What changed in this filing

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Item 1. Financial Statements

2021-11-15 compared with 2021-08-16 · 207 added, 154 removed, 823 unchanged (30% of the section changed)

5 unchanged sentences

except per share amounts)

September 30,

CURRENT ASSETS

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Short-term seller note payable

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

Accounts payable

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For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Services and other

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(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Operating Activities:

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Change in fair value of Convertible Loan

Deferred tax provision

Deferred tax benefit

Allowance for doubtful accounts

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Loss on goodwill impairment

Loss on disposal of assets

Gain on settlement of obligations

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Purchases of property and equipment

Capitalization of third-party labor for software development

Capitalization of internal labor for software development

Capitalization of labor for software development

Net cash used in investing activities

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(in thousands, except shares)

Three months ended June 30, 2021

Balance as of March 31, 2021

Three months ended September 30, 2021

Balance as of June 30, 2021

Shares issued for services

1 unchanged sentence

Stock-based compensation

Balance as of June 30, 2021

Six months ended June 30, 2021

Net income / (loss)

Balance as of September 30, 2021

Nine months ended September 30, 2021

Balance as of December 31, 2020

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Sales of Shares via registered direct offering, net of offering cost

Net income / (loss)

Balance as of September 30, 2021

Three months ended September 30, 2020

Balance as of June 30, 2020

Three months ended June 30, 2020

Balance as of March 31, 2020

Stock-based compensation

Shares issued to directors as compensation

Exercise of warrants

Balance as of June 30, 2020

Six months ended June 30, 2020

Shares issued through at-the-market offering

Net income / (loss)

Balance as of September 30, 2020

Nine months ended September 30, 2020

Balance as of December 31, 2019

Stock-based compensation

Shares issued to directors as compensation

Stock-based compensation

Shares issued through at-the-market offering

Exercise of warrants

Balance as of June 30, 2020

Net income / (loss)

Balance as of September 30, 2020

See accompanying notes to condensed consolidated

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a result of uncertainties.

For the three months ended June 30, 2021 and 2020

we have recognized/(incurred) net income/(losses) of $ 1,025 and ($ 2,459 ), respectively.

For the six months ended June 30, 2021 and 2020,

we recognized/(incurred) net income/(losses) of $ 2,297 and ($ 15,642 ), respectively.

As of June 30, 2021, we had cash and cash equivalents

of $ 3,004 and a working capital surplus of $ 4,014 .

For the three months ended September 30, 2021 and

2020 we incurred net losses of $ 343 and $ 585 , respectively.

For the nine months ended September 30, 2021 and 2020, we recognized/(incurred)

net income/(losses) of $ 1,954 and ($ 16,227 ), respectively.

As of September 30, 2021, we had cash and cash equivalents of $ 2,772 and a

working capital surplus of $ 3,134 .

On January 11, 2021, we

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during the three months ended June 30, 2021.

Management believes that,

based on (i) the forgiveness of our PPP Loan, (ii) the execution of the Offering and remaining availability for incremental offerings

under our previously registered Form S-3 (including our current at-the-market offering), (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, (iv) the settlement of the Seller Note, and (v) our operational forecast through 2022, we can continue as a going concern

through at least August 16, 2022.

However, given our history of net losses and cash used in operating activities, we obtained a continued

support letter from Slipstream through August 16, 2022.

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.

Management believes

that, based on (i) the forgiveness of our PPP Loan, (ii) the execution of the Offering and remaining availability for incremental

offerings under our previously registered Form S-3 registration statement (including our current at-the-market offering), (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, (iv) the settlement of the Seller Note, and (v) our operational

forecast through 2022, we can continue as a going concern through at least November 15, 2022.

However, given our history of net

losses and cash used in operating activities, we obtained a continued support letter from Slipstream through November 15, 2022.

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 and further

discussion of the Company’s refinancing activities during the three and six months ended June 30, 2021.

discussion of the Company’s refinancing activities during the three and nine months ended September 30, 2021.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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net realizable value, determined by the first-in, first-out (FIFO) method, and consist of the following:

September 30,

Raw materials, net of reserve of $ 260 and $ 104 , respectively

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We evaluated whether there were any triggering events for consideration of impairment of long-lived

assets as of June 30, 2021 and concluded there were none.

assets as of September 30, 2021 and concluded there were none.

