What changed in this filing

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Item 9A. Controls and Procedures

2021-03-10 compared with 2020-03-13 · 1418 added, 1466 removed, 870 unchanged (77% of the section changed)

AND PROCEDURES

of Disclosure Controls and Procedures

evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer

(principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of our disclosure

controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act (“Exchange Act”),

as of the end of the period covered by this report.

Based on that evaluation, our management, including our Chief Executive Officer

and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of December 31,

2019, and designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange

Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities

and Exchange Commission and that such information is accumulated and communicated to our management, including our Chief Executive

Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s

Annual Report on Internal Control Over Financial Reporting

management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules

13a-15(f) and 15d-15(f) under the Exchange Act.

Our internal control over financial reporting is designed to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in

accordance with GAAP.

of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Therefore, even

those systems determined to be effective can provide only reasonable assurance of achieving their control objectives.

the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer,

we evaluated the effectiveness of our internal control over financial reporting as of December 31, 2019 based on

the framework in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations

of the Treadway Commission ("COSO").

Based on our assessment and those criteria, management believes that we maintained

effective internal control over financial reporting as of December 31, 2019.

in Internal Control over Financial Reporting

were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2019, that

have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Board of Directors consists of Dennis McGill (Chairman), Richard Mills (CEO), David Bell, Donald Harris, Joseph Manko, and Stephen

The following table sets forth the name and position of each of our current directors and executive officers.

Executive Officer and Director

Financial Officer

biographies of the above-identified individuals are set forth below:

Dennis McGill joined our

Board of Directors in November 2019.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision

and with the participation of our management, including our Chief Executive Officer (principal executive officer) and Chief Financial

Officer (principal financial officer), of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e)

and 15d-15(e) under the Securities Exchange Act (“Exchange Act”), as of the end of the period covered by this report.

Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our

disclosure controls and procedures were effective as of December 31, 2020, and designed to ensure that information required

to be disclosed by us in reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported

within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is

accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate

to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control Over

Financial Reporting

Our management is responsible for establishing

and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange

Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial

reporting and the preparation of financial statements for external purposes in accordance with GAAP.

Because of its inherent limitations, internal

control over financial reporting may not prevent or detect misstatements.

Therefore, even those systems determined to be effective

can provide only reasonable assurance of achieving their control objectives.

Under the supervision and with the participation

of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our internal

control over financial reporting as of December 31, 2020 based on the framework in Internal Control - Integrated

Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

on our assessment and those criteria, management believes that we maintained effective internal control over financial reporting

as of December 31, 2020.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control

over financial reporting that occurred during the quarter ended December 31, 2020, that have materially affected, or are reasonably

likely to materially affect, our internal control over financial reporting.

OTHER INFORMATION

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 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.

Earnings Release

On March 9, 2021, the Company issued a

press release announcing its financial condition and results of operations for the three months and year ended

December 31, 2020.

A copy of the press release is furnished as Exhibit 99.1 and is incorporated by reference into

this Item 9B in lieu of separately furnishing such press release under Item 2.02 of Form 8-K.

This disclosure, including

Exhibit 99.1 hereto, shall not be deemed “filed”

for purposes of Section 18 of the Securities Exchange Act of

1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be

deemed incorporated by reference into any of the Company’s filings under the Securities Act of 1933, as amended, or the

Exchange Act, except as expressly set forth by specific reference in such filing.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

On March 14, 2020, Joseph M.

as a member of the Company’s Board of Directors, effective March 15, 2020.

Following the resignation, the Board approved

a reduction in the size of the Board of Directors to five directors.

Our Board of Directors consists of Dennis

McGill (Chairman), Richard Mills (CEO), David Bell, Donald Harris, and Stephen Nesbit.

The following table sets forth the name and

position of each of our current directors and executive officers.

Dennis McGill

Director (Chairman)

Richard Mills

Chief Executive Officer and Director

Stephen Nesbit

Chief Financial Officer

The biographies of the above-identified individuals

are set forth below:

Dennis McGill joined our Board

of Directors in November 2019.

Over the course of a 45-year career, Mr.

McGill has served as a director, Chief Executive

Officer or Chief Financial Officer of various public and private companies.

McGill has served as a director, Chief Executive Officer

or Chief Financial Officer of various public and private companies.

From June 2015 to October 2017, Mr.

McGill served

as the President and CEO of ReCommunity Holdings II, Inc., the largest independent recycling processing company in the US, processing

over 1.8 million tons of material annually and employing a team of 1,600 members.

McGill served on the Board of Directors

for Lighting Science Group Corp.

McGill served as the President

and CEO of ReCommunity Holdings II, Inc., the largest independent recycling processing company in the US, processing over 1.8 million

tons of material annually and employing a team of 1,600 members.

McGill served on the Board of Directors for Lighting Science

(“LSGC”) from March 2015 to July 2017 while the company was publicly traded.

McGill also served as the LSGC’s Interim Chief Operating Officer from June 2014 to September 2014 and as LSGC’s Interim

Chief Financial Officer from July 2014 to December 2014.

McGill joined Pegasus Capital as an operating advisor in December

2014 and remains in that capacity today.

McGill also served as

the LSGC’s Interim Chief Operating Officer from June 2014 to September 2014 and as LSGC’s Interim Chief Financial Officer

from July 2014 to December 2014.

McGill joined Pegasus Capital as an operating advisor in December 2014 and remains in that

capacity today.

Since June 2014, Mr.

McGill has also served on the board of directors of DGSE Companies,

Inc., a company listed on the NYSE MKT that buys and sells jewelry, diamonds, fine watches, rare coins and currency (“DGSE”).

McGill previously served on the board of directors of DGSE, ReCommunity Holdings, LP and Fiber Composites, LLC and served

as the chairman of DGSE’s audit committee.

McGill has also served on the board of directors of DGSE Companies, Inc., a company listed

on the NYSE MKT that buys and sells jewelry, diamonds, fine watches, rare coins and currency (“DGSE”).

McGill previously

served on the board of directors of DGSE, ReCommunity Holdings, LP and Fiber Composites, LLC and served as the chairman of DGSE’s

audit committee.

From February 2013 to October 2013, Mr.

McGill served as executive vice president

and Chief Financial Officer of Heartland Automotive Services, Inc., where he actively participated with the senior management

team to develop and roll-out a new business model.

McGill served as executive vice president and Chief Financial Officer

of Heartland Automotive Services, Inc., where he actively participated with the senior management team to develop and roll-out

a new business model.

From September 2010 to February 2013, Mr.

McGill served as executive vice president

and Chief Financial Officer of Blockbuster LLC and was responsible for directing and managing various aspects of the Chapter 11

From March 2005 to July 2010, Mr.

McGill served as executive vice president and Chief Financial Officer of Safety-Kleen

Systems, Inc., during which time he led the company’s merger and acquisition efforts and grew the company from $0 to $160

million in EBITDA during his tenure.

McGill holds a Bachelor of Science degree in Finance and Accounting and Master of Business

Administration degree from the University of California, Berkeley and is a Certified Public Accountant in the state of California.

Bell joined our Board of Directors in August 2014 in connection with our acquisition of Creative Realities, LLC.

brings over 40 years of advertising and marketing industry experience to the board, including serving as CEO of three of the largest

companies in the industry–Bozell Worldwide, True North Communications and The Interpublic Group of Companies, Inc.

Bell has led Slipstream Communications, LLC which is an international company providing strategic branding, digital

marketing, and public relations services and served as a Senior Advisor to Google Inc.

McGill served as executive vice president and Chief Financial Officer

of Blockbuster LLC and was responsible for directing and managing various aspects of the Chapter 11 process.

From March 2005 to

July 2010, Mr.

McGill served as executive vice president and Chief Financial Officer of Safety-Kleen Systems, Inc., during which

time he led the company’s merger and acquisition efforts and grew the company from $0 to $160 million in EBITDA during his

McGill holds a Bachelor of Science degree in Finance and Accounting and Master of Business Administration degree from

the University of California, Berkeley and is a Certified Public Accountant in the state of California.

David Bell joined our Board

of Directors in August 2014 in connection with our acquisition of Creative Realities, LLC.

Bell brings over 40 years of advertising

and marketing industry experience to the board, including serving as CEO of three of the largest companies in the industry–Bozell

Worldwide, True North Communications and The Interpublic Group of Companies, Inc.

Since 2007, Mr.

Bell has led Slipstream Communications,

LLC which is an international company providing strategic branding, digital marketing, and public relations services and served

as a Senior Advisor to Google Inc.

from 2006 to 2009.

Bell previously

served as an Operating Advisor at Pegasus Capital Advisors.

He is currently a Senior Advisor to AOL and has also served on the

boards of multiple publicly traded companies, including Lighting Science Group Corporation and Point Blank Solutions, Inc., and

Primedia, Inc., and served as President and CEO of The Interpublic Group of Companies Inc.

Bell previously served as an Operating Advisor at Pegasus Capital Advisors.

He is currently a Senior Advisor to AOL and has also served on the boards of multiple publicly traded companies, including Lighting

Science Group Corporation and Point Blank Solutions, Inc., and Primedia, Inc., and served as President and CEO of The Interpublic

Group of Companies Inc.

from 2003 to 2005.

as an independent director on the Board of Directors of Time, Inc.

from June 2014 to January 2018.

Harris was appointed to our Board of Directors in August 2014 in connection with our acquisition of Broadcast International,

He has been President of 1162 Management, and the General Partner of 5 Star Partnership, a private equity firm, since June

Harris has been President and Chief Executive Officer of UbiquiTel Inc., a telecommunications company organized by Mr.

Harris and other investors, since its inception in September 1999 and also its Chairman since May 2000.

Harris served as the

President of Comcast Cellular Communications Inc.

Bell served as an independent director on the Board of Directors of Time, Inc.

June 2014 to January 2018.

Harris was appointed

to our Board of Directors in August 2014 in connection with our acquisition of Broadcast International, Inc.

He has been President

of 1162 Management, and the General Partner of 5 Star Partnership, a private equity firm, since June 2006.

Harris has been

President and Chief Executive Officer of UbiquiTel Inc., a telecommunications company organized by Mr.

Harris and other investors,

since its inception in September 1999 and also its Chairman since May 2000.

Harris served as the President of Comcast Cellular

Communications Inc.

from March 1992 to March 1997.

Harris received a Bachelor of Science degree

from the United States Military Academy and an MBA from Columbia University.

Harris’s experience in the telecommunications

industry and his association with private equity funding is valuable to the Company.

Harris received a Bachelor of Science degree from the United States Military

Academy and an MBA from Columbia University.

Harris’s experience in the telecommunications industry and his association

with private equity funding is valuable to the Company.

Richard Mills is currently

1 unchanged sentence

Mills possesses over 32 years of industry experience.

He was previously Chief Executive Officer of ConeXus World Global, a leading digital media services company, which he founded

in 2010, and which was acquired by the Company.

was previously Chief Executive Officer of ConeXus World Global, a leading digital media services company, which he founded in 2010,

and which was acquired by the Company.

Prior to founding ConeXus, Mr.

Mills was President and Director at Beacon Enterprise

Solutions Group, Inc., a public telecom and technology infrastructure services provider.

Previous to that, he joined publicly

traded Pomeroy Computer Resources, Inc.

in 1993 and served as Chief Operating Officer and a member of the Board of Directors from

1995 until 1999.

Mills was President and Director at Beacon Enterprise Solutions

Group, Inc., a public telecom and technology infrastructure services provider.

Previous to that, he joined publicly traded Pomeroy

Computer Resources, Inc.

in 1993 and served as Chief Operating Officer and a member of the Board of Directors from 1995 until 1999.

Mills helped grow sales at Pomeroy during his time there from $100 million to $700 million.

also a founder of Strategic Communications LLC.

Joseph Manko is an experienced

Board member and Senior Principal in Horton Capital Management LLC, the investment manager for the Horton Capital Partners Fund,

LP (“Horton Fund”), and significant shareholder in the Company.

Manko was appointed to our Board in 2018.

has over 20 years of investment experience in the asset management, investment banking, private equity and corporate securities

markets, including senior roles at Deutsche Bank in London and Merrill Lynch in Hong Kong.

Prior to founding the Horton Fund, Mr.

Manko was a Partner and Chief Executive Officer of Switzerland-based BZ Fund Management Limited.

Manko has served on the board

of several companies and currently serves as a director of Safeguard Scientifics, Inc., Wireless Telecom Group, Inc., and Repro

Med Systems, Inc.

(doing business as KORU Medical Systems).

Manko began his career as a corporate finance attorney at Skadden,

Arps, Slate, Meagher & Flom and earned both his B.A.

and Juris Doctorate from the University of Pennsylvania.

Nesbit has been in the digital signage and digital advertising industry for over 20 years.

He is currently the Managing

Director of Prestonwood Trail Holdings LLC and has provided advisory services for companies in the Digital Signage and Digital

Media Industry for the past 10 years.

He has directed and advised projects in North America, Europe, Asia proper, Southeast

Asia, the Middle East, Australia and Africa.

Mills was also a founder of

Strategic Communications LLC.

Stephen Nesbit has been in

the digital signage and digital advertising industry for over 20 years.

He is currently the Managing Director of Prestonwood Trail

Holdings LLC and has provided advisory services for companies in the Digital Signage and Digital Media Industry for the past 10

He has directed and advised projects in North America, Europe, Asia proper, Southeast Asia, the Middle East, Australia

Prior to founding Prestonwood Trail, Mr.

Nesbit was the President/COO at Reflect

Systems, a prominent software and services company in the Digital Signage business.

He joined Reflect after serving as President/COO

of MarketForward, the Global Digital Media Division owned by the Publicis Groupe S.A.

Nesbit was the President/COO at Reflect Systems, a prominent software and

services company in the Digital Signage business.

