarter ended June 30, 2025, the Company filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission

(“SEC”), authorizing the future offering and sale of up to $150,000 thousand of various securities.

Concurrently, the Company

filed a prospectus supplement allowing for the issuance of up to $7,959 thousand of common stock under this registration.

is included within the total aggregate offering authorized.

The Company evaluated subsequent events and transactions that occurred after September 30, 2025, through the date the condensed consolidated financial statements were issued.

Based upon this review, the Company identified the following subsequent events:

Company commenced sales of its common stock pursuant to the shelf registration.

These sales were facilitated through a third-party arrangement

with Maxim Group LLC, acting as the Company’s agent under an equity distribution agreement.

The Company received $ 669 thousand

and issued 782,102

shares of class A common stock, which are intended

to be used for general working capital and other general corporate purposes.

October 17, 2025, the Company received net cash proceeds of $ 5,000

thousand from the second tranche of the Pre-Paid

Purchase Agreement with Avondale, as per the SPA entered into on, October 17, 2025.

The third tranche was structured with a principal

amount of $ 5,250

thousand, less a $ 250

thousand OID, resulting in the net cash proceeds

mentioned above.

Following the quarter ended September 30, 2025,

the Company converted a portion of its outstanding Avondale Prepaid Purchase #1 Convertible Notes into Class A common stock.

These conversions

were part of the Company’s ongoing efforts to reduce debt and strengthen its equity structure.

As the transactions occurred after the reporting

date, they are classified as non-recognized subsequent events.

In total, the Company issued approximately 1,583,633 shares of Class A

common stock in connection with these conversions.

filing does not reflect conditions existing as of the reporting date and is therefore classified as a non-recognized subsequent event.

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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 unaudited condensed consolidated financial statements and related notes included elsewhere in this Form 10-Q, with the audited consolidated financial statements and notes thereto included in our Annual Report on 10-K filed with the Securities and Exchange Commission (“SEC”) on April 7, 2025 (the “Annual Report”).

References in this report (the “Quarterly 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 three months ended June 30, 2025.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected.

All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements.

Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements.

Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available.

A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements.

For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual Report on Form 10-K filed with the SEC.

The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov.

Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Overview of Our Business

Executive Overview

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

As a leader in this evolving market, our strategic focus is to drive sustainable growth, scale our enterprise customer base, and deliver innovative solutions that leverage data and artificial intelligence to optimize workplace experiences.

In fiscal year 2025, we prioritized three strategic pillars:

AI-First Product Innovation:

During the quarter, we continued to strengthen our competitive differentiation through the development of AI-native workplace intelligence tools.

Enhancements to our Generative AI analytics platform enabled improved data ingestion, real-time behavioral insights, and predictive modeling capabilities.

These innovations support enterprise decision-makers in optimizing space utilization, workforce engagement, and operational agility.

Our investment in proprietary AI infrastructure aligns with market demand for intelligent, scalable solutions that transform the modern hybrid workplace.

Enterprise Penetration and Revenue Quality Expansion:

Our customer expansion strategy remained focused on high-value enterprise accounts, particularly across the financial services, healthcare,

and technology sectors.

We deepened relationships with existing Fortune 1000 clients through expanded deployments and multi-site

activations while entering new verticals with strong product-market fit.

As a result, recurring SaaS revenue accounted for 99% of

total revenue in Q2 2025, underscoring the effectiveness of our “land-and-expand” motion and the stickiness of our platform.

Margin Expansion through Cost Discipline:

we reduced operating costs by streamlining SG&A and rationalizing our services delivery model.

Gross profit totaled $1,052 thousand

for the quarter and $2,126 thousand for the six-month period ended June 30, 2025, compared to $1,413 thousand and $2,904 thousand

in the same periods of 2024, respectively.

While total revenue declined due to the deliberate de-emphasis of non-recurring professional

services, gross margin improved to 87% as we scaled our high-margin SaaS offerings.

These actions demonstrate our ability to manage

spend responsibly while building a more predictable, capital-efficient business model.

Looking forward, our leadership team remains committed to balancing innovation with financial discipline, ensuring that CXApp is positioned for long-term profitability and strategic growth.

By leveraging our AI-driven platform and expanding our enterprise footprint, we aim to deliver scalable, data-driven solutions that address the evolving needs of hybrid workplaces.

Financial Performance Summary

Revenue Growth and Customer Expansion

During the three months ended June 30, 2025, the gross margin increased to 86% when compared to 80% in June 30, 2024, driven by moving the company to a SaaS based model focused on AI-enabled services.

Our customer base continues to expand across key industries, including financial services, healthcare, and technology, aligning with our objective to target high-value, recurring revenue clients.

