Liquidity

As of June 30, 2026, the Company had cash and cash equivalents of approximately $11,675 thousand and working capital of approximately $5,258 thousand. For the three and six months ended June 30, 2026, the Company incurred net losses of approximately $8,620 thousand and $12,623 thousand, respectively. During the six months ended June 30, 2026, the Company used approximately $4,455 4,455 thousand of cash for operating activities. The Company has historically incurred recurring losses and negative cash flows from operations. These conditions and events, considered in the aggregate, raised substantial doubt about the Company’s ability to continue as a going concern.

Management evaluated plans intended to address these conditions, including reductions in discretionary expenditures, vendor and professional-fee reductions, hiring controls, active accounts-receivable management and available financing arrangements. Certain of the Company’s financing sources are dependent on market conditions, including the Company’s stock price, trading volume, registration effectiveness and compliance with contractual conditions. Accordingly, the contractual capacity of those arrangements may differ from the amount practically available to the Company.

Based on the Company’s cash on hand, forecast cash collections, planned operating expenditures and management’s plans that were considered probable of implementation and effective mitigation, management concluded that its plans alleviate the substantial doubt for at least one year from the date these unaudited condensed consolidated financial statements are issued.

On March 27, 2026, the Company entered into a Securities Purchase Agreement (“SPA”) with Avondale Capital, LLC, (“Avondale”) under which the Company may issue and sell one or more Pre-Paid Purchase Agreements for up to an aggregate of $40,000 thousand in exchange for shares of its common stock. The initial Pre-Paid Purchase, in the principal amount of $1,050 thousand, closed on March 27, 2026, the Company received net proceeds of approximately $990 thousand. A second tranche was received on May 26, 2026, with a principal amount of $5,250 thousand and net proceeds of approximately $5,000 thousand. As of June 30, 2026, approximately $33,700 thousand remained available under this agreement.

On March 26, 2025, the Company entered into a 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, 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. The third tranche of the SPA was issued on October 17, 2025 with the principal amount of $5,250 thousand, of which, the Company received net proceeds of $5,000 thousand. The fourth tranche of the SPA was issued on December 30, 2025 with the principal amount of $4,200 thousand, of which, the Company received net proceeds of $4,000 thousand. As of June 30, 2026, approximately $3,200 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, 2026 and December 31, 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 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 under its At-The-Market (“ATM”) offering program. During the six months ended June 30, 2026, the Company received $2,464 thousand and issued 7,995,651 shares of class A Common Stock, which are intended to be used for general working capital and other general corporate purposes. Although the Company has remaining capacity under its ATM program, the program represents a market-dependent source of financing, and the Company’s ability to generate additional liquidity through future ATM sales is subject to factors outside its control, including market conditions and trading activity. Accordingly, no assurance can be provided regarding the amount or timing of any future proceeds.

Management’s assessment of the Company’s ability to continue as a going concern is based on its current cash position, expected operating cash requirements, and the availability of these financing sources. While access to certain capital sources is dependent on market conditions, including the Company’s stock price, trading volume, and continued effectiveness of its registration statement, management believes that its existing liquidity, combined with planned cost management initiatives and access to external capital, will be sufficient to fund operations and meet obligations as they come due for at least twelve months from the issuance date of these unaudited condensed consolidated financial statements.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting U.S. GAAP applicable to interim financial information and the rules and regulations of the SEC. Accordingly, these unaudited condensed consolidated financial statements do not include all information and disclosures required by U.S. GAAP for complete annual financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the interim periods presented have been included. Such adjustments consist of normal recurring adjustments. The operating results for the three and six months ended June 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026 or any other interim period.

The condensed consolidated balance sheet as of December 31, 2025 was derived from the Company’s audited consolidated financial statements as of that date. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 30, 2026.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash, cash equivalents, and accounts receivable. The Company’s cash is placed 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. 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. As of June 30, 2026, one customer accounted for approximately 30% of the Company’s consolidated gross accounts receivable. The concentration was attributable to accounts receivable associated with EngineRoom.

Income Taxes

The Company accounts for income taxes using the asset and liability method. Accordingly, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rate is recognized in income or expense in the period that the change is effective. Income tax benefits are recognized when it is probable that the deduction will be sustained. A valuation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will either expire before the Company is able to realize the benefit, or that future deductibility is uncertain.

Australian Research and Development Tax Incentive

EngineRoom participates in the Australian Research and Development Tax Incentive program. The Company recognizes benefits relating to qualifying research and development expenditures when there is reasonable assurance that the income will be received, the relevant expenditure has been incurred and the consideration can be reliably measured. The ultimate amount of the benefit is subject to completion of the filing process and review by the applicable Australian authorities.

Management has assessed the Company’s research and development activities and expenditures to determine which activities and expenditures are likely to be eligible under the tax incentive regime described above. At each period end management estimates the refundable tax offset available to the Company based on available information at the time. This estimate is also reviewed by external tax advisors on an annual basis. For the period ended June 30, 2026, the Company has recorded research and development tax incentive income of $ 92 thousand for the three and six months ended June 30, 2026, and reported under other income in the statements of operations and comprehensive loss.

Convertible Debt

The Company issued convertible debt in the form of Pre-Paid Purchases during December 2024, March 2025 (Settled in April 2025), August 2025, October 2025, December 2025, March 2026 and May 2026 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 an unrealized loss on the changes in the estimated fair value of the convertible debt of approximately $4,479 thousand and $4,679 thousand, respectively, and $382 thousand and $500 thousand, respectively, for the three and six months ended June 30, 2026 and June 30, 2025, respectively.

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. Upon conversion, the carrying amount of the convertible debt is reclassified to equity. No gain or loss is recognized in earnings, as 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” (“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.

Business Combinations

The Company accounts for business combinations under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC 805”) “Business Combinations” using the acquisition method of accounting, and accordingly, the assets and liabilities of the acquired business are recorded at their fair values at the date of acquisition. The excess of the purchase price over the estimated fair value is recorded as goodwill. All acquisition costs are expensed as incurred. Upon acquisition, the accounts and results of operations are included as of and subsequent to the acquisition date. Provisional amounts may be adjusted during the measurement period as additional information about facts and circumstances existing as of the acquisition date becomes available.

Stock-based Compensation

The Company measures the cost of employee and non-employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. The Company has issued stock-based compensation awards in the form of options and restricted stock units. The grant date fair value is recognized over the requisite service period during which an employee and non-employee is required to provide service in exchange for the award.

The grant date fair value of options is estimated using the Black-Scholes option pricing model based on the average of the high and low stock prices at the grant date for awards under the CXApp Inc. 2023 Equity Incentive Plan (the “Incentive Plan”). The risk-free interest rate assumptions were based upon the observed interest rates appropriate for the expected term of the equity instruments. The expected dividend yield is assumed to be zero as the Company has not paid any dividends since its inception and does not anticipate paying dividends in the foreseeable future. The Company uses the simplified method to estimate the expected term.

For stock-based awards that contain a market condition, including vesting conditions based on the Company’s stock price or total stockholder return, the effect of the market condition is reflected in the grant-date fair value of the award. The grant-date fair value of such awards is estimated using an appropriate valuation technique, such as a Monte Carlo simulation model, that incorporates the probability of satisfying the market condition.

Compensation expense for an award containing a market condition is recognized over the applicable requisite service period when the requisite service is rendered, regardless of whether the market condition is ultimately achieved. Compensation cost is not subsequently reversed solely because the market condition is not satisfied.

The grant date fair value for restricted stock units is valued using the closing price of the Company’s common stock on the date of grant.

The Company estimates forfeitures at the time of grant and revises these estimates in subsequent periods if actual forfeitures differ from those estimates.

Fair Value Measurements

FASB ASC 820, “Fair Value Measurements” (“ASC 820”), provides guidance on the development and disclosure of fair value measurements. The Company follows this authoritative guidance for fair value measurements, which defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles in the United States, and expands disclosures about fair value measurements. The guidance requires fair value measurements be classified and disclosed in one of the following three categories:

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. The fair value of the private placement warrants is measured using the quoted market price of the public warrants as an observable input, a Level 2 measurement, because the private placement warrants are not actively traded and there are no observable market inputs specific to those warrants. The Company recognized in the condensed consolidated Statements of Operations and Comprehensive Loss, an unrealized loss on its warrant liabilities (comprising both public and private placement warrants) of $526 thousand and $148 thousand, respectively, for the three and six months ended June 30, 2026 and an unrealized gain of $1,262 thousand and $3,576 thousand, respectively, for the three and six months ended June 30, 2025 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, 2026 and December 31, 2025, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

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 and comprehensive loss at the end of each reporting period. When the warrants are exercised, the corresponding derivative liability is de-recognized at the underlying fair value of the Class A common stock that is issued to the warrant holder less any cash paid in accordance with the warrant agreement. Upon either cash or cashless exercise, the de-recognized derivative liability results in an increase in additional paid in capital equal to the difference between the fair value of the underlying Class A common stock and its par value. A cashless exercise results in the warrant holder surrendering Class A common stock equal to the stated warrant exercise price based on the contractual terms in the warrant agreement that governs the cashless conversion.

The following table shows the changes in fair value of the liabilities for the six months ended June 30, 2026 and June 30, 2025:

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, 2026 and June 30, 2025, the Company recognized an unrealized loss in the condensed consolidated Statements of Operations and Comprehensive Loss of $4,479 thousand and $4,679 thousand, respectively, and $382 thousand and $500 thousand, respectively, which are presented as a change in fair value of derivative liability. See additional details within Note 7, Convertible debt.

The significant inputs in the valuation models for each of the three issuances were as follows:

Avondale (2025)

Pre-Paid Purchase #4

Avondale (2026)

Pre-Paid Purchase #1

Avondale (2026)

Pre-Paid Purchase #2

Streeterville

Pre-Paid Purchase #3

Avondale (2025)

Pre-Paid Purchase #1

Carrying Value, Recoverability and Impairment of Long-Lived Assets

The Company follows FASB ASC 360 “Property, Plant, and Equipment” (“ASC 360”) for its long-lived assets. Pursuant to ASC 360-10-35-17, an impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). That assessment shall be based on the carrying amount of the asset (asset group) at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value. Pursuant to ASC 360-10-35-20 if an impairment loss is recognized, the adjusted carrying amount of a long-lived asset shall be its new cost basis. For a depreciable long-lived asset, the new cost basis shall be depreciated (amortized) over the remaining useful life of that asset. 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: (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 six months ended June 30, 2026 and June 30, 2025.

Recently Issued Accounting Standards Not Yet Adopted

In November 2024, the FASB issued ASU No. 2024-03 “Disaggregation of Income Statement Expenses”. The amendment requires more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation, amortization, and depletion) included in certain expense captions presented on the face of the income statement. This ASU is effective for fiscal years beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to unaudited condensed consolidated financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the unaudited condensed consolidated financial statements. We are currently evaluating the impact this ASU will have on our disclosures.

In May 2025, the FASB issued ASU 2025-04, “Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer”. The amendments clarify the accounting for share-based consideration payable to a customer in connection with the sale of goods or services, including the measurement date, vesting conditions and recognition of the resulting reduction in the transaction price. The amendments are effective for annual and interim reporting periods in fiscal years beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the impact of adopting this guidance on its condensed consolidated financial statements and related disclosures.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the accounting for internal-use software to current development practices, clarifies when to begin capitalizing costs, and enhances disclosure requirements. The amendments in ASU 2025-06 are effective for annual periods beginning after December 15, 2027, and interim periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact of this standard on the Company’s unaudited condensed consolidated financial statements.

In December 2025, the FASB issued ASU 2025-11, “Interim Reporting (Topic 270): Narrow-Scope Improvements”. The amendments improve the organization and clarity of the interim reporting guidance and establish a principle requiring disclosure of events and changes since the end of the most recent annual reporting period that have a material effect on an entity. The amendments are effective for interim periods beginning after December 15, 2027 for public business entities, with early adoption permitted. The Company is currently evaluating the impact of adopting this guidance on its interim financial statement disclosures.