He joined Reflect after serving as President/COO of MarketForward, the Global

Digital Media Division owned by the Publicis Groupe S.A.

in Paris France.

his career in Digital Signage as the EVP Global Operations & GM International Business for Next Generation Network.

one of the first Digital Place Based Advertising companies in the industry before its sale to Anschutz Investments where the company

changed its name to National Cinemedia (NASDAQ:

He began his career at IBM in the Data Processing Division holding various

field and HQ management positions.

Nesbit also held management and executive positions at Wang Labs and BBN Communications

Inc., the communications company that was the original architect of the Internet.

Nesbit holds an undergraduate degree

from the University of Notre Dame and earned an MBA from the Indiana University Kelly Graduate School of Business.

Logan joined the Company as VP of Finance in November 2017 and was promoted to the position of Chief Financial Officer

effective May 16, 2018.

From January 2007 until November 2017, Mr.

Logan was employed by Ernst & Young in the

assurance services group where he primarily served large public companies, including a two-year international rotation in London,

UK in the asset management practice.

He brings over ten years of experience in SEC reporting, technical accounting matters and

Sarbanes-Oxley compliance expertise as well as expertise in initial public offerings, acquisitions and integration.

degrees in Accounting and Economics from Bellarmine University and is a Certified Public Accountant.

our corporate bylaws, all of our directors serve for indefinite terms expiring upon the next annual meeting of our shareholders.

considering whether directors and nominees have the experience, qualifications, attributes and skills to enable the Board of Directors

to satisfy its oversight responsibilities effectively in light of our business and structure, the Board of Directors focuses primarily

on the industry and transactional experience, in addition to any unique skills or attributes associated with a director.

regard to Mr.

McGill, the Board of Directors considered his background and experience with running and accelerating growth at

public companies.

Nesbit began his career in Digital Signage as the

EVP Global Operations & GM International Business for Next Generation Network.

NGN was one of the first Digital Place Based

Advertising companies in the industry before its sale to Anschutz Investments where the company changed its name to National Cinemedia

He began his career at IBM in the Data Processing Division holding various field and HQ management positions.

Nesbit also held management and executive positions at Wang Labs and BBN Communications Inc., the communications company that was

the original architect of the Internet.

Nesbit holds an undergraduate degree from the University of Notre Dame and earned

an MBA from the Indiana University Kelly Graduate School of Business.

Will Logan joined the Company

as VP of Finance in November 2017 and was promoted to the position of Chief Financial Officer effective May 16, 2018.

January 2007 until November 2017, Mr.

Logan was employed by Ernst & Young in the assurance services group where he

primarily served large public companies, including a two-year international rotation in London, UK in the asset management practice.

He brings over ten years of experience in SEC reporting, technical accounting matters and Sarbanes-Oxley compliance expertise as

well as expertise in initial public offerings, acquisitions and integration.

degrees in Accounting and Economics from

Bellarmine University and is a Certified Public Accountant.

Under our corporate bylaws, all of our directors

serve for indefinite terms expiring upon the next annual meeting of our shareholders.

When considering whether directors and nominees

have the experience, qualifications, attributes and skills to enable the Board of Directors to satisfy its oversight responsibilities

effectively in light of our business and structure, the Board of Directors focuses primarily on the industry and transactional

experience, in addition to any unique skills or attributes associated with a director.

With regard to Mr.

Bell, the Board considered his deep experience within the advertising and marketing industries

and his prior management of large enterprises.

McGill, the Board of

Directors considered his background and experience with running and accelerating growth at public companies.

With regard to Mr.

Mills, the Board of Directors considered his extensive background

and experience in the industry.

Bell, the Board considered his deep experience within the advertising and marketing industries and his prior management of large

With regard to Mr.

Manko, the Board of Directors considered his legal and corporate finance background

and prior experience on boards of directors.

Mills, the Board of Directors considered his extensive background and experience in the industry.

With regard to Mr.

Harris, the Board of Directors considered his extensive experience

in the telecommunications industry and association with private equity investors.

Harris, the Board of Directors considered his extensive experience in the telecommunications industry and association

with private equity investors.

Finally, with regard to Mr.

Nesbit, the Board

of Directors considered his extensive experience in the digital signage industry, having run several companies in the industry

and acted as a consultant broadly for digital signage companies over the past twenty years.

Board of Directors has determined that there are presently four “independent”

directors as such term is defined in

Section 5605(a)(2) of the Nasdaq listing rules, each of whom also meets the criteria for independence set forth in Rule 10A-3(b)(1)

under the Securities Exchange Act of 1934.

Nesbit, the Board of Directors considered his extensive experience in

the digital signage industry, having run several companies in the industry and acted as a consultant broadly for digital signage

companies over the past twenty years.

The Board of Directors has determined that

there are presently three “independent”

directors as such term is defined in Section 5605(a)(2) of the Nasdaq listing

rules, each of whom also meets the criteria for independence set forth in Rule 10A-3(b)(1) under the Securities Exchange Act of

The directors whom the board has determined to be independent are Messrs.

Bell, Harris,

Manko and Nesbit.

The Board of Directors has determined that at least two members

of the Board, Mr.

Bell, Harris, and Nesbit.

The Board of Directors has determined that

at least two members of the Board, Mr.

McGill and Mr.

Bell, qualify as an “audit committee financial expert”

as that term is defined in

Regulation S-K promulgated under the Securities Exchange Act of 1934.

term is defined in Regulation S-K promulgated under the Securities Exchange Act of 1934.

McGill and Mr.

Bell’s relevant experience

in this regard is detailed above, which includes past employment experience in finance and through various Director roles at public

companies, including experience on the Audit Committee for other publicly traded companies.

Bell is deemed to be independent

of the Company.

The Board of Directors has determined that each director is able to read and understand fundamental financial statements.

Our Board of Directors has created a standing Compensation Committee

and Audit Committee.

Manko, Nesbit and Bell serve on the Compensation Committee.

Bell, Harris and Manko serve on

the Audit Committee.

relevant experience in this regard is detailed above, which includes past employment experience in finance and through various

Director roles at public companies, including experience on the Audit Committee for other publicly traded companies.

deemed to be independent of the Company.

The Board of Directors has determined that each director is able to read and understand

fundamental financial statements.

Board Committees

Our Board of Directors has created a standing

Compensation Committee and Audit Committee.

Nesbit, Harris, and Bell serve on the Compensation Committee.

Harris and Nesbit serve on the Audit Committee.

In the case of the Compensation Committee, Mr.

Manko serves as chair, and in the case of the Audit Committee,

Nesbit serves as chair, and in the

case of the Audit Committee, Mr.

Bell serves as chair.

The Board of Directors has determined that at least one member of the Audit Committee, Mr.

“audit committee financial expert”

as that term is defined in Regulation S-K promulgated under the Securities Exchange

The Board of Directors has determined that at least one member of the Audit

Committee, Mr.

Bell, is an “audit committee financial expert”

as that term is defined in Regulation S-K promulgated

under the Securities Exchange Act of 1934.

Bell’s relevant experience in this regard is detailed above.

Harris and Mr.

Manko qualify

as “independent”

Nesbit qualify as “independent”

member of the board as described above.

The Board of Directors has determined that each director serving

on the Audit Committee is able to read and understand fundamental financial statements.

Board of Directors has not created a separate committee for nomination or corporate governance.

Instead, the entire Board of Directors

shares the responsibility of identifying potential director-nominees to serve on the Board of Directors.

Nevertheless, nominees

to serve as directors on our Board of Directors are selected by those directors on our board who are independent.

Communications

with Board Members

Board of Directors has provided the following process for shareholders and interested parties to send communications to our board

and/or individual directors.

All communications should be addressed to Creative Realities, Inc., 13100 Magisterial Drive, Ste.

The Board of Directors has determined

that each director serving on the Audit Committee is able to read and understand fundamental financial statements.

The Board of Directors has not created a

separate committee for nomination or corporate governance.

Instead, the entire Board of Directors shares the responsibility of

identifying potential director-nominees to serve on the Board of Directors.

Nevertheless, nominees to serve as directors on our

Board of Directors are selected by those directors on our board who are independent.

Communications with Board Members

Our Board of Directors has provided the following

process for shareholders and interested parties to send communications to our board and/or individual directors.

All communications

should be addressed to Creative Realities, Inc., 13100 Magisterial Drive, Ste.

100, Louisville, KY 40223, Attention:

Corporate Secretary.

Communications to individual directors may also be made to such director

at our company’s address.

All communications sent to any individual director will be received directly by such individuals

and will not be screened or reviewed by any company personnel.

Any communications sent to the board in the care of the Corporate

Secretary will be reviewed by the Corporate Secretary to ensure that such communications relate to the business of the company

before being reviewed by the board.

have adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers (including our principal executive

officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions) and

Our Code of Business Conduct and Ethics satisfies the requirements of Item 406(b) of Regulation S-K.

Our Code of Business

Conduct and Ethics is available, free of charge, upon written request to our Corporate Secretary at 13100 Magisterial Drive, Ste.

Communications to individual directors may also be made to such director at our company’s address.

All communications

sent to any individual director will be received directly by such individuals and will not be screened or reviewed by any company

Any communications sent to the board in the care of the Corporate Secretary will be reviewed by the Corporate Secretary

to ensure that such communications relate to the business of the company before being reviewed by the board.

Code of Ethics

We have adopted a Code of Business Conduct

and Ethics that applies to all of our employees, officers (including our principal executive officer, principal financial officer,

principal accounting officer or controller, and persons performing similar functions) and directors.

Our Code of Business Conduct

and Ethics satisfies the requirements of Item 406(b) of Regulation S-K.

Our Code of Business Conduct and Ethics is available, free

of charge, upon written request to our Corporate Secretary at 13100 Magisterial Drive, Ste.

100, Louisville, KY 40223.

Compensation Table

following table sets forth information concerning the compensation of our named executive officers for 2019 and 2018:

EXECUTIVE COMPENSATION

Executive Compensation

Summary Compensation Table

The following table sets forth information

concerning the compensation of our named executive officers for 2020 and 2019 ( table and footnotes in whole dollars ) :

Name and Principal Position (a)

6 unchanged sentences

Chief Financial Officer

Chief Operating Officer

212,000, including

18,000 for consulting (b)

212,000, including

18,000 for consulting (b)

Mills joined the Company effective October 15, 2015.

March 13, 2019, the Board of Directors removed John Walpuck as Chief Operating Officer.

Effective December 31, 2018, the Company

entered into a separation agreement with Mr.

Logan joined the Company effective November 2017.

Pursuant to the terms of Mr.

Walpuck’s employment agreement, Mr.

Walpuck received $194,000 in severance payments in even monthly installments through December 2019.

Walpuck provided consulting services to the Company and was paid an additional $18,000 for such services in 2019.

On September 20, 2018, the Compensation Committee of the Board of Directors (1) adjusted the salary of Mr.

Mills, CEO, to $330 annually, retroactive to January 1, 2018 and (2) granted 166,667 shares of common stock to Mr.

The chart above reflects the fair value of the unrestricted shares which vested and received by Mr.

Mills on the date the shares were formally issued, December 19, 2018 (133,333) and January 11, 2019 (33,334).

Represents the grant date fair value based on the Black-Scholes value determined as of September 20, 2018, the grant dates.

On January 28, 2019, the Board approved payment of a $25 bonus

Logan for his efforts related to the Company’s public offering completed in November 2018, including work related

to the acquisition of Allure, uplisting to Nasdaq, conversion of debt and equity securities into common stock, and the completion

of the capital raise.

Effective March 19, 2020 and in response to state and local authorities forcing many businesses to temporarily reduce or cease operations to slow the spread of the COVID-19 pandemic, the Company’s Board of Directors approved a six-month reduction of the salaries of the Chief Executive Officer and Chief Financial Officer by twenty percent (20%), thereby reducing the salaries payable to such officers in 2020 to $297,000 and $224,100, respectively.

The salary reductions remain in-force as of the date of this report, resulting in actual salaries to $277,962 and $209,735, respectively.

On November 6, 2019, the Board approved payment of a $150 cash bonus to Mr.

1 unchanged sentence

$100 was paid during December 2019 and $50 was recorded in accrued expenses as of December 31, 2019 and paid in January 2020.

material terms of employment agreements and payments to be made upon a change in control are discussed below, in the narrative

following “Employment Agreements.”

Our named executive officers are eligible for retirement benefits

on the same terms as non-executives under the Company’s defined contribution 401(k) retirement plan.

Employees may contribute

pretax compensation to the plan in accordance with current maximum contribution levels proscribed by the Internal Revenue Service.

Beginning on April 1, 2018, the Company began contributing an employer contribution match of 50% of employee wages up to 6%, for

an effective match of 3%.

Represents the grant date fair value based on the Black-Scholes value determined as of September 20, 2018, the grant dates.

There were two tranches of stock options issued to Mr.

Mills and Mr.

Logan during the year.

50% of the stock options awarded become exercisable in increments of 33 percent of the total shares purchasable under this issuance on June 1 annually, beginning in 2021 and ending in 2023.

The fair value of the options on the grant date was $1.87 and was determined using the Black-Scholes model.

The values included in the table above represent the number of shares awarded to Mr.

Mills (480,000) and Mr.

Logan (240,000) multiplied by the grant date fair value of the awards as of the grant date.

These calculations exclude any value associated with an equal number of performance restricted stock options issued to both Mr.

Mills and Mr.

Logan which become exercisable in increments of 33 percent of the total shares purchasable under this issuance on June 1 annually, beginning in 2021 and ending in 2023, subject to satisfying the Company revenue target and earnings before interest, taxes, depreciation and amortization (“EBITDA”) target for the applicable year.

In each of calendar years 2020, 2021 and 2022, one-third of the total shares may vest (if the revenue and EBITDA targets are met), and the shares that are subject to vesting each year are allocated equally to each of the revenue and EBITDA targets for such year.

These performance options include a catch-up provision, where any options that did not vest during a prior year due to the Company’s failure to meet a prior revenue or EBITDA target may vest in a subsequent vesting year if the revenue or EBITDA target, as applicable, is met in the future year.

No value was associated with these awards as of the grant date as the performance metrics had not been deemed to be achieved.