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

Operational Efficiencies and Cost Management

During the three months ended June 30, 2025, operating expenses increased to $5,163 thousand compared to $5,063 thousand for the same period in 2024.

This increase reflects strategic investment in ongoing research and development activities, alongside strategic cost management initiatives that have contributed to improved margins.

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

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

Cash Flow and Liquidity Position

For the three months ended June 30, 2025, cash and cash equivalents was 4,854 thousand.

This liquidity provides a strategic buffer for continued investment in AI product enhancements and market expansion initiatives.

Strategic Growth Initiatives

should read the following discussion of our financial condition and results of operations in conjunction with the unaudited condensed

consolidated financial statements and related notes included elsewhere in this Form 10-Q, with the audited consolidated financial statements

and notes thereto included in our Annual Report on 10-K filed with the Securities and Exchange Commission (“SEC”) on April

7, 2025 (the “Annual Report”).

References in this report (the “Quarterly 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

three months ended September 30, 2025.

Note Regarding Forward-Looking Statements

Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and

Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ

materially from those expected and projected.

All statements, other than statements of historical fact included in this Form 10-Q including,

without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations,

are forward-looking statements.

Words such as “expect,” “believe,” “anticipate,” “intend,”

“estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking

Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs,

based on information currently available.

A number of factors could cause actual events, performance or results to differ materially from

the events, performance and results discussed in the forward-looking statements.

For information identifying important factors that could

cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section

of the Company’s Annual Report on Form 10-K filed with the SEC.

The Company’s securities filings can be accessed on the EDGAR

section of the SEC’s website at www.sec.gov.

Except as expressly required by applicable securities law, the Company disclaims any

intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

of Our Business

CXApp, we are at the forefront of transforming the modern workplace through AI-powered solutions that enhance employee experience, operational

efficiency, and workplace intelligence.

As a leader in this evolving market, our strategic focus is to drive sustainable growth, scale

our enterprise customer base, and deliver innovative solutions that leverage data and artificial intelligence to optimize workplace experiences.

fiscal year 2025, we prioritized three strategic pillars:

Product Innovation:

We are expanding our AI-native

capabilities, integrating agentic AI for desk booking, advanced analytics, and developing seamless integrations with key enterprise

platforms to position CXApp as the go-to solution for hybrid workplace management.

Market Expansion:

By targeting new verticals and strengthening

partnerships with cloud providers and key technology platforms, we aim to increase market share and drive cross-selling opportunities.

Operational Excellence:

Ongoing cost optimization,

customer retention strategies, and sales efficiency initiatives remain key focus areas as we strive to enhance profitability and

maintain financial discipline.

Competitive Positioning and Market Outlook

According to industry research, the global employee experience and workplace technology market is expected to grow at a compound annual growth rate (CAGR) exceeding 20% over the coming years.

This trend reflects ongoing enterprise investment in hybrid workplace enablement, data-driven decision-making, and employee-centric technology platforms.

CXApp believes its AI-driven platform offers differentiated capabilities compared to traditional workplace management systems by integrating real-time analytics, behavioral insights, and predictive modeling.

These features may support more agile decision-making for customers managing distributed workforces and dynamic office environments.

While macroeconomic uncertainty persists, the Company continues to observe strong interest from enterprise clients for intelligent, flexible workplace infrastructure.

Management believes this demand aligns with the Company’s strategy to scale AI-enabled solutions that address evolving operational needs.

As we advance our strategic roadmap, CXApp remains focused on executing with discipline and precision.

Our AI-first approach, financial discipline, and emphasis on customer-centric innovation are key drivers of our long-term vision to redefine employee experiences in the hybrid workplace.

By leveraging our strong foundation and expanding our enterprise footprint, we are well-positioned to deliver sustained growth and value for our stakeholders.

Recent Events

On April 8, 2025, the Company received proceeds from the Avondale convertible Pre-Paid Purchase #1.

RESULTS OF OPERATIONS

Comparison of the results of operations for the three months ended June 30, 2025 and June 30, 2024

The following table sets forth our results of operations.

This data should be read together with our unaudited financial statements and related notes.

During the quarter, we continued to strengthen our competitive differentiation through the development of AI-native

workplace intelligence tools.

Enhancements to our Generative AI analytics platform enabled improved data ingestion, real-time behavioral

insights, and predictive modeling capabilities.

These innovations support enterprise decision-makers in optimizing space utilization,

workforce engagement, and operational agility.

Our investment in state-of-the-art AI infrastructure in partnership with Google Cloud (GCP)

is enabling intelligent and scalable solutions that will transform the modern workplace.

Revenue Quality Expansion:

Our customer expansion strategy remained focused on high-value enterprise accounts, particularly across

the financial services, healthcare, and technology sectors with subscription based recurring revenue model.