If the impairment tests indicate that the carrying

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Shares reserved for outstanding stock options, including

stock options with performance restricted vesting, and warrants totaling approximately 6,964,517 at June 30, 2021 were excluded from the

computation of income/(loss) per share as the strike price on the options and warrants were higher than the Company’s market price

and therefore anti-dilutive.

Diluted weighted average shares outstanding for the three and six-months ended June 30, 2021 included 8,333

options which were both exercisable and in-the-money as of June 30, 2021.

Those options were included in the calculation of diluted earnings

per share as of the beginning of the calculation period.

Shares reserved for outstanding stock options, including stock options with performance

restricted vesting, and warrants totaling approximately 7,309,998 at June 30, 2020 were excluded from the computation of income/(loss)

per share due to the net loss in the period.

stock options with performance restricted vesting, and warrants totaling approximately 6,776,771 at September 30, 2021 were excluded from

the computation of income/(loss) per share as the strike price on the options and warrants were higher than the Company’s market

price and therefore anti-dilutive.

Diluted weighted average shares outstanding for the three and nine-months ended September 30, 2021

included 8,333 options which were both exercisable and in-the-money as of September 30, 2021.

Those options were included in the calculation

of diluted earnings per share as of the beginning of the calculation period.

Shares reserved for outstanding stock options, including

stock options with performance restricted vesting, and warrants totaling approximately 7,229,998 at September 30, 2020 were excluded from

the computation of income/(loss) per share due to the net loss in the period.

In calculating diluted earnings per share for the

three and six months ended June 30, 2021 and 2020, 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 Convertible Loan as we have the intent and ability to settle

the debt in cash.

three and nine months ended September 30, 2021 and 2020, 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 Convertible Loan as we have the intent and ability

to settle the debt in cash.

Deferred income taxes are recognized in the financial

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We had no uncertain

tax positions as of June 30, 2021 and December 31, 2020.

We follow the provisions of ASC 350, Intangibles

– Goodwill and Other.

tax positions as of September 30, 2021 and December 31, 2020.

We follow the provisions of ASC 350, Goodwill

and Other Intangible Assets .

Pursuant to ASC 350, goodwill acquired in a purchase business combination is not amortized, but instead

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The Company uses a measurement date of September 30 (see Note 7 Intangible Assets and Goodwill).

We evaluated whether there were any triggering events for consideration of impairment of our goodwill as of June 30, 2021 and concluded

there were none.

For quarters that do not coincide with the measurement date, we evaluate whether there are any triggering events for consideration of

impairment of goodwill.

Use of Estimates

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The Company applies ASC 606 for revenue recognition.

The following table disaggregates the Company’s revenue by major source for the three and six months ended June 30, 2021 and 2020:

The following table disaggregates the Company’s revenue by major source for the three and nine months ended September 30, 2021 and

(in thousands)

September 30,

Installation Services

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The aggregate amount of the transaction price allocated

to installation service performance obligations that are partially unsatisfied as of June 30, 2021 and 2020 were $0.

to installation service performance obligations that are partially unsatisfied as of September 30, 2021 and 2020 were $35 and $0.

Software design and development services

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cash flow model, discount rate assumptions, and an estimation of the likelihood of conversion of the Convertible Loan.

As of June 30,

2021, we utilized a discounted cash flow analysis in updating our fair value analysis of the Convertible Loan, resulting in recognition

of a $ 0 and $ 166 gain during the three and six-months ended June 30, 2021, respectively, from the change in fair value of the liability

and a corresponding increase in the debt balance recorded in the Condensed Consolidated Balance Sheet.

The Company recorded a $ 551 and

$ 702 loss during the same periods in 2020, respectively, related to the fair value of the Special Loan.

We utilized a discounted

cash flow analysis in updating our fair value analysis of the Convertible Loan, resulting in recognition of a $ 0 and $ 166 gain during

the three and nine-months ended September 30, 2021, respectively, from the change in fair value of the liability and a corresponding increase

in the debt balance recorded in the Condensed Consolidated Balance Sheet.

The Company recorded a $ 0 and $ 702 loss during the same periods

in 2020, respectively, related to the fair value of the Special Loan.

SUPPLEMENTAL CASH FLOW STATEMENT INFORMATION

Six Months Ended

Nine Months Ended

September 30,

Supplemental Cash Flow Information

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Intangible assets consisted

of the following at June 30, 2021 and December 31, 2020:

of the following at September 30, 2021 and December 31, 2020:

September 30,

Technology platform

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Net book value of amortizable intangible assets

For the three months ended June 30, 2021 and 2020,

amortization of intangible assets charged to operations was $ 139 and $ 158 , respectively.

