Company: CXAI
Filing Date: 2025-08-13
Form Type: 424B3
Source: 0001829126-25-006142
Chunk: 14

Company: CXApp Inc.
Filing Date: 2025-08-13
Form: 424B3
Chunk 14
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 and $76 thousand for the three months and six months ended June 30, 2024, respectively.

Convertible Debt

The Company issued convertible debt in the form of Pre-Paid Purchases during December 2024 and March 2025 (Settlement date April 2025) 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 a loss on changes in the estimated fair value of the convertible debt of approximately $382thousand and $500thousand for the three and six months ended June 30, 2025, respectively, and $0 for the three and six months ended June 30, 2024.

Debt Issuance Costs

Under the fair value option election, costs directly associated with the borrowing are expensed as incurred.

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. 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