Company: CXAI
Filing Date: 2025-04-07
Form Type: 10-K
Source: 0001829126-25-002438
Chunk: 830

Company: CXApp Inc.
Filing Date: 2025-04-07
Form: 10-K
Item: Item 6
Chunk 830
---
 effective controls to ensure the completeness and accuracy of income tax accruals, particularly related to state tax liabilities.

    ●
    Expense Accrual Process: A significant year-end adjustment for legal fees revealed deficiencies in our period-end accrual processes and related management review controls.

    ●
    Fair
    Value Election for Financial Instruments: Managements lack of identification of the embedded derivatives requirement bifurcation
    and measurement at fair value. The Company did not appropriately assess or document the fair value option for a financial instrument, resulting in an adjustment to the
financial statements

As
a result of these material weaknesses, the Company concluded that previously issued interim financial statements for the quarters
ended June 30, 2024 and September 30, 2024 required restatement. These issues reflect deficiencies in internal control over
financial reporting that impacted our disclosure controls and procedures. The material weakness as of
December 31, 2023 related to the impairment of goodwill has been remediated. 

Despite the identified weaknesses, management believes that the consolidated financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, our financial position, results of operations, and cash flows in accordance with U.S. generally accepted accounting principles.

Remediation Plan

To address these material weaknesses, the Company has developed and implemented the following remediation initiatives:

    ●
    Tax Provision Process:

    ○
    Partnered with third-party tax advisors to assist with state and local income tax reporting and nexus evaluations.

    ●
    Legal Expense Accrual Process:

    ○
    Introduced real-time legal invoice tracking with automated accrual calculations.

    ○
    Added multi-level review of significant legal expenses during period-end close.

57

    ●
    Financial Instrument Accounting:

    ○
    Appointed the CFO to oversee technical accounting for complex and judgmental transactions.

    ○
    Engaged technical accounting support and engaged third-party valuation specialists for equity-linked instruments.

    ●
    Cross-functional Improvements:

    ○
    Enhanced month-end close workflows, including standardized documentation, checklists, and approval protocols.

    ○
    Engaged external advisors semiannually to review valuation, tax, equity-linked instruments, and disclosures.

Management, under the oversight of the Audit Committee, is monitoring the effectiveness of these remediation efforts. We expect to complete testing of the remediated controls during fiscal year 2025.

Management’s Report on Internal Control Over Financial Reporting

As required