The revenue and EBITDA targets for the following years are as follows:

Calendar Year

Revenue Target

EBITDA Target

In addition to the employee stock option

plan approved by the Board of Directors in May 2020, the Board of Directors also approved an employee bonus plan pursuant to which

certain officers and other employees of the Company would be granted incentive compensation in the form of cash bonuses.

of the calendar years 2020, 2021 and 2022, Mr.

Mills was provided a target bonus of $165, or 50% of his base salary, and Mr.

was provided a target bonus of $62, or 25% of his base salary, subject to satisfying the same Company revenue and EBITDA targets

for the applicable year on which vesting of performance-based share compensation were set.

The Company targets for calendar year

2020 were not met and there was no impact on the Company’s financial statements of those awards during 2020.

The material terms of employment agreements

and payments to be made upon a change in control are discussed below, in the narrative following “Employment Agreements.”

Our named executive officers are eligible

for retirement benefits on the same terms as non-executives under the Company’s defined contribution 401(k) retirement plan.

Employees may contribute pretax compensation to the plan in accordance with current maximum contribution levels proscribed by the

Internal Revenue Service.

Beginning on April 1, 2018 but suspended indefinitely as of March 19, 2020, the Company began contributing

an employer contribution match of 50% of employee wages up to 6%, for an effective match of 3%.

Richard Mills Employment Agreement

We employ Richard Mills as our Chief Executive

employment agreement is effective for a two-year term, which automatically renews for additional one-year

periods unless either we or Mr.

employment agreement was initially effective for a two-year term, which automatically renews for additional

one-year periods unless either we or Mr.

Mills elects not to extend the term.

The agreement provides for an initial annual base salary of

$270 subject to annual increases but generally not subject to decreases.

current annual base salary is $330.

the agreement, Mr.

Mills is eligible to participate in performance-based cash bonus or equity award plans for our senior executives.

Mills will participate in our employee benefit plans, policies, programs, perquisites and arrangements to the extent he meets

applicable eligibility requirements.

In the event of a termination of employment for good reason, as defined, without cause, as

defined, or within 12 months following a change in control, as defined, other than for reason of death, disability or for cause,

any of which occur during the first year of Mr.

employment, Mr.

Mills will be entitled to receive a severance payment

equal to six months of his base salary.

After the one-year anniversary of his employment (the current term of Mr.

employment is beyond the one-year anniversary), the severance amount increases to 12 months of then-current base salary.

The agreement

provides that any severance payments would be paid in installments over the course of the severance.

The agreement contains certain

non-solicitation and non-competition provisions that continue after employment for a period of one year.

The agreement also contains

other customary restrictive and other covenants relating to the confidentiality of information, the ownership of inventions and

other matters.

The agreement provided for an initial annual base

salary of $270 subject to annual increases but generally not subject to decreases.

current annual base salary

is $330, but since March 19, 2020 has been reduced by twenty percent (20%) as a result of actions implemented by the Company’s

Board of Directors in response to the COVID-19 pandemic.

Under the agreement, Mr.

Mills is eligible to participate in performance-based

cash bonus or equity award plans for our senior executives.

Mills will participate in our employee benefit plans, policies,

programs, perquisites and arrangements to the extent he meets applicable eligibility requirements.

In the event of a termination

of employment for good reason, as defined, without cause, as defined, or within 12 months following a change in control, as defined,

other than for reason of death, disability or for cause, any of which occur during the first year of Mr.

Mills will be entitled to receive a severance payment equal to six months of his base salary.

After the one-year anniversary

of his employment (the current term of Mr.

employment is beyond the one-year anniversary), the severance amount increases

to 12 months of then-current base salary.

The agreement provides that any severance payments would be paid in installments over

the course of the severance.

The agreement contains certain non-solicitation and non-competition provisions that continue after

employment for a period of one year.

The agreement also contains other customary restrictive and other covenants relating to the

confidentiality of information, the ownership of inventions and other matters.

Will Logan Employment Arrangement

Will Logan, the Company’s Chief Financial

Officer, has an employment arrangement with the Company pursuant to which, during fiscal 2019, he received an annual base salary

of $189 and a performance bonus of $25.

Officer, has an at-will employment arrangement with the Company.

Logan’s current annual base salary is $249, but since

March 19, 2020 has been reduced by twenty percent (20%) as a result of actions implemented by the Company’s Board of Directors

in response to the COVID-19 pandemic.

Logan participates in our employee benefit plans, policies, programs, perquisites and

1 unchanged sentence

Equity Awards at Fiscal Year-End”

Equity Awards at Fiscal Year-End

following table sets forth certain information concerning outstanding stock options and restricted stock awards held by our named

executive officers as of December 31, 2019:

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth certain information

concerning outstanding stock options and restricted stock awards held by our named executive officers as of December 31, 2020:

Option Awards (a)

1 unchanged sentence

Richard Mills

stock option becomes exercisable to the extent of 25 percent of the shares purchasable thereunder on November 6, 2018, with

additional increments of 25 percent becoming exercisable annually thereafter.

stock option becomes exercisable to the extent of 25 percent of the shares purchasable thereunder on September 20, 2019, with

additional increments of 25 percent becoming exercisable annually thereafter.

March 13, 2019, the Company’s Board of Directors approved a plan to compensate non-officer directors for their service to

the Company in the amount of $25 per year, beginning April 1, 2019, to be issued in either cash or restricted stock vesting immediately

upon issuance.

Shares of restricted stock are to be issued quarterly in arrears for service the preceding quarter for a value

of $6 per director, with the number of shares issued based on the most recent close price of the Company’s common stock.

During 2019, non-employee directors were issued a total of 31,760

Non-employee directors received no compensation during 2018.

The table below sets forth the compensation paid to our non-employee

directors during 2019:

These stock options become exercisable in increments of 33 percent of the total shares purchasable under this issuance on June 1 annually, beginning in 2021 and ending in 2023.

These stock options become exercisable in increments of 33

percent of the total shares purchasable under this issuance on June 1 annually, beginning in 2021 and ending in 2023, subject

to satisfying the Company revenue target and earnings before interest, taxes, depreciation and amortization

(“EBITDA”) target for the applicable year.

In each of calendar years 2020, 2021 and 2022, one-third of the total

shares may vest (if the revenue and EBITDA targets are met), and the shares that are subject to vesting each year are

allocated equally to each of the revenue and EBITDA targets for such year.

These performance options include a catch-up

provision, where any options that did not vest during a prior year due to the Company’s failure to meet a prior revenue

or EBITDA target may vest in a subsequent vesting year if the revenue or EBITDA target, as applicable, is met in the future

The revenue and EBITDA targets for the following years are as follows:

Calendar Year

Revenue Target

EBITDA Target

These stock options become exercisable in increments of 25 percent of the total shares purchasable under this issuance on November 6 annually, beginning in 2018 and ending in 2021.

These stock options become exercisable in increments of 25 percent of the total shares purchasable under this issuance on September 20 annually, beginning in 2019 and ending in 2020.

Director Compensation

On March 13, 2019, the Company’s Board

of Directors approved a plan to compensate non-officer directors for their service to the Company in the amount of $25 per year,

beginning April 1, 2019, to be issued in either cash or restricted stock vesting immediately upon issuance.

Shares of restricted

stock are to be issued quarterly in arrears for service the preceding quarter for a value of $6 per director, with the number of

shares issued based on the most recent close price of the Company’s common stock at the end of the previous calendar quarter.

During 2020, non-employee directors were

issued a total of 20,997 shares, with the exception of Mr.

Manko, who was issued a total of 4,085 shares for his service for the

three months ended March 31, 2020 prior to his exit from the Board.

During 2019, non-employee directors were issued a total of

31,760 shares.

The table below sets forth the compensation paid to our non-employee directors during 2020:

Director Compensation ( table and footnotes in whole dollars )

Option awards

3 unchanged sentences

Dennis McGill

Joseph Manko Jr.

Stephen Nesbit

Alec Machiels(1)

Machiels resigned from the Board of Directors effective November 8, 2019.

Each director was awarded shares for his service having an aggregate value of $6,250 on a quarterly basis in arrears commencing in the third quarter of 2019 for services completed in the second quarter of 2019.

McGill was granted the option to purchase 25,000 shares of the Company’s common stock at an exercise price of $1.88 per share.

The options vest in three equal annual installments beginning on the one-year anniversary of the issuance, November 7, 2020.

Manko resigned from the Board of Directors effective March 15, 2020.

Each director was awarded shares for service having an aggregate value of $6,250 on a quarterly basis in arrears for services completed during the immediately preceding quarter.

Value represents the share aggregate value of shares issued on the date of issuance.

Under a Consulting Agreement (described below), Mr.

McGill receives compensation of $5,000 per month.

November 7, 2019, the Company and Dennis McGill executed a Consulting Agreement (the “Consulting Agreement”).

term of the Consulting Agreement is one year, and it automatically renews for successive one-year periods.

Either party may terminate

the Consulting Agreement at any time upon 30 days’

Consulting Agreement

On November 7, 2019, the Company and Dennis

McGill executed a Consulting Agreement (the “Consulting Agreement”).

The term of the Consulting Agreement was one year,

and it automatically renews for successive one-year periods.

Either party may terminate the Consulting Agreement at any time upon

30 days’

written notice.

Under the Consulting Agreement, Mr.

McGill will receive

compensation of $5 per month in cash in exchange for general business and strategy consulting services to the Company.

OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth the number of common shares,

and percentage of outstanding common shares, beneficially owned as of March 11, 2020, by:

person known by us to be the beneficial owner of more than five percent of our outstanding common stock

current director

executive officer of the Company and other persons identified as a named executive in this Annual Report on Form 10-K, and

current executive officers and directors as a group.

otherwise indicated, the address of each of the following persons is 13100 Magisterial Drive, Suite 100, Louisville, KY 40223,

and each such person has sole voting and investment power with respect to the shares set forth opposite his, her or its name.

McGill will receive compensation of $5 per month in cash in

exchange for general business and strategy consulting services to the Company.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth the number

of common shares, and percentage of outstanding common shares, beneficially owned as of March 8, 2021, by:

each person known by us to be the beneficial owner of more than five percent of our outstanding common stock

each current director

each executive officer of the Company and other persons identified as a named executive in this Annual Report on Form 10-K, and

all current executive officers and directors as a group.

Unless otherwise indicated, the address of

each of the following persons is 13100 Magisterial Drive, Suite 100, Louisville, KY 40223, and each such person has sole voting

and investment power with respect to the shares set forth opposite his, her or its name.

Name and Address

4 unchanged sentences

c/o Pegasus Capital Advisors, L.P.

99 River Road

Cos Cob, CT 06807

750 E Main St., Suite 600

Stamford, CT 06902

Slipstream Communications, LLC [3]

c/o Pegasus Capital Advisors, L.P.

99 River Road

Cos Cob, CT 06807

Horton Capital Partners Fund, L.P.

Joseph Manko [5]

750 E Main St., Suite 600

Stamford, CT 06902

Stephen Nesbit [4]

4 unchanged sentences

All current executive officers and directors as a group [10]

ownership is determined in accordance with the rules of the SEC, and includes general voting power and/or investment power

with respect to securities.

Shares of common stock issuable upon exercise of options or warrants that are currently exercisable

or exercisable within 60 days of the record rate, and shares of common stock issuable upon conversion of other securities

currently convertible or convertible within 60 days, are deemed outstanding for computing the beneficial ownership percentage

of the person holding such securities but are not deemed outstanding for computing the beneficial ownership percentage of

any other person.

Under applicable SEC rules, each person’s beneficial ownership is calculated by dividing the total

number of shares with respect to which they possess beneficial ownership by the total number of outstanding shares of the

In any case where an individual has beneficial ownership over securities that are not outstanding, but are issuable

upon the exercise of options or warrants or similar rights within the next 60 days, that same number of shares is added to

the denominator in the calculation described above.

Because the calculation of each person’s beneficial ownership set

forth in the “Percentage of Common Shares”

column of the table may include shares that are not presently outstanding,

the sum total of the percentages set forth in such column may exceed 100%.

and voting power over shares held by Slipstream Funding, LLC is held by Slipstream Communications, LLC, its sole member, and

may deemed to be directly or indirectly controlled by Craig Cogut, Chairman and Chief Executive Officer of Pegasus Capital

Advisors, LLC.

Beneficial ownership is determined in accordance with the rules of the SEC, and includes general voting power and/or investment power with respect to securities.

Shares of common stock issuable upon exercise of options or warrants that are currently exercisable or exercisable within 60 days of the record rate, and shares of common stock issuable upon conversion of other securities currently convertible or convertible within 60 days, are deemed outstanding for computing the beneficial ownership percentage of the person holding such securities but are not deemed outstanding for computing the beneficial ownership percentage of any other person.

Under applicable SEC rules, each person’s beneficial ownership is calculated by dividing the total number of shares with respect to which they possess beneficial ownership by the total number of outstanding shares of the Company.

In any case where an individual has beneficial ownership over securities that are not outstanding, but are issuable upon the exercise of options or warrants or similar rights within the next 60 days, that same number of shares is added to the denominator in the calculation described above.

Because the calculation of each person’s beneficial ownership set forth in the “Percentage of Common Shares”

column of the table may include shares that are not presently outstanding, the sum total of the percentages set forth in such column may exceed 100%.

Investment and voting power over shares held by Slipstream Funding, LLC is held by Slipstream Communications, LLC, its sole member, and may deemed to be directly or indirectly controlled by Craig Cogut, Chairman and Chief Executive Officer of Pegasus Capital Advisors, LLC.

See table footnote 3 for further information regarding Slipstream Communications, LLC.

and voting power over shares held by Slipstream Communications, LLC may be deemed to be directly or indirectly controlled

by Craig Cogut, Chairman and Chief Executive Officer of Pegasus Capital Advisors, LLC.

Slipstream Communications, LLC (“Slipstream

Communications”) is the sole member of Slipstream Funding, LLC (“Slipstream Funding”).