We deepened relationships

with existing Fortune 1000 clients through expanded deployments and multi-site activations As a result, recurring SaaS revenue accounted

for 99.46% of total revenue in Q3 2025, underscoring the effectiveness of our recurring business model.

Expansion through Cost Discipline:

In Q3 2025, we reduced operating costs by streamlining SG&A and rationalizing our services

delivery model.

Gross profit totaled $991 thousand for the quarter and $3,117 thousand for the nine-month period ended September 30, 2025,

compared to $1,525 thousand and $4,429 thousand in the same periods of 2024, respectively.

While total revenue declined due to the deliberate

de-emphasis of non-recurring professional services, gross margin improved to 88.96% as we scaled our high-margin SaaS offerings.

actions demonstrate our ability to manage spend responsibly while building a more predictable, capital-efficient business model.

forward, our leadership team remains committed to balancing innovation with financial discipline, ensuring that CXApp is positioned for

long-term profitability and strategic growth.

By leveraging our AI-driven platform and expanding our enterprise footprint, we aim to deliver

scalable, data-driven solutions that address the evolving needs of hybrid workplaces.

Performance Summary

Growth and Customer Expansion

the three months ended September 30, 2025, the gross margin remained strong reaching, 88.96%, when compared to 80.39% in September 30,

2024, driven by moving the company to a SaaS based model focused on AI-enabled services.

base remained stable and diversified, with continued presence across financial services, healthcare, and technology sectors, supporting

our focus on high-value, recurring revenue clients.

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

Efficiencies and Cost Management

expenses remained largely consistent during the three months ended September 30, 2025, totaling $4,816 thousand compared to $5,210 thousand

for the same period in 2024.

This stability reflects a balanced approach to strategic investments in research and development, alongside

effective cost management initiatives that have supported margin improvements.

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

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

and customer acquisition.

Flow and Liquidity Position

the three months ended September 30, 2025, cash and cash equivalents was $5,088 thousand.

liquidity provides a strategic buffer for continued investment in AI product enhancements and market expansion initiatives.

Growth Initiatives

We are expanding our AI-native capabilities, integrating agentic AI for desk booking, advanced analytics, and developing

seamless integrations with key enterprise platforms to position CXApp as the go-to solution for hybrid workplace management.

By targeting new verticals and strengthening partnerships with cloud providers and key technology platforms, we aim to

increase market share and drive cross-selling opportunities.

Ongoing cost optimization, customer retention strategies, and sales efficiency initiatives remain key focus areas as we

strive to enhance profitability and maintain financial discipline.

Positioning and Market Outlook

to industry research, the global employee experience and workplace technology market is expected to grow at a compound annual growth rate

(CAGR) exceeding 20% over the coming years.

This trend reflects ongoing enterprise investment in hybrid workplace enablement, data-driven

decision-making, and employee-centric technology platforms.

believes its AI-driven platform offers differentiated capabilities compared to traditional workplace management systems by integrating

real-time analytics, behavioral insights, and predictive modeling.

These features may support more agile decision-making for customers

managing distributed workforces and dynamic office environments.

macroeconomic uncertainty persists, the Company continues to observe strong interest from enterprise clients for intelligent, flexible

workplace infrastructure.

Management believes this demand aligns with the Company’s strategy to scale AI-enabled solutions that

address evolving operational needs.

we advance our strategic roadmap, CXApp remains focused on executing with discipline and precision.

Our AI-first approach, financial discipline,

and emphasis on customer-centric innovation are key drivers of our long-term vision to redefine employee experiences in the hybrid workplace.

By leveraging our strong foundation and expanding our enterprise footprint, we are well-positioned to deliver sustained growth and value

for our stakeholders.

August 7, 2025, the Company received net proceeds of $3,000 thousand from the Avondale convertible Pre-Paid Purchase #2.

August 11, 2025, the Company filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission (“SEC”),

authorizing the future offering and sale of up to $150.0 million of various securities.

Concurrently, the Company filed a prospectus supplement

allowing for the issuance of up to $7.959 million of common stock under this registration.

This amount is included within the total aggregate

offering authorized.

The Company commenced sales of its common stock pursuant to the shelf registration.

These sales were facilitated through a

third-party arrangement with Maxim Group LLC, acting as the Company’s agent under an equity distribution agreement.

Company received $669 thousand and issued 782,102 shares of class A common stock, which are intended to be used for general working

capital and other general corporate purposes.

OF OPERATIONS

of the results of operations for the three months ended September 30, 2025 and September 30, 2024

following table sets forth our results of operations.