For the six months ended June 30, 2021 and 2020

For the three months ended September 30, 2021 and

2020, amortization of intangible assets charged to operations was $ 139 and $ 161 , respectively.

For the nine months ended September 30,

2021 and 2020 amortization of intangible assets charged to operations was $ 418 and $ 478 , respectively.

Goodwill represents the excess of the purchase

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There were no indicators

of impairment as of or during the three and six months ended June 30, 2021.

of impairment as of or during the three and nine months ended September 30, 2021.

Interim Impairment Assessment – March 31, 2020

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Further discussion of the debt follows.

As of June 30, 2021

As of September 30, 2021

Interest Rate Information

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Amended and Restated Loan and Security Agreement

On March 7, 2021, the Company refinanced their

On March 7, 2021, the Company refinanced its

current debt facilities with Slipstream Communications, LLC (“Slipstream”), pursuant to an Amended and Restated Credit and

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ended March 31, 2021.

Amended and Restated Seller Note from acquisition

Amended and Restated Seller Note from acquisition of Allure

The Amended and Restated Seller Note represented

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COMMITMENTS AND CONTINGENCIES

On August 2, 2019, the Company filed suit in Jefferson Circuit Court,

Kentucky, against a supplier of Allure for breach of contract, breach of warranty, and negligence with respect to equipment installations

performed by such supplier for an Allure customer.

On August 2, 2019, the Company filed suit in Jefferson

Circuit Court, Kentucky, against a supplier of Allure for breach of contract, breach of warranty, and negligence with respect to equipment

installations performed by such supplier for an Allure customer.

On October 10, 2019, the Allure customer that is

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Except as noted above, the Company is not party

to any other material legal proceedings, other than ordinary routine litigation incidental to the business, as of August 16, 2021, and

to any other material legal proceedings, other than ordinary routine litigation incidental to the business, as of November 15, 2021, and

there were no other such proceedings pending during the period covered by this Report.

Settlement of obligations

During the six months ended June 30, 2021, (i)

the full principal amount of the PPP Loan and the accrued interest of $ 1,552 were forgiven and recorded as a gain on settlement, and (ii)

During the nine months ended September 30, 2021,

(i) the full principal amount of the PPP Loan and the accrued interest of $ 1,552 were forgiven and recorded as a gain on settlement, (ii)

the Company settled the Amended and Restated Seller Note and related accrued interest for $ 100 , recording a gain on settlement of $ 1,624 ,

representing $ 1,538 related to the Amended and Restated Seller Note and $ 86 of related interest thereon, during the three months ended

June 30, 2021.

During the three and six months ended June 30,

2021 and 2020, the Company settled and/or wrote off obligations of $ 15 and $ 59 , respectively, for aggregate cash payments of $ 2 and $ 19 ,

respectively, resulting in recognition of a gain on settlement of $ 13 and $ 40 , respectively.

Employee-related Expenses

During the three months ended March 31, 2020, we

completed a reduction-in-force and accrued one-time termination benefits related to severance to the affected employees of $ 135 , the total

of which was paid during the three months ended June 30, 2020.

There were no comparable activities during the three or six months

ended June 30, 2021.

representing $ 1,538 related to the Amended and Restated Seller Note and $ 86 of related interest thereon, and (iii) the statute of limitations

passed related to the remaining liability on a lease abandoned by the Company in 2015, resulting in a gain of $ 256 .

During the three and nine months ended September

30, 2020, the Company settled and/or wrote off other obligations of $ 155 and $ 406 , respectively.

RELATED PARTY TRANSACTIONS

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and services from the Company.

For the three and six months ended June 30, 2021, the Company had sales to 33 Degrees of $171, or 5.2%,

For the three and nine months ended September 30, 2021, the Company had sales to 33 Degrees of $82, or

1.7%, and $365, or 2.8%, respectively, of consolidated revenue.

For the three and six months ended June 30, 2020, the Company had sales to 33

Degrees of $291, or 8.0%, and $791, or 10.7%, respectively, of consolidated revenue.

Accounts receivable due from 33 Degrees was $ 21 , or

0.9 %, and $ 40 , or 1.2 % of consolidated accounts receivable at June 30, 2021 and December 31, 2020, respectively.

For the three and nine months ended September 30, 2020, the Company had

sales to 33 Degrees of $131, or 2.6%, and $922, or 7.4%, respectively, of consolidated revenue.