BCOM Holdings, LP

(“BCOM Holdings”) is the managing member of Slipstream Communications.

BCOM GP LLC (“BCOM GP”) is

the general partner of BCOM Holdings.

Business Services Holdings, LLC (“Business Services Holdings”) is the sole

member of BCOM GP.

Investment and voting power over shares held by Slipstream Communications, LLC may be deemed to be directly or indirectly controlled by Craig Cogut, Chairman and Chief Executive Officer of Pegasus Capital Advisors, LLC.

Slipstream Communications, LLC (“Slipstream Communications”) is the sole member of Slipstream Funding, LLC (“Slipstream Funding”).

BCOM Holdings, LP (“BCOM Holdings”) is the managing member of Slipstream Communications.

BCOM GP LLC (“BCOM GP”) is the general partner of BCOM Holdings.

Business Services Holdings, LLC (“Business Services Holdings”) is the sole member of BCOM GP.

PP IV BSH, LLC (“PP IV BSH”), Pegasus Investors IV, L.P.

(“Pegasus Investors”)

and Pegasus Partners IV (AIV), L.P.

(“Pegasus Investors”) and Pegasus Partners IV (AIV), L.P.

(“Pegasus Partners (AIV)”) are the members of Business Services Holdings.

2 unchanged sentences

Pegasus Investors IV, L.P.

(“Pegasus

Investors”) is the general partner of each of Pegasus Partners (AIV) and Pegasus Partners and Pegasus Investors IV GP,

(“Pegasus Investors”) is the general partner of each of Pegasus Partners (AIV) and Pegasus Partners and Pegasus Investors IV GP, L.L.C.

(“Pegasus Investors GP”) is the general partner of Pegasus Investors.

Pegasus Investors GP is wholly owned

by Pegasus Capital, LLC (“Pegasus Capital”).

Pegasus Capital may be deemed to be directly or indirectly controlled

by Craig Cogut.

The share figure includes the 952,365 shares of common stock issued to and held by Slipstream Funding, LLC

in connection with the merger transaction with Creative Realities, LLC.

Share figure also includes 2,143,539 common shares

purchasable upon exercise of outstanding warrants issued to and held by Slipstream Communications, LLC.

Investment and voting power over shares held by Horton Capital

Partners Fund, L.P.

(“HCPF”) may be deemed to be directly or indirectly controlled by Joseph M.

figure includes 230,050 common shares purchasable upon exercise of outstanding warrants.

The warrants to purchase shares held by

HCPF contain “blocker”

provisions that limits its ability to exercise such warrants to the extent that such exercise

would cause the shareholder’s beneficial ownership in the Company to exceed 4.99% of the Company’s shares outstanding.

The calculation of beneficial ownership does not take into account the effect of such “blocker”

Manko is a director of the Company.

Includes shares that

Manko may be deemed to beneficially own that are held by HCPF described in footnote 4.

Manko disclaims beneficial ownership of such shares.

Pegasus Investors GP is wholly owned by Pegasus Capital, LLC (“Pegasus Capital”).

Pegasus Capital may be deemed to be directly or indirectly controlled by Craig Cogut.

The share figure includes the 952,365 shares of common stock issued to and held by Slipstream Funding, LLC in connection with the merger transaction with Creative Realities, LLC.

Share figure also includes 2,449,897 common shares purchasable upon exercise of outstanding warrants issued to and held by Slipstream Communications, LLC.

Nesbit is a director of the Company.

2 unchanged sentences

McGill is a director of the Company and Chairman of the Board.

Share figured includes 8,333 shares purchasable upon the exercise of outstanding options.

Bell is a director of the Company.

Mills is a director of the Company and Chief Executive Officer.

Includes 756,904 common shares and 8,929 common shares purchasable

upon exercise of outstanding warrants, each held by RFK Communications, LLC.

The warrants to purchase shares held by RFK Communications,

LLC contain “blocker”

provisions that limits its ability to exercise such warrants to the extent that such exercise

would cause the shareholder’s beneficial ownership in the Company to exceed 4.99% of the Company’s shares outstanding.

The calculation of beneficial ownership does not take into account the effect of such “blocker”

Logan is the Chief Financial Officer of the Company.

McGill, Mills, Manko, Bell, Harris, Nesbit and Logan.

Authorized for Issuance Under Equity Compensation Plans

table below sets forth certain information, as of the close of business on December 31, 2019, regarding equity compensation plans

(including individual compensation arrangements) under which our securities were then authorized for issuance.

of Securities to be

Share figured includes 22,709 shares purchasable upon the exercise of outstanding options.

Includes Messrs.

McGill, Mills, Bell, Harris, Nesbit and Logan.

Securities Authorized for Issuance Under Equity Compensation

The table below sets forth certain information,

as of the close of business on December 31, 2020, regarding equity compensation plans (including individual compensation arrangements)

under which our securities were then authorized for issuance.

Number of Securities to be

Issued Upon Exercise of

5 unchanged sentences

Warrants and Rights

of Securities Remaining

Number of Securities Remaining

Available for Issuance Under Equity

Compensation Plans (excluding

securities reflected

Equity compensation

plans approved by stockholders

compensation plans not approved by stockholders

securities reflected in column a)

Equity compensation plans approved by stockholders

Equity compensation plans not approved by stockholders

2,613,809 (1)

shares reflected in the table are issuable upon exercise of outstanding stock options issued under the 2006 Amended and Restated

Equity Incentive Plan or the 2014 Stock Incentive Plan.

number of securities remaining available for issuance under the 2014 Stock Incentive Plan.

RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE

3,398,326 (2)

All shares reflected in the table are issuable upon exercise of outstanding stock options issued under the 2006 Amended and Restated Equity Incentive Plan or the 2014 Stock Incentive Plan.

Reflects number of securities remaining available for issuance under the 2014 Stock Incentive Plan.

CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Slipstream Financings

On August 17, 2016, we entered into a Loan

and Security Agreement with Slipstream, and obtained a $3,000 term loan, with interest thereon at 8% per annum.

The term loan contains

certain customary restrictions including, but not limited to, restrictions on mergers and consolidations with other entities, cancellation

of any debt or incurring new debt (subject to certain exceptions), and other customary restrictions.

On December 30, 2019, we entered into the

Special Loan as part of the Seventh Amendment under which we obtained $2,000, with interest thereon at 8% per annum payable 6%

in cash and 2% via the issuance of 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.

The 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.

On August 17, 2016, the Company and its

subsidiaries (collectively, the “Borrowers”) entered into a Loan and Security Agreement (the “Loan and Security

Agreement”) with Slipstream.

As of March 8, 2021, Slipstream is the holder of 83.5% of our outstanding debt instruments including

a term loan, secured revolving promissory note, and secured special promissory note and has beneficial ownership of approximately

36.1% of our common stock (on an as-converted, fully diluted basis including conversion of outstanding warrants, and assuming no

other convertible securities, options and warrants are converted or exercised by other parties).

On November 6, 2019, Slipstream extended

the maturity date of the Term Loan and revolver loan to June 30, 2021 through the Sixth Amendment to the Loan and Security Agreement,

aligning the maturity date of the Term Loan and Secured Revolving Promissory Note with the Secured Disbursed Escrow Promissory

On December 30, 2019, we entered into the Special Loan as part

of the Seventh Amendment under which we obtained $2,000, with interest thereon at 8% per annum payable 6% in cash and 2% via the

issuance of 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.

The entry into the Seventh Amendment adjusted the interest rate on the 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.

Upon the earlier to occur of an Event of

Default and 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

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 the Company (“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:

● be the most senior equity security of CRI, including with respect

to the payment of dividends and other distributions;

● be 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;

● not be subject to a right of redemption upon the part of a holder

● accrue and pay quarterly dividends at the rate of twelve percent (12%)

per annum which shall be payable in cash;

● have a Stated Value that is an amount mutually agreed by CRI and the

Lender at the time of issuance;

● Conversion 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;

terms and conditions, as reasonably determined by the Company and Slipstream, the New Preferred shall:

● be the most senior equity security of the Company, including

with respect to the payment of dividends and other distributions;

● be on substantially the same terms and conditions as the

Company’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;

● not be subject to a right of redemption upon the part of

a holder thereof;

● accrue and pay quarterly dividends at the rate of twelve

percent (12%) per annum which shall be payable in cash;

● have a Stated Value that is an amount mutually agreed by

the Company and Slipstream at the time of issuance;

● Conversion 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 the Company’s

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

● neither section 6(e) of the Series A-1 Certificate of Designation

nor any similar provision shall apply to the New Preferred.

On 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.

On April 1, 2020, we entered into an Eighth

Amendment to Loan and Security Agreement (the “Eighth Amendment”) with Slipstream to amend the terms of the payments

and interest accruing on the Term Loan, Secured Revolving Promissory Note, and Special Loan.

The Eighth Amendment increased the

interest rates of these loans from 8% to 10%, effective April 1, 2020.

Until January 1, 2021, rather than cash payments of accrued

interest under the term and revolving loans, interest will be paid by the issuance of and treated as additional principal thereunder.

Commencing January 2, 2021, such interest will be payable in cash.

Interest on the special loan will no longer be paid in cash,

but by the issuance of and treated as additional principal thereunder.

On February 28, 2021, January 31, 2021, December 31, 2020, November

30, 2020, and September 29, 2020, the Company entered into several amendments to Loan and Security Agreement with its subsidiaries

and Slipstream to amend the automatic conversion date of the Special Loan.

Each amendment extended the automatic conversion date

of the Special Loan into the defined new class of senior preferred stock of the Company, which was ultimately Amended and Restated

in full on March 7, 2021 as discussed further above.

The Company paid no fees in exchange for these extensions.

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.

On August 14, 2018, we entered into a payment

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For the years ended December 31, 2020 and

2018, we had sales of $1,103 (3.5% of consolidated revenue) and $1,566 (6.9% of consolidated revenue), respectively, with 33 Degrees.

2019, we had sales of $1,058 (6.1% of consolidated sales) and $1,103 (3.5% of consolidated sales), respectively, with 33 Degrees.

Accounts receivable due from 33 Degrees was $40, or 1.2%, and $1, or 0% of consolidated accounts receivable at December 31, 2020

and December 31, 2019, respectively.

Each of the foregoing transactions were approved by our Board

of Directors after full disclosure of any conflicts of interest.

Any directors that had a conflicting interest in the transactions

abstained from approving such matter.

Company does not have a standing nominating committee.

Instead, the entire Board of Directors shares the responsibility of identifying

potential director-nominees to serve on the Board of Directors.

The Board believes the engagement of all directors in this function

is important at this time in the Company’s development in light of the Company’s recent acquisition activities.

Board of Directors has determined that there are presently four “independent”

directors as such term is defined in

Section 5605(a)(2) of the Nasdaq listing rules, each of whom also meets the criteria for independence set forth in Rule 10A-3(b)(1)

under the Securities Exchange Act of 1934.

Each of the foregoing transactions were

approved by our Board of Directors after full disclosure of any conflicts of interest.

Any directors that had a conflicting interest

in the transactions abstained from approving such matter.

The Company does not have a standing nominating

Instead, the entire Board of Directors shares the responsibility of identifying potential director-nominees to serve

on the Board of Directors.

The Board believes the engagement of all directors in this function is important at this time in the

Company’s development in light of the Company’s recent acquisition activities.

The Board of Directors has determined that

there are presently four “independent”

directors as such term is defined in Section 5605(a)(2) of the Nasdaq listing

rules, each of whom also meets the criteria for independence set forth in Rule 10A-3(b)(1) under the Securities Exchange Act of

The directors whom the board has determined to be independent are Messrs.

Bell, Harris,

Manko and Nesbit.

ACCOUNTANT FEES AND SERVICES

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

following table presents fees for audit and other services provided by EisnerAmper LLP for 2019 and 2018.

Fees for tax services

were provided by Ernst & Young, LLP beginning in the second quarter of 2018 and were provided by Eichen & Dimeglio, CPAs,

PC in the first quarter of 2018.

Bell, Harris, and Nesbit.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

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

and per share amounts.)

The following table presents fees for audit

and other services provided by Deloitte and Touche LLP for 2020 and by EisnerAmper LLP for 2019.

Fees for tax services were provided

by Ernst & Young, LLP beginning in the second quarter of 2018 and were provided by Eichen & Dimeglio, CPAs, PC in the first

quarter of 2018.

Fees to EisnerAmper LLP were as follows:

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Audit related fees (b)

fees for 2019 and 2018 relate to professional services provided in connection with the audit of our consolidated

financial statements, the reviews of our quarterly condensed consolidated financial statements, services provided in connection

with filing Form S-1 and audit services provided in connection with other regulatory filings.

were no audit-related fees.

were no tax fees to EisnerAmper LLP.

Tax fees to other service providers consisted of the aggregate fees billed for tax compliance,

tax advice, and tax planning of $32 and $55 for 2019 and 2018, respectively.

Board of Directors pre-approved the audit services rendered by EisnerAmper, LLP during 2019 and 2018 and concluded that such services

were compatible with maintaining the auditor’s independence.

AND FINANCIAL STATEMENT SCHEDULES

“Index to Consolidated Financial Statements”

Audit fees for 2020 and 2019 relate to professional services provided in connection with the audit of our consolidated financial statements, the reviews of our quarterly condensed consolidated financial statements, services provided in connection with filing Form S-3 and audit services provided in connection with other regulatory filings.

There were no audit-related fees.

There were no tax fees paid to Deloitte and Touche LLP or EisnerAmper LLP.

Tax fees to other service providers consisted of the aggregate fees billed for tax compliance, tax advice, and tax planning of $105 and $32 for 2020 and 2019, respectively.

Our Board of Directors pre-approved the

audit services rendered by Deloitte and Touche LLP and EisnerAmper, LLP during 2020 and 2019, respectively, and concluded that

such services were compatible with maintaining the auditor’s independence.