This data should be read together with our unaudited financial statements and related

(in thousands)

Three months ended

Condensed Consolidated Statements of Operations Data

Nine months ended

September 30,

Nine months ended

September 30,

Condensed Consolidated

Statements of Operations Data

Cost of revenues

1 unchanged sentence

Loss from operations

Other expense, net

Income tax benefit, provision (expense)

The Company generates revenue primarily from subscription-based Software as a Service (“SaaS”), as well as from the design, deployment, and implementation services provided through its enterprise applications platform.

For the three months ended June 30, 2025, total revenue was $1,223 thousand, compared to $1,766 thousand for the three months ended June 30, 2024.

The decrease of $543 thousand, or approximately 31%, was primarily attributable to a decline in non-recurring Professional Services revenue.

The reduction in Professional Services revenue reflects the Company’s strategic transition to a full SaaS delivery model, with a focus on recurring, high-margin revenue streams.

Professional Services generally relate to implementation, customization, or integration services that are customer-specific and non-recurring in nature.

Subscription-based revenue comprised approximately 96% of total revenue for the three months ended June 30, 2025, compared to 85% for the same period in 2024, representing an 11-percentage point increase in revenue mix.

This shift in revenue composition is consistent with management’s strategy to drive predictable recurring revenue and improve gross margin over time.

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

Cost of revenues was $171 thousand for the three months ended June 30, 2025, compared to $353 thousand for the three months ended June 30, 2024.

The gross profit margin was 86% for the three months ended June 30, 2025, compared to 80% for the three months ended June 30, 2024.

The decrease in cost of revenues of approximately $182 thousand, or approximately 51.55%, for the comparative periods ended June 30, 2025 and June 30, 2024, was attributable to a reduction in professional services-related costs, as well as lower hosting and infrastructure expenses for cloud services.

Operating Expenses

Operating expenses consist primarily of research

and development (“R&D”), sales and marketing, and general and administrative (“G&A”) costs.

For the three

months ended June 30, 2025, total operating expenses were $5,163 thousand, compared to $5,063 thousand for the same period in 2024,

representing an increase of $100 thousand.

This increase was primarily driven by a $462 thousand

rise in R&D expenses, reflecting increased investment in platform enhancements, including those related to the Company’s strategic

relationship with Google.

These efforts include development of deeper integrations with Google Workspace and AI infrastructure alignment

designed to optimize data analytics and employee experience features across joint enterprise deployments.

The increase in R&D was partially offset by

a $279 thousand decrease in sales and marketing expenses, as the Company reallocated go-to-market resources toward high-ROI enterprise

accounts and strategic channel partnerships.

Additionally, G&A expenses decreased by $83 thousand, reflecting ongoing cost control

measures in administrative functions.

Management believes that these investments in

innovation and platform interoperability position the Company to scale its AI-native offerings while driving long-term operating leverage.

Other Income/Expense

Other income/expense was an income of $973 thousand

and an expense of $1,765 thousand for the three months ended June 30, 2025, and the three months ended June 30, 2024, respectively.

This increase of $2,738 thousand in other income for the comparative periods was attributable to an increase in the change in fair value

of derivative warrant liabilities of approximately $1,931 thousand, an increase in other income of approximately $286 thousand, and a

decrease in interest expense of approximately $521 thousand.

Provision for Income Taxes

There was $1 thousand income tax expenses for the three months ended June 30, 2025, compared to $159 thousand tax benefit for the six months ended June 30, 2024.

The income tax benefit for the three months ended June 30, 2024 is primarily a result of the release of valuation allowance attributable to acquired intangible assets from the Business Combination recorded in the first quarter of 2023.

Non-GAAP Financial information

The Company includes a non-GAAP measure that we use to supplement our results presented in accordance with U.S.

EBITDA is defined as earnings before interest and other income, taxes, depreciation and amortization.

Adjusted EBITDA is used by our management as the matrix in which it manages the business.

It is defined as EBITDA plus adjustments for other income or expense items, non- recurring items and non-cash stock-based compensation.

Adjusted EBITDA is a performance measure that we believe is useful to investors and analysts because it illustrates the underlying financial and business trends relating to our core, recurring results of operations and enhances comparability between periods.

Adjusted EBITDA is not a recognized measure under U.S.

Other income (expense), net

Income tax benefit, provision

Company generates revenue primarily from subscription-based Software as a Service (“SaaS”), as well as from the design, deployment,

and implementation services provided through its enterprise applications platform.

For the nine months ended September 30, 2025, total

revenue was $3,561 thousand, compared to $5,481 thousand for the nine months ended September 30, 2024.

The decrease of $1,920 thousand,

or approximately 35%, was primarily attributable to a decline in non-recurring Professional Services and hardware revenue.

reduction in Professional Services revenue reflects the Company’s strategic transition to a full SaaS delivery model, with a focus

on recurring, high-margin revenue streams.

Professional Services generally relate to implementation, customization, or integration services

that are customer-specific and non-recurring in nature.

Subscription-based

revenue comprised approximately 98.12% of total revenue for the nine months ended September 30, 2025, compared to 86.70% for the same

period in 2024, representing a 12-percentage point increase in revenue mix.

This shift in revenue composition is consistent with management’s

strategy to drive predictable recurring revenue and improve gross margin over time.

of revenues includes the direct costs to deliver the services, including labor and overhead.

Cost of revenues was $444 thousand for the

nine months ended September 30, 2025, compared to $1,052 thousand for the nine months ended September 30, 2024.

The gross profit margin

was 87.53% for the nine months ended September 30, 2025, compared to 80.81% for the nine months ended September 30, 2024.

in cost of revenues of approximately $608 thousand, or approximately 57.79%, for the comparative periods ended September 30, 2025 and

September 30, 2024, was attributable to a reduction in professional services-related costs, as well as lower hosting and infrastructure

expenses for cloud services.

expenses consist primarily of research and development (“R&D”), sales and marketing, and general and administrative (“G&A”)

For the nine months ended September 30, 2025, total operating expenses were $14,798 thousand, compared to $15,351 thousand for

the same period in 2024, representing a decrease of $553 thousand.

decrease was primarily driven by a $1,076 thousand rise in S&M expenses, was mainly driven by workforce downsizing and lower payroll,

travel, and commission-related costs.

decrease in S&M was partially offset by a $261 thousand increase in general and administrative expenses, primarily due to higher professional

service fees and increased stock-based compensation expenses related to restricted stock units (RSUs).

Furthermore, R&D expenses increase

by $262 thousand, primarily due to the true-up billing of the Google commit and the completion of the GCP Marketplace integration.

believes that these investments in innovation and platform interoperability position the Company to scale its AI-native offerings while

driving long-term operating leverage.

Income/Expense

income/expense was an income of $3,770 thousand and expense of $5,663 thousand for the nine months ended September 30, 2025, and the nine

months ended September 30, 2024, respectively.

This increase of 9,433 thousand in other income for the comparative periods was attributable

to an increase in the change in fair value of derivative warrant liabilities of approximately $7,555 thousand, a increase in other income

of approximately $174 thousand, an increase in interest expense of approximately $1,217 thousand, and an increase of $487 thousand in

debt extinguishment.

for Income Taxes

was $1 thousand income tax expenses for the nine months ended September 30, 2025, compared to $147 thousand tax benefit for the nine months

ended September 30, 2024.

The income tax benefit for the nine months ended September 30, 2024 is primarily a result of the release of

valuation allowance attributable to acquired intangible assets from the Business Combination recorded in the first quarter of 2023.

Financial Information

Company includes a non-GAAP measure that we use to supplement our results presented in accordance with U.S.

EBITDA is defined as

earnings before interest and other income, taxes, depreciation and amortization.

Adjusted EBITDA is used by our management as the matrix

in which it manages the business.

It is defined as EBITDA plus adjustments for other income or expense items, non- recurring items and

non-cash stock-based compensation.

Adjusted EBITDA is a performance measure that we believe is useful to investors and analysts because

it illustrates the underlying financial and business trends relating to our core, recurring results of operations and enhances comparability

between periods.

EBITDA is not a recognized measure under U.S.

GAAP and is not intended to be a substitute for any U.S.

GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.

GAAP financial measure and, as

calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the

same industry.

Investors should exercise caution in comparing our non-GAAP measure to any similarly titled measure used by other companies.

This non-GAAP measure excludes certain items required by U.S.

GAAP and should not be considered as an alternative to information reported in accordance with U.S.

The table below presents our adjusted EBITDA, reconciled to net income, which is the most comparable GAAP measure, for the periods indicated (in thousands).

non-GAAP measure excludes certain items required by U.S.

GAAP and should not be considered as an alternative to information reported in

accordance with U.S.

The table below presents our adjusted EBITDA, reconciled to net income, which is the most comparable GAAP measure,

for the periods indicated (in thousands).

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Interest and other income

6 unchanged sentences

Loss on contract to issue common stock

Stock-based compensation - compensation and related benefits

Loss on asset disposal

Stock-based compensation - compensation and

related benefits

Adjusted EBITDA

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

To compare our current operating results with corresponding periods and with the operating results of other companies in our industry;

As a basis for allocating resources to various projects;

As a measure to evaluate potential economic outcomes of acquisitions, operational alternatives and strategic decisions; and

To evaluate internally the performance of our personnel.

We have presented Adjusted EBITDA above because we believe it conveys useful information to investors regarding our operating results.

