CXApp Inc. Form 8-K Summary
Business context and reporting period
Filed March 20, 2023, reporting the March 14, 2023 closing of the business combination between KINS Technology Group Inc., Inpixon and Legacy CXApp. KINS acquired Inpixon’s enterprise applications business, including workplace experience, indoor mapping, analytics, employee engagement, reservations, communications and related technologies. CXApp ceased to be a shell company and became the successor issuer to KINS.
The historical financial information presented relates primarily to Design Reactor, Inc. and subsidiaries on a combined carve-out basis for the years ended December 31, 2022 and 2021. These results may not represent the results of CXApp as a standalone public company.
Key financial metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Revenue | $8.47 million | $6.37 million | Up 33% |
| Gross profit | $6.41 million | $4.72 million | Up 36% |
| Gross margin | 76% | 74% | Up 2 percentage points |
| Operating expenses | $35.43 million | $49.23 million | Down 28% |
| Loss from operations | $29.03 million | $44.50 million | Loss decreased $15.48 million |
| Net loss | $29.18 million | $41.98 million | Loss decreased $12.80 million |
| Adjusted EBITDA | $(17.89) million | $(17.13) million | Loss increased $0.76 million |
| Cash used in operating activities | $(18.90) million | $(16.92) million | Use increased $1.98 million |
| Cash and cash equivalents | $6.31 million | $5.03 million | Up $1.28 million |
Approximately 65% of 2022 revenue was recurring, compared with approximately 53% in 2021. Gross-margin improvement was attributed primarily to a greater contribution from higher-margin smart office application sales.
Cash flows from investing activities used $0.48 million in 2022, while financing activities provided $20.73 million, including $26.0 million of cash received from Inpixon and $5.1 million of acquisition-related payments. The filing does not provide a clear standalone debt balance; it reports operating lease obligations of approximately $0.7 million and acquisition liabilities of approximately $0.2 million at December 31, 2022.
Material changes versus the prior comparable period
- Revenue increased by approximately $2.1 million, primarily because 2022 included a full year of smart office application revenue following the Design Reactor acquisition.
- Cost of revenue increased 25% to $2.06 million, driven mainly by higher hosting and professional-services costs.
- Operating expenses declined by $13.8 million, reflecting lower goodwill impairment, earnout expense and stock-based compensation, partly offset by transaction costs, foreign-exchange losses and higher operating expenses.
- Goodwill impairment was $5.5 million in 2022 versus $11.9 million in 2021.
- Operating cash use increased despite the lower GAAP net loss, and adjusted EBITDA remained materially negative.
- The company’s working-capital position improved from a $9.7 million deficit at December 31, 2021 to a $3.2 million surplus at December 31, 2022.
Transaction, liquidity, outlook and risks
- Inpixon transferred the enterprise applications business to Legacy CXApp and contributed $10 million in cash on March 14, 2023. Holders of 230,328 KINS Class A shares redeemed their shares for approximately $2.34 million, or $10.18 per share.
- Immediately after closing, CXApp had 8,582,699 Class A shares, 5,487,300 Class C shares, 13.8 million public warrants and 10.28 million private placement warrants. The warrants have an exercise price of $11.50 per share.
- Class C shares are subject to transfer restrictions and automatically convert into Class A shares after 180 days or upon satisfaction of the specified $12.00 trading-price condition.
- Class A shares and public warrants began trading on Nasdaq on March 15, 2023 under CXAI and CXAIW, respectively, subject to continued listing compliance.
- The company states that recurring losses and operating cash use create going-concern indicators. Management expects cost reductions, the cash contribution and transaction proceeds to provide at least one year of liquidity from the date the carve-out financial statements were issued, but may require additional equity or debt financing.
- No formal revenue or earnings guidance is provided. Management expects lower transaction and financing costs, lower compensation following headcount reductions, and lower professional fees and insurance expenses.
- Key risks include limited liquidity, inability to achieve profitability, dependence on Inpixon-related resources during the historical periods, difficulty operating as a standalone company, customer concentration, competition and pricing pressure, technology and intellectual-property risks, macroeconomic and pandemic effects, Nasdaq listing compliance, transaction-related litigation and costs, and potential indemnification obligations under the Tax Matters Agreement.
- A one-time $180,000 consulting fee is payable to 3AM, LLC, controlled by Inpixon’s chief executive officer.
- The company approved a 2023 Equity Incentive Plan with 2,110,500 Class A shares available for issuance, equal to 15% of post-closing outstanding common stock.
Most important facts for investors to verify
- Verify the post-closing cash balance, transaction expenses and actual runway, since the filing discusses expected liquidity but does not provide a final post-closing balance sheet.
- Review the audited carve-out financial statements and unaudited pro forma information in Exhibits 99.1 and 99.2.
- Assess the impact of 13.8 million public warrants, 10.28 million private placement warrants and the 2.11 million-share equity incentive reserve on potential dilution.
- Confirm continued Nasdaq compliance and the trading status of CXAI and CXAIW.
- Evaluate the sustainability of recurring revenue growth, customer concentration and the reported average quarterly churn rate below 5%.
- Monitor whether cost reductions and standalone-company efficiencies offset continuing operating losses and negative adjusted EBITDA.
- Review the Employee Matters Agreement, Tax Matters Agreement, Transition Services Agreement and related-party consulting arrangement for ongoing obligations and contingencies.