Cxapp Inc. (CXAI) - Q2 2026 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2026. Cxapp Inc. operates an AI-powered enterprise workplace platform. A significant development during the period was the acquisition of EngineRoom (Virtus Digital Marketing Pty Ltd) on June 3, 2026, adding managed advertising and growth marketing advisory services to the company's portfolio. The company is classified as a non-accelerated filer and a smaller reporting company.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2026 | Six Months Ended June 30, 2026 |
|---|---|---|
| Revenue | $1,694,000 | $2,644,000 |
| Net Loss | $(8,620,000) | $(12,623,000) |
| Gross Profit | $1,071,000 | $1,861,000 |
| Gross Margin | 63.2% | 70.4% |
| Operating Loss | $(4,119,000) | $(8,243,000) |
| Cash and Equivalents (End of Period) | $11,675,000 | |
| Working Capital | $5,258,000 | |
| Convertible Debt (Fair Value) | $10,062,000 | |
| Net Cash Used in Operating Activities | $(4,455,000) (Six Months) |
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 38.5% year-over-year for the quarter, driven primarily by the inclusion of EngineRoom's revenue streams (managed advertising and growth marketing) starting June 3, 2026.
- Margin Compression: Gross margin declined to 63.2% (Q2 2026) from 86.0% (Q2 2025). This decrease is attributed to the lower-margin profile of the newly acquired EngineRoom services compared to the company's core subscription software revenue.
- Net Loss Expansion: Net loss widened significantly to $8.62 million for the quarter (vs. $3.14 million in Q2 2025). The primary driver was a $5.005 million unrealized loss on the change in fair value of derivative liabilities and warrants, compared to a gain of $0.88 million in the prior year period.
- Operating Expenses: Total operating expenses remained relatively flat at $5.19 million compared to $5.16 million in the prior year quarter, despite acquisition-related costs of $208,000, due to reductions in R&D and Sales & Marketing.
- Capital Structure: The company issued 67.3 million shares of Class A common stock during the six months to settle convertible debt liabilities. Additionally, 7.99 million shares were issued via an At-The-Market (ATM) offering, raising $2.46 million.
Guidance, Outlook, and Risks
- Strategic Focus: Management emphasizes three priorities: AI-first product innovation, scaling following the EngineRoom acquisition, and maintaining cost discipline to improve margins over time.
- Liquidity and Going Concern: The filing notes that historical recurring losses and negative cash flows raised substantial doubt about the company's ability to continue as a going concern. However, management concluded that its plans (cost reductions, financing arrangements) alleviate this doubt for at least one year.
- Financing Capacity: Approximately $33.7 million remains available under a new Securities Purchase Agreement (SPA) with Avondale Capital, and $3.5 million under a Streeterville Capital SPA. The ATM program remains active but is market-dependent.
- Risks: Key risks include the company's dependence on market conditions for financing, the volatility of fair value measurements for convertible debt and warrants, and the integration risks associated with the EngineRoom acquisition.
- Subsequent Events: Following the quarter end, the company converted a portion of its 2025 Avondale Prepaid Purchase #4 notes into approximately 7.67 million shares of Class A common stock.
Investor Verification Checklist
- Derivative Liability Volatility: Verify the sensitivity of the $10M+ convertible debt and warrant liabilities to stock price fluctuations, as fair value adjustments caused a $5M loss in Q2.
- EngineRoom Integration: Assess the preliminary purchase price allocation and the sustainability of EngineRoom's revenue contribution, which was only included for less than one month in this period.
- Financing Runway: Confirm the availability and terms of the remaining $33.7M Avondale facility and the effectiveness of the ATM program given current market conditions.
- Debt Conversion Terms: Review the conversion prices and floor prices of the outstanding Pre-Paid Purchases to understand potential future dilution.
- Goodwill Impairment: Monitor the $7.68M goodwill balance, particularly given the company's history of impairment charges and current operating losses.