Accounts receivable due from 33 Degrees was $ 5 ,

or 0.17 %, and $ 40 , or 1.2 % of consolidated accounts receivable at September 30, 2021 and December 31, 2020, respectively.

Our deferred tax assets are primarily related to

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there continues to be a full valuation allowance against the net deferred tax assets of the Company with a definite life.

For the three and six-months ended June 30, 2021,

For the three and nine-months ended September 30,

2021, we reported tax expense of $ 1 and $ 9 , respectively.

As of June 30, 2021, the net deferred tax assets totaled $ 0 after valuation allowance,

consistent with December 31, 2020.

As of September 30, 2021, the net deferred tax assets totaled $ 0 after valuation

allowance, consistent with December 31, 2020.

A summary of outstanding warrants is included below:

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Warrants expired

Balance June 30, 2021

Balance September 30, 2021

STOCK-BASED COMPENSATION

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Forfeited or expired

Balance, June 30, 2021

Balance, September 30, 2021

The weighted average remaining contractual life

for options exercisable is 7.5 years as of June 30, 2021.

for options exercisable is 7.2 years as of September 30, 2021.

Valuation Information for Stock-Based Compensation

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The Company recorded $ 79 during the

three months ended June 30, 2021 and anticipates recording $ 79 in each subsequent quarter of 2021 related to the EBITDA target for Calendar

Year 2020 and 2021 portion of these awards.

three months ended September 30, 2021 and anticipates recording $ 79 in each subsequent quarter of 2021 related to the EBITDA target for

Calendar Year 2020 and 2021 portion of these awards.

Stock Compensation Expense Information

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Compensation expense recognized for the issuance

of stock options, inclusive of performance-restricted stock options, for the three and six months ended June 30, 2021 of $ 356 and $ 895 ,

of stock options, inclusive of performance-restricted stock options, for the three and nine months ended September 30, 2021 of $ 331 and

$ 1,177 , respectively, was included in general and administrative expense in the Condensed Consolidated Financial Statements.

Compensation expense

recognized for the issuance of stock options for the three and six months ended June 30, 2020 of $ 19 and $ 119 , respectively, was included

in general and administrative expense in the Condensed Consolidated Financial Statements.

Amounts recorded include stock compensation

expense for awards granted to directors of the Company in exchange for services at fair value.

As of June 30, 2021, there was approximately $ 1,861

and $ 1,157 of total unrecognized compensation expense related to unvested share-based awards with time vesting and performance vesting

criteria, respectively.

As of June 30, 2020, there was approximately $ 3,014 and $ 1,499 of total unrecognized compensation expense related

to unvested share-based awards with time vesting and performance vesting criteria, respectively.

Generally, expense related to the time

vesting options will be recognized over the next two- and one-half years and will be adjusted for any future forfeitures as they occur.

Compensation expense related to performance vesting options will be recognized if it becomes probable that the Company will achieve the

identified performance metrics.

expense recognized for the issuance of stock options for the three and nine months ended September 30, 2020 of $ 273 and $ 442 , respectively,

was included in general and administrative expense in the Condensed Consolidated Financial Statements.

Amounts recorded include stock

compensation expense for awards granted to directors of the Company in exchange for services at fair value.

As of September 30, 2021, there was approximately

$ 1,609 and $ 1,078 of total unrecognized compensation expense related to unvested share-based awards with time vesting and performance

vesting criteria, respectively.

As of September 30, 2020, there was approximately $ 2,617 and $ 1,499 of total unrecognized compensation

expense related to unvested share-based awards with time vesting and performance vesting criteria, respectively.

Generally, expense related

to the time vesting options will be recognized over the next two- and one-half years and will be adjusted for any future forfeitures as

Compensation expense related to performance vesting options will be recognized if it becomes probable that the Company will

achieve the identified performance metrics.

Non-Employee Awards

During the three months ended June 30, 2021, the

Company engaged certain consultants to perform services in exchange for Company common stock.

Shares issued for services were calculated

based on the ten (10) day volume weighted average price (“VWAP”) for the last ten (10) days during the month of service provided.

The Company recorded $ 40 in compensation expense during the period in exchange for issuance of 22,204 shares.

During the three and nine months ended September

30, 2021, the Company engaged certain consultants to perform services in exchange for Company common stock.

Shares issued for services

were calculated based on the ten (10) day volume weighted average price (“VWAP”) for the last ten (10) days during the month

of service provided.

The Company recorded $ 45 and $ 85 in compensation expenses in exchange for issuance of 31,257 and 53,459 shares during

the three and nine months ended September 30, 2021, respectively.

$ 15 of the compensation expenses were recorded as capitalized software.

SIGNIFICANT CUSTOMERS/VENDORS

Significant Customers

We had two (2) customers that in the aggregate

accounted for 32.9 % and 42.6 % of accounts receivable as of June 30, 2021 and December 31, 2020, respectively.

We had three (3) and two (2) customers that accounted

for 44.0 % and 27.0 % of revenue for the three months ended June 30, 2021 and 2020, respectively.

We had two (2) customers that accounted

for 37.4 % and 22.5 % of revenue for the six months ended June 30, 2021 and 2020, respectively.

We had one (1) and two (2) customers that in the

aggregate accounted for 30.6 % and 42.6 % of accounts receivable as of September 30, 2021, and December 31, 2020, respectively.

We had two (2) and one (1) customer that accounted

for 45.9 % and 11.3 % of revenue for the three months ended September 30, 2021, and 2020, respectively.

We had two (2) and one (1) customer

that accounted for 40.1 % and 11.5 % of revenue for the nine months ended September 30, 2021 and 2020, respectively.

Significant Vendors

We had two (2) vendors that accounted for 47.2 %

and 47.0 % of outstanding accounts payable at June 30, 2021 and December 31, 2020, respectively.

and 47.0 % of outstanding accounts payable at September 30, 2021 and December 31, 2020, respectively.

We have entered into various non-cancelable operating

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(in thousands)

Six Months Ended

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Finance lease cost

9 unchanged sentences

The following is a schedule, by years, of maturities

of lease liabilities as of June 30, 2021:

of lease liabilities as of September 30, 2021:

(in thousands)

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(in thousands)

Six Months Ended

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

Operating cash flows from operating leases, net

Operating cash flows from finance leases

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is eligible to claim a refundable tax credit against the employer share of Social Security taxes equal to seventy percent ( 70 %) of the

qualified wages that the Company pays to employees between December 31, 2020 and June 30, 2021.

Qualified wages are limited to $ 10 per

employee per calendar quarter in 2021 for a maximum ERC per employee of $ 7 per calendar quarter in 2021.

qualified wages that the Company pays to employees between December 31, 2020 and September 30, 2021.

Qualified wages are limited to $ 10

per employee per calendar quarter in 2021 for a maximum ERC per employee of $ 7 per calendar quarter in 2021.

As a result of the Taxpayer Certainty and Disaster

1 unchanged sentence

requirements.

The ERC was extended and expanded in March 2021 through

December 31, 2021, as part of the American Rescue Plan Act of 2021 (“ARPA”).

Under the CARES Act, the amount of

credit was fifty percent (50%) of qualified wages paid to the employee plus the employer cost to provide health benefits.

Consolidated Appropriations Act of 2021, eligible employers can claim a refundable tax credit against the employer share of Social

Security taxes equal to seventy percent (70%) of the qualified wages they pay to employees after December 31, 2020, through June

The ERC was extended and expanded in March 2021

through December 31, 2021, as part of the American Rescue Plan Act of 2021 (“ARPA”).

Under the CARES Act, the amount

of credit was fifty percent (50%) of qualified wages paid to the employee plus the employer cost to provide health benefits.

the Consolidated Appropriations Act of 2021, eligible employers can claim a refundable tax credit against the employer share of Social

Security taxes equal to seventy percent (70%) of the qualified wages they pay to employees after December 31, 2020, through September

The ARPA allows employers to retain a seventy percent (70%) credit for qualified wages paid between July 1, 2021, and December

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The Company qualified for the ERC beginning on

March 13, 2020 (the earliest eligibility date) through June 30, 2021 (the most recent assessment date).

During the three months ended June 30, 2021, the

Company recorded an ERC totaling $ 1,237 , representing $ 396 , $ 412 , and $ 429 for credits earned for wages paid in 2020, the first quarter

of 2021, and the second quarter of 2021, respectively.

The Company filed Form 941-X with the IRS for each quarter of 2020 and the first

quarter of 2021.

Credits for the second quarter of 2021 were claimed on the Company’s original Form 941 .

The Company has recorded

these amounts as receivable within prepaid and other currents assets within the Condensed Consolidated Balance Sheet as of June 30, 2021.

During the three months ended June 30, 2021, the

$ 1,237 of ERCs were included as a reduction in payroll taxes within the Condensed Consolidated Statement of Operations and allocated to

the financial statement caption from which the employee taxes were originally incurred.

March 13, 2020 (the earliest eligibility date) through September 30, 2021 (the most recent assessment date).

During the three months ended September 30, 2021,

the Company recorded an ERC totaling $ 422 for credits earned for wages paid the third quarter of 2021.

The credit for the third quarter

of 2021 was claimed on the Company’s original Form 941 .

The Company has recorded these amounts as receivable within prepaid and

other currents assets within the Condensed Consolidated Balance Sheet as of September 30, 2021.

During the three months ended September 30, 2021,

the $ 422 of ERCs were included as a reduction in payroll taxes within the Condensed Consolidated Statement of Operations and allocated

to the financial statement caption from which the employee taxes were originally incurred.

As a result, the Company recorded a reduction

in expenses of $ 136 , $ 50 , $ 49 , and $ 186 in Cost of Goods – Services, Sales and Marketing Expenses, Research and Development Expenses,

and General and Administrative Expenses, respectively, for the three months ended June 30, 2021.

and General and Administrative Expenses, respectively, for the three months ended September 30, 2021.

The Company would qualify for an ERC for each remaining

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receipts that are less than eighty percent ( 80 %) of its gross receipts for the same calendar quarter in 2019.

SUBSEQUENT EVENTS

On November 12, 2021, the Company and Reflect

Systems, Inc., a Delaware corporation (“RSI”), entered into an Agreement and Plan of Merger (the "Merger

Agreement") providing for the merger of RSI with a wholly owned subsidiary of the Company in exchange for the consideration

described below (the “Merger”).

RSI provides digital signage solutions, including software, strategic and media services

to a wide range of companies across the retail, financial, hospitality and entertainment, healthcare, and employee communications

industries in the North America.

Reflect offers digital signage platforms, including

ReflectView, which delivers content to more than 75,000 devices.

Through its strategic services, RSI assists its customers with designing,

deploying and optimizing their digital signage networks, and through its media services, RSI assists customers with monetizing their digital

advertising networks.

If the Merger is consummated, each outstanding Reflect

share will be converted into the right to receive a portion of (i) $ 18,667 in cash, subject to certain adjustments set forth in the Merger

Agreement, (ii) 2,333,334 shares of Creative Realities common stock, par value $ 0.01 per share, referred to herein as the “Creative

Realities shares,” and (iii) contingent cash payable on or after the three-year anniversary of the effective time of the merger,

in an amount by which the closing price of the Creative Realities shares on such anniversary is than $ 6.40 per share, or if certain customers

of Reflect collectively achieve over 85,000 billable devices online at any time on or before December 31, 2022, $7.20 per share, in each

case multiplied by the amount of Creative Realities shares held by the Reflect stockholders on the three-year anniversary of the effective

time of the Merger (subject to a possible six-month extension period) .

At the closing of the Merger (the “Closing”), the Merger

Agreement requires Creative Realities to adopt a Retention Plan in substantially the form attached as Exhibit C to the Merger Agreement,

pursuant to which key members of Reflect’s management team will be eligible to receive an aggregate of $1,333,333 in cash, which

will be paid 50% at the Closing, and subject to continuous employment with Reflect, 25% on the one-year anniversary of Closing and 25%

on the two-year anniversary of the Closing.

The future cash payments due on the one-year and two-year anniversaries of the Closing will

be deposited into a “rabbi trust” at Closing.

The Retention Plan also will require Creative Realities to issue Creative Realities

shares having an aggregate value of $666,667 to the plan participants as follows:

50% of the value of such shares will be issued at the

Closing, and subject to continuous employment with Reflect, 25% of the value of such shares will be issued on the one-year anniversary

of Closing and the remaining 25% of the value of such shares will be issued on the two-year anniversary of the Closing.

The shares to

be issued will be determined based on dividing the value of shares issuable on such date by the trailing 10-day volume weighed average

price (VWAP) of the shares as of the such date The Merger is subject to standard Closing conditions, including the approval of RSI’s

stockholders, the approval of the listing of additional shares of CRI common stock to be issued to RSI’s stockholders in the Merger,

required federal and state regulatory approvals and other customary Closing conditions.

We expect the merger to close in the first quarter

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

What changed 10-Q

Item 1. Financial Statements