What changed in CXApp Inc.'s 10-K — 2024 vs 2025

Item 1. Business. Overview CXApp Inc. (“CXApp” or the “Company”) is a leading provider of AI-powered employee experience solutions, delivering enterprise-grade software that enhances workplace engagement, productivity, and operational efficiency. Our cloud-based, mobile-first platform integrates artificial intelligence, automation, and real-time analytics to streamline workplace interactions across people, spaces, and technology.

By leveraging advanced mapping, location intelligence, and digital workplace tools, CXApp enables organizations to optimize hybrid work environments and foster meaningful employee experiences. As businesses continue adapting to the evolving nature of work, CXApp is positioned as a strategic enabler of digital transformation, helping enterprises navigate the complexities of workspace utilization, employee engagement, and intelligent automation.

Our commitment to innovation and customer success has allowed us to establish a strong presence in key industries, including technology, financial services, healthcare, and corporate real estate. Products and Services Our employee experience solution is a vertical software-as-a-service (or SaaS) platform for enterprise customers.

Our technology platform delivers the following core components that work in combination to deliver an incredible experience for companies around the world. Our flagship product, the CXAI Platform (pronounced “Sky”), provides a comprehensive suite of tools designed to empower employees and enable organizations to create smarter workplaces.

Key components of the platform include: ● CXAI Applications : Mobile and web-based applications that provide employees and other users with access to workplace information, communications, and workflows across iOS, Android, kiosk and web environments. ● CXAI BTS (Behind the Scenes) : The platform’s core infrastructure layer that supports content management, workflow automation, integrations with enterprise systems, and security and compliance controls.

CXAI BTS includes a configurable rules engine designed to support complex customer requirements, including policy-based workflows, role-based access controls, and administrative governance. ● CXAI-VU : An analytics and AI-enabled insights module that aggregates and analyzes workplace and experience-related data to provide visibility into usage patterns, engagement metrics, and operational trends.

CXAI-VU includes natural language processing capabilities that allow administrators to query data and retrieve insights using voice or text-based commands. ● Agentic AI Capabilities : AI-enabled functionality designed to support task execution, workflow orchestration, and self-service interactions across workplace, employee, and venue-related use cases.

The CXAI Platform is offered through subscription-based licensing arrangements and is available for deployment through major cloud service providers, including Amazon Web Services, Google Cloud Platform, and Microsoft Azure.

The Company also provides implementation, configuration, and ongoing support services in connection with customer deployments. 1 Business Model CXApp’s workplace solution is an AI-powered SaaS platform designed to meet the dynamic needs of enterprise organizations by providing a mobile-first approach to workplace management.

Our platform empowers employees with a seamless, intelligent employee experience by integrating AI-driven insights, automation, and real-time analytics, ensuring a more efficient and engaging work environment. The CXApp platform delivers a comprehensive, cloud-based content management system (CMS), enabling customers to autonomously and dynamically configure workplace settings based on real-time data and evolving organizational needs.

Our intelligent automation capabilities allow for personalized experiences, operational efficiency, and optimized space utilization at scale. Our pricing structure consists of recurring software fees as well as a professional service fee to setup and deploy a new location or campus, including digitized maps and configurations at the global and regional level.

Technology Overview CXApp’s platform is a comprehensive employee experience solution that introduced a mobile-first mindset to everyday interactions and business needs to help customers drive engagement across their global workforce. We bring employee experience initiatives together in one simple and comprehensive system, so customers don’t have to host, manage, support or maintain one of their own.

We believe this results in low cost, low overhead and easy maintenance. 2 Industry Background Since 2009, digital transformation initiatives have steadily reshaped the corporate workplace, introducing advancements such as conference room signage, desk booking systems, next-generation intranets, and transparent communications. These technologies provided enterprises with an efficient way to integrate and automate key workplace functions.

The shift toward flexible work models, including hot-desking and occupancy sensors, gained momentum in the late 2010s. However, the COVID-19 pandemic in 2020 accelerated the adoption of remote and hybrid work strategies. Organizations rapidly deployed workplace technology solutions to address immediate challenges, enabling employees to work efficiently from distributed locations.

This period saw the rapid proliferation of third-party workplace applications, leading to increasingly siloed data and fragmented experiences. In the years following the pandemic, organizations have sought to balance flexibility with operational efficiency. By 2024, return-to-office initiatives gained traction, with companies refining their hybrid models and investing in AI-powered employee experience platforms to enhance employee engagement, productivity, and space utilization.

As more tools and systems connect, comprehensive workplace analytics will become crucial for job roles such as corporate real estate, facilities, and even human resources as they’ll be able to glean cross-platform, actionable insights that impact spaces, technology, and the people that use them.

Trends The Evolving Return-to-Office Landscape: Technology’s Role in Shaping the Future of Work The workplace is undergoing a fundamental transformation as companies strive to balance operational efficiency with employee expectations. While many organizations are pushing for a return-to-office model of 3-5 days per week, many employees remain disengaged, uncertain about in-office benefits, and wary of rigid mandates.

To bridge this gap, companies must rethink how they optimize space, foster engagement, and create an office environment that truly enhances productivity and collaboration. A major challenge in today’s workplace is the lack of clarity and purpose behind the office experience.

Employees question why they need to be physically present, struggle with unpredictable attendance from colleagues, and face inequities in hybrid work arrangements. Without clear value propositions for in-office work, attendance policies alone are not enough. Instead, businesses must focus on creating dynamic, tech-enabled workplaces that support both in-office and hybrid employees.

The Role of Technology in Reinventing Workplace Engagement To successfully transition into this new era, organizations must adopt smarter workplace technologies that remove friction, improve collaboration, and provide real-time insights into how space is utilized. Key areas of focus include: 1.

Unified Workplace Platforms – Employees and operations teams are often overwhelmed by fragmented workplace technologies, leading to app fatigue and inefficiencies. A single, integrated application that consolidates desk bookings, meeting spaces, navigation, and collaboration tools helps to streamline the employee experience. 2.

Real-Time Occupancy Insights – Many hybrid models have disrupted traditional desk assignments, leading to ghost bookings, double reservations, and inefficient space utilization. AI-driven desk booking and reservation tools, paired with sensors, help to ensure companies can track and manage occupancy accurately, eliminating wasted real estate. 3.

Adaptive Space Management – Many corporate offices no longer operate under a fixed environment where employees work from the same desk daily. Many offices are evolving into innovation hubs with dynamic layouts that adjust to employee demand. Successful organizations need flexible mapping, real-time navigation, and workspace reconfiguration tools to help ensure every square foot is optimized. 3 4.

Automated Employee Experiences – To entice employees back, companies should strive to create a seamless and engaging workplace journey. This means leveraging AI-driven personalization, automated check-ins, smart notifications, and real-time updates to enhance the office experience. Why We Believe Mobile is the Future of Workplace Connectivity As companies continue phased re-entry strategies, mobile-first solutions are increasingly more critical.

A workplace app serves as the central hub for booking resources, finding colleagues, receiving updates, and staying connected across distributed teams. The ability to manage workspaces, navigate changing office environments, and engage with real-time data is key to empowering employees and driving office attendance organically.

At CXApp we are leading this transformation through our state-of-the-art employee experience platform, backed by 37 filed patents, including 17 which have been granted. Our solutions are designed to help organizations navigate the complexities of modern work environments, optimize office space, and foster a workplace that employees want to return to.

The Future of Work is Hybrid, Connected, and Intelligent We believe the future of the return-to-office model is not about rigid mandates — it’s about creating an office experience that employees choose to be part of. We believe companies that invest in automation, real-time insights, and seamless digital experiences will successfully bridge the gap between attendance goals and employee expectations.

With the right technology in place, organizations can transform the office into a hub of innovation, engagement, and productivity, setting the foundation for long-term workplace success. Competition The market for our products and services is highly competitive, rapidly evolving, and subject to changing technology trends and customer demands.

As a provider of AI-driven employee experience solutions, we operate in a new and emerging category of vertical SaaS that redefines traditional approaches to workplace management. Our innovative platform represents a shift in how organizations engage with their employees and optimize physical spaces, offering a new way to integrate digital workplace tools with physical environments.

As a result, we face competition not only from established enterprise software vendors but also from emerging cloud-based providers and niche solution providers specializing in employee experience and workplace optimization.

Our primary competitors include: ● Employee Experience and Desk Booking Platforms: We face competition from specialized SaaS providers focused on workplace optimization, such as Envoy, Modo Labs, Condeco, Robin, and Petur. These competitors offer comprehensive desk booking, space management, and employee experience solutions that directly address hybrid workplace needs.

Their strong presence in the market and integration capabilities present a significant challenge. ● Intranet Solution providers like Appspace, Workvivo and Simplrr.

These competitors have been providing traditional digital signage and intranet applications to enterprises. ● In-House Solutions: Some organizations choose to build and maintain their own internal solutions for employee experience and desk management, leveraging custom-built software or open-source tools. ● New Market Entrants and Niche Solution Providers: As the hybrid work trend continues to evolve, new competitors emerge with specialized solutions addressing aspects of employee experience, workplace analytics, and hybrid office management.

Large technology-driven entrants like ServiceNow, Microsoft and Cisco have started looking at integrating space management and employee experience offerings in their enterprise platforms. 4 Research and Development Expenses Our research and development (R&D) activities have primarily been focused on enhancing our workplace app and mapping platform with additional features and capabilities to strengthen the total offering of our workplace solutions.

In addition, we have allocated development resources to integrating our recently acquired technologies with our existing solutions, such as integrating our mapping and app platform, and incorporating “on device” positioning and analytics capabilities within our platform.

While our R&D expenses have historically exceeded our revenues, we anticipate R&D expenses will grow at a slower rate than our revenue, however, we may need additional funding to support our planned R&D activities after the next 12 months or if we decide to accelerate the time to availability for planned development activities to grow faster or meet customer demand.

Sales and Marketing We utilize direct sales and marketing through sales representatives, who are compensated with a base salary and, in certain instances, may participate in incentive plans such as commissions or bonuses.

To generate demand for our products and services, we utilize account-based marketing initiatives, lead gen and demand gen programs, tradeshows, webinars and other direct and indirect marketing activities to reach our target audience. Additionally, we have dedicated resources to support and grow our business through strategic channel and technology partner opportunities.

Our products are primarily sold on a recurring SaaS license model along with one-time implementation costs (for professional services). The SaaS model is typically for a multi-year contract and includes maintenance upgrades. It is common for our customers to expand our products to additional locations as well as implement new features resulting in additional revenue potential.

Item 1A. Risk Factors. In addition to the other information contained in this Annual Report, the following risks have the potential to impact the business and operations of CXApp. An investment in our securities involves a high degree of risk.

You should carefully consider all the risks described in this Annual Report, together with the other information contained in this Annual Report. These risk factors are not exhaustive, and all investors are encouraged to perform their own investigation with respect to the business, financial condition and prospects of CXApp.

The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe are immaterial could have a material adverse effect on our business, financial condition, results of operations and future growth prospects.

In that event, the trading price of our securities could decline, and you could lose all or part of your investment. Risk Factor Summary Risks Relating to our Operations. ● We have a history of net losses, and future financings may be dilutive or difficult to obtain.

Integrating acquisitions or new offerings strains our infrastructure and may not generate expected benefits. Contract disputes or litigation can be costly and time-consuming, and any failure to control our expenses or effectively manage growth could negatively affect profitability. Risks Relating to our Growth ● Our plans depend on scaling operations and expanding sales to new and existing customers.

The rapidly evolving technology landscape requires us to anticipate and respond to shifts in customer needs and industry standards; if our solutions do not achieve broad adoption, our growth prospects and revenues may suffer. Risks Relating to our Personnel ● Our business depends on hiring, developing, and retaining highly skilled employees, including key executives and technical professionals.

Competition for specialized talent is intense; any difficulty in recruiting or high turnover could disrupt operations and impede growth. If we lose critical personnel without adequate successors, fail to motivate our workforce, or incur excessive expenses to retain staff, our profitability and strategic objectives may be adversely affected.

Risks Relating to our Intellectual Property ● Our success depends on protecting proprietary technologies, methodologies, and trade secrets. We rely on patents, copyrights, confidentiality agreements, and other intellectual property measures to maintain our competitive advantage.

However, the rapidly evolving nature of technology and the potential for unauthorized use or misappropriation of our intellectual property expose us to infringement claims and legal disputes that may be expensive, divert management’s attention, or result in loss of proprietary rights.

Risks Related to Ownership of our Securities ● Our stock price can be volatile, and we have no current plans to pay dividends. Future equity issuances could dilute existing stockholders. Failure to meet Nasdaq listing standards or changing market conditions could reduce market liquidity or cause delisting.

New or evolving regulations may also affect stockholder rights and the value of our common stock. 8 Risks Related to our Accounting Policies ● We prepare our consolidated financial statements in accordance with U.S. GAAP, which is subject to interpretation and may change over time.

Adjustments in standards or unexpected changes in accounting estimates, goodwill impairments, or restatements of prior-period financial statements could adversely affect our reported results. If our internal control over financial reporting proves ineffective, we may be unable to provide accurate or timely financial information, potentially harming our credibility with investors and regulators.

Risks Related to Cybersecurity Threats ● We operate in an environment prone to security breaches, data corruption, hacking, and other cyber incidents. Our products, services, and corporate systems — along with those of our partners or suppliers — may be vulnerable to increasingly sophisticated cyber threats.

A successful breach or service disruption could compromise customer data, impede operations, damage our reputation, result in legal and regulatory liability, and diminish market confidence in our solutions. Risks Related to our Industry ● We compete in a rapidly evolving sector with frequent technological advances, emerging business models, and the introduction of new or improved products by competitors.

Developing market-leading innovations is capital-intensive and uncertain. Failure to anticipate and respond to industry changes, standardize new offerings, or gain market acceptance could erode our competitive position. In addition, macroeconomic pressures, regulatory complexities, and intensifying competition all contribute to heightened operational and financial risks.

Risks Related to External Factors and Third Parties ● Fluctuations in global or regional economic conditions, political disruptions, pandemics, or conflicts can interrupt supply chains and dampen demand for our products.

Compliance with diverse international regulations, including data privacy laws and trade restrictions, involves complexities and potential liabilities that can adversely affect our business. 9 Risks Relating to our Operations We have a history of operating losses and there is no assurance that we will ever be able to earn sufficient revenue to achieve profitability or raise additional financing to successfully operate our business plan.

We have a history of operating losses and may not earn sufficient revenue to support our operations. We have incurred recurring net losses of approximately $13,473 thousand and $19,408 thousand for the fiscal years ended 2025 and 2024, respectively.

Our continuation is dependent upon attaining and maintaining profitable operations and raising additional capital as needed, but there can be no assurance that we will be able to raise any further financing. Our ability to generate positive cash flow from operations is dependent on implementing certain cost reductions and generating sufficient revenues.

Based on our current business plan, we may need additional capital to support our operations, which may be satisfied by additional debt or equity financings. Future financings through equity offerings will be dilutive to existing stockholders. In addition, the terms of securities we may issue in future capital transactions may be more favorable to new investors than our current investors.

Newly issued securities may include preferences, superior voting rights, and the issuance of warrants or other derivative securities. We may also issue incentive awards under our equity incentive plans, which may have additional dilutive effects.

We may also be required to recognize non-cash expenses in connection with certain securities we may issue in the future such as convertible notes and warrants, which would adversely impact our financial condition and results of operations.

Our ability to obtain needed financing may be impaired by certain factors, including the condition of the economy and capital markets, both generally and specifically in our industry, and the fact that we are not profitable, which could affect the availability or cost of future financing.

If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, we may need to reduce our operations by, for example, selling certain assets or business segments.

Failure to manage or protect growth may be detrimental to our business because our infrastructure may not be adequate for expansion. Our corporate strategy contemplates potential future acquisitions and to the extent we acquire other businesses, we will also need to integrate and assimilate new operations, technologies and personnel.

The integration of new personnel will continue to result in some disruption to ongoing operations. The ability to successfully manage growth in a rapidly evolving market requires effective planning and management processes. We will need to continue to improve operational, financial, and managerial controls, reporting systems and procedures, and will need to continue to expand, train and manage our workforce.

There can be no assurance that we would be able to accomplish such an expansion on a timely basis. If we are unable to affect any required expansion and are unable to perform our contracts on a timely and satisfactory basis, our reputation and eligibility to secure additional contracts in the future could be damaged.

The failure to perform could also result in contract terminations and significant liability. Any such result would adversely affect our business and financial condition. Insurance and contractual protections may not always cover lost revenue, increased expenses, or liquidated damages payments, which could adversely affect our financial results.

Although we maintain insurance and intend to obtain warranties from suppliers, obligate subcontractors to meet certain performance levels and attempt, where feasible, to pass risks we cannot control to our customers, the proceeds of such insurance or the warranties, performance guarantees or risk sharing arrangements may not be adequate to cover lost revenue, increased expenses or liquidated damages payments that may be required in the future. 10 Adverse judgments or settlements in legal proceedings could materially harm our business, financial condition, operating results, and cash flows.

We may be a party to claims that arise from time to time in the ordinary course of our business, which may include those related to, for example, contracts, sub-contracts, protection of confidential information or trade secrets, adversarial proceedings arising from customer bankruptcies, employment of our workforce and immigration requirements or compliance with any of a wide array of state and federal statutes, rules or regulations that pertain to different aspects of our business.

We may also be required to initiate expensive litigation or other proceedings to protect our business interests. There is a risk that we will not be successful or otherwise be able to satisfactorily resolve any such claims or litigation. In addition, litigation and other legal claims are subject to inherent uncertainties.

Those uncertainties include, but are not limited to, litigation costs and attorneys’ fees, unpredictable judicial or jury decisions and the differing laws and judicial proclivities regarding damage awards among the states in which we operate.

Unexpected outcomes in such legal proceedings, or changes in management’s evaluation or predictions of the likely outcomes of such proceedings (possibly resulting in changes in established reserves), could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Due to recurring losses and net capital deficiency, our current financial status may increase our default and litigation risks and may make us more financially vulnerable in the face of threatened litigation. Any future acquisitions that we may make could disrupt our business, cause dilution to our stockholders and harm our business, financial condition or operating results.

If we are successful in consummating acquisitions, those acquisitions could subject us to a number of risks, including, but not limited to: ● the purchase price we pay and/or unanticipated costs could significantly deplete our cash reserves or result in dilution to our existing stockholders; ● we may find that the acquired company or technologies do not improve our market position as planned; ● we may have difficulty integrating the operations and personnel of the acquired company, as the combined operations will place significant demands on our management, technical, financial and other resources; ● key personnel and customers of the acquired company may terminate their relationships with the acquired company as a result of the acquisition; ● we may experience additional financial and accounting challenges and complexities in areas such as tax planning and financial reporting; ● we may assume or be held liable for risks and liabilities (including environmental-related costs) as a result of our acquisitions, some of which we may not be able to discover during our due diligence investigation or adequately adjust for in our acquisition arrangements; ● our ongoing business and management’s attention may be disrupted or diverted by transition or integration issues and the complexity of managing geographically or culturally diverse enterprises; ● we may incur one-time write-offs or restructuring charges in connection with the acquisition; ● we may acquire goodwill and other intangible assets that are subject to amortization or impairment tests, which could result in future charges to earnings; and ● we may not be able to realize the cost savings or other financial benefits we anticipated.

We cannot assure you that, following any acquisition, our continued business will achieve sales levels, profitability, efficiencies or synergies that justify the acquisition or that the acquisition will result in increased earnings for us in any future period.

These factors could have a material adverse effect on our business, financial condition and operating results. 11 The growth of our business is dependent on increasing sales to our existing customers and obtaining new customers, which, if unsuccessful, could limit our financial performance.

Our ability to increase revenues from existing customers by identifying additional opportunities to sell more of our products and services and our ability to obtain new customers depends on a number of factors, including our ability to offer high quality products and services at competitive prices, the strength of our competitors and the capabilities of our sales and marketing departments.

If we are not able to continue to increase sales of our products and services to existing customers or to obtain new customers in the future, we may not be able to increase our revenues and could suffer a decrease in revenues as well.

If we are unable to sell additional products and services to our customers and increase our overall customer base, our future revenue and operating results may suffer. Our future success depends, in part, on our ability to expand the deployment of technologies with existing customers and finding new customers to sell our products and services to.

This may require increasingly sophisticated and costly sales efforts and may not result in additional sales. In addition, the rate at which our customers purchase additional products and services, and our ability to attract new customers, depends on a number of factors, including the perceived need for indoor mapping products and services, as well as general economic conditions.

If our efforts to sell additional products and services are not successful, our business may suffer. We may need additional cash financing and any failure to obtain cash financing, could limit our ability to grow our business and develop or enhance our service offerings to respond to market demand or competitive challenges.

While we believe that we have sufficient cash funds to satisfy our working capital needs for the next 12 months, we expect that we may need to raise funds to continue our operations and implement our plans to grow our business.

However, if we decide to seek additional capital, we may be unable to obtain financing on terms that are acceptable to us or at all. If we are unable to raise the required cash, our ability to grow our business and develop or enhance our service offerings to respond to market demand or competitive challenges could be limited.

If we cannot collect our receivables or if payment is delayed, our business may be adversely affected by our inability to generate cash flow, provide working capital, or continue our business operations.

Our business depends on our ability to successfully obtain payment from our customers of the amounts they owe us for products received from us and any work performed by us. The timely collection of our receivables allows us to generate cash flow, provide working capital and continue our business operations.

Our customers may fail to pay or delay the payment of invoices for several reasons, including financial difficulties resulting from macroeconomic conditions or lack of an approved budget. An extended delay or default in payment relating to a significant account will have a material and adverse effect on the aging schedule and turnover days of our accounts receivable.

If we are unable to timely collect our receivables from our customers for any reason, our business and financial condition could be adversely affected. Defects, errors, or vulnerabilities in our products or services or the failure of such products or services to prevent a security breach, could harm our reputation and adversely affect our results of operations.

Because our location-based products and services are complex, they have contained and may contain design or manufacturing defects or errors that are not detected until after their commercial release and deployment by customers.

Defects may cause such products to be vulnerable to advanced persistent threats (“APTs”) or security attacks, cause them to fail to help secure information or temporarily interrupt customers’ networking traffic.

Because the techniques used by hackers to access sensitive information change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques and provide a solution in time to protect customers’ data.

In addition, defects or errors in our subscription updates or products could result in a failure to effectively update customers’ hardware products and thereby leave customers vulnerable to APTs or security attacks.

Any defects, errors or vulnerabilities in our products could result in: ● expenditure of significant financial and product development resources in efforts to analyze, correct, eliminate, or work-around errors or defects or to address and eliminate vulnerabilities; 12 ● delayed or lost revenue; ● loss of existing or potential customers or partners; ● increased warranty claims compared with historical experience, or increased cost of servicing warranty claims, either of which would adversely affect gross margins; and ● litigation, regulatory inquiries, or investigations that may be costly and harm our reputation Our current research and development efforts may not produce successful products or features that result in significant revenue, cost savings or other benefits in the near future.

If we do not realize significant revenue from our research and development efforts, our business and results of operations may be adversely affected. Developing products and related enhancements in our field is expensive. Investments in research and development may not result in significant design improvements, marketable products or features or may result in products that are more expensive than anticipated.

We may not achieve the cost savings or the anticipated performance improvements expected, and we may take longer to generate revenue from products in development or generate less revenue than expected. Our future plans include significant investments in research and development and related product opportunities.

Our management believes that we must continue to dedicate a significant amount of resources to research and development efforts to maintain a competitive position. However, we may not receive significant revenue from these investments in the near future, or these investments may not yield the expected benefits, either of which could adversely affect our business and operating results.

Risks Relating to our Growth We will need to increase the size of our organization, and we may experience difficulties in managing growth, which could hurt our financial performance. In order to manage our future growth, we will need to continue to improve our management, operational and financial controls and our reporting systems and procedures.

All of these measures will require significant expenditures and will demand the attention of management.

If we do not continue to enhance our management personnel and our operational and financial systems and controls in response to growth in our business, we could experience operating inefficiencies that could impair our competitive position and could increase our costs more than we had planned.

If we are unable to manage growth effectively, our business, financial condition and operating results could be adversely affected. 13 Risks Relating to our Personnel Our business depends on experienced and skilled personnel, and if we are unable to attract and integrate skilled personnel, it will be more difficult for us to manage our business and complete contracts.

The success of our business depends on the skill of our personnel. Accordingly, it is critical that we maintain, and continue to build, a highly experienced management team and specialized workforce, including those who create software programs and sales professionals.

Competition for personnel with skill sets specific to our industry is high, and identifying candidates with the appropriate qualifications can be costly and difficult.

We may not be able to hire the necessary personnel to implement our business strategy given our anticipated hiring needs, or we may need to provide higher compensation or more training to our personnel than we currently anticipate.

Our business is labor intensive, and our success depends on our ability to attract, retain, train and motivate highly skilled employees, including employees who may become part of our organization in connection with our acquisitions.

The increase in demand for consulting, technology integration and managed services has further increased the need for employees with specialized skills or significant experience in these areas.

Our ability to expand our operations will be highly dependent on our ability to attract a sufficient number of highly skilled employees and to retain our employees and the employees of companies that we have acquired. We may not be successful in attracting and retaining enough employees to achieve our desired expansion or staffing plans.

Furthermore, the industry turnover rates for these types of employees are high and we may not be successful in retaining, training or motivating our employees. Any inability to attract, retain, train and motivate employees could impair our ability to adequately manage and complete existing projects and to accept new customer engagements.

Such inability may also force us to increase our hiring of independent contractors, which may increase our costs and reduce our profitability on customer engagements. We must also devote substantial managerial and financial resources to monitoring and managing our workforce. Our future success will depend on our ability to manage the levels and related costs of our workforce.

In the event we are unable to attract, hire and retain the requisite personnel and subcontractors, we may experience delays in completing contracts in accordance with project schedules and budgets, which may have an adverse effect on our financial results, harm our reputation and cause us to curtail our pursuit of new contracts.

Further, any increase in demand for personnel may result in higher costs, causing us to exceed the budget on a contract, which in turn may have an adverse effect on our business, financial condition and operating results and harm our relationships with our customers.

We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of their former employers. We may be subject to claims that we and our employees may have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of former employers or competitors.

Litigation may be necessary to defend against these claims. We may be subject to unexpected claims of infringement of third-party intellectual property rights, either for intellectual property rights of which we are not aware, or for which we believe are invalid or narrower in scope than the accusing party.

Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. If we fail in defending such claims, in addition to paying money damages, we may lose valuable intellectual property rights or personnel or be enjoined from selling certain products or providing certain services.

A loss of key research personnel or their work product could hamper or prevent our ability to commercialize certain products, which could severely harm our business. The loss of key personnel may adversely affect our operations. Our success depends to a significant extent upon the operation, experience, and continued services of certain of our officers, and other key personnel.

While our key personnel are employed under employment contracts, there is no assurance we will be able to retain their services. The loss of our key personnel could have an adverse effect on us.

If certain of our executive officers were to leave, we would face substantial difficulty in hiring a qualified successor and could experience a loss in productivity while any successor obtains the necessary training and experience.

Furthermore, we do not maintain “key person” life insurance on the lives of any executive officer and their death or incapacity would have a material adverse effect on us.