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

See “Index to Consolidated Financial Statements”

on page F-1 and “Exhibit Index”

“Exhibit Index”

Pursuant to the requirements of Section 13 or 15(d) of the Securities

Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly

authorized, in the City of Louisville, State of Kentucky, on March 12, 2020.

See “Exhibit Index”

Not applicable.

Pursuant to the requirements of Section

13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the

undersigned, thereunto duly authorized, in the City of Louisville, State of Kentucky, on March 9, 2021.

Creative Realities, Inc.

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Chief Financial Officer

accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant, and

in the capacities and on the date indicated.

Executive Officer and Director

Financial Officer (Principal Financial and

Accounting Officer)

of the Board of Directors

In accordance with the Exchange Act, this

report has been signed below by the following persons on behalf of the registrant, and in the capacities and on the date indicated.

/s/ Richard Mills

Chief Executive Officer and Director

March 9, 2021

Richard Mills

/s/ Will Logan

Chief Financial Officer (Principal Financial and

March 9, 2021

Principal Accounting Officer)

/s/ Dennis McGill

Chairman of the Board of Directors

March 9, 2021

Dennis McGill

/s/ David Bell

March 9, 2021

/s/ Donald Harris

March 9, 2021

Donald Harris

/s/ Steve Nesbit

March 9, 2021

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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ACCOUNTING FIRM

the Shareholders and the Board of Directors of Creative Realities, Inc.

on the Financial Statements

have audited the accompanying consolidated balance sheet of Creative Realities, Inc.

and subsidiaries (the “Company”)

as of December 31, 2020 and the related consolidated statements of operations, shareholders’

equity, and cash flows, for

the year ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”).

our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December

31, 2020, and the results of its operations and its cash flows for year ended December 31, 2020, in conformity with accounting

principles generally accepted in the United States of America.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight

Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not

for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to

error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was

communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material

to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of

critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by

communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or

disclosures to which it relates.

Refer to Note 7 to the Financial Statements

Audit Matter Description

Company operates as a single reportable segment, operating segment and reporting unit.

The Company’s evaluation of goodwill

for impairment involves comparing the book value of the reporting unit to its estimated fair value.

The Company’s determination

of estimated fair value of the reporting unit is based primarily on a discounted cash flow model utilizing the income approach.

The Company used the discounted cash flow model to estimate fair value which requires management to make significant estimates

and assumptions related to the valuation of the reporting unit, including assumptions regarding discount rates, forecasts of future

revenue and operating margins, and the long-term growth rate.

Changes in these assumptions could have a significant impact on

either the fair value of the reporting unit, the amount of any goodwill impairment charge, or both.

During the quarter ended March

31, 2020, management identified indicators of potential impairment of goodwill related to the impact of the COVID-19 pandemic

on the Company’s business.

As a result, management performed an interim assessment of potential impairment.

Consequently,

the Company recorded an impairment charge of approximately $10.6 million during the quarter ended March 31, 2020, reducing the

recorded goodwill balance to approximately $7.5 million.

The Company’s annual impairment assessment date is September 30.

Accordingly, management performed an additional impairment assessment as of September 30, 2020.

The estimated fair value of the

reporting unit exceeded the carrying value as of September 30, 2020 and, therefore, no additional impairment was recognized.

identified the valuation of goodwill as a critical audit matter because of the significant estimates and assumptions management

made to estimate the fair value of the reporting unit and the highly sensitive nature of Company’s operations to changes

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our

fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions.

the Critical Audit Matter Was Addressed in the Audit

audit procedures related to the forecasts of future revenues and operating margins, and the selection of the long-term growth

rate and discount rate for the reporting unit included the following, among others:

both the March 31, 2020 interim assessment and the September 30, 2020 annual assessment, we evaluated the reasonableness of management’s

forecasts of revenue and operating margins by comparing the forecasts to (1) historical revenues and operating margins, (2) internal

communications to management and the Board of Directors, and (3) forecasted information included in analyst reports for the industry

and certain of its peer companies.

● Specifically,

for the September 30, 2020 annual impairment assessment, we compared the Company’s actual performance to the forecasted

revenue and operating margin from the March 31, 2020 interim assessment and evaluated the impact of any changes in management’s

forecast from the March to September assessments.

evaluated the impact of any changes in management’s forecasted revenue and operating margin from the September 30, 2020

annual assessment to the December 31, 2020 balance sheet date.

evaluated the reasonableness of the long-term growth rate used in the discounted cash flow model by comparing the information

used by the Company to third party economic and industry related information.

evaluated the reasonableness of the discounted cash flow valuation methodology.

the assistance of our fair value specialists:

evaluated the discounted cash flow model and performed underlying procedures on the mathematical accuracy of the calculations.

evaluated the reasonableness of the discount rate used in the discounted cash flow model by testing the underlying source information,

developing an independent range of estimated discount rates and comparing that range to the discount rate selected by the Company.

/s/ Deloitte & Touche LLP

Louisville, Kentucky

March 9, 2021

We have served as the Company’s auditor since 2020.

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

To the Board of Directors and Shareholders

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of Creative Realities, Inc.

and Subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated

and Subsidiaries (the “Company”) as of December 31, 2019, and the related consolidated

statements of operations, shareholders’

equity, and cash flows for each of the years then ended, and the related notes (collectively

equity, and cash flows for the year then ended, and the related notes (collectively

referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material

respects, the consolidated financial position of the Company as of December 31, 2019 and 2018, and the consolidated results of

their operations and their cash flows for each of the years then ended, in conformity with accounting principles generally accepted

in the United States of America.

respects, the consolidated financial position of the Company as of December 31, 2019, and the consolidated results of their operations

and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States

Change in Accounting Principle

11 unchanged sentences

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s

internal control over financial reporting.

The Company is not required to have, nor were we

engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain

an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness

of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

7 unchanged sentences

/s/ EisnerAmper LLP

We have served as the Company’s auditor

We served as the Company’s auditor from 2015 to 2020.

EISNERAMPER LLP

8 unchanged sentences

Unbilled receivables

Work-in-process and inventories

Work-in-process and inventories, net

Prepaids and other current assets

13 unchanged sentences

Current maturities of financing leases

Warrant liability

Total current liabilities

Long-term Payroll Protection Program note payable

Long-term related party loans payable, net of $168 and $507 discount, respectively

Long-term seller note payable

Long-term related party convertible loans payable, at fair value

Long-term obligations under operating leases

Long-term obligations under financing leases

Long-term accrued expenses

Deferred tax liabilities

Other liabilities

TOTAL LIABILITIES

SHAREHOLDERS’

Common stock, $.01 per value, 200,000 shares authorized;

Common stock, $0.01 par value, 200,000 shares authorized;

10,924 and 9,775 shares issued and outstanding, respectively

19 unchanged sentences

Lease termination expense

Goodwill impairment

Loss on disposal of fixed assets

Gain on reversal of earnout liability

5 unchanged sentences

Gain on settlement of obligations

Debt conversion expense

Loss on fair value of debt

Other income/(expense), net

1 unchanged sentence

Net income/(loss) before income taxes

Benefit 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

Net income/(loss) per common share - basic

Net income/(loss) per common share - diluted

Net income/(loss) per common share attributable to common shareholders

Weighted average shares outstanding - basic

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(in thousands, except shares)

Year ended December 31, 2020

Balance as of December 31, 2019

Shares issued upon conversion of preferred stock

Shares issued upon conversion of preferred stock in public offering

Shares issued upon conversion of promissory notes in public offering

Shares issued in public offering, net of expenses

Vesting of performance shares granted to CEO

Issuance of warrants with debt extension

Common stock issued as dividend

Shares issued to directors as compensation

Stock-based compensation

Shares issued via at-the-market offering

Exercise of warrants

Balance as of December 31, 2020

Adjustment due to adoption of ASU 2016-02 (Topic 842, Leases)

Year ended December 31, 2019

Balance as of December 31, 2018

Adjustment due to adoption of ASU 2016-02

Vesting of performance shares previously granted to CEO

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(in thousands, except share per share

For the Years Ended

For the Years

Operating Activities:

Net income/(loss)

Net (loss)/income

Adjustments to reconcile net income/(loss) to be used in operating activities:

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Change in warrant liability

Allowance/(reversal) for doubtful accounts

Non-cash interest expense on convertible notes

Allowance for doubtful accounts

Non-cash interest expense on related party loans

Deferred tax benefit

Loss on conversion of related party promissory notes

Deferred tax (benefit)/expense

Gain on obligation settlement

Loss on disposal of assets

Loss on fair value of debt

Goodwill impairment

Gain on reversal of earnout liability

Changes to operating assets and liabilities, net of acquisition:

Changes to operating assets and liabilities:

Accounts receivable and unbilled receivables

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Operating lease right of use asset, net

Accounts payable

Accounts payable and other current payables

Deferred revenue

Accrued expenses

Accrued expenses, net

Customer deposits

Operating lease liabilities

Other non-current liabilities

Operating lease liabilities, net

Net cash used in operating activities

1 unchanged sentence

Proceeds from net working capital settlement

Purchases of property and equipment

Acquisition of business, net of cash acquired

Purchases/additions of property and equipment and software development

Net cash used in investing activities

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Proceeds from related party loans

Payment of related party loans

Proceeds from Payroll Protection Program loan

Principal payments on finance leases

Repayment of seller note

Proceeds from warrant exercise into common stock

Other financing activities, net

Net cash provided by financing activities

(Decrease)/increase in Cash and Cash Equivalents

Decrease in Cash and Cash Equivalents

Cash and Cash Equivalents, beginning of year

Cash and Cash Equivalents, end of year

See accompanying

Notes to Consolidated Financial Statements.

See accompanying Notes to Consolidated

Financial Statements.

CREATIVE REALITIES, INC.

32 unchanged sentences

and proprietary processes and automation tools.

we are one of the world’s leading interactive marketing technology companies that focuses on the retail shopper experience

by helping retailers and brands use the latest technologies to create better shopping experiences.

On November 20, 2018, we closed on our acquisition

of Allure Global Solutions, Inc.

(the “Allure Acquisition”).

While the Allure Acquisition expanded our operations,

geographical footprint and customer base and also enhanced our current product offerings, the core business of Allure is consistent

with the operations of Creative Realties, Inc.

and as a result of the Allure Acquisition we did not add different operating activities

to our business.

Our main operations are conducted directly

through Creative Realities, Inc., and under 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.

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.

and Creative Realities Canada, Inc., a Canadian corporation.

Our other wholly owned subsidiaries, Creative Realities, LLC, a Delaware

limited liability company, and ConeXus World Global, LLC, a Kentucky limited liability company, are effectively dormant.

Liquidity and Financial Condition

5 unchanged sentences

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.

On November 6, 2019, Slipstream Communications,

LLC (“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.

On December 30, 2019, Slipstream 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.

The 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.

Upon 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:

● be the most senior equity security of CRI, including with respect

to the payment of dividends and other distributions;

● be 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;

● not be subject to a right of redemption upon the part of a holder

● accrue and pay quarterly dividends at the rate of twelve percent (12%)

per annum which shall be payable in cash;

● have a Stated Value that is an amount mutually agreed by CRI and the

Lender at the time of issuance;

● Conversion 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;

● neither section 6(e) of the Series A-1 Certificate of Designation

nor any similar provision shall apply to the New Preferred.

See Note 9 Loans Payable to the Consolidated

Financial Statements for discussion of the accounting for the Special Loan.

On 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.

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

extension of the maturity date on our term loan and revolving loans, and (ii) our operational forecast through 2021, we can continue

as a going concern through at least March 31, 2021.

However, given our history of net losses, cash used in operating activities

and working capital deficit, we obtained a continued support letter from Slipstream through March 31, 2021.

We can provide no assurance

that our ongoing operational efforts will be successful which could have a material adverse effect on our results of operations

and cash flows.

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.

However, given our net losses, cash

used in operating activities and working capital deficit, we obtained a continued support letter from Slipstream through March

We can provide no assurance that our ongoing operational efforts will be successful which could have a material adverse

effect on our results of operations and cash flows.

See Note 8 Loans Payable to the Consolidated

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

Acquisition of Allure Global Solutions,

On September 20, 2018, we entered into a

Stock Purchase Agreement (the “Purchase Agreement”) with Christie Digital Systems, Inc.

(“Seller”) to acquire

the capital stock of Allure Global Solutions, Inc.

(“Allure”), a wholly owned subsidiary of Seller (the “Allure

Acquisition”).

Allure is an enterprise software development company providing software solutions, a suite of complementary

services, and ongoing support for an array of digital media and POS solutions.

Allure provides a wide range of products for the

theatre, restaurant, convenience store, theme park, and retail spaces and works to create, develop, deploy, and maintain enterprise

software solutions including those designed specifically to integrate, manage, and power ambient client-owned networks.

Those networks

manage data and marketing content that has been designed and proven to influence consumer purchase behavior.

The Allure Acquisition

closed on November 20, 2018.

Subject to the terms and conditions of the

Purchase Agreement, upon the closing of the Allure Acquisition, we acquired ownership of all of Allure’s issued and outstanding

capital shares in consideration for a total purchase price of approximately $8,450, subject to a post-closing working capital adjustment.

Of this purchase price amount, we paid $6,300 in cash.

Of the remaining purchase price amount, approximately $1,250 was to be paid

to former management of Allure, and approximately $900 is due from Allure to Seller, under an existing Seller note which was amended

and restated for this reduced amount (as so amended and restated, the “Amended and Restated Seller Note”).

and Restated Seller Note accrued interest at 3.5% per annum and required us to make quarterly payments of interest only through

February 19, 2020, on which date the Amended and Restated Seller Note matured and all remaining amounts owing thereunder were due.

On May 10, 2019, we reached a settlement

agreement with Seller on, among other things, the final net working capital as of the acquisition date resulting in (i) a payment

to us from Seller in the amount of $210, and (ii) a reduction of the amount due under the Amended and Restated Seller Note of $168

of cash collected by the Company which had been previously designated for payment on the Amended and Restated Seller Note but was

not ultimately remitted to the Seller and (b) $20 of unpaid accrued interest.

In addition to this net working capital settlement,

Seller accepted collection risk for one acquired receivable in the amount of $666, which was net settled through the Amended and

Restated Seller Note.

Our consolidated balance sheet reflects a reduction in both accounts receivable and the Amended and Restated

Seller Note of $666.

The outstanding principal balance of the Amended and Restated Seller Note as of December 31, 2019 is $1,637.

The Amended and Restated Seller Note is

convertible into shares of our common stock at Seller’s option on or after May 19, 2019, at an initial conversion price of

$8.40 per share, subject to customary equitable adjustments.

Conversion of all amounts owing under the Amended and Restated Seller

Note will be mandatory if the 30-day volume-weighted average price of our common stock exceeds 200% of the common stock trading

price at the closing of the Allure Acquisition.

We will grant Seller customary registration rights for the shares of our common

stock issuable upon conversion of the Amended and Restated Seller Note.

The Purchase Agreement contemplates additional

consideration of $2,000 to be paid by us to Seller in the event that Allure’s revenue exceeds $13,000, provided that revenues

from one specifically-named customer is capped at 70% of their gross revenue as part of the aggregate revenue calculation, for

any of (i) the 12-month period ending December 31, 2019, or (ii) any of the next following trailing 12-month periods ending on

each of March 31, June 30, September 30 and December 31, 2020.

We currently do not expect to owe any amount of additional consideration

to Seller and no liability has been recorded in the Consolidated Financial Statements for this contingent liability as of December

See Note 5 Business Combinations for

further discussion of the Company’s Allure Acquisition.

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

refinancing activities subsequent to the year-end date.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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Inc., and Creative Realities, LLC.

All inter-company balances and transactions have been eliminated in consolidation, as applicable.

All intercompany balances and transactions have been eliminated in consolidation, as applicable.

Revenue Recognition

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

from Contracts with Customers (“ASC 606”), which we adopted effective January 1, 2018, using the modified

retrospective method.

See Note 4 Revenue Recognition for further discussion of the impact of adoption and our revenue recognition

from Contracts with Customers , applying the five-step model.

If an arrangement involves multiple performance

obligations, the items are analyzed to determine the separate units of accounting, whether the items have value on a standalone

basis and whether there is objective and reliable evidence of their standalone selling price.

The total contract transaction price

is allocated to the identified performance obligations based upon the relative standalone selling prices of the performance obligations.

The standalone selling price is based on an observable price for services sold to other comparable customers, when available, or

an estimated selling price using a cost plus margin approach.

The Company estimates the amount of total

contract consideration it expects to receive for variable arrangements by determining the most likely amount it expects to earn

from the arrangement based on the expected quantities of services it expects to provide and the contractual pricing based on those

The Company only includes some or a portion of variable consideration in the transaction price when it is probable

that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with

the variable consideration is subsequently resolved.

The Company considers the sensitivity of the estimate, its relationship and

experience with the client and variable services being performed, the range of possible revenue amounts and the magnitude of the

variable consideration to the overall arrangement.

The Company receives variable consideration in very few instances.

Revenue is recognized when a customer obtains

control of promised goods or services under the terms of a contract and is measured as the amount of consideration the Company

expects to receive in exchange for transferring goods or providing services.

The Company does not have any material extended payment

terms as payment is due at or shortly after the time of the sale, typically ranging between thirty and ninety days.

prices are used to determine the standalone selling price of separate performance obligations or a cost plus margin approach when

one is not available.

Sales, value-added and other taxes collected concurrently with revenue producing activities are excluded

from revenue.

The Company recognizes contract assets or

unbilled receivables related to revenue recognized for services completed but not yet invoiced to the clients.

Unbilled receivables

are recorded as accounts receivable when the Company has an unconditional right to contract consideration.

A contract liability

is recognized as deferred revenue when the Company invoices clients in advance of performing the related services under the terms

of a contract.

Deferred revenue is recognized as revenue when the Company has satisfied the related performance obligation.

The Company uses the practical expedient

for recording an immediate expense for incremental costs of obtaining contracts, including certain design/engineering services,

commissions, incentives and payroll taxes, as these incremental and recoverable costs have terms that do not exceed one year.

Inventories are stated at the lower of cost

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Raw materials, net of reserve of $104 and $134, respectively

Inventory on consignment with distributors

Work-in-process

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Basic and Diluted Income/(Loss) per Common Share

Basic and diluted income/(loss)

per common share for all periods presented is computed using the weighted average number of common shares outstanding.

Basic weighted

average shares outstanding includes only outstanding common shares.

Diluted weighted average shares outstanding includes outstanding

common shares and potential dilutive common shares outstanding in accordance with the treasury stock method.

Shares reserved for

outstanding stock options and warrants totaling approximately 5,046,888 and 5,320,162 at December 31, 2019 and 2018, respectively

were excluded from the computation of income/(loss) per share as no options or warrants were in the money for 2019 and all options

and warrants were anti-dilutive in 2018 due to the net loss.

In calculating diluted earnings per share for 2019, in accordance

with ASC 260 Earnings per share , we included the dilutive issuance of the potential issuance of common stock upon an assumed

conversion of the Special Loan.

Net loss attributable to common shareholders for the years ended December 31, 2018 is after common

stock dividends on Series A Convertible Preferred Stock (“preferred stock”) of $345 and a preferred stock conversion

expense of $3,932 as discussed further in Note 13 Convertible Preferred Stock .

Basic and diluted income/(loss) per common

share for all periods presented is computed using the weighted average number of common shares outstanding.

Basic weighted average

shares outstanding includes only outstanding common shares.

Diluted weighted average shares outstanding includes outstanding common

shares and potential dilutive common shares outstanding in accordance with the treasury stock method.

Shares reserved for outstanding

stock options, including stock options with performance restricted vesting, and warrants totaling approximately 7,040,709 and 5,046,888

at December 31, 2020 and 2019, respectively were excluded from the computation of income/(loss) per share as all options and warrants

were anti-dilutive due to the net loss in 2020 and no options or warrants were in the money for 2019.

In calculating diluted earnings

per share for the years ended December 31, 2020 and 2019, in accordance with ASC 260 Earnings per share , we excluded the

dilutive effect of the potential issuance of common stock upon an assumed conversion of the Special Loan.

Deferred income taxes are recognized in

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to be taken in a tax return.

We had no uncertain tax positions as of December 31, 2019 and 2018.

We had no uncertain tax positions as of December 31, 2020 and December 31, 2019.

Goodwill and Definite-Lived Intangible

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tested for impairment at least annually.

The Company uses a measurement date of September 30.

There was no impairment loss recognized

on goodwill or definite-lived intangible assets during the years ended December 31, 2019 and 2018 (see Note 8 Intangible Assets

and Goodwill ).

The Company uses an annual measurement date of September 30 (see Note 7 Intangible

Assets and Goodwill ).

Use of Estimates

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Our significant estimates include:

the allowance for doubtful accounts, recognition

of revenue, valuation allowances related to deferred taxes, deferred revenue, the fair value of acquired assets and liabilities,

valuation of stock-based compensation awards and other assumptions and estimates used to evaluate the recoverability of long-lived

assets, goodwill and other intangible assets and the related amortization methods and periods.

Actual results could differ from

those estimates.

On October 17, 2018, the Company effectuated

a l-for-30 reverse stock split of its outstanding common stock, which was approved by the Company’s board of directors on

October 17, 2018.

The accompanying financial statements and notes to the financial statements give retroactive effect to the reverse

stock split for all periods presented.

The shares of common stock retained a par value of $0.01 per share.

Business Combinations

Accounting for acquisitions requires us

to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values.

as of the acquisition date is measured as the excess of consideration transferred over the net acquisition date fair values of

the assets acquired and the liabilities assumed.

While we use our best estimates and assumptions to accurately value assets acquired

and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, our estimates are inherently

uncertain and subject to refinement.

As a result, during the measurement period, which may be up to one year from the acquisition

date, we may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever

comes first, any subsequent adjustments are recorded to our consolidated statements of operations.

Refer to Note 5 Business

Combination for a discussion of the accounting for the Allure Acquisition.

the allowance for doubtful accounts, valuation allowances

related to deferred taxes, the fair value of acquired assets and liabilities, the fair value of liabilities reliant upon the appraised

fair value of the Company, valuation of stock-based compensation awards and other assumptions and estimates used to evaluate the

recoverability of long-lived assets, goodwill and other intangible assets and the related amortization methods and periods.

results could differ from those estimates.

Property and Equipment

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Net property and equipment

During 2018, we wrote-off fully depreciated

property and equipment and the related accumulated depreciation of $3,628.

The estimated useful lives used to compute

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net on the Consolidated Balance Sheets.

On January 1, 2019, we adopted Accounting

Standards Updates (“ASU”) No.

2016-02, Leases (Topic 842), as amended, which supersedes the lease

accounting guidance under ASC 840, and generally requires lessees to recognize operating and financing lease liabilities and corresponding

right-of-use (“ROU”) assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing

and uncertainty of cash flows arising from leasing arrangements.

We adopted the new guidance using the modified retrospective transition

approach by applying the new standard to all leases existing at the date of initial application and not restating comparative periods.

The most significant impact was the recognition of ROU assets and lease liabilities for operating leases, while our accounting

for finance leases remained substantially unchanged.

For information regarding the impact of Topic 842 adoption, see Note 17 Leases .

Lease accounting results and disclosure

requirements for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts have

not been adjusted and continue to be reported in accordance with our historical accounting under Topic 840.

We elected the package of practical expedients

permitted under the transition guidance, which allowed us to carryforward our historical lease classification, our assessment on

whether a contract was or contains a lease, and our initial direct costs for any leases that existed prior to January 1, 2019.

We also elected to combine our lease and non-lease components.

We have no leases with an initial term of 12 months or less.

Upon adoption, we recognized total ROU assets

of $2,319, with corresponding liabilities of $2,319 on the consolidated balance sheets.

This included $54 of pre-existing

finance lease ROU assets previously reported in computer equipment within property and equipment, net.

The ROU assets include adjustments

for prepayments and accrued lease payments.

The effect of the adoption resulted in a $171 cumulative effect adjustment to retained

earnings on January 1, 2019 but did not impact our prior year consolidated statements of income, statements of cash flows, or statements

of shareholders’

Under Topic 842, we determine if an arrangement

is a lease at inception.

ROU assets and liabilities are recognized at commencement date based on the present value of remaining

lease payments over the lease term.

For this purpose, we consider only payments that are fixed and determinable at the time of

commencement.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information

available at commencement date in determining the present value of lease payments.

Our incremental borrowing rate is a hypothetical

rate based on our understanding of what our credit rating would be.

The ROU asset also includes any lease payments made prior to

commencement and is recorded net of any lease incentives received.

Our lease terms may include options to extend or terminate the

lease when it is reasonably certain that we will exercise such options.

We account for leases in accordance with

2016-02, Leases (Topic 842), as amended.

We determine if an arrangement is a lease

at inception.

Right of use (“ROU”) assets and liabilities are recognized at commencement date based on the present

value of remaining lease payments over the lease term.

For this purpose, we consider only payments that are fixed and determinable

at the time of commencement.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based

on the information available at commencement date in determining the present value of lease payments.

Our incremental borrowing

rate is a hypothetical rate based on our understanding of what our credit rating would be.

The ROU asset also includes any lease

payments made prior to commencement and is recorded net of any lease incentives received.

Our lease terms may include options to

extend or terminate the lease when it is reasonably certain that we will exercise such options.

Operating leases are included in operating

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Recently adopted

On January 1, 2019, we adopted ASU No.

2016-02, Leases (Topic

842), as amended.

For information regarding the impact of Topic 842 adoption, see Note 2 Summary of Significant Accounting

Policies and Note 17 Leases .

On January 1, 2020, we adopted ASU 2018-15 Customer’s

Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract , which provide guidance

on evaluating the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance

for determining when the arrangement includes a software license.

The adoption of this guidance had no material impact on our Consolidated

Financial Statements.

On January 1, 2020, we adopted ASU No.

2018-07, Improvements

to Nonemployee Share-Based Payment Accounting (Topic 718) to simplify the accounting for share-based payments to nonemployees

by aligning it with the accounting for share-based payments to employees, with certain exceptions.

The new guidance expanded the

scope of ASC 718 to include share-based payments granted to nonemployees in exchange for goods or services used or consumed in

an entity’s own operations.

The adoption had no impact to the Company’s Consolidated Financial Statements.

On January 1, 2019, we adopted ASU 2017-04, Intangibles—Goodwill

and Other (Topic 350):

Simplifying the Test for Goodwill Impairment which aimed to address concerns over the cost and

complexity of the two-step goodwill impairment test by removing the second step of the test.

Prior to adoption, an entity was required

to perform a two-step test to determine the amount, if any, of goodwill impairment.

In Step 1, an entity compared the fair value

of a reporting unit with its carrying amount, including goodwill.

If the carrying amount of the reporting unit exceeds its fair

value, the entity performed Step 2 by comparing the implied fair value of goodwill with the carrying amount of that goodwill for

that reporting unit.

An impairment charge equal to the amount by which the carrying amount of goodwill for the reporting unit exceeds

the implied fair value of that goodwill is recorded, limited to the amount of goodwill allocated to that reporting unit.

of adoption, in completing our annual impairment testing of goodwill as of September 30, 2019, we applied a one-step quantitative

test and would have recorded the amount of goodwill impairment, if any, as the excess of a reporting unit’s carrying amount

over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit.

There was no impact on our Consolidated

Financial Statements as the result of adoption.

2018-13, Changes

to Disclosure Requirements for Fair Value Measurements (Topic 820) , which improved the effectiveness of disclosure requirements

for recurring and nonrecurring fair value measurements.

The standard removed, modified, and added certain disclosure requirements.

The adoption of this guidance had no material impact on our Consolidated Financial Statements.

Not yet adopted

In December 2019, the FASB issued ASU 2019-12, Income

Taxes (Topic 740):

Simplifying the Accounting for Income Taxes , which simplifies the accounting for income taxes.

This guidance will be effective for us in the first quarter of 2021 on a prospective basis, and early adoption is permitted.

are currently evaluating the impact of the new guidance on our Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-15 Customer’s

Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract .

The amendments in

this update provide guidance on evaluating the accounting for fees paid by a customer in a cloud computing arrangement (hosting

arrangement) by providing guidance for determining when the arrangement includes a software license.

The amendments in this ASU

are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those

fiscal years.

Early adoption of the amendments in this ASU is permitted, including adoption in any interim period, for all entities.

We are currently evaluating the impact of adopting this guidance on our Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-13, Fair

Value Measurement (Topic 820):

Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement .

standard modifies the disclosure requirements for fair value measurements by removing the requirements to disclose:

of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy;

(ii) timing of recognizing transfers between

levels within the fair value hierarchy;

and (iii) valuation processes used for Level 3 fair value measurements.

Additionally, the

standard now requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income

(loss) for recurring Level 3 fair value measurements held at the end of each reporting period and the range and weighted average

of significant unobservable inputs used to develop Level 3 fair value measurements.

ASU 2018-13 is effective for fiscal years beginning

after December 15, 2019, including interim periods within those fiscal years.

An entity is permitted to early adopt all of the

disclosure changes or early adopt only the removed disclosure requirements and delay adoption of the additional disclosures until

the effective date of this amendment.

We are currently evaluating the disclosure requirements related to adopting this guidance.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes , which simplifies the accounting

for income taxes.

This guidance will be effective for us in the first quarter of 2021 on a prospective basis, and early adoption

is permitted.

We continue evaluating the impact of the guidance but anticipate it will have no material effect on our Consolidated

Financial Statements.

In June 2016, the FASB issued ASU No.

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We are currently evaluating the disclosure requirements related to adopting this guidance.

In August 2020, the FASB issued ASU No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts

in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU

2020-06) , which simplifies the accounting for convertible instruments by reducing the number of accounting models available

for convertible debt instruments.

This guidance also eliminates the treasury stock method to calculate diluted earnings per share

for convertible instruments and requires the use of the if-converted method.

This guidance will be effective for us in the

first quarter of 2022 on a full or modified retrospective basis, with early adoption permitted.

We do not expect the

adoption of this guidance to have a material impact on our Consolidated Financial Statements.

REVENUE RECOGNITION

On January 1, 2018, the Company adopted

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.

Under ASC 606, the Company accounts 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, the Company satisfies the performance obligations

The Company combines contracts with the

same customer into a single contract for accounting purposes when the contracts are entered into at or near the same time and the

contracts are negotiated as a single commercial package, consideration in one contract depends on the other contract, or the services

are considered a single performance obligation.

If an arrangement involves multiple performance obligations, the items are analyzed

to determine the separate units of accounting, whether the items have value on a standalone basis and whether there is objective

and reliable evidence of their standalone selling price.

The total contract transaction price is allocated to the identified performance

obligations based upon the relative standalone selling prices of the performance obligations.

The standalone selling price is based

on an observable price for services sold to other comparable customers, when available, or an estimated selling price using a cost

plus margin approach.

The Company estimates the amount of total

contract consideration it expects to receive for variable arrangements by determining the most likely amount it expects to earn

from the arrangement based on the expected quantities of services it expects to provide and the contractual pricing based on those

The Company only includes some or a portion of variable consideration in the transaction price when it is probable

that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with

the variable consideration is subsequently resolved.

The Company considers the sensitivity of the estimate, its relationship and

experience with the customer and variable services being performed, the range of possible revenue amounts and the magnitude of

the variable consideration to the overall arrangement.

The Company receives variable consideration in very few instances.

As discussed in more detail below, revenue

is recognized when a customer obtains control of promised goods or services under the terms of a contract and is measured as the

amount of consideration the Company expects to receive in exchange for transferring goods or providing services.

The Company does

not have any material extended payment terms as payment is due at or shortly after the time of the sale.

Observable prices are

used to determine the standalone selling price of separate performance obligations or a cost plus margin approach when one is not

Sales, value-added and other taxes collected concurrently with revenue producing activities are excluded from revenue.

The Company recognizes contract assets or

unbilled receivables related to revenue recognized for services completed but not yet invoiced to the customers.

Unbilled receivables

are recorded as accounts receivable when the Company has an unconditional right to contract consideration.

A contract liability

is recognized as deferred revenue when the Company invoices clients in advance of performing the related services under the terms

of a contract.

Deferred revenue is recognized as revenue when the Company has satisfied the related performance obligation.

Deferred contract acquisition costs were

evaluated for inclusion in other assets;

however, the Company elected to use the practical expedient for recording an immediate

expense for those incremental costs of obtaining contracts, including certain design/engineering services, commissions, incentives

and payroll taxes, as these incremental and recoverable costs have terms that do not exceed one year.

The Company provides innovative digital

marketing technology and solutions to retail companies, individual retail brands, enterprises and organizations throughout the

United States and in certain international markets.

The Company’s technology and solutions include:

digital merchandising

systems and omni-channel customer engagement systems, 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.

We typically generate revenue through the

following sources:

System hardware sales –

displays, computers and peripherals

Services and Other:

Professional implementation and installation services

Software design and development services

Software as a service, including content management

Maintenance and support services, including technical help desk operations

The following table disaggregates the Company’s

revenue by major source for the year-ended December 31, 2019:

The Company applies ASC 606 for revenue

The following table disaggregates the Company’s revenue by major source for the years ended December 31, 2020

(in thousands)

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System hardware sales

Included in “hardware”

hardware sales whereby revenue is recognized generally upon shipment of the product or customer acceptance depending upon contractual

arrangements with the customer in instances in which the sale of hardware is the sole performance obligation.

Shipping charges billed to customers are

included in hardware sales and the related shipping costs are included in hardware cost of sales.

The cost of freight and shipping

to the customer is recognized in cost of sales at the time of transfer of control to the customer.

The company generally provides a warranty

on hardware sales in-line with the warranty provided by the original equipment manufacturer and therefore has not identified hardware

warranties as a significant estimate or additional performance obligation at the date of sale.

System hardware revenue is recognized generally

upon shipment of the product or customer acceptance depending upon contractual arrangements with the customer in instances in which

the sale of hardware is the sole performance obligation.

Shipping charges billed to customers are included in hardware sales and

the related shipping costs are included in hardware cost of sales.

The cost of freight and shipping to the customer is recognized

in cost of sales at the time of transfer of control to the customer.

System hardware revenues are classified as “Hardware”

within our disaggregated revenue.

Installation services

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services for customers and recognizes revenue upon completion of the installations.

Installation services also includes engineering

services performed as part of an installation project.

When system hardware sales include installation

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of labor hours completed as a percentage of the budgeted hours for the installation.

The aggregate amount of the transaction

price allocated to installation service performance obligations that are unsatisfied (or partially unsatisfied) as of December

31, 2019 and 2018 were $0 and $52, respectively.

Installation services revenues are classified

as “Installation Services”

within our disaggregated revenue.

Software design and development services

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is delivered to customers electronically.

Software design and development revenues are classified as “Software Development

Services”

within our disaggregated revenue.

Software as a service

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and patches released during the term of the support period.

We account for revenue from these services in accordance with ASC 985

Software and recognize revenue ratably over the performance period.

These services are classified as Managed Services.

Contracts for these services are generally 12-36 months in length.

We account for revenue from these services in accordance with ASC 985-20-15-5 and recognize revenue ratably over the performance

Software as a service revenue are classified as “Managed Services”

within our disaggregated revenue.

Maintenance and support services

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to the costs incurred in fulfilling performance obligations under the contract.

Maintenance and Support revenues are classified

as “Managed Services”

within our disaggregated revenue.

Maintenance and support fees are based on

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Revenue is recognized ratably and evenly over the service period.

These services

are classified as Managed Services.

The Company also performs time and materials-based

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Revenue is recognized at a point in time when the performance obligation has been fully

Certain portions of these revenues are classified as Hardware, Installation Services and Managed Services, depending

on the customer and related contractual terms.

In addition to changes in the timing of

when we record variable consideration, ASC 606 provided clarification about the classification of certain costs relating to revenue

arrangements with customers.

As a result of our analysis, we did not identify any components of our revenue transactions which

required reclassification between principle and agent presentation.

BUSINESS COMBINATION

On November 20, 2018, the Company completed

the Allure Acquisition.

Pursuant to the Stock Purchase Agreement, the total purchase price was $8,450, which was primarily

funded using cash from the Company’s public offering closed on November 19, 2018.

The difference between the total purchase

price and the net consideration transferred is driven by the cash acquired in the acquisition, including cash received by the Company

as a result of a net working capital settlement with Seller.

During the fourth quarter of 2019, the Company finalized the purchase

price accounting of Allure.

The final purchase price consisted of the following items:

(in thousands)

Consideration

Cash consideration for stock

Payable to former Allure management

Seller note payable

Earnout liability

Total consideration

Cash acquired

Net consideration transferred

Cash consideration for outstanding shares of Allure common stock per Stock Purchase Agreement.

Represents a payable due to two former members of the Allure management team for a total of $1,250 as a result of the acquisition;

30% due in November 2018 and 70% due in November 2019.

The fair value of the payable as of the acquisition date was deemed to be $1,021.

During November 2019, the Company entered a payment plan with each former member of Allure management to spread the remaining payments due from the Company throughout 2020.

As of December 31, 2019, the Company’s consolidated balance sheet includes $535 related to this liability within accrued expenses.

Represents a note payable due from Allure to Seller, under a pre-existing Seller Note which was amended and restated for this amount through the Stock Purchase Agreement.

At the closing date, the estimated net working capital deficit of Allure was $801 in excess of the target net working capital as defined in the stock purchase agreement.

As of the acquisition date, Allure also had accounts payable to Seller for outsourced services of $2,204.

We agreed with the Seller to settle the estimated net working capital deficit through a reduction in the accounts payable to Seller as of the acquisition date and to further amend the Seller Note to include the remaining $1,403 accounts payable due from Allure to Seller.

The Seller Note thereby increased from $900 per the Stock Purchase Agreement to $2,303 at the opening balance sheet.

That debt is represented by our issuance to the Seller of a promissory note accruing interest at 3.5% per annum.

The promissory note required us to make quarterly payments of interest through February 19, 2020, on which date the promissory note matured and all remaining amounts owing thereunder were due.

See Note 10 Commitments and Contingencies in the consolidated financial statements for further discussion of this note, which is now past due.

The Stock Purchase Agreement contemplates additional consideration or $2,000 to be paid by us to Seller in the event that acquiree revenue exceeds $13,000, as defined in the underlying agreement.

The fair value of the earnout liability was initially determined to be $250 at the time of acquisition but has since been adjusted to $0, resulting in a gain on reversal of earnout liability of $250 in the fourth quarter of 2019.

We currently do not expect to owe any amount of additional consideration to Seller and no liability has been recorded in the Consolidated Financial Statements for this contingent liability as of December 31, 2019.

We utilized a third-party valuation specialist to assist in evaluating this liability as of the opening balance sheet date.

Should revenues from Allure customers exceed $13,000 during 2020, the $2,000 liability generated would be recorded through the Company’s statement of operations.

Represents the Allure cash balance acquired at acquisition ($26)

and the cash received from Seller in settlement of our net working capital claim ($398).

On May 10, 2019, we reached a settlement agreement with Seller

on, among other things, the final net working capital as of the acquisition date resulting in (i) a payment to us from Seller in

the amount of $210, and (ii) a reduction of the amount due under the Amended and Restated Seller Note of $168 of cash collected

by the Company which had been previously designated for payment on the Amended and Restated Seller Note but was not ultimately

remitted to the Seller and (b) $20 of unpaid accrued interest.

In addition to this net working capital settlement, Seller accepted

collection risk for one acquired receivable in the amount of $666, which was net settled through the Amended and Restated Seller

As a result, our consolidated balance sheet reflects a reduction in both accounts receivable and the Amended and Restated

Seller Note of $666.

The outstanding principal balance of the Amended and Restated Seller Note as of December 31, 2019 is $1,637.

The Company incurred $710 of direct

transaction costs for the year ended December 31, 2018.

These costs are included in general, administrative expense in the accompanying

consolidated statement of operations.

In addition, the Company incurred $9 of incremental interest expense for the year ended

December 31, 2018, representing interest on the Allure Amended and Restated Note for the period from November 20, 2018 to December

The Company accounted for the Allure Acquisition

using the acquisition method of accounting.

The allocation of the purchase price, which was finalized in November 2019 in conjunction

with the close of the one-year measurement period, is based on estimates of the fair value of assets acquired and liabilities assumed

as of November 20, 2018.

The components of the final purchase price allocation are as follows:

(in thousands)

Accounts receivable

Unbilled receivables

Prepaid expenses & other current assets

Property and equipment

Identified intangible assets:

Definite-lived trade names

Developed technology

Customer relationships

Accounts payable

Accrued expenses

Customer deposits

Deferred revenues

Accounts payable converted into Seller Note

Net consideration transferred

The fair value of the customer relationship

intangible asset has been estimated using the income approach through a discounted cash flow analysis with the cash flow projections

discounted using a rate of 26.0%.

The cash flows are based on estimates used to price the Allure Acquisition, and the discount

rates applied were benchmarked with reference to the implied rate of return from the Company’s pricing model and the weighted

average cost of capital.

The definite-lived trade name represents

the Allure brand name as marketed primarily in the sports & entertainment, large venue and quick service restaurant verticals

of the digital signage industry.

The Company applied the income approach through an excess earnings analysis to determine the preliminary

fair value of the trade name asset.

The Company identified this asset as definite-lived as opposed to indefinite-lived as the Company

plans to utilize the Allure trade name as a product name as opposed to go-to-market company name.

The Company applied the income

approach through a relief-from-royalty analysis to determine the fair value of this asset.

The developed technology assets are primarily

comprised of know-how and functionality embedded in Allure’s proprietary content management application which drives currently

marketed products and services.

The Company applied the income approach through a relief-from-royalty analysis to determine the

fair value of this asset.

The Company is amortizing the identifiable

intangible assets on a straight-line basis over the weighted average lives ranging from 3 to 15 years.

The table below sets forth the valuation

and amortization period of identifiable intangible assets:

(in thousands)

Identifiable intangible assets:

Definite-lived trade names

Developed technology

Customer relationships

The Company estimated the fair value of

the acquired property, plant and equipment using a combination of the cost and market approaches, depending on the component.

fair value of property, plant and equipment of $177.

The excess of the purchase price over the

estimated fair value of the tangible net assets and identifiable intangible assets acquired was recorded as goodwill and is subject

to change upon final valuation.

The factors contributing to the recognition of the amount of goodwill are based on several strategic

and synergistic benefits that are expected to be realized from the Allure Acquisition.

These benefits include a comprehensive portfolio

of iconic customer brands, complementary product offerings, enhanced national footprint, and attractive synergy opportunities and

value creation.

None of the goodwill is expected to be deductible for income tax purposes.

The following unaudited pro forma information

for the year-ended December 31, 2018 presents the combined financial results for the Company and Allure, adjusted for Allure’s

fiscal year ended March 31, as if the Allure Acquisition had been completed January 1, 2017.

Prior to the Allure Acquisition, Allure

had a fiscal year reporting from April 1 to March 31 annually.

The pro forma financial information set forth below for the year-ended

December 31, 2018 includes Allure’s pro forma information for the twelve-month period January 1, 2018 through December 31,

The information set forth below for the year-ended December 31, 2019 represents the Company’s consolidated results

for that period.

Year Ended December 31,

(in thousands, except earnings per common share)

Net income/(loss)

Earnings per common share

The information above does not include the

pro forma adjustments that would be required under Regulation S-X for pro forma financial information and does not reflect future

events that may occur after December 31, 2018 or any operating efficiencies or inefficiencies that may result from the Allure

Acquisition and related financing.

Therefore, the information is not necessarily indicative of results that would have been achieved

had the businesses been combined during the periods presented or the results that the Company will experience going forward.

FAIR VALUE MEASUREMENT

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cash equivalents, at fair value on a recurring basis.

In accordance with ASC 820, fair value is a market-based measurement that

should be determined based on the assumptions that market participants would use in pricing an asset or liability.

As a basis for

considering such assumptions, ASC 820 establishes a three-level hierarchy that prioritizes the inputs used in measuring fair value.

In accordance with ASC 820-10-30, fair value is a market-based measurement

that should be determined based on the assumptions that market participants would use in pricing an asset or liability.

for considering such assumptions, ASC 820-10-35 establishes a three-level hierarchy that prioritizes the inputs used in measuring

The three hierarchy levels are defined as follows:

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liabilities that were measured at fair value on a recurring basis using a binomial option pricing model.

The warrant liabilities

were classified as Level 3 and were determined to have a fair value of $21 as of December 31, 2018.

The warrant liabilities had

been previously decreased to $0 as of June 30, 2019.

All of the Company’s outstanding warrants classified as liabilities

expired during the three months ended September 30, 2019.

All of the Company’s

outstanding warrants classified as liabilities expired during 2019.

As part of the Allure Acquisition, the Purchase

Agreement contemplated additional consideration of $2,000 to be paid by us to Seller in the event that acquiree revenue exceeds

$13,000, as defined in the underlying agreement, for any of the trailing twelve-month periods measured as of December 31, 2019,

March 31, 2020, June 30, 2020, September 30, 2020 and December 31, 2020.

The fair value of the earnout liability was determined

to be $250 at the time of acquisition.

As part of our finalization of opening balance sheet accounting at the close of the measurement

period, we recorded an adjustment to reflect the earnout liability to $0.

The liability is deemed to be Level 3 as the valuation

is based on revenue projections and estimates developed by management as informed by historical results.

Agreement contemplated additional consideration of $2,000 to be paid by us to Christie Digital Systems, USA (“Seller”)

in the event that acquiree revenue exceeds $13,000, as defined in the underlying agreement, for any of the trailing twelve-month

periods measured as of December 31, 2019, March 31, 2020, June 30, 2020, September 30, 2020 and December 31, 2020.

The fair value

of the earnout liability was determined to be $250 at the time of acquisition.

As part of our finalization of opening balance sheet

accounting at the close of the measurement period in November 2019, we recorded an adjustment to reflect the earnout liability

The liability was deemed to be Level 3 as the valuation is based on revenue projections and estimates developed by management

as informed by historical results.

The liability was confirmed to be $0 at December 31, 2020 as metrics were not achieved for additional

consideration through the year-end date.

As discussed in Note 7 Intangible Assets,

Including Goodwill , the calculation of the weighted average cost of capital and management’s forecast of future financial

performance utilized within our discounted cash flow model for the impairment of goodwill contains inputs which are unobservable

and involve management judgment and are considered Level 3 estimates.

As discussed in Note 8 Loans Payable ,

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This liability is deemed to be a Level 3 valuation.

As the Special Loan was entered

into on December 30, 2019, we have concluded that the fair value on December 31, 2019 approximates the cash proceeds received on

the issuance of the debt.

Certain unobservable inputs into

the calculation of the fair value of this liability include an estimate of the fair value of the Company at a future date using

a discounted cash flow model, discount rate assumptions, and an estimation of the likelihood of conversion of the Special Loan.

As of December 31, 2020, we updated our fair value analysis of the Special Loan, which was originally evaluated at March 31, 2020

utilizing the assistance of a third-party valuation specialist, resulting in recognition of a loss of $93 during the year ended

December 31, 2020 from the change in fair value of the liability and a corresponding increase/decrease in the debt balance recorded

in the Consolidated Balance Sheet.

SUPPLEMENTAL CASH FLOW STATEMENT INFORMATION

Supplemental non-cash Investing and Financing Activities

Issuance of common stock upon conversion of preferred stock

Issuance of warrants with term loan extensions / revolver draws

Noncash preferred stock dividends

Conversion of promissory notes

Noncash preferred stock conversion expense

Supplemental disclosure information for cash flow

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Net book value of amortizable intangible assets

For the year ended December 31, 2018, the

gross carrying amount of technology platform, customer relationships, and trademarks and trade names increased $1,770, $2,870,

and $340, respectively, from the Allure acquisition completed on November 19, 2018.

For the years ended December 31, 2020 and

2018, amortization of intangible assets charged to operations was $654 and $795, respectively, inclusive of amortization expense

for the acquired intangible assets for the six-week period from November 19, 2018 to December 31, 2018.

2019, amortization of intangible assets charged to operations was $617 and $654, respectively.

Estimated amortization is as follows:

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Balance as of January 1, 2020

Adjustments due to finalization of purchase price allocation

Goodwill impairment

Balance as of December 31, 2020

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The Company has only one reporting unit, and therefore the entire goodwill is allocated to that reporting

Interim Impairment Assessment –

March 31, 2020

Despite the excess fair value identified

in our 2019 annual impairment assessment, 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 first quarter.

Therefore, we qualitatively assessed whether it was more likely than not

that the goodwill was impaired as of March 31, 2020.

We reviewed our previous forecasts and assumptions based on our current

projections that are subject to various risks and uncertainties, including:

(1) 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, (5) changes to the regulatory environment and (6) 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

and that a quantitative interim impairment assessment of our goodwill was necessary as of March 31, 2020.

As a result of the adoption of ASU 2017-04,

Intangibles—Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment the impairment test consists

solely of comparing the carrying value of the reporting unit with its fair value and recording impairment, if identified.

The fair value of the reporting unit was estimated

via the income approach.

Under the income approach, fair value is determined based on the present value of estimated future cash

flows, discounted at an appropriate risk-adjusted rate.

We use our internal forecasts to estimate future cash flows and include

an estimate of long-term future growth rates based on our most recent views of the long-term outlook for our industry.

Actual results

may differ from those assumed in our forecasts.

We derive our discount rates using a capital asset pricing model and by analyzing

published rates relevant to our business to estimate the cost of equity financing.

We use discount rates that are commensurate

with the risks and uncertainty inherent in the respective businesses and in our internally developed forecasts.

We utilized a discount

rate of 14.5% in our valuation completed as of March 31, 2020.

While our outlook for the digital signage

industry over the long term remains strong, we have experienced rapid and immediate deterioration in our short term business as

a result of the COVID-19 pandemic, generating increased uncertainty across our customer base in many of our key vertical markets.

The elective and forced closures of businesses across the United States has resulted in reduced demand for our services, which

primarily assist business in engaging with their end customers in a physical space through digital technology.

The elimination

and minimization of public gatherings has materially impacted demand for products and services in our movie theater, sports arena

and large entertainment markets.

These conditions resulted in downward revisions of our internal forecasts on current and future

projected earnings and cash flows, leading to an implied fair value of goodwill substantially below the carrying value.

during the three months ended March 31, 2020, we recorded a non-cash impairment loss of $10,646.

We recorded the estimated

impairment losses in the caption “Goodwill impairment”

in our Consolidated Statement of Operations.

Annual Impairment Assessment –

September 30, 2020

The Company assessed the carrying value

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at September 30, 2020.

Given the proximity in time to the most recent

goodwill impairment, which marked the Company’s goodwill balance down to fair value, the Company anticipated its analysis

would result in a thin margin in the percentage of excess fair value over carrying value as of the assessment date.

analysis performed as of September 30, 2020, the excess fair value over carrying value was approximately 7%.

Based on the Company’s

assessment, we determined that the fair value of our reporting unit exceeds its carrying value, and accordingly, the goodwill associated

with the reporting unit is not considered to be impaired at September 30, 2020.

The Company recognizes that any changes

in our projected 2020 results could potentially have a material impact on our assessment of goodwill impairment.

The Company will

continue to monitor the actual performance of its operations against expectations and assess indicators of possible impairment.

in our projected 2021 and future results could potentially have a material impact on our assessment of goodwill impairment.

Company will continue to monitor the actual performance of its operations against expectations and assess further indicators of

possible impairment.

The valuation of goodwill and intangible assets is subject to a high degree of judgment, uncertainty and complexity.

indicators of impairment occur in subsequent periods, the Company will be required to perform an analysis in order to determine

whether goodwill is impaired.

Should any indicators of impairment occur in subsequent periods, the Company will be required to perform an analysis in order to

determine whether goodwill is impaired.

LOANS PAYABLE

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Further discussion of the notes follows.

As of December 31, 2020

Interest Rate Information

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3.5% interest

10.0% interest

4/27/2022 (3)

Total debt, gross

Fair value (E)

Total debt, gross

Debt discount

Total debt, net

Less current maturities

Long term debt

As of December 31, 2019

Interest Rate Information

0.0% interest

8.0% interest

3.5% interest

8.0% interest

Debt discount

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Secured Disbursed Escrow Promissory Note with related

Revolving Loan with related party

Secured Revolving Promissory Note with related party

Term Loan with related party

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at fair value

(1) 0.0% interest per annum.

(2) 8.0% cash interest per annum when total borrowings under

the term and revolver loans, in aggregate, are below $4,100 in principal (disregarding PIK interest);

8.0% cash, 2.0% PIK when

total borrowing under the term and revolver loans, in aggregate, exceed $4,100 in principal (disregarding PIK interest).

(3) 3.5% simple cash interest per annum;

interest payable

quarterly with the first payment due on December 31, 2018 with payments of accrued interest continuing quarterly thereafter until

the maturity date of February 20, 2020.

(4) 8.0% cash interest per annum, comprised of 6.0% cash,

Interest payable monthly with the first payment due on February 1, 2020.

In an event of default, the interest rate increases

by 6.0% to 14.0%.

Debt is convertible to preferred stock at the earlier of an event of default or October 1, 2020.

While the stated

maturity date of the Special Loan is June 30, 2021, the mandatory conversion feature into preferred stock as of October 1, 2020

results in the classification of this debt instrument as a current liability on the consolidated balance sheet.

Term Note, Revolving Promissory Note,

Secured Convertible Special Loan and Secured Disbursed Escrow Promissory Note

On August 17, 2016, we entered into a Loan

and Security Agreement with Slipstream, and obtained a $3,000 term loan, with interest thereon at 8% per annum.

The term loan contains

Paycheck Protection Program Loan from Small Business

Administration

8.0% cash interest per annum through March 31, 2020.

10.0% paid-in-kind interest (“PIK”) interest per annum from April 1, 2020 through December 31, 2020.

8.0% cash interest per annum January 1, 2021 through the maturity date.

8.0% cash interest per annum, comprised of 6.0% cash, 2.0% PIK through March 31, 2020.

10.0% PIK interest per annum through September 30, 2020.

In an event of default, the interest rate increases by 6.0% to 16.0%.

Debt is automatically convertible to a new class of senior preferred stock of the Company at the earlier of an event of default or November 30, 2020.

The principal, including PIK interest, as of December 31, 2020 is $2,177;

however, fair value accounting for the convertible debt instrument results in an additional $93 of debt recorded on the Consolidated Balance Sheet as of December 31, 2020 related to this instrument.

1,0% cash interest per annum.

Payments are deferred for six months from the date of the Promissory Note and the Company can apply for forgiveness of the Promissory Note after 60 days.

SBA Paycheck Protection Program Loan

On April 27, 2020, the Company entered into

a Promissory Note with Old National Bank (the “Promissory Note”), which provided for an unsecured loan of $1,552 pursuant

to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act and applicable regulations (the

“CARES Act”).

The Promissory Note has a term of two years with a 1% per annum interest rate.

While the Promissory Note

currently has a two-year term, the amended law permits the Company to request a five-year maturity from Old National Bank.

are deferred for six months from the date of the Promissory Note and the Company can apply for forgiveness of the Promissory Note

after 60 days.

On January 11, 2021, Creative Realities, Inc.

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.

Amended and Restated Loan and Security