We believe it provides an additional way for investors to view our operations, when considered with both our GAAP results and the reconciliation to net loss.

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

compare our current operating results with corresponding periods and with the operating results of other companies in our industry;

a basis for allocating resources to various projects;

a measure to evaluate potential economic outcomes of acquisitions, operational alternatives and strategic decisions;

evaluate internally the performance of our personnel.

have presented Adjusted EBITDA above because we believe it conveys useful information to investors regarding our operating results.

believe it provides an additional way for investors to view our operations, when considered with both our GAAP results and the reconciliation

By including this information, we can provide investors with a more complete understanding of our business.

Specifically, we present Adjusted EBITDA as supplemental disclosure because of the following:

We believe Adjusted EBITDA is a useful tool for investors to assess the operating performance of our business without the effect of interest, income taxes, depreciation and amortization and other non- cash items including acquisition transaction and financing costs, impairment, unrealized gains, stock based compensation, interest income and expense, and income tax benefit.

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

We believe that the use of Adjusted EBITDA is helpful to compare our results to other companies.

Even though we believe Adjusted EBITDA is useful for investors, it does have limitations as an analytical tool.

Thus, we strongly urge investors not to consider this metric in isolation or as a substitute for net income (loss) and the other condensed consolidated statement of operations data prepared in accordance with GAAP.

Specifically,

we present Adjusted EBITDA as supplemental disclosure because of the following:

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, impairment,

unrealized gains, stock based compensation, interest income and expense, and income tax benefit.

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

believe that the use of Adjusted EBITDA is helpful to compare our results to other companies.

though we believe Adjusted EBITDA is useful for investors, it does have limitations as an analytical tool.

Thus, we strongly urge investors

not to consider this metric in isolation or as a substitute for net income (loss) and the other condensed consolidated statement of operations

data prepared in accordance with GAAP.

Some of these limitations include the fact that:

Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

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

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

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

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

Other companies in our industry may calculate Adjusted EBITDA differently than we do, thereby potentially limiting its usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA should not be considered a measure of discretionary cash available to us to invest in the growth of our business or as a measure of performance in compliance with GAAP.

We compensate for these limitations by relying primarily on our GAAP results and providing Adjusted EBITDA only as supplemental information.

Financing Obligations and Requirements

Net cash used in operating activities during the three months ended June 30, 2025, was $3,012 thousand, consisting of a net loss of $3,139 thousand and an operating gain of $596 thousand.

On March 26, 2025, the Company entered into a Securities Purchase Agreement with Avondale Capital, LLC, under which the Company may issue and sell one or more Pre-Paid Purchase Agreements for up to an aggregate of $20,000 thousand in exchange for shares of its common stock.

The initial Pre-Paid Purchase, in the principal amount of $4,200 thousand, was structured with a $200 thousand original issue discount (“OID”) and $10 thousand in transaction-related fees, resulting in net proceeds of approximately $3,990 thousand, which were received on April 8, 2025.

As of June 30, 2025, approximately $15,800 thousand remained available under this agreement.

Additionally, under the SPA with Streeterville Capital, LLC, entered into on May 22, 2024, the Company had access to up to $10,000 thousand in funding.

As of June 30, 2025, $3,520 thousand in funding remained available under this agreement.

The Company believes these funds are sufficient to satisfy its working capital needs, capital asset purchases, debt repayments, and other liquidity requirements associated with its existing operations for at least 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 its equity securities and/or a combination of cash and debt financings appropriate for each acquisition.

Liquidity and Capital Resources as of June 30, 2025 Compared with June 30, 2024

Liquidity describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations, including working capital needs, debt service, acquisitions, contractual obligations and other commitments.

We assess liquidity in terms of our cash flows from operations and their sufficiency to fund our operating and investing activities.

As of June 30, 2025, the Company had a working capital deficiency of approximately $1,415 thousand and cash of approximately $4,854 thousand.

For the three months ended June 30, 2025, the Company incurred a net loss of approximately $3,139 thousand and used approximately $3,012 thousand of cash in operating activities.

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

Three Months Ended

EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

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

EBITDA does not reflect the significant interest expense or the cash requirements necessary to service interest or principal payments

depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future,

and Adjusted EBITDA does not reflect any cash requirements for such replacements;

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

companies in our industry may calculate Adjusted EBITDA differently than we do, thereby potentially limiting its usefulness as a comparative

of these limitations, Adjusted EBITDA should not be considered a measure of discretionary cash available to us to invest in the growth

of our business or as a measure of performance in compliance with GAAP.

We compensate for these limitations by relying primarily on our

GAAP results and providing Adjusted EBITDA only as supplemental information.

Obligations and Requirements

cash used in operating activities during the nine months ended September 30, 2025, was $6,750 thousand, consisting of a net loss of $7,912

thousand and an operating gain of $1,162 thousand.

On March 26, 2025, the Company entered into a Securities Purchase Agreement with Avondale

Capital, LLC, under which the Company may issue and sell one or more Pre-Paid Purchase Agreements for up to an aggregate of $20,000 thousand

in exchange for shares of its common stock.

The initial Pre-Paid Purchase, in the principal amount of $4,200 thousand, was structured

with a $200 thousand original issue discount (“OID”) and $10 thousand in transaction-related fees, resulting in net proceeds

of approximately $3,990 thousand, which were received on April 8, 2025.

The second tranche of the SPA was issued on August 7, 2025, with

the principal amount of $3,150 thousand, was structured with $150 thousand of OID, net proceeds of $3,000 thousand which was received on

August 7, 2025.

As of September 30, 2025, approximately $12,650 thousand remained available under this agreement.

Additionally, under

the SPA with Streeterville Capital, LLC, entered into on May 22, 2024, the Company had access to up to $10,000 thousand in funding.

of September 30, 2025, $3,520 thousand in funding remained available under this agreement.

The Company believes these funds are sufficient

to satisfy its working capital needs, capital asset purchases, debt repayments, and other liquidity requirements associated with its existing

operations for at least 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 its equity securities and/or a combination of cash and debt financings

appropriate for each acquisition.

and Capital Resources as of September 30, 2025 Compared to September 30, 2024

describes the ability of a company to generate sufficient cash flows to meet the cash requirements of its business operations, including

working capital needs, debt service, acquisitions, contractual obligations and other commitments.

We assess liquidity in terms of our

cash flows from operations and their sufficiency to fund our operating and investing activities.

August 11, 2025, the Company filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission (“SEC”),

authorizing the future offering and sale of up to $150,000 thousand of various securities.

Concurrently, the Company filed a prospectus

supplement allowing for the issuance of up to $7,959 thousand of common stock under this registration.

This amount is included within

the total aggregate offering authorized.

of September 30, 2025, the Company had a working capital deficiency of approximately $711 thousand and cash of approximately $5,088 thousand.

For the nine months ended September 30, 2025, the Company incurred a net loss of approximately $7,912 thousand and used approximately

$6,750 thousand of cash in operating activities.

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

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Cash flows (used in) provided by

3 unchanged sentences

Effect of exchange rates on cash

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents

Net increase (decrease)

in cash and cash equivalents

September 30,

cash equivalents

Working capital deficit

Operating Activities for the three months ended June 30, 2025 and June 30, 2024

Three Months Ended

Activities for the nine months ended September 30, 2025 and September 30, 2024

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Net income (loss)

Non-cash income and expenses

Net change in operating assets and liabilities

Net cash used in operating activities

Cash Flows from Investing Activities for the three months ended June 30, 2025 and June 30, 2024

Net cash flows used in investing activities during the three months ended June 30, 2025 was approximately $11 thousand compared to net cash flows used in and provided in investing activities for the three months ended June 30, 2024 is $8 thousand.

Cash flows related to investing activities during the three months ended June 30, 2025 and June 30, 2024 include $11 thousand and $8 thousand were used for the purchase of property and equipment.

Cash Flows from Financing Activities for the three months ended June 30, 2025 and June 30, 2024

Net cash flows provided in financing activities during the three months ended June 30, 2025 was approximately $3,990 thousand, primarily due to proceeds received from the issuance of convertible debt compared to net cash flows provided in financing activities for the six months ended June 30, 2024 is $ $2,480 thousand.

On April 8,2025, the Company entered into a financing arrangement under which it issued convertible debt with a principal amount of $4,200 thousand.

The Company received net proceeds of $3,990 thousand after accounting for any applicable discounts and transaction costs.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts.

We do not engage in trading activities involving non-exchange traded contracts.

Contractual Obligations and Commitments

Contractual obligations are cash that we are obligated to pay as part of certain contracts that we have entered during our course of business.

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

As of June 30, 2025, the total obligation for operating leases is approximately $422 thousand, of which approximately $208 thousand is expected to be paid in the next twelve months.

Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Critical Accounting Policies and Estimates

Our unaudited condensed consolidated financial statements are prepared in accordance with U.S.

Net change in operating

assets and liabilities

Net cash used in operating

Flows from Investing Activities for the nine months ended September 30, 2025 and September 30, 2024

cash flows used in investing activities during the nine months ended September 30, 2025 was approximately $21 thousand compared to net

cash flows used in investing activities for the nine months ended September 30, 2024 is $30 thousand.

Cash flows related to investing

activities during the nine months ended September 30, 2025 and September 30, 2024 include $21 thousand and $30 thousand were used for

the purchase of property and equipment.

Flows from Financing Activities for the nine months ended September 30, 2025 and September 30, 2024

cash flows provided in financing activities during the nine months ended September 30, 2025 was approximately $6,990 thousand, primarily

due to proceeds received from the issuance of convertible debt compared to net cash flows provided in financing activities for the nine

months ended September 30, 2024 is $3,480 thousand.

On April 11, 2025, the Company entered into a financing arrangement under which it

issued convertible debt with a principal amount of $4,200 thousand.

A second tranche of the arrangement was issued on August 7, 2025,

with a principal amount of $3,150 thousand.

The Company received total net proceeds of $6,990 thousand after deducting applicable discounts

and transaction costs.

Sheet Arrangements

do not have any off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts.

We do not engage in trading

activities involving non-exchange traded contracts.

Obligations and Commitments

obligations are cash that we are obligated to pay as part of certain contracts that we have entered during our course of business.

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

As of September 30, 2025, the total

obligation for operating leases is approximately$324 thousand, of which approximately $274 thousand is expected to be paid in the next

twelve months.

and Qualitative Disclosures about Market Risk

Accounting Policies and Estimates

unaudited condensed consolidated financial statements are prepared in accordance with U.S.

Generally Accepted Accounting Principles (“GAAP”).

In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures.

We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our unaudited condensed consolidated financial statements are prepared.

On a regular basis, we review the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP.

However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

Critical Accounting Policies

Our significant accounting policies are discussed in Note 2 of the unaudited condensed consolidated financial statements which are included elsewhere in this filing.

Critical Accounting Estimates

We consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on our unaudited condensed consolidated financial statements.

The Management believes there have been no significant changes during the three months ended June 30, 2025, to the items disclosed as critical accounting estimates in management’s discussion and analysis in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 that was filed with the SEC on April 7, 2025.

JOBS Act Accounting Election

Following the transaction, CXApp will be an “emerging growth company” as defined in the JOBS Act.

As such, the Company will be eligible to take advantage of certain exemptions from various reporting requirements that apply to other public companies that are not emerging growth companies, including compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and the requirements to hold a non-binding advisory vote on executive compensation and any golden parachute payments not previously approved.

The Company has not made a decision whether to take advantage of any or all of these exemptions.

If the Company does take advantage of some or all of these exemptions, some investors may find the Company’s common stock less attractive.

The result may be a less active trading market for the Company’s common stock and its stock price may be more volatile.

In addition, Section 107 of the JOBS Act provides that an emerging growth company may take advantage of the extended transition period provided in Section 13(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for complying with new or revised accounting standards, meaning that CXApp, as an emerging growth company, can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

The Company has elected to take advantage of this extended transition period, and therefore our financial statements may not be comparable to those of companies that comply with such new or revised accounting standards.

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.

In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events

and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures.

assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant

at the time our unaudited condensed consolidated financial statements are prepared.

On a regular basis, we review the accounting policies,

assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP.

because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates,

and such differences could be material.

Accounting Policies

significant accounting policies are discussed in Note 2 of the unaudited condensed consolidated financial statements which are included

elsewhere in this filing.

Accounting Estimates

consider an accounting judgment, estimate or assumption to be critical when (1) the estimate or assumption is complex in nature or requires

a high degree of judgment and (2) the use of different judgments, estimates and assumptions could have a material impact on our unaudited

condensed consolidated financial statements.

Management believes there have been no significant changes during the three months ended September 30, 2025, to the items disclosed as

critical accounting estimates in management’s discussion and analysis in the Company’s Annual Report on Form 10-K for the

year ended December 31, 2024 that was filed with the SEC on April 7, 2025.

Act Accounting Election

the transaction, CXApp will be an “emerging growth company” as defined in the JOBS Act.

As such, the Company will be eligible

to take advantage of certain exemptions from various reporting requirements that apply to other public companies that are not emerging

growth companies, including compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and the requirements

to hold a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved.

The Company has

not made a decision whether to take advantage of any or all of these exemptions.

If the Company does take advantage of some or all of

these exemptions, some investors may find the Company’s common stock less attractive.

The result may be a less active trading market

for the Company’s common stock and its stock price may be more volatile.

addition, Section 107 of the JOBS Act provides that an emerging growth company may take advantage of the extended transition period provided

in Section 13(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for complying with new or revised

accounting standards, meaning that CXApp, as an emerging growth company, can delay the adoption of certain accounting standards until

those standards would otherwise apply to private companies.

The Company has elected to take advantage of this extended transition period,

and therefore our financial statements may not be comparable to those of companies that comply with such new or revised accounting standards.

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 Disclosures About Market Risk

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis