What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2021-03-10 compared with 2020-03-13 · 572 added, 417 removed, 64 unchanged (94% of the section changed)

FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

currency is rounded to the nearest thousands, except share and per share amounts.)

common stock is listed for trading on the Nasdaq Capital Markets (“Nasdaq”) under the symbol “CREX”.

of our common stock on Nasdaq commenced on November 19, 2018.

Prior to November 19, 2018, our common stock was listed for trading

on the OTC Bulletin Board, the “OTCQX,”

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

(All currency is rounded to the nearest thousands, except share

and per share amounts.)

Market Information

Our common stock is listed for trading on

the Nasdaq Capital Markets (“Nasdaq”) under the symbol “CREX”.

Trading of our common stock on Nasdaq commenced

on November 19, 2018.

Prior to November 19, 2018, our common stock was listed for trading on the OTC Bulletin Board, the “OTCQX,”

under the symbol “CREX.”

The transfer agent and registrar for

our common stock is Computershare Limited, 401 2nd Avenue North, Minneapolis, Minnesota 55401.

of February 27, 2020, we had 371 holders of record of our common stock.

The actual number of stockholders is greater than this

number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers

and other nominees.

This number of holders of record also does not include stockholders whose shares may be held in trust by other

have never declared or paid cash dividends on our common stock.

We currently intend to retain future earnings, if any, to operate

and expand our business and to finance the development and expansion of our business.

We do not anticipate paying cash dividends

on our common stock in the foreseeable future.

Any payment of cash dividends in the future will be at the discretion of our Board

of Directors and will depend upon our results of operations, earnings, capital requirements, contractual restrictions and other

factors deemed relevant by our Board of Directors.

Holders of our common stock are entitled to share pro rata in

dividends and distributions with respect to the common stock when, as and if declared by our Board of Directors out of funds legally

available therefor.

Our future dividend policy is subject to the sole discretion of our Board of Directors and will depend upon

a number of factors, including future earnings, capital requirements and our financial condition.

Sales of Unregistered Securities

On December 30, 2019, the Company entered

into a Seventh Amendment to Loan and Security Agreement (the “Seventh Amendment”) with its subsidiaries and Slipstream

Communications, LLC (“Lender”).

Pursuant to the Seventh Amendment, Lender made a $2,000 loan to the Company (the “Special

Loan”) under the terms of the Company’s existing Loan and Security Agreement with Lender (as amended by the Seventh

Amendment, the “Loan Agreement”).

The Special Loan is evidenced by a Secured Convertible Special Loan Promissory Note

(the “Note”).

The Note bears simple interest at 8% per annum, of which 6% is payable in cash (the “Interest”)

and 2% is payable in kind as additional principal under the Note (“Additional Principal”), which is payable monthly

commencing February 1, 2020.

The entire unpaid principal balance of the Note (including the Additional Principal) together with

all accrued but unpaid interest is due on June 30, 2021 (the “Maturity Date”).

The Company may prepay the Note, in

whole or in part, at any time and from time to time, without penalty or premium.

The principal (including the Additional Principal)

and accrued but unpaid interest will be converted into a new class of senior preferred stock of the Company upon any event of default

or in the event that the Company does not refinance the Note prior to October 1, 2020, with such class of senior preferred stock

of the Company to be created in advance of such conversion, having those rights and preferences set forth in the Loan Agreement

and as otherwise agreed to by the Company and Lender.

For this issuance, we relied on the statutory exemptions from registration

under Section 4(a)(2) of the Securities Act, including Rule 506 promulgated thereunder.

We relied on this exemption based on the

fact that the investor was an accredited investor.

FINANCIAL DATA

MANAGEMENT’S

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

currency is rounded to the nearest thousands, except share and per share amounts.)

Forward-Looking

following discussion contains various forward-looking statements within the meaning of Section 21E of the Exchange Act.

we believe that, in making any such statement, our expectations are based on reasonable assumptions, any such statement may be

influenced by factors that could cause actual outcomes and results to be materially different from those projected.

in the following discussion, the words “anticipates,”

The transfer agent and registrar for our common stock is Computershare Limited, 401 2nd Avenue

North, Minneapolis, Minnesota 55401.

As of March 8, 2021, we had 344 holders

of record of our common stock.

The actual number of stockholders is greater than this number of record holders, and includes stockholders

who are beneficial owners, but whose shares are held in street name by brokers and other nominees.

This number of holders of record

also does not include stockholders whose shares may be held in trust by other entities.

Dividend Policy

We have never declared or paid cash dividends

on our common stock.

We currently intend to retain future earnings, if any, to operate and expand our business and to finance the

development and expansion of our business.

We do not anticipate paying cash dividends on our common stock in the foreseeable future.

Any payment of cash dividends in the future will be at the discretion of our Board of Directors and will depend upon our results

of operations, earnings, capital requirements, contractual restrictions and other factors deemed relevant by our Board of Directors.

Holders of our common stock are entitled

to share pro rata in dividends and distributions with respect to the common stock when, as and if declared by our Board of Directors

out of funds legally available therefor.

Our future dividend policy is subject to the sole discretion of our Board of Directors

and will depend upon a number of factors, including future earnings, capital requirements and our financial condition.

Recent Sales of Unregistered Securities

On March 7, 2021, the Company and its subsidiaries

(collectively, the “Borrowers”) refinanced their current debt facilities with Slipstream Communications, LLC (“Slipstream”),

pursuant to an Amended and Restated Credit and Security Agreement (the “Credit Agreement”).

The debt facilities continue

to be fully secured by all assets of the Borrowers.

The maturity date (“Maturity Date”) on the outstanding debt and

new debt is extended to March 31, 2023.

The Credit Agreement (i) provides a $1,000 of availability under a line of credit (the

“Line of Credit”), (ii) consolidates our existing term and revolving line of credit facilities into a new term loan

(the “New Term Loan”) having an aggregate principal balance of approximately $4,550 (including a 3.0% issuance fee

capitalized into the principal balance), (iii) increases the outstanding special convertible term loan (the “Convertible

Loan”) to approximately $2,280 (including a 3.0% issuance fee capitalized into the principal balance), and (iv) extinguishes

the outstanding obligations owed with respect to a $264 existing disbursed escrow loan in exchange for shares of the Company’s

common stock (the “Disbursed Escrow Conversion Shares”), valued at $2.718 per share (the trailing 10-day volume weighted

average price (“VWAP”)) as reported on the Nasdaq Capital Market as of the date of execution of the Credit Agreement).

The Line of Credit and Convertible Loan accrue interest at 10% per year, and the New Term Loan accrues interest at 8% per year.

The New Term Loan requires no principal

payments until the Maturity Date, and interest payments are payable on the first day of each month until the Maturity Date.

interest payments owed prior to October 1, 2021 are payable as PIK payments, or increases to the principal balance only.

The Line of Credit and Convertible Loan

require payments of accrued interest payable on the first day of each month through April 1, 2022.

All such interest payments made

prior to October 1, 2021 are payable as PIK payments, or increases to the principal balances under the Line of Credit and Convertible

No principal payments are owed under the Line of Credit or Convertible Loan until April 1, 2022, at which time all principal

and interest on each of the Line of Credit and Convertible Loan will be paid in monthly installments until the Maturity Date to

fully amortize outstanding principal by the Maturity Date.

All payments of interest (other than PIK

payments) and principal on the Line of Credit and Convertible Loan may be paid, in the Borrowers’

sole discretion, in shares

of the Company’s Common Stock (the “Payment Shares,”

and together with the Disbursed Escrow Conversion Shares,

the “Shares”).

The Payment Shares will be valued on a per-Share basis at 70% of the VWAP of the Company’s shares

of common stock as reported on the Nasdaq Capital Market for the 10 trading days immediately prior to the date such payment is

provided that the Payment Shares shall not be valued below $0.50 per Share (the “Share Price”).

The Credit Agreement limits the Company’s

ability to issue Shares as follows (the “Exchange Limitations”):

(1) The total number of Shares that may be issued

under the Credit Agreement will be limited to 19.99% of the Company’s outstanding shares of common stock on the date the

Credit Agreement is signed (the “Exchange Cap”), unless stockholder approval is obtained to issue shares in excess

of the Exchange Cap;

(2) if Slipstream and its affiliates (the “Slipstream Group”) beneficially own the largest ownership

position of shares of Company common stock immediately prior to the proposed issuance of Payment Shares and such shares are less

than 19.99% of the then-issued and outstanding shares of Company common stock, the issuance of such Payment Shares will not cause

the Slipstream Group to beneficially own in excess of 19.99% of the issued and outstanding shares of Company common stock after

such issuance unless stockholder approval is obtained for ownership in excess of 19.99%;

and (3) if the Slipstream Group does not

beneficially own the largest ownership position of shares of Company common stock immediately prior to the proposed issuance of

Payment Shares, the Company may not issue Payment Shares to the extent that such issuance would result in Slipstream Group beneficially

owning more than 19.99% of the then issued and outstanding shares of Company common stock unless (A) such ownership would not be

the largest ownership position in the Company, or (B) stockholder approval is obtained for ownership in excess of 19.99%.

The Borrowers covenant to, within 30 days

of the signing of the Credit Agreement, file a preliminary proxy statement with the SEC to procure an approval of the transactions

contemplated herein from its majority stockholders for purposes of complying with Nasdaq Marketplace Rule 5635(b), (c) and (d).

The Borrowers will thereafter use their commercially reasonable efforts to file a definitive proxy statement to cause to be held

a shareholder meeting for such approval.

The Borrowers will use their reasonable

best efforts to have declared effective within 45 days of signing of the Credit Agreement (“Effectiveness Date”) a

registration statement on Form S-3 covering the resale of the Disbursed Escrow Conversion Shares and the Payment Shares.

SELECTED FINANCIAL DATA

Not applicable.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(All currency is rounded to the nearest thousands, except share

and per share amounts.)

Forward-Looking Statements

The following discussion contains various

forward-looking statements within the meaning of Section 21E of the Exchange Act.

Although we believe that, in making any such

statement, our expectations are based on reasonable assumptions, any such statement may be influenced by factors that could cause

actual outcomes and results to be materially different from those projected.

When used in the following discussion, the words “anticipates,”

“believes,”

3 unchanged sentences

“estimates”

and similar expressions, as they relate to us or our management, are intended to

identify such forward-looking statements.

These forward-looking statements are subject to numerous risks and uncertainties that

could cause actual results to differ materially from those anticipated.

Factors that could cause actual results to differ materially

from those anticipated, certain of which are beyond our control, are set forth in Item 1A under the caption “Risk Factors.”

actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking statements.

Accordingly, we cannot be certain that any of the events anticipated by forward-looking statements will occur or, if any of them

do occur, what impact they will have on us.

We caution you to keep in mind the cautions and risks described in this document and

to refrain from attributing undue certainty to any forward-looking statements, which speak only as of the date of the document

in which they appear.

We do not undertake to update any forward-looking statement.

Realities, Inc.

is a Minnesota corporation that provides innovative digital marketing technology solutions to a broad range of

companies, individual brands, enterprises, and organizations throughout the United States and in certain international markets.

We have expertise in a broad range of existing and emerging digital marketing technologies across 18 vertical markets, as well

as the related media management and distribution software platforms and networks, device and content management, product management,

customized software service layers, systems, experiences, workflows, and integrated solutions.

expressions, as they relate to us or our management, are intended to identify such forward-looking statements.

These forward-looking

statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from those anticipated.

Factors that could cause actual results to differ materially from those anticipated, certain of which are beyond our control, are

set forth in Item 1A under the caption “Risk Factors.”

Our actual results, performance or achievements

could differ materially from those expressed in, or implied by, forward-looking statements.

Accordingly, we cannot be certain that

any of the events anticipated by forward-looking statements will occur or, if any of them do occur, what impact they will have

We caution you to keep in mind the cautions and risks described in this document and to refrain from attributing undue certainty

to any forward-looking statements, which speak only as of the date of the document in which they appear.

We do not undertake to

update any forward-looking statement.

Creative Realities, Inc.

is a Minnesota corporation

that provides innovative digital marketing technology solutions to a broad range of companies, individual brands, enterprises,

and organizations throughout the United States and in certain international markets.

We have expertise in a broad range of existing

and emerging digital marketing technologies across approximately fifteen (15) vertical markets, as well as the related media management

and distribution software platforms and networks, device and content management, product management, customized software service

layers, systems, experiences, workflows, and integrated solutions.

Our technology and solutions include:

digital merchandising systems and omni-channel customer engagement systems;

content creation, production and scheduling programs

a comprehensive series of recurring maintenance, support, and field service offerings;

interactive digital shopping

assistants, advisors and kiosks;

and, other interactive marketing technologies such as mobile, social media, point-of-sale transactions,

beaconing and web-based media that enable our customers to transform how they engage with consumers.

main operations are conducted directly through Creative Realities, Inc.

and our wholly owned subsidiaries Allure Global Solutions,

Inc., a Georgia corporation, Creative Realities Canada, Inc., a Canadian corporation, and ConeXus World Global, LLC, a Kentucky

limited liability company.

Our other wholly owned subsidiary Creative Realities, LLC, a Delaware limited liability company, has

been effectively dormant since October 2015, the date of the merger with ConeXus World Global, LLC.

generate revenue in our business by:

with our customers to determine the technologies and solutions required to achieve their specific goals, strategies and objectives;

our customers’

digital merchandising

systems and omni-channel customer engagement systems;

content creation, production and scheduling programs and systems;

a comprehensive

series of recurring maintenance, support, and field service offerings;

interactive digital shopping assistants, advisors and kiosks;

and, other interactive marketing technologies such as mobile, social media, point-of-sale transactions, beaconing and web-based

media that enable our customers to transform how they engage with consumers.

Our main operations are conducted directly

through Creative Realities, Inc.

and our wholly owned subsidiary Creative Realities Canada, Inc., a Canadian corporation.

wholly owned subsidiaries are effectively dormant:

Creative Realities, LLC, a Delaware limited liability company, ConeXus World

Global, LLC, a Kentucky limited liability company, and Allure Global Solutions, Inc., a Georgia corporation.

We generate revenue by:

consulting with our customers to determine the technologies and solutions required to achieve their specific goals, strategies and objectives;

designing our customers’

digital marketing experiences, content and interfaces;

the systems architecture delivering the digital marketing experiences we design –

engineering the systems architecture delivering the digital marketing experiences we design –

both software and hardware –

and integrating those systems into a customized, reliable and effective digital marketing experience;

the efficient, timely and cost-effective deployment of our digital marketing technology solutions for our customers;

and updating the content of our digital marketing technology solutions using a suite of advanced media, content and network

management software products;

our customers’

managing the efficient, timely and cost-effective deployment of our digital marketing technology solutions for our customers;

delivering and updating the content of our digital marketing technology solutions using a suite of advanced media, content and network management software products;

maintaining our customers’

digital marketing technology solutions by:

providing content production and related services;

additional software-based features and functionality;

creating additional software-based features and functionality;

hosting the solutions;

monitoring solution service levels;

and responding

to and/or managing remote or onsite field service maintenance, troubleshooting and support calls.

activities generate revenue through:

and responding to and/or managing remote or onsite field service maintenance, troubleshooting and support calls.

These activities generate revenue through:

bundled-solution sales;

consulting services, experience design, content development and production,

software development, engineering, implementation, and field services;

consulting services, experience design, content development and production, software development, engineering,

implementation, and field services;

software license fees;

and maintenance and support services

related to our software, managed systems and solutions.

Sources of Revenue

generate revenue through digital marketing solution sales, which include system hardware, professional and implementation services,

software design and development, software licensing, deployment, and maintenance and support services.

currently market and sell our technology and solutions primarily through our sales and business development personnel, but we

also utilize agents, strategic partners, and lead generators who provide us with access to additional sales, business development

and licensing opportunities.

expenses are primarily comprised of three categories:

and maintenance and support services related to our software, managed

systems and solutions.

Recent Developments

COVID-19 Pandemic

In January 2020, an outbreak of a new strain

of coronavirus, COVID-19, was identified in Wuhan, China.

Through the first quarter of 2020, the disease became widespread

around the world, and on March 11, 2020, the World Health Organization declared a pandemic.

Thereafter, state and local authorities

in the United States and worldwide have forced many businesses to temporarily reduce or cease operations to slow the spread of

the COVID-19 pandemic.

As a result of the COVID-19 pandemic, we

experienced rapid and immediate deterioration in our business in each of our key vertical markets.

The elective and forced closures

of, and implementation of social distancing policies on, businesses across the United States has resulted in materially reduced

demand for our services by our customers, as our customers purchase our products and services to engage with their end customers

in a physical space through digital technology, particularly in our theater, sports arena and large entertainment markets.

reduced demand has resulted in customer orders being delayed.

These conditions resulted in downward revisions of our internal forecasts

on current and future projected earnings and cash flows, resulting in a non-cash impairment loss of $10,646 recording during

the period, and reduced liquidity as described below.

While we are experiencing an intense curtail

in current customer demand, our long-term outlook for the digital signage industry remains strong.

We believe that the digital

signage industry will experience rapid consolidation, adding scale and enhancing profitability to those companies that emerge as

the enterprise-level providers within our industry after the COVID-19 pandemic and consolidations.

We believe that one byproduct

of the COVID-19 pandemic may be the acceleration of industry consolidation as smaller providers may be unwilling or unable to continue

business over the course of 2021.

Given the uncertainty around the extent and

timing of the potential future spread or mitigation of the COVID-19 pandemic and around the imposition or relaxation of protective

measures, we cannot reasonably estimate the impact to our future results of operations, cash flows, or financial condition at this

See “Employee Related Expenses”

within Note 9 Commitments and Contingencies for a discussion of the Company’s cost-control measures, including

employment compensation reductions designed to achieve preliminary cost savings in light of the significant economic uncertainty

caused by the COVID-19 pandemic.

Safe Space Solutions

On April 28, 2020, we announced the joint

launch of an AI-integrated non-contact temperature inspection kiosk known as the Thermal Mirror with our partner, InReality, LLC

(“InReality”), for use by businesses as COVID-19 related workplace restrictions are reduced or eliminated.

we have experience in providing customers digital integration solutions, our launch of the Thermal Mirror involves the development,

marketing and sale of a new product to new customers involving a joint effort with InReality.

The product also uses hardware and

technologies that have not been used with our other customers.

Throughout the course of the remainder of 2020, the Company and

InReality have continued to develop incremental use cases and have launched a suite of Safe Space Solutions products addressing

this market, each of which operate consistently with our primary business model in that they represent a sale of hardware and a

SaaS-based subscription license services contract.

Although we believe these products and our

launch will be successful, there are a number of risks involved in such launch, including investing significant time and resources

in the launch, which may ultimately not be successful.

While market response has been encouraging, we may not ultimately recover

our investment into the launch of these products.

At-the-market offering

On June 19, 2020, the Company entered into

a Sales Agreement (the “Agreement”) with Roth Capital Partners, LLC (“Roth”) under which the Company may

offer and sell, from time to time at its sole discretion, shares of its common stock, par value $0.01 per share (the “Common

Stock”), having an aggregate offering price of up to $8,000,000 through Roth as the Company’s sales agent.

sell the Common Stock by any method permitted by law deemed to be an “at the market offering”

as defined in Rule 415

of the Securities Act of 1933, as amended.

Subject to the terms of the Agreement, Roth will use its commercially reasonable efforts

to sell the Common Stock from time to time, based upon instructions from the Company (including any price, time or size limits

or other customary parameters or conditions the Company may impose).

The Company or Roth may suspend the offering of the Common

Stock being made through Roth under the Agreement upon proper notice to the other party.

The Company will pay Roth a commission

of 3.0% of the gross sales proceeds of any Common Stock sold through Roth under the Agreement, and also has provided Roth with

customary indemnification rights.

The sale of Common Stock under the Agreement is registered on a Form S-3 registration statement

(Registration No.

333-238275) and related prospectus supplement filed with the SEC on June 19, 2020.

Pursuant to the “baby

rules that apply to such registration statement, we cannot sell our common stock in a public primary offering (including

under the Agreement) with a value exceeding more than one-third of our public float in any 12 calendar month period so long as

our public float remains below $75.0 million.

The Company is not obligated to make any

sales of Common Stock under the Agreement.

The offering of shares of Common Stock pursuant to the Agreement will terminate upon

the earlier of (i) the sale of all Common Stock subject to the Agreement or (ii) termination of the Agreement in accordance with

Through March 8, 2021, the Company received

gross proceeds under the Agreement of $1,831 from the issuance of 1,034,068 shares of our Common Stock, and paid an aggregate of

$53 to Roth in commissions, yielding net proceeds of $1,778 after commissions, and net proceeds of $1,636 after other offering-related

Registered Direct Offering

On February 18, 2021, the Company entered

into a securities purchase agreement with an institutional investor which provided for the issuance and sale by the Company of

800,000 shares of the Company’s common stock (the “Shares”), in a registered direct offering (the “Offering”)

at a purchase price of $2.50 per Share, for gross proceeds of $2,000.

The net proceeds from the Offering after paying estimated

offering expenses were approximately $1,835, which the Company intends to use for general corporate purposes.

The closing of the

Offering occurred on February 22, 2021.

Amended and Restated Credit Agreement

On March 7, 2021, the Company and its subsidiaries

(collectively, the “Borrowers”) refinanced their current debt facilities with Slipstream Communications, LLC (“Slipstream”),

pursuant to an Amended and Restated Credit and Security Agreement (the “Credit Agreement”).

The debt facilities continue

to be fully secured by all assets of the Borrowers.

The maturity date (“Maturity Date”) on the outstanding debt and

new debt is extended to March 31, 2023.

The Credit Agreement (i) provides a $1,000 of availability under a line of credit (the

“Line of Credit”), (ii) consolidates our existing term and revolving line of credit facilities into a new term loan

(the “New Term Loan”) having an aggregate principal balance of approximately $4,550 (including a 3.0% issuance fee

capitalized into the principal balance), (iii) increases the outstanding special convertible term loan (the “Convertible

Loan”) to approximately $2,280 (including a 3.0% issuance fee capitalized into the principal balance), and (iv) extinguishes

the outstanding obligations owed with respect to a $264 existing disbursed escrow loan in exchange for shares of the Company’s

common stock (the “Disbursed Escrow Conversion Shares”), valued at $2.718 per share (the trailing 10-day VWAP as reported

on the Nasdaq Capital Market as of the date of execution of the Credit Agreement).

The Line of Credit and Convertible Loan accrue

interest at 10% per year, and the New Term Loan accrues interest at 8% per year.

See Note 8 Loans Payable for additional

information with respect to the Credit Agreement.

Our Sources of Revenue

We generate revenue through digital marketing

solution sales, which include system hardware, professional and implementation services, software design and development, software

licensing, deployment, and maintenance and support services.

We currently market and sell our technology

and solutions primarily through our sales and business development personnel, but we also utilize agents, strategic partners, and

lead generators who provide us with access to additional sales, business development and licensing opportunities.

Our expenses are primarily comprised of three

sales and marketing, research and development, and general and administrative.

Sales and marketing expenses include salaries and benefits for our sales, business development solution management and marketing

personnel, and commissions paid on sales.

This category also includes amounts spent on marketing networking events, promotional

materials, hardware and software to prospective new customers, including those expenses incurred in trade shows and product demonstrations,

and other related expenses.

Our research and development expenses represent the salaries and benefits of those individuals who

develop and maintain our proprietary software platforms and other software applications we design and sell to our customers.

general and administrative expenses consist of corporate overhead, including administrative salaries, real property lease payments,

salaries and benefits for our corporate officers and other expenses such as legal and accounting fees.

Accounting Policies and Estimates

management is responsible for our financial statements and has evaluated the accounting policies to be used in their preparation.

Our management believes these policies are reasonable and appropriate.

The Company’s significant accounting policies are

described in Note 2 Summary of Significant Accounting Policies of the Company’s Consolidated Financial Statements

included within Part II, ITEM 8 of this Report.

The following discussion identifies those accounting policies that we believe

are critical in the preparation of our financial statements, the judgments and uncertainties affecting the application of those

policies and the possibility that materially different amounts will be reported under different conditions or using different

preparation of financial statements in conformity with GAAP requires that management make estimates and assumptions that affect

the reported amounts of assets and liabilities and disclosure of commitments and contingencies at the date of the financial statements

and the reported amounts of revenues and expenses during the reporting period.

Sales and marketing expenses include

salaries and benefits for our sales, business development solution management and marketing personnel, and commissions paid on

This category also includes amounts spent on marketing networking events, promotional materials, hardware and software to

prospective new customers, including those expenses incurred in trade shows and product demonstrations, and other related expenses.

Our research and development expenses represent the salaries and benefits of those individuals who develop and maintain our proprietary

software platforms and other software applications we design and sell to our customers.

Our general and administrative expenses

consist of corporate overhead, including administrative salaries, real property lease payments, salaries and benefits for our corporate

officers and other expenses such as legal and accounting fees.

Critical Accounting Policies and Estimates

Our management is responsible for our financial

statements and has evaluated the accounting policies to be used in their preparation.

Our management believes these policies are

reasonable and appropriate.

The Company’s significant accounting policies are described in Note 2 Summary of Significant

Accounting Policies of the Company’s Consolidated Financial Statements included within Part II, ITEM 8 of this Report.

The following discussion identifies those accounting policies that we believe are critical in the preparation of our financial

statements, the judgments and uncertainties affecting the application of those policies and the possibility that materially different

amounts will be reported under different conditions or using different assumptions.

The preparation of financial statements in

conformity with GAAP requires that management make estimates and assumptions that affect the reported amounts of assets and liabilities

and disclosure of commitments and contingencies at the date of the financial statements and the reported amounts of revenues and

expenses during the reporting period.

Our actual results could differ from those estimates.

January 1, 2018, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)

606, Revenue from Contracts with Customers (“ASC 606”) using the modified retrospective method for all

contracts not completed as of the date of adoption.

Results for reporting periods beginning on or after January 1, 2018 are presented

under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect

for the prior period.

Under this method, we concluded that the cumulative effect of applying this guidance was not material to

the financial statements and no adjustment to the opening balance of accumulated deficit was required on the adoption date.

ASC 606, we account for revenue using the following steps:

the contract, or contracts, with a customer

the performance obligations in the contract

the transaction price

the transaction price to the identified performance obligations

revenue when, or as, we satisfy our performance obligations

Note 2 Summary of Significant Accounting Policies in our Consolidated Financial Statements, included in Part

II, ITEM 8 of this Report, for a complete discussion of our revenue recognition policies.

have not made any material changes in the accounting methodology we use to measure the estimated liability for doubtful accounts

during the past two fiscal years.

We do not believe there is a reasonable likelihood that there will be a material change in the

future estimates or assumptions we use to establish the liability for doubtful accounts.

However, if actual results are not consistent

with our estimates or assumptions, we may be exposed to losses or gains that could be material.

and Intangible Assets

is evaluated for impairment annually as of September 30 and whenever events or circumstances make it more likely than not that

impairment may have occurred.

We have no indefinite-lived intangible assets.

We test goodwill for impairment by comparing the

book value to the fair value at the reporting unit level.

We have only one reporting unit, and therefore the entire goodwill is

allocated to that reporting unit.

The fair value of the reporting unit is determined by using a discounted cash flow analyses

consisting of various assumptions, including expectations of future cash flows based on projections or forecasts derived from

analysis of business prospects and economic or market trends that may occur.

We use these same expectations in other valuation

models throughout the business.

In addition to the discounted cash flow analysis, we utilize a leveraged buy-out model, trading

comps and market capitalization to ultimately determine an estimated fair value of our reporting unit based on weighted average

calculations from these models.

We base our fair value estimates on assumptions we believe to be reasonable but that are unpredictable

and inherently uncertain.

If the carrying amount exceeds the fair value, further analysis is performed to measure the impairment

addition, our market capitalization could fluctuate from time to time.

Such fluctuation may be an indicator of possible impairment

of goodwill if our market capitalization falls below its book value.

If this situation occurs, we will perform the required detailed

analysis to determine if there is impairment.

have not made any material changes in our reporting units or the accounting methodology we used to assess impairment of goodwill

since September 30, 2019.

We updated our goodwill analysis as of December 31, 2019 using actual fourth quarter 2019 results and

updated projected 2020 results and concluded no impairment exists.

The valuation of goodwill and intangible assets is subject

to a high degree of judgment, uncertainty and complexity.

We do not believe there is a reasonable likelihood that there will be

a material change in the future estimates or assumptions we use to test for impairment losses on goodwill.

However, if actual

results are not consistent with our estimates or assumptions, we may be exposed to an impairment charge that could be material.

assets include the following and are being amortized over their estimated useful lives as follows:

Acquired Intangible Asset:

Amortization Period:

Technology platform and patents

Customer relationships

assets are evaluated for impairment if events and circumstances warrant by comparing the fair value of the intangible asset with

its carrying amount.

The impairment evaluation involves testing the recoverability of the asset on an undiscounted cash-flow basis,

and, if the asset is not recoverable, recognizing impairment charge, if necessary, to reduce the asset’s carrying amount

to its fair value.

There were no indicators of impairment identified in 2019 and no impairments were recorded for the years ended

December 31, 2019 or 2018.

for income taxes requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events

that have been included in the financial statements or tax returns.

Under this method, deferred tax assets and liabilities are

determined based on the difference between the financial statement and tax bases of assets and liabilities.

These deferred taxes

are measured by applying the provisions of tax laws in effect at the balance sheet date, including the impact of the Tax Cuts

and Jobs Act (the “Tax Act”) enacted on December 22, 2017.

The Tax Act made broad and significant changes to the U.S.

tax code that affects the year ended December 31, 2017, including, but not limited to, a change in the federal rate from 35% to

21% effective January 1, 2018.

recognize in income the effect of a change in tax rates on deferred tax assets and liabilities in the period that includes the

enactment date.

of December 31, 2019 and 2018, a full valuation allowance is recorded against our deferred tax assets to reduce the consolidated

deferred tax asset to zero, with the exception of those deferred tax assets generated by net operating losses post-Tax Act.

valuation allowance is based, in part, on our estimate of future taxable income, the expected utilization of federal and state

tax loss carryforwards, and credits and the expiration dates of such tax loss carryforwards.

Significant assumptions are used

in developing the analysis of future taxable income for purposes of determining the valuation allowance for deferred tax assets

which, in our opinion, are reasonable under the circumstances.

of Recently Issued Accounting Pronouncements

to Note 3 Recently Issued Accounting Pronouncements in our Consolidated Financial Statements included in Part II,

ITEM 8 of this Report, for a full description of recent accounting pronouncements, including the expected dates of adoption and

estimated effects on results of operations and financial condition, which is incorporated herein by reference.

of Operations

All dollar amounts reported in Results of Operations are in thousands, except per-share information.

Ended December 31, 2019 Compared to Year Ended December 31, 2018

tables presented below compare our results of operations from one period to another, and present the results for each period and

the change in those results from one period to another in both dollars and percentage change.

For the Years Ended

Revenue Recognition

We recognized revenue in accordance with

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue

from Contracts with Customers (“ASC 606”).

Under ASC 606, we account for revenue using the following steps:

Identify the contract, or contracts, with a customer

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to the identified performance obligations

Recognize revenue when, or as, we satisfy our performance obligations

See Note 2 Summary of Significant

Accounting Policies and Note 4 Revenue Recognition in our Consolidated Financial Statements, included in Part II,

ITEM 8 of this Report, for a complete discussion of our revenue recognition policies.

Allowance for Doubtful Accounts

We have not made any material changes in

the accounting methodology we use to measure the estimated liability for doubtful accounts during the past two fiscal years.

Company’s methodology for calculating the allowance for doubtful accounts consists of (1) reserving for specific receivables

which (a) are known to be facing serious financial problems, (b) have a trade dispute with the Company, or (c) are significantly

aged and/or unresponsive, and (2) a general reserve for unaged accounts receivable based on a percentage of revenue each period.

We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions

we use to establish the liability for doubtful accounts.

However, if actual results are not consistent with our estimates or assumptions,

we may be exposed to losses or gains that could be material.

Goodwill is evaluated for impairment annually

as of September 30 and whenever events or circumstances make it more likely than not that impairment may have occurred.

no indefinite-lived intangible assets.

We test goodwill for impairment by comparing the book value to the fair value at the reporting

We have only one reporting unit, and therefore the entire goodwill is allocated to that reporting unit.

The fair value

of the reporting unit is determined by using a discounted cash flow analyses consisting of various assumptions, including expectations

of future cash flows based on projections or forecasts derived from analysis of business prospects and economic or market trends

that may occur.

We use these same expectations in other valuation models throughout the business.

In addition to the discounted

cash flow analysis, we utilize a leveraged buy-out model, trading comps and market capitalization to ultimately determine an estimated

fair value of our reporting unit based on weighted average calculations from these models.

We base our fair value estimates on

assumptions we believe to be reasonable but that are unpredictable and inherently uncertain.

If the carrying amount exceeds the

fair value, further analysis is performed to measure the impairment loss.

In addition, our market capitalization could

fluctuate from time to time.

Such fluctuation may be an indicator of possible impairment of goodwill if our market capitalization

falls below its book value.

If this situation occurs, we perform the required detailed analysis to determine if there is impairment.

During the first quarter of 2020, we determined

that the reduced cash flow projections and the significant decline in our market capitalization as a result of the COVID-19 pandemic

during the three months ended March 31, 2020 indicated that an impairment loss may have been incurred during the period.

We qualitatively

assessed and concluded that it was more likely than not that goodwill was impaired as of March 31, 2020.

We reviewed our previous

forecasts and assumptions based on our updated projections that were subject to various risks and uncertainties, including:

forecasted revenues, expenses and cash flows, including the duration and extent of impact to our business and our alliance partners

from the COVID-19 pandemic, (2) current discount rates, (3) the reduction in our market capitalization, (4) changes to the regulatory

environment and (5) the nature and amount of government support that will be provided.

As a result of this qualitative assessment,

we concluded that indicators of impairment were present.

The subsequent quantitative interim impairment assessment of our goodwill

as of March 31, 2020 resulted in recording an impairment of $10,646 as of March 31, 2020.

No additional impairment was recorded

during the remainder of 2020, including as a result of our annual assessment completed as of September 30, 2020.

We have not made any material changes in

our reporting units or the accounting methodology we used to assess impairment of goodwill since September 30, 2020.

The valuation

of goodwill is subject to a high degree of judgment, uncertainty and complexity.

We do not believe there is a reasonable likelihood

that there will be a material change in the future estimates or assumptions we use to test for impairment losses on goodwill.

if actual results are not consistent with our estimates or assumptions, we may be exposed to an impairment charge that could be

There were no indicators of impairment identified

in or recorded for the year ended December 31, 2019.

Accounting for income taxes requires recognition

of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial

statements or tax returns.

Under this method, deferred tax assets and liabilities are determined based on the difference between

the financial statement and tax bases of assets and liabilities.

These deferred taxes are measured by applying the provisions of

tax laws in effect at the balance sheet date, including the impact of the Tax Cuts and Jobs Act (the “Tax Act”) enacted

on December 22, 2017.

We recognize in income

the effect of a change in tax rates on deferred tax assets and liabilities in the period that includes the enactment date.

As of December 31, 2020, a full valuation

allowance is recorded against our deferred tax.

The valuation allowance is based, in part, on our estimate of future taxable income,

the expected utilization of federal and state tax loss carryforwards, and credits and the expiration dates of such tax loss carryforwards.

Significant assumptions are used in developing the analysis of future taxable income for purposes of determining the valuation

allowance for deferred tax assets which, in our opinion, are reasonable under the circumstances.

Impact of Recently Issued Accounting

Pronouncements

Refer to Note 3 Recently Issued Accounting

Pronouncements in our Consolidated Financial Statements included in Part II, ITEM 8 of this Report, for a full description

of recent accounting pronouncements, including the expected dates of adoption and estimated effects on results of operations and

financial condition, which is incorporated herein by reference.

Results of Operations

All dollar amounts reported in Results of Operations

are in thousands, except per-share information.

Year Ended December 31, 2020 Compared to Year Ended December

The tables presented below compare our results

of operations from one period to another, and present the results for each period and the change in those results from one period

to another in both dollars and percentage change.

Year Ended December 31,

Cost of sales

4 unchanged sentences

Lease termination expense

Gain on earnout liability

Loss on disposal of assets

Goodwill impairment

Earnout liability

Total operating expenses

3 unchanged sentences

Change in fair value of warrant liability

Gain on settlement of obligations

Debt conversion expense

Gain on settlement of debt

Loss on fair value of debt

Other income/(expense)

1 unchanged sentence

Net income/(loss) before income taxes

Benefit/(provision) from income taxes

Income tax benefit/(expense)

Net income/(loss)

Dividends on preferred stock

Preferred stock conversion expense

Net income/(loss) attributable to common shareholders

Sales increased by $9,123, or 41% in 2019

compared to 2018 driven by (1) $3,458 from new customers in 2019, (2) $5,290 contributed by legacy Allure customers, and (3) expansion

of revenue within pre-existing customer base.

Organic growth accounted for approximately $4,434 of the increase, representing

an organic growth rate of approximately 20% as compared to 2018.

The remaining growth of approximately $4,689 year-over-year represents

the revenue growth contributed by the inclusion of Allure in our consolidated results for a full year in 2019, which contributed

approximately $601 revenue to our consolidated 2018 results.

profit increased $3,516 in absolute dollars to $13,739 in 2019 from $10,223 in 2018, or 34% driven by an increase in sales, partially

offset by a reduction in gross margin.

Gross margin decreased from 45.5% for the year-ended December 31, 2018 to 43.5% in 2019

during the same period, primarily driven by product mix.

and Marketing Expenses

and marketing expenses generally include the salaries, taxes, and benefits of our sales and marketing personnel, as well as trade

show activities, travel, and other related sales and marketing costs.

Sales and marketing expenses increased by $269 or 13% in

2019 compared to 2018 as a result of increased sales headcount following the Allure Acquisition and participation in an increased

number of trade shows and customer-facing events.

and Development Expenses

and development expenses increased 12% to $1,413 in 2019 from $1,257 in 2018 as the result of an increase in amortization expense

related to capitalized software and salary costs driven by an increased investment in products and offerings in the most recent

twelve months, including further development of the content management system application acquired by the Company as part of the

acquisition of Allure in November 2018.

Allure contributed approximately $31 in the period between the acquisition date and

December 31, 2018.

and Administrative Expenses

general and administrative expenses decreased 6% to $9,092 in 2019 from $9,714 in 2018, a decrease of $622.

The primary drivers

of this decrease were (1) $936 reduction in compensation expense related to (a) shares of common stock granted to our current

CEO during 2018 which did not recur in 2019 and (b) a reduction in amortization of stock compensation expenses as a result of

previously issued option awards fully vesting in 2018 and 2019, and (2) $710 reduction in transaction costs incurred in 2018 as

a result of the Allure Acquisition which did not recur in 2019, partially offset by (1) $480 increase in bonus expense in 2019

and (2) $408 increase in rent as a result of the Allure Acquisition and expansion of the Company’s headquarters.

and Amortization Expenses

and amortization expense increased 5% from $1,185 in 2019 to $1,250 in 2018, driven by a combination of legacy Company recorded

tangible and intangible assets reaching the end of their depreciable lives during the period and partially offset by increases

in depreciation and amortization recorded for assets acquired in the Allure Acquisition for the period between the acquisition

date and December 31, 2018.

Termination Expense

August 10, 2017, we announced the planned closure of our office facilities located at 22 Audrey Place, Fairfield, New Jersey 07004,

which housed our previous operations center and ceased use of the facilities in February 2018.

In ceasing use of these facilities,

we recorded a one-time non-cash charge of $474 to accrue for the remaining rent under the lease term, net of anticipated subtenant

rental income.

Effective June 30, 2018, we entered into a settlement agreement to exit this lease agreement, resulting in the

Company recording a gain on settlement of $39.

There were no such lease terminations during 2019.

Sales decreased by $14,141, or 45% in 2020

compared to the same period in 2019 driven by reductions in (1) installation services of $4,962 following a significant increase

in suspended, delayed, and cancelled customer projects, initiatives, and capital expenditures as a direct result of the COVID-19

pandemic, (2) software development services of $8,754 which included nonrecurrence of approximately $7,937 of 2019 revenue related

to software development and licensing arrangements, and (3) management services of $1,186 related to contracts with customers which

were partially or permanently closed during the year.

Reductions in year over year core digital signage business were partially

offset by $3,535 of revenue generated from our Safe Space Solutions products and services during the year ended December 31, 2020

following launch of the suite of products at the end of April 2020.

Gross profit decreased $5,618 in absolute

dollars to $8,121 in 2020 from $13,739 in 2019, or 41% driven by reductions in revenue which were partially offset by an increase

in gross margin to 46.5% in 2020 from 43.5% in 2019.

The increase in gross margin relates to the sales of Safe Space Solutions

products and a higher percentage of managed services revenue to consolidated revenue.

Sales and Marketing

Sales and marketing expenses generally include

the salaries, taxes, and benefits of our sales and marketing personnel, as well as trade show activities, travel, and other related

sales and marketing costs.

Sales and marketing expenses decreased by $668, or 28%, for the year ended December 31, 2020 as compared

to the same period in 2019 driven by a $662 reduction in personnel costs as the result of reduced headcount and salary reductions

in March 2020, combined with reduced spend on trade show activity and related travel costs following the cancellation of several

key industry events as a result of the COVID-19 pandemic.

We anticipate that our sales and marketing expenses will continue to

be significantly lower than those incurred in 2019 as trade shows and industry events planned for throughout 2021 have been suspended,

delayed, or completely cancelled.

We further anticipate our sales personnel will continue to incur reduced travel costs during

the extended pandemic period and utilize virtual meeting technology more commonly moving forward.

Research and Development

Research and development expenses decreased

by $330, or 23%, for the year ended December 31, 2020 as compared to the same period in 2019 as the result of a reduction in personnel

costs during the period following reduced headcount and salary reductions in March 2020.

General and Administrative

Total general and administrative expenses

increased by $201, or 2%, for the year ended December 31, 2020 as compared to the same period in 2019 from $9,092 to $9,293.

costs, including salaries, benefits, and travel-related expenses, decreased by $1,109 in 2020, partially offset by an increase

in stock compensation amortization expense of $273 related to incremental employee and directors’

awards during 2020 which

are being amortized over the thirty-six (36) month vesting period based on the grant date fair value calculated using the Black

Scholes method.

Personnel costs were reduced following completion of a reduction-in-force and salary reductions for remaining personnel

in March 2020.

The reductions in personnel costs were offset by increases in (1) incremental reserve for bad debts of $616 primarily

driven by a customer bankruptcy, (2) legal and deal costs of approximately $500 related to our offering process and ongoing litigation

efforts discussed in Note 9 Commitments and Contingencies to the Consolidated Financial Statements, and (3) insurance costs,

including director and officer related coverage which is experiencing significant tightening in the most recent twenty-four months.

Depreciation and

Amortization Expenses

Depreciation and amortization expenses increased

by $224, or 18%, for the year ended December 31, 2020 as compared to the same period in 2019 driven by a combination of an increased

intangible asset base and increased capitalized costs related to the continued development of our software products since the acquisition

Lease Termination

On December 31, 2020, we exited our office

facilities located in Dallas, TX.

In ceasing use of these facilities, we recorded a one-time non-cash charge of $18.

no such lease terminations during 2019.

Goodwill impairment

See Note 7 Intangible Assets, Including

Goodwill to the Consolidated Financial Statements for a discussion of the Company’s interim impairment test and the non-cash

impairment charge recorded.

Gain on Earnout

3 unchanged sentences

As a result of that analysis, the Company concluded the fair

value of the liability was $0, resulting in a gain of $250 in the current year.

Note 9 Loans Payable to the Consolidated Financial Statements for a discussion of the Company’s debt and related

interest expense obligations.

in Fair Value of Warrant Liability

of the Company’s outstanding warrants classified as liabilities expired during the three months ended September 30, 2019.

See Note 6 Fair Value Measurement to the Consolidated Financial Statements for a discussion of the Company’s non-cash

change in Warrant Liability.

on Settlement of Obligations

During the year ended December 31, 2019, the Company settled

and/or wrote off obligations of $3,178 for $1,132 cash payment and recognized a gain of $2,046.

$1,619 of this gain related to

settlement of legacy sales commissions due to a third-party vendor which were settled with a cash payment of $1,100 during the

three-months ended December 31, 2019.

The remaining settlements related to legacy accounts payable deemed to no longer be legal

obligations to vendors.

value of the liability was $0, resulting in a gain of $250 in 2019.

Interest Expense

See Note 8 Loans Payable to the Consolidated

Financial Statements for a discussion of the Company’s debt and related interest expense obligations.

Change in Fair

Value of Warrant Liability

All of the Company’s outstanding warrants

classified as liabilities expired during 2019.

See Note 5 Fair Value Measurement to the Consolidated Financial Statements

for a discussion of the Company’s non-cash change in Warrant Liability.

Gain on Settlement

of Obligations

During the year ended December 31, 2020,

the Company settled and/or wrote off obligations of $348 for aggregate cash payments of $139 and recognized a gain of $209 related

to legacy accounts payable deemed to no longer be legal obligations to vendors.

During the year ended December 31, 2019,

the Company settled and/or wrote off obligations of $3,178 for $1,132 cash payment and recognized a gain of $2,046.

This obligation

included $30 of accrued wage labor liabilities no longer anticipated to be pursued against the Company.

Conversion Expense

Company recorded debt conversion expense of $5,055 in connection with issuance of incentive shares issued upon conversion of the

convertible promissory notes into common stock on November 19, 2018 in conjunction with the Public Offering.

See Note 9 Loans

Payable to the Consolidated Financial Statements.

There was no such corresponding activity and expense in 2019.

on Preferred Stock

Company issued common stock dividends on Series A Convertible Preferred Stock of $345 during the year-ended December 31, 2018.

There was no outstanding preferred stock in 2019 and no such dividends were issued during the year-ended December 31, 2019.

Stock Conversion Expense

Company recorded preferred stock conversion expense of $3,932, which is reflected as a loss to common shareholders, in connection

with issuance of incentive shares issued upon conversion of the Series A preferred stock into common stock on November 19, 2018

in conjunction with the Public Offering.

See Note 13 Convertible Preferred Stock to the Consolidated Financial Statements.

There was no such corresponding activity and expense in 2019.

Unaudited Quarterly Financial Information

following represents unaudited financial information derived from the Company’s annual and quarterly financial statements:

$1,619 of this

gain related to settlement of legacy sales commissions due to a third party vendor which were settled with a cash payment of $1,100

during the three-months ended December 31, 2019.

The remaining settlements related to legacy accounts payable deemed to no longer

be legal obligations to vendors.

Supplemental Operating Results on a Non-GAAP Basis

The following non-GAAP data, which adjusts

for the categories of expenses described below, is a non-GAAP financial measure.

Our management believes that this non-GAAP financial

measure is useful information for investors, shareholders and other stakeholders of our Company in gauging our results of operations

on an ongoing basis.

We believe that EBITDA is a performance measure and not a liquidity measure, and therefore a reconciliation

between net loss/income and EBITDA and Adjusted EBITDA has been provided.

EBITDA should not be considered as an alternative to

net loss/income as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of

cash flows, in each case as determined in accordance with GAAP, or as a measure of liquidity.

In addition, EBITDA does not take

into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows.

intend the presentation of these non-GAAP measures to be considered in isolation or as a substitute for results prepared in accordance

These non-GAAP measures should be read only in conjunction with our Consolidated Financial Statements prepared in accordance

Quarters Ended

September 30,

Cost of sales

Operating expenses, excluding depreciation and amortization

Depreciation/amortization

Operating (loss)/income

Other expenses/(income)

Net income/(loss)

Quarters ended

September 30,

Cost of sales

Operating expenses, excluding depreciation and amortization

GAAP net loss

Interest expense:

Amortization of debt discount

Other interest, net

Depreciation/amortization:

Operating (loss)/income

Other expenses/(income)

Net (loss)/income

Operating Results on a Non-GAAP Basis

following non-GAAP data, which adjusts for the categories of expenses described below, is a non-GAAP financial measure.

Our management

believes that this non-GAAP financial measure is useful information for investors, shareholders and other stakeholders of our

Company in gauging our results of operations on an ongoing basis.

We believe that EBITDA is a performance measure and not a liquidity

measure, and therefore a reconciliation between net loss/income and EBITDA and Adjusted EBITDA has been provided.

EBITDA should

not be considered as an alternative to net loss/income as an indicator of performance or as an alternative to cash flows from

operating activities as an indicator of cash flows, in each case as determined in accordance with GAAP, or as a measure of liquidity.

In addition, EBITDA does not take into account changes in certain assets and liabilities as well as interest and income taxes

that can affect cash flows.

We do not intend the presentation of these non-GAAP measures to be considered in isolation or as a

substitute for results prepared in accordance with GAAP.

These non-GAAP measures should be read only in conjunction with our Consolidated

Financial Statements prepared in accordance with GAAP.

Amortization of intangible assets

Amortization of finance lease assets

Amortization of share-based awards

Depreciation of property, equipment & software

Income tax expense/(benefit)

Change in fair value of Special Loan

Gain on settlement of obligations

Loss on disposal of assets

Loss on lease termination

Loss on goodwill impairment

Stock-based compensation –

Director grants

Adjusted EBITDA

Quarters ended

11 unchanged sentences

Adjusted EBITDA

and Capital Resources

Liquidity and Capital Resources

We produced net income for the year ended

December 31, 2019 but incurred a net loss for the year ended December 31, 2020 and have negative cash flows from operating activities

as of December 31, 2019.

for both periods.

As of December 31, 2020, we had cash and cash equivalents of $1,826 and a working capital deficit of $306.

November 6, 2019, Slipstream extended the maturity date of our term loan and revolver loan to June 30, 2021 through the Sixth

Amendment to the Loan and Security Agreement, aligning the maturity date of our term loan and revolver loan with the Secured Disbursed

Escrow Promissory Note.

December 30, 2019, we entered into the Secured Convertible Special Loan Promissory Note (“Special Loan”) as part of

the Seventh Amendment of the Loan and Security Agreement with Slipstream, under which we obtained $2,000, with interest thereon

at 8% per annum payable 6% in cash and 2% via the issuance of paid-in-kind (“SLPIK”) interest, provided however that

upon occurrence of an event of default the interest rate shall automatically be increased by 6% per annum payable in cash.

entry into the Seventh Amendment adjusted the interest rate on the Company’s Term Loan and Revolving Loan to 8% per annum,

provided, however, at all times when the aggregate outstanding principal amount of the Term Loan and the Revolving Loan exceeds

$4,100 then the Loan Rate shall be 10%, of which eight percent 8% shall be payable in cash and 2% shall be paid by the issuance

of and treated as additional PIK.

the earlier to occur of an Event of Default or October 1, 2020, if any of the principal amount of the Special Loan is then outstanding,

the principal and accrued but unpaid interest of the Special Loan and the outstanding SLPIK shall be automatically converted into

shares of a new series of Senior Convertible Preferred Stock of CRI ("New Preferred") having an Appraised Value equal

to three times the then outstanding principal amount and accrued but unpaid interest of the Special Loan and the outstanding SLPIK

and having the following terms and conditions, as reasonably determined by CRI and the Lender, the New Preferred shall:

the most senior equity security of CRI, including with respect to the payment of dividends

and other distributions;

on substantially the same terms and conditions as CRI’s Series A-1 6% Convertible

Preferred Stock as set forth in its Certificate of Designation immediately before the

same was cancelled pursuant to a Certificate of Cancellation dated as of March 13, 2019;

be subject to a right of redemption upon the part of a holder thereof;

and pay quarterly dividends at the rate of twelve percent (12%) per annum which shall

be payable in cash;

a Stated Value that is an amount mutually agreed by CRI and the Lender at the time of

Price shall be an amount equal to 80% of the average for the 30-day period ending two

days prior to the required conversion date of the daily average of the range of CRI's

common stock (calculated pursuant to information on The Wall Street Journal Online Edition),

subject to appropriate adjustments;

section 6(e) of the Series A-1 Certificate of Designation nor any similar provision shall

apply to the New Preferred.

November 9, 2018, Slipstream extended the maturity date of our term loan and revolving loan to August 16, 2020.

In conjunction

with the extension of the maturity date of our term loan, we agreed that the cash portion of the interest rate would increase

from 8.0% per annum to 10.0% per annum effective July 1, 2019.

believes that, based on (i) the extension of the maturity date on our term loan and revolving loans, and (ii) our operational

On January 11, 2021, Creative Realities,

received a notice from Old National Bank regarding forgiveness of the loan in the principal amount of $1,552 (the “PPP

Loan”) that was made pursuant to the Small Business Administration Paycheck Protection Program under the Coronavirus Air,

Relief and Economic Security Act of 2020.

According to such notice, the full principal amount of the PPP Loan and the accrued interest

have been forgiven.

Accounting for the forgiveness will be recognized in the first quarter of 2021.

On February 18, 2021, the Company entered

into a securities purchase agreement with an institutional investor which provided for the issuance and sale by the Company of

800,000 shares of the Company’s common stock (the “Shares”), in a registered direct offering (the “Offering”)

at a purchase price of $2.50 per Share, for gross proceeds of $2,000.

The net proceeds from the Offering after paying estimated

offering expenses were approximately $1,835, which the Company intends to use for general corporate purposes.

The closing of the

Offering occurred on February 22, 2021.

On March 7, 2021, the Company and Slipstream

entered into an agreement to refinance the Company’s Loan and Security Agreement, including (1) the extension of all maturity

dates therein to March 31, 2023, (2) the conversion of the Disbursed Escrow Promissory Note into equity, (3) access to an additional

$1,000 via a multi-advance line of credit facility, and (4) the removal of the three times liquidation preference with respect

to the Company’s Secured Convertible Special Loan Promissory Note.

Management believes that, based on (i) the

forgiveness of our PPP Loan, (ii) the execution of a registered direct offering and remaining availability for incremental offerings

under our previously registered Form S-3, (iii) the refinancing of our debt, including extension of the maturity date on our term

and convertible loans, as well as access to incremental borrowings under the new multi-advance line of credit, and (iv) our operational

forecast through 2021, we can continue as a going concern through at least March 31, 2022.

3 unchanged sentences

effect on our results of operations and cash flows.

Note 9 Loans Payable to the Consolidated Financial Statements for an additional discussion of the Company’s debt

We do not currently generate positive cash flow.

Our operational

costs have been greater than sales generated to date.

As of December 31, 2019, we had an accumulated deficit of $35,643.

flows used in operating activities was ($970) and ($1,564) for the years ended December 31, 2019 and 2018, respectively.

of the cash consumed by operations for both periods was attributed to our net losses.

For the years ended December 31, 2019 and

2018, our net loss attributable to common shareholders was $(1,008) and ($15,191) when adjusted for gain on settlements of obligations,

respectively.

Included in our net losses were non-cash charges consisting of depreciation, amortization of debt discount related

to convertible preferred stock / issued for debt-issuance costs, change in warrant liability, stock-based compensation, stock issuance

expenses related to the Allure acquisition, settlement of lease termination, and changes in the allowance for doubtful accounts

totaling $2,420 and $2,951 for the years ended December 31, 2019 and 2018, respectively.

Net cash used in investing activities during the years ended

December 31, 2019 were $(687) compared to ($6,582) during 2018.

The decrease in cash used in investing activities is primarily

due to completion of our acquisition of Allure during the prior period, partially offset by the loss recorded on conversion of

related party promissory notes, and the current year proceeds from net working capital settlement.

We currently do not have any

material commitments for capital expenditures as of December 31, 2019, nor do we anticipate any significant expenditures for investing

cash provided by financing activities during the years ended December 31, 2019 and 2018 was $1,473 and $9,861, respectively.

decrease was driven by smaller loans from a related party in 2019 as compared to proceeds from of our public offering in November

Sheet Arrangements

the year ended December 31, 2019, we did not engage in any off-balance sheet arrangements set forth in Item 303(a) (4)

of Regulation S-K.

AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements on Page F-1.

IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

See Note 8 Loans Payable to the Consolidated

Financial Statements for an additional discussion of the Company’s debt obligations and further discussion of the Company’s

refinancing activities subsequent to December 31, 2020.

Operating Activities

The cash flows used in operating activities

were $3,530 and $970 for the years ended December 31, 2020 and 2019, respectively.

The majority of the cash consumed by operations

for both periods was attributed to our net losses.

For the years ended December 31, 2020 and 2019, our net loss was $17,053 and

$1,008 when adjusted for gain on settlements of obligations, respectively.

The cash flows used in operating activities were further

driven by the Company’s increase in inventory on hand as a result of the launch of our Safe Space Solutions product suite,

partially offset by non-cash charges of $93, $2,531, and $10,646 related to (1) fair value of our Special Loan, (2) depreciation

and amortization expenses, and (3) impairment charge related to goodwill, respectively, combined with an increase of $613 in our

allowance for doubtful accounts primarily as a result of a customer bankruptcy.

Investing Activities

Net cash used in investing activities during

the year ended December 31, 2020 was $657 as compared to $687 for the same period in 2019.

Uses of cash in the current and prior

period relate primarily to internal and external costs associated with software development.

We currently do not have any material

commitments for capital expenditures as of December 31, 2020, nor do we anticipate any significantly expanding our expenditures

for investing in 2021.

Financing Activities

Net cash provided by financing activities

during the years ended December 31, 2020 and 2019 was $3,479 and $1,473, respectively.

The increase was driven by our receipt of

a PPP Loan of $1,552 and proceeds from our at-the-market offering of $1,832, partially offset by no debt proceeds during the year.

Off-Balance Sheet Arrangements

During the year ended December 31, 2020,

we did not engage in any off-balance sheet arrangements set forth in Item 303(a) (4) of Regulation S-K.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Index to Consolidated Financial Statements

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity