CXAI 10-K & 10-Q changes, risk factors and insider trading

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.

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

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

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

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

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

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

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

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

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

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

Shelf Registration Statement (Form S-3)

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

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

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

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

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

Subscription Revenue

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

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

Professional Services Revenue

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

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

Hardware Revenue

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

Strategic Focus

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

Cost of Revenue

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

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

Gross Profit and Gross Margin

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

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

On May 26, 2026, the Company issued an unsecured Pre-Paid Purchase to Avondale Capital, LLC with an original principal amount of $5,250 thousand. The Company received net proceeds of approximately $5,000 thousand after an original issue discount of $250 thousand.

Following the quarter ended June 30, 2026, the Company converted a portion of its outstanding 2025 Avondale Prepaid Purchase #4 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 7,673,664 shares of Class A common stock in connection with these conversions.

Business Combination

On June 3, 2026, the Company, through its wholly owned subsidiary CXAI Australia Pty Ltd, acquired 100% of the outstanding equity interests of Virtus Digital Marketing Pty Ltd, doing business as EngineRoom. EngineRoom provides managed advertising and growth marketing advisory services. EngineRoom’s results of operations have been included in the Company’s condensed consolidated financial statements from June 3, 2026. See Note 12, Business Combination, for additional information.

The Company derives revenue from subscription software as a service (SaaS), design, deployment and implementation services for its enterprise apps business. Revenue was $1,694 thousand for the three months ended June 30, 2026, compared to $1,223 thousand for the three months ended June 30, 2025. The increase in revenue of $471 thousand, for the comparative quarters ended June 30, 2026 and June 30, 2025 was primarily contributed by the newly acquired subsidiary, EngineRoom, which added new revenue streams through managed advertising and growth marketing advisory services. EngineRoom operates across multiple service lines, including paid performance marketing, search engine optimization (SEO), social marketing, network development, website development, customer engagement, and advisory services. The Company noted an decrease in the revenue from licenses during this period however, it was compensated by increase in Professional Services revenue.

Recurring revenue represents revenue recognized from ongoing customer arrangements that provide software, platform, managed advertising, growth marketing advisory or other continuing services under contractual or renewable arrangements. Recurring revenue may include both Subscription Revenue and Non-Subscription Revenue depending on the nature of the underlying customer arrangement. It excludes one-time projects, hardware sales and other revenue that management does not consider to be recurring in nature.

Recurring revenue is a management operating metric and is not a measure calculated in accordance with U.S. GAAP. It is not synonymous with Subscription Revenue. Refer following

Of the $1,557 thousand and $2,491 thousand for the three and six months, period ended June 30, 2026, of Recurring Revenue includes software platform, managed advertising, growth marketing advisory or other continuing services. The $137 thousand and $153 thousand for the three and six months, period ended June 30, 2026, of Non-recurring revenue consists of one-time projects, hardware and professional services.

For the three and six months, period ended June 30, 2025, subscription revenue represents Recurring Revenue and non-subscription revenue represents Non-Recurring Revenue as disclosed in the Note 3 – Disaggregation of Revenue.

The increase of $27 thousand period over period was primarily the result of acquisition related cost of $208 thousand incurred for acquisition of EngineRoom. Other than that, the research and development decreased by approximately $505 thousand, sales and marketing was decreased by $109 thousand which was offset by increase in general and administrative expenses of approximately $391 thousand and increase in amortization of intangibles by approximately $42 thousand.

Net cash used in operating activities was $4,455 thousand for the six months ended June 30, 2026, reflecting a net loss of $12,623 thousand, adjusted for noncash items and changes in operating assets and liabilities. During the period, the Company received net proceeds of approximately $5,990 thousand from the issuance of convertible debt under the Securities Purchase Agreement entered into on March 27, 2026 and $2,464 thousand from its at-the-market offering program.

As of June 30, 2026, the Company had cash and cash equivalents of $11,675 thousand and working capital surplus of $5,258 thousand. Management continues to implement expense-management and working-capital initiatives and evaluate available financing sources. Certain financing sources are dependent on market and contractual conditions, including the Company’s stock price, trading volume, registration effectiveness and applicable issuance limitations. See Note 2, Summary of Significant Accounting Policies, for the Company’s liquidity and going-concern disclosures.

With respect to sales of the Company’s license agreements, customers generally pay fixed annual fees in advance in exchange for the Company’s software service provided via electronic means, which are generally recognized ratably over the license term. Some agreements allow the customer to terminate their subscription contracts before the end of the applicable term, and in such cases the customer is generally entitled to a refund pro-rata but only for the elapsed time remaining at the point of termination, which would approximate the deferred revenue at such time. The Company’s performance obligation is satisfied over time as the electronic services are provided continuously throughout the service period. The Company recognizes revenue evenly over the service period using a time-based measure because the Company is providing continuous access to its service. The Company’s customers generally pay within 30 to 60 days from the receipt of a customer approved invoice.

Renewals or extensions of licenses are evaluated as distinct licenses and revenue attributed to the distinct service is not recognized until: (1) the entity provides the distinct license (or makes the license available) to the customer and (2) the customer is able to use and benefit from the distinct license. Renewal contracts are not combined with original contracts, and, as a result, the renewal right is evaluated in the same manner as all other additional rights granted after the initial contract. The revenue is not recognized until the customer can begin to use and benefit from the license, which is typically at the beginning of the license renewal period. The Company recognizes revenue resulting from renewal of licensed software over time.

Revenue from performance marketing, search-engine optimization, customer engagement, network-development, advisory and website-development services. Revenue recognition is determined based on the performance obligations and transfer pattern established in the applicable customer contracts.

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

Professional services are also contracted on the fixed fee and in some cases on a time and materials basis. Fixed fees are paid monthly, in phases, or upon acceptance of deliverables. The Company’s time and materials contracts are paid weekly or monthly based on hours worked. Revenue on time and material contracts is recognized based on a fixed hourly rate as direct labor hours are expended. Materials, or other specified direct costs, are reimbursed as actual costs and may include markup. The Company has elected the practical expedient to recognize revenue for the right to invoice because the Company’s right to consideration corresponds directly with the value to the customer of the performance completed to date. For fixed fee contracts provided by in house personnel, the Company recognizes revenue evenly over the service period using a time-based measure because the Company is providing continuous service. Because the Company’s contracts have an expected duration of one year or less, the Company has elected the practical expedient in ASC 606-10-50-14(a) to not disclose information about its remaining performance obligations. Anticipated losses are recognized as soon as they become known.

For the six months ended June 30, 2026 and June 30, 2025, the Company did not incur any such losses. These amounts are based on known and estimated factors.

Managed Advertising, Growth Marketing Advisory and Subscription Services Revenue Recognition

Following the acquisition of EngineRoom, the Company derives revenue from managed advertising services, and growth marketing advisory services. Managed advertising services primarily include performance and search marketing, customer engagement, communications and data services, campaign management and related digital marketing services. Growth marketing advisory services include website development and related advisory, network development, data-driven marketing insights and related consulting services. Subscription based revenue includes access to the EngineRoom platform and strategic advertising and access to search-engine optimization solutions. EngineRoom Platform generally represents an input used by the Company to deliver its services and is not a separately transferred software license.

The Company evaluates the goods and services promised in each customer contract to determine whether they are distinct performance obligations. A service is accounted for as a separate performance obligation when the customer can benefit from the service on its own or together with other readily available resources and the service is separately identifiable from the other promises in the contract. Multiple services are combined into a single performance obligation when the Company provides a significant integration service or when the services are highly interdependent or interrelated and are not separately identifiable in the context of the contract. Accordingly, the determination of whether managed advertising, subscription and growth marketing advisory services represent separate performance obligations or a single combined performance obligation is based on the specific terms of each customer contract.

Managed advertising, subscription and growth marketing advisory services generally represent a series of distinct services that are substantially the same and have the same pattern of transfer to the customer. Revenue from these services is recognized over time because the customer simultaneously receives and consumes the benefits as the Company performs. Fixed recurring fees are recognized ratably over the applicable service period when the services are provided evenly throughout that period. The Company uses an elapsed-time output method because the recurring services are transferred to the customer in a consistent pattern over the service period.

Variable or activity-based consideration, including amounts related to advertising spend, campaign activity or other usage-based services, is recognized as the related activity is performed and the amount becomes known or determinable, to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur.

Website development, platform enhancements and similar project-based deliverables are not included within advisory services merely because they may be sold together with advisory or marketing services. The Company evaluates these deliverables separately to determine whether they are distinct performance obligations. Revenue is recognized over time when the applicable criteria for over-time recognition are met, primarily where the services performed create no alternative use to the Company and the Company has an enforceable right to payment for work completed to date.

For managed advertising services, it is an integrated managed marketing campaign that combines campaign design, keyword and bid management, budget deployment, optimization, monitoring, reporting and third-party advertising inputs. The Company generally acts as principal when it controls that integrated service before transfer, is primarily responsible for fulfillment and the acceptability of the campaign, selects and directs the third-party providers, controls the media-buying process, contracts directly with the providers, remains obligated for provider costs regardless of customer collection, and has discretion in establishing the price charged to the customer. Therefore, the Company presents the customer billings, including advertising spend and other third-party inputs, as revenue on a gross basis.

For the six months ended June 30, 2026 the non-cash loss was approximately $7,059 thousand and for the six months ended June 30, 2025 the non-cash income was approximately $65 thousand: