Cxapp Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The filing was signed May 24, 2024. CXApp provides enterprise workplace-experience software, including employee apps, indoor mapping, positioning, event tools and analytics, primarily through SaaS subscriptions and implementation services.
Comparability note: The business combination closed March 14, 2023. Audited successor results cover March 15–December 31, 2023; predecessor results cover January 1–March 14. For year-over-year discussion, management presents a combined 2023 figure that adds those periods. Management says this combined presentation is not GAAP and may not be comparable to a standalone-company year.
Financial performance and liquidity
Amounts below are in thousands of dollars, except percentages and per-share data.
| Metric | 2023 combined | 2022 predecessor |
|---|---|---|
| Revenue | $7,366 | $8,470 |
| Gross profit / margin | $5,615 / 76% | $6,406 / 76% |
| Operating expenses | $58,204 | $35,431 |
| Loss from operations | $(52,589) | $(29,025) |
| Net loss | $(53,618) | $(29,175) |
| Operating cash used | $(17,910), combined predecessor and successor periods | $(18,895) |
- Revenue fell 13%, mainly because professional-services revenue declined as the business shifted toward SaaS. Subscription revenue was approximately 78% of 2023 combined revenue, versus 65% in 2022.
- Q4 2023 revenue was $1,719 and gross profit was $1,376, implying an approximately 80% gross margin. Q4 net loss was $38,707, including the $36,056 goodwill impairment. Q4 2022 revenue was $1,997 and net loss was $5,541.
- At December 31, 2023, cash and cash equivalents were $6,275, working capital was negative $1,287, total assets were $36,581 and total liabilities were $11,183.
- The December 2023 unsecured note had $3,885 principal, a 10% annual interest rate and $3,000 net proceeds. Its balance-sheet carrying amount, including accrued interest and after discounts and financing costs, was $3,053 at year-end. The note matures within 12 months of issuance and includes monthly redemption rights, a monitoring fee and 22% default interest.
- Operating cash use for the audited successor period (March 15–December 31) was $12,766. Cash at year-end also reflected $10,003 acquired in the business combination, $7,620 of successor-period financing cash flow and $5,002 of cash proceeds from warrant exercises.
Material changes and unusual items
- Operating expenses rose $22,773 in management’s combined comparison. The increase primarily reflects the $36,056 goodwill impairment, partly offset by a $7,743 decrease in other operating expenses following management’s cost-reduction efforts.
- The company recorded a $4,714 loss from changes in fair value of derivative warrant liabilities. A $3,572 income-tax benefit was primarily related to the release of a valuation allowance associated with acquired intangible assets.
- The March 2023 business combination was accounted for as an acquisition, with approximately $69,928 of consideration and $44,122 of preliminary goodwill. The company recorded a $36,056 goodwill impairment in 2023; year-end goodwill was $8,737.
- In 2023, CXApp received $5,002 from cash warrant exercises and exchanged warrants for shares in a separate non-cash transaction. There were 21.0 million public and private warrants outstanding at year-end, with an $11.50 exercise price per whole warrant.
Outlook, risks and contingencies
- Management said cash, the December note and a May 2024 equity-line financing were expected to support liquidity for at least 12 months from issuance of the financial statements, while acknowledging there is no assurance that the company can raise needed funds or execute its business plan. The predecessor auditor’s report included a going-concern explanatory paragraph; the successor-period audit opinion was unmodified.
- The May 22, 2024 financing agreement provides for up to $10,000 of prepaid purchases, with an initial $2,500 draw. The terms include discounts and potential share issuance at prices tied to market prices, creating dilution risk.
- After a January 2024 reorganization, management expected operational efficiencies exceeding 25%. This is an operating-efficiency expectation, not quantified revenue or earnings guidance.
- Management identified material weaknesses in internal control over financial reporting, chiefly around goodwill valuation and impairment testing. It concluded controls were ineffective at December 31, 2023, while stating the weakness did not cause a material misstatement in the filed statements. Remediation was planned, including a third-party valuation specialist and stronger review controls.
- Nasdaq notified CXApp on April 18, 2024 that it was out of compliance because the 2023 Form 10-K was delinquent. The company said it intended to submit a compliance plan; Nasdaq could allow through October 14, 2024 to regain compliance. Delisting could impair liquidity and share price.
- The top three customers represented 22% of 2023 gross revenue; one customer represented 12%. Other key risks include recurring losses, customer concentration, competition and pricing pressure, cybersecurity and privacy exposure, AI-related legal and product risks, and potential financing needs. No material legal proceedings were reported.
Important facts for investors to verify
- Reconcile the combined, non-GAAP 2023 comparison with audited successor and predecessor statements, and confirm the Q4 impairment’s effect on quarterly results.
- Review the detailed note and equity-line agreements, including redemption and monitoring fees, maturity, share-pricing mechanics and potential dilution.
- Track cash burn, working capital, financing availability and whether management’s stated 12-month liquidity expectation is achieved.
- Monitor remediation and independent testing of the material weakness, particularly goodwill valuation controls, and confirm timely future SEC filings and Nasdaq compliance.
- Assess customer retention, concentration, subscription mix, expansion and churn, and whether expected operational efficiencies translate into improved financial results.