What changed in this filing

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Item 9A. Controls and Procedures

2022-03-22 compared with 2021-03-10 · 1584 added, 1847 removed, 441 unchanged (89% of the section changed)

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

ITEM 9A CONTROLS 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 Annual 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, 2021, 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.

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, 2021 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, 2021.

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.

in Internal Control over Financial Reporting

were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2021, that have

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

ITEM 9B OTHER INFORMATION

March 22, 2022, the Company issued a press release announcing its financial condition and results of operations for the three months

and year ended December 31, 2021.

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.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

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

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:

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

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

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.

(“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 joined Pegasus Capital as an operating advisor in December 2014 and remains in that capacity

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.

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 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.

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 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 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.

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.

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

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.

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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.

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 2006.

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

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.

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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

our Chief Executive Officer and a member of our Board of Directors.

Mills possesses over 32 years of industry experience.

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.

Harris’s experience in the telecommunications industry and his association with

private equity funding is valuable to the Company.

Mills is currently our Chief Executive Officer and a member of our Board of Directors.

Mills possesses over 32 years of industry

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.

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.

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

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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

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.

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.

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.

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 (NASDAQ:

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

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

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.

McGill, the Board of

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

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.

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

With regard to Mr.

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

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

of large enterprises.

With regard to Mr.

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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.

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

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 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 1934.

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

Bell, Harris, and Nesbit.

The Board of Directors has determined that

at least two members of the Board, Mr.

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”

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

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.

McGill and Mr.

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.

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.

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.

Board of Directors has created a standing Compensation Committee and Audit Committee.

Nesbit, Harris, and Bell serve on the Compensation

Bell, Harris and Nesbit serve on the Audit Committee.

In the case of the Compensation Committee, Mr.

Nesbit serves as chair, and in the

case of the Audit Committee, Mr.

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.

Bell, is an “audit committee financial expert”

as that term is defined in Regulation S-K promulgated

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.

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.

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:

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.

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 ) :

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

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.

100, Louisville,

KY 40223, Attention:

Corporate Secretary.

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

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 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,

ITEM 11 EXECUTIVE COMPENSATION

Compensation Table

following table sets forth information concerning the compensation of our named executive officers for 2021 and 2020 ( table and

footnotes in whole dollars ) :

Name and Principal Position (a)

Stock Awards ($) (d)

Option Awards ($) (e)

Non-Equity Incentive Plan Compensation ($)

All Other Compensation ($)

Incentive Plan

Richard Mills

3 unchanged sentences

Logan joined the Company effective November 2017.

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.

Mills for his significant contributions to the Company’s performance in 2018.

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

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.

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 resulted in actual salaries to $277,962 and $209,735, respectively,

During 2021, the Company reinstated lost salaries one-third on each of April 1, July 1, and October 1, the final reinstate

thereby increasing the compensation to its pre-pandemic levels of $330,000 and $249,000, respectively.

The graded reinstatement resulted

in actual salaries for Mr.

Mills and Mr.

Logan during 2021 of $296,152, and $223,460, respectively.

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.

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

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.

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.

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.

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

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

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 expense was recorded in 2020 as neither the revenue nor EBITDA target were achieved.

The Company recorded stock compensation expense of $449,623 related to Mr.

Mills and Mr.

Logan for current year and catch-up expense

related to the achievement of the EBITDA target in 2021.

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 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 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.

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.

In each 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.

Logan 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.

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.

While the Company targets for revenue were not achieved in 2021, the EBTIDA target was achieved and the Company

has accrued $114 in the Consolidated Balance Sheet as of December 31, 2021 related to this bonus plan.

material terms of employment agreements of Richard Mills, Chief Executive Officer of Creative Realities, and Will Logan, Chief Financial

Officer of the Company, including those adopted on November 12, 2021, and payments to be made upon a change in control are discussed

below, in the narrative following “Employment Agreements.”

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%.

Creative Realities re-implemented

the employer contribution match at the previous rate effective October 1, 2021.

Mills Employment Agreement

Realities employed Richard Mills as Creative Realities Chief Executive Officer.

Mills’ employment agreement was initially effective

for a two-year term, which automatically renewed for additional one-year periods unless either Creative Realities or Mr.

Mills elected

not to extend the term.

The agreement provided for an initial annual base salary of $270 subject to annual increases but generally not

subject to decreases.

Mills’ current annual base salary is $330.

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.

Mills was eligible to participate

in performance-based cash bonus or equity award plans for Creative Realities senior executives.

Mills participated in Creative Realities

employee benefit plans, policies, programs, prerequisites 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 would have been 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.

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

increased to 12 months of then-current base salary.

The agreement provided that any severance payments would be paid in installments

over the course of the severance.

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

employment for a period of one year.

The agreement also contained other customary restrictive and other covenants relating to the confidentiality

of information, the ownership of inventions and other matters.

Mills and Creative Realities entered into a new employment agreement on November 12, 2021.

The employment agreement is effective for

a one-year term, which automatically renews for additional one-year periods unless either Creative Realities or Mr.

Mills elects not

to extend the term.

The agreement provides for an initial annual base salary of $330 subject to annual increases but generally not subject

to decreases.

The employment agreement provides that Mr.

Mills’ annual base salary adjusts automatically upon the closing of the

Merger to $450 subject to annual increases but not generally subject to decreases.

Under the agreement, Mr.

Mills is eligible to participate

in performance-based cash bonus or equity award plans for Creative Realities senior executives.

Mills will participate in Creative

Realities 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 de-fined, or within 12 months following a

change in control, as defined, other than for reason of death, disability or for cause, Mr.

Mills will be entitled to receive aggregate

severance payments equal to twelve months of his 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 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

arrangements to the extent he meets applicable eligibility requirements, and also received the stock options discussed under “Outstanding

Equity Awards at Fiscal Year-End”

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:

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

of information, the ownership of inventions and other matters.

Logan Employment Agreement

Logan, Creative Realities’ Chief Financial Officer, had an at-will employment arrangement with Creative Realities.

current annual base salary is $249.

Logan participated in Creative Realities employee benefit plans, policies, programs, perquisites

and arrangements to the extent he meets applicable eligibility requirements, and also received the stock options discussed under “Outstanding

Equity Awards at Fiscal Year-End” below.

Logan and Creative Realities entered into an employment agreement on November 12, 2021.

The employment agreement is effective for a one-year

term, which automatically renews for additional one-year periods unless either Creative Realities or Mr.

Logan elects not to extend the

The agreement provides for an initial annual base salary of $249 subject to annual increases but generally not subject to decreases.

The employment agreement provides that Mr.

Logan’s annual base salary adjusts automatically upon the closing of the Merger to $350,

subject to annual increases but not generally subject to decreases, and Mr.

Logan will receive a $75 cash bonus upon the closing of the

The Merger closed on February 17, 2022.

Under the agreement, Mr.

Logan is eligible to participate in performance-based cash bonus

or equity award plans for Creative Realities senior executives.

Logan participates in Creative Realities employee benefit plans,

policies, programs, prerequisites 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, Mr.

Logan will be entitled to receive aggregate severance payments equal to

six months of his base salary.

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

The agreement contains certain non-solicitation and non-competition provisions that continue after employment for a period

The agreement also contains other customary restrictive and other covenants relating to the confidentiality of information,

the ownership of inventions and other matters.

Equity Awards at Fiscal Year-End

following table sets forth certain information concerning outstanding stock options and restricted stock awards held by Creative Realities

named executive officers as of December 31, 2021:

Option Awards (a)

1 unchanged sentence

Richard Mills

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

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 16.67 percent of the total shares purchasable under this issuance subject to satisfying Creative Realities revenue target and earnings before interest, taxes, depreciation and amortization (“EBITDA”) target for the applicable year.

These performance options include a catch-up provision, where any options that did not vest during a prior year due to Creative Realities’ 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.

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

2 unchanged sentences

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:

executives met the foregoing EBTIDA target for calendar year 2021.

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.

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 2022.

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

Creative Realities 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 were 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 Creative Realities’ common stock at the end of the previous

calendar quarter.

November 17, 2021, Creative Realities’ Board of Directors updated its director compensation plan to compensate non-officer directors

grant of shares of unrestricted common stock of Creative Realities, issuable on November 17, 2021, 2022 and 2023, having an annual value

of $24, with the per-share price to be determined based upon the closing price of the Company’s common stock as reported on Nasdaq

on such issuance date;

option issuable to each non-executive director to purchase 60,000 shares of Creative Realities common stock (or in the case of Dennis

McGill, Chairman of the Creative Realities Board, 75,000 shares), which vest in three equal installments on November 17, 2021, 2022 and

2023, subject to continuing service as a director as of such vesting date.

The exercise price of such options is $2.21, the closing price

of Creative Realities’ common stock as reported on Nasdaq on the date of adoption of such plan.

table below sets forth the compensation paid to Creative Realities non-employee directors during 2021:

Director Compensation ( table and footnotes in whole dollars )

Option awards

Non-equity incentive plan compensation

Nonqualified deferred compensation earnings

All other compensation ($)

incentive plan

Dennis McGill

Joseph Manko Jr.

Stephen Nesbit

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.

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.

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.

director was awarded shares of the Company’s common stock for service having an aggregate value of $6,250 on a quarterly basis

in arrears for services completed during the immediately preceding quarter.

This arrangement was in place for the first three quarters

of 2021, with $18,750 of the total above for each director representing the aggregate value of shares issued on the date of issuance.

the aggregate grant date fair value of three-year option awards vesting in 2021, 2022, and 2023 based on the Black-Scholes value

determined as of the November 17, 2021 grant date.

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

following table sets forth the number of common shares, and percentage of outstanding common shares, beneficially owned as of March 22,

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.

Name and Address

Common Shares Beneficially Owned [1]

Percentage of

Common Shares [1]

Slipstream Funding, LLC [2]

12 unchanged sentences

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

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%.

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 March 22, 2022, 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 Creative Realities.

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.

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

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.

1 unchanged sentence

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

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

Pegasus Partners IV, L.P.

(“Pegasus Partners”) is the sole member of PP IV BSH.

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, 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 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.

2 unchanged sentences

Nesbit is a director of the Company.

Share figure includes 20,000 shares purchasable upon the exercise of outstanding options.

Harris is a director of the Company.

Share figure includes 21,035 shares purchasable upon the exercise of outstanding warrants.

Share figure includes 9,130 shares purchasable upon the exercise of outstanding warrants and

20,000 shares purchasable upon the exercise of outstanding options.

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.

Share figured includes 41,667 shares purchasable upon the exercise

of outstanding options.

Bell is a director of the Company.

Share figure includes 20,000 shares purchasable upon the exercise of outstanding options.

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

Share figure includes 320,000 shares purchasable upon the exercise

of outstanding options.

Logan is the Chief Financial Officer of the Company.

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

Includes Messrs.

Share figure includes 191,667 shares purchasable upon the exercise of outstanding

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.

Authorized for Issuance Under Equity Compensation Plans

table below sets forth certain information, as of the close of business on December 31, 2021, regarding equity compensation plans (including

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

Number of Securities to be

14 unchanged sentences

3,143,326 (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, 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 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 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 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

agreement with 33 Degrees Convenience Connect, Inc., a related party that is approximately 17.5% owned by a member of our senior

management (“33 Degrees”), outlining terms for repayment of $2,567 of aged accounts receivable as of that date.

payment agreement stipulated a simple interest rate of 12% on aged accounts receivable to be paid on the tenth day of each month

through the maturity date of December 31, 2019.

As of December 31, 2019, 33 Degrees paid the note in full and had a remaining outstanding

accounts receivable balance of $1 in the Consolidated Financial Statements.

33 Degrees has continued to purchase additional hardware

and services from the Company on a prepaid basis.

For the years ended December 31, 2020 and

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.

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

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.

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS, AND DIRECTOR INDEPENDENCE

February 17, 2022, the Company and its subsidiaries (collectively, the “Borrowers”) refinanced their current debt facilities

with Slipstream, pursuant to a Second Amended and Restated Credit and Security Agreement (the “Credit Agreement”).

The Borrowers

include Reflect, which became a wholly owned subsidiary of the Company as a result of the closing of the Merger on February 17, 2022.

The debt facilities continue to be fully secured by all assets of the Borrowers.

The Company raised $10,000 in gross proceeds, or

$9,950 in net proceeds, from entry into a new, 36-month senior secured term loan (the “Acquisition Loan”) with Slipstream

as part of the Credit Agreement, which matures on February 17, 2025 (the “Maturity Date”).

The Acquisition Loan has an interest

rate of 8.0%, with 50.0% warrant coverage (or 2,500,000 warrants).

On the first day of each month, commencing March 1, 2022 through February

1, 2025, the Borrowers will make interest-only payments on the Acquisition Loan (estimated to be $67 per monthly payment).

payments on the Acquisition Loan are payable until the Maturity Date.

The Credit Agreement also provides that the Company’s

outstanding loans from Slipstream, consisting of its pre-existing $4,767 senior secured term loan and $2,418 secured convertible loan,

with an aggregate of $7,185 in outstanding principal and accrued and unpaid interest under such loans, were consolidated into a term loan

(the “Consolidation Term Loan”).

The Consolidation Term Loan has an interest rate of 10.0%, with 75.0% warrant coverage (or

2,694,495 warrants).

On the first day of each month, commencing March 1, 2022 through February 1, 2025, the Borrowers will make interest-only

payments on the Consolidation Term Loan (estimated to be $60 per monthly payment).

Commencing on September 1, 2023, and on the first day

of each month thereafter until the Maturity Date, the Borrowers will make a payment on the Consolidation Term Loan, in an equal monthly

installment of principal sufficient to fully amortize the Consolidation Term Loan in eighteen equal installments (estimated to be $399

per monthly installment).

In connection with the

Acquisition Loan and the Consolidation Term Loan warrant coverage, the Company issued to Slipstream a warrant to purchase an aggregate

of 5,194,495 shares of Company common stock (the “Lender Warrant”).

The Lender Warrant has a five-year term, an initial exercise

price of $2.00 per share, subject to adjustments in the Lender Warrant, and is not exercisable until August 17, 2022.

certain circumstances, upon a fundamental transaction of the Company, the holder of the Lender Warrant will have the right to require

the Company to repurchase the Lender Warrant at its fair value using a Black Scholes option pricing formula;

provided that such holder

may not require the Company or its successor entity to repurchase the Lender Warrant for the Black Scholes value in connection with a

fundamental transaction that is not approved by the Company’s Board of Directors, and therefore not within the Company’s

33 Degrees Convenience Connect, Inc., a related

party that was approximately 17.5% owned by a member of our senior management (“33 Degrees”) until September 2021, is

a customer of both equipment and services from the Company.

For the years ended December 31, 2021 and 2020, we had sales of $457 (2.5%

of consolidated sales) and $1,058 (6.1% of consolidated sales), respectively, with 33 Degrees.

Accounts receivable due from 33 Degrees

was $35, or 1.0%, and $40, or 1.2% of consolidated accounts receivable at December 31, 2021 and December 31, 2020, respectively.

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.

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

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:

ITEM 14 PRINCIPAL 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 Deloitte and Touche LLP for 2021 and 2020.

Fees for tax services

were provided by Ernst & Young, LLP beginning in the second quarter of 2018.

Fees to Deloitte and Touche LLP were as follows:

Audit fees (a)

Audit related fees (b)

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”

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.

/s/ Richard Mills

Richard Mills

Chief Executive Officer

/s/ Will Logan

Chief Financial Officer

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

fees for 2021 and 2020 relate to professional services provided in connection with the audit of our consolidated financial

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

other regulatory filings.

Audit related fees relate to professional services provided in connection

with the preparation and filing of SEC reports related to our Registered Direct Offering and the Reflect Merger.

were no tax fees paid to Deloitte and Touche LLP.

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

tax compliance, tax advice, and tax planning of $223 and $105 for 2021 and 2020, respectively.

Board of Directors pre-approved the audit services rendered by Deloitte and Touche LLP during 2021 and 2020, respectively, and concluded

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

ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

“Index to Consolidated Financial Statements” on page F-1 and “Exhibit Index” on page E-1.

“Exhibit Index” on page E-1.

FORM 10-K SUMMARY .

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 22, 2022.

Realities, Inc.

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

Executive Officer

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

/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

Report of Independent Registered Public Accounting Firms

TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (PCAOB ID No.

34 ) F-2 - F-3

Consolidated Financial Statements

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Shareholders’

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

Consolidated Balance Sheets F-4

Consolidated Statements of Operations F-5

Consolidated Statements of Shareholders’ Equity F-6

Consolidated Statements of Cash Flows F-7

Notes to Consolidated Financial Statements F-8

OF INDEPENDENT REGISTERED PUBLIC 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.

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

and subsidiaries (the "Company") as of

December 31, 2021 and 2020, the related consolidated statements of operations, shareholders’ equity, and cash flows, for each of

the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the "financial statements").

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

31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021,

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 audits.

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.

federal securities

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

conducted our audits 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 or fraud.

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.

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

audits 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 audits 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 audits

provide 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 Notes 2 and 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 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.

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 and forecasts of future revenue and operating

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.

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

Accordingly, management performed

an impairment assessment as of September 30, 2021.

The estimated fair value of the reporting unit exceeded the carrying value as of September

30, 2021 and, therefore, no 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 in demand.

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.

audit procedures related to the forecasts of future revenues, gross profit, operating income/EBITDA, and capital expenditures, and the

selection of the long-term growth rate and discount rate for the reporting unit included the following, among others:

evaluated the reasonableness of management’s forecasts of revenue, gross profit, operating

income/EBITDA, and capital expenditures by comparing the forecasts to:

(1) historical

revenue, gross profit, operating income/EBITDA, and capital expenditures,

communications to management and the Board of Directors, and

(3) forecasted

information included in industry reports for the Company.

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

Creative Realities, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets

of Creative Realities, Inc.

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

statements of operations, shareholders’

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 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

As discussed in Note 2 to the consolidated financial statements,

the Company has changed its method of accounting for leases in 2019.

Basis for Opinion

These financial statements are the responsibility of the Company’s

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

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.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of

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 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.

Accordingly, we express no such opinion.

Our audits 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

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial

Our audits 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 audits provide a reasonable basis

for our opinion.

/s/ EisnerAmper LLP

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

EISNERAMPER LLP

Iselin, New Jersey

March 12, 2020

CREATIVE REALITIES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

evaluated the reasonableness of the discounted cash flow valuation methodology 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.

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.

Deloitte & Touche LLP

have served as the Company’s auditor since 2020.

REALITIES, INC.

BALANCE SHEETS

thousands, except per share amounts)

CURRENT ASSETS

2 unchanged sentences

Unbilled receivables

Work-in-process and inventories, net

Inventories, net

Prepaids and other current assets

3 unchanged sentences

Intangibles, net

LIABILITIES AND SHAREHOLDERS’

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES

Short-term seller note payable

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

Accounts payable

9 unchanged sentences

Long-term obligations under operating leases

Long-term obligations under financing leases

Long-term accrued expenses

Deferred tax liabilities

Other liabilities

TOTAL LIABILITIES

SHAREHOLDERS’

SHAREHOLDERS’ EQUITY

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

2 unchanged sentences

Accumulated deficit

Total shareholders’

TOTAL LIABILITIES AND SHAREHOLDERS’

See accompanying Notes to Consolidated

Financial Statements.

CREATIVE REALITIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

Total shareholders’ equity

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

accompanying Notes to Consolidated Financial Statements.

REALITIES, INC.

STATEMENTS OF OPERATIONS

thousands, except per share amounts)

For the Years Ended

7 unchanged sentences

General and administrative

Bad debt expense/(recovery)

Depreciation and amortization

2 unchanged sentences

Loss on disposal of fixed assets

Gain on reversal of earnout liability

Deal and transaction costs

Total operating expenses

2 unchanged sentences

Interest expense, including amortization of debt discount

Change in fair value of warrant liability

Gain on settlement of obligations

Loss on fair value of debt

Gain/(loss) on fair value of debt

Other income/(expense), net

7 unchanged sentences

Weighted average shares outstanding - diluted

See accompanying Notes to Consolidated

Financial Statements.

CREATIVE REALITIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’

For the years ended December 31, 2020

(in thousands, except shares)

accompanying Notes to Consolidated Financial Statements.

REALITIES, INC.

STATEMENTS OF SHAREHOLDERS’ EQUITY

the years ended December 31, 2021 and 2020

thousands, except shares)

Year ended December 31, 2021

Balance as of December 31, 2020

Shares issued to directors as compensation

Stock-based compensation

Shares issued via at-the-market offering

Exercise of warrants

Stock-based compensation – employees

Stock-based compensation - directors

Stock-based compensation - vendors

Conversion of Disbursed Escrow Loan

Gain on Extinguishment of Special Loan

Shares issued via registered direct offering

Balance as of December 31, 2021

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Balance as of December 31, 2019

Adjustment due to adoption of ASU 2016-02

Vesting of performance shares previously granted to CEO

Shares issued for services

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

See accompanying Notes to Consolidated

Financial Statements.

CREATIVE REALITIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands, except share per share

For the Years

accompanying Notes to Consolidated Financial Statements.

REALITIES, INC.

STATEMENTS OF CASH FLOWS

thousands, except share per share amounts)

For the Years Ended

Operating Activities:

Net (loss)/income

Net income/(loss)

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

2 unchanged sentences

Stock-based compensation

Shares issued for services

Change in warrant liability

Allowance for doubtful accounts

Employee retention and other government credits

Non-cash interest expense on related party loans

Non-cash receivables from in-process projects

Non-cash application of customer deposits to completed projects

Stock compensation issued to vendors for services

Deferred tax (benefit)/expense

Gain on obligation settlement

Gain on forgiveness of PPP loan

Gain on settlement of Seller Note

Gain on settlement of other obligation

Loss on disposal of assets

Loss on fair value of debt

(Gain)/loss on fair value of debt

Goodwill impairment

Gain on reversal of earnout liability

Changes to operating assets and liabilities:

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Prepaid expenses and other current assets

Operating lease right of use asset, net

Vendor deposits

Operating lease right of use asset

Accounts payable and other current payables

2 unchanged sentences

Customer deposits

Operating lease liabilities, net

Net cash used in operating activities

Operating lease liabilities

Other liabilities

Net cash provided by / (used in) operating activities

Investing activities

Proceeds from net working capital settlement

Purchases/additions of property and equipment and software development

Purchases of property and equipment

Capitalization of internal and external labor for software development

Net cash used in investing activities

1 unchanged sentence

Proceeds from common stock issuance, net of issuance costs

Proceeds from related party loans

Proceeds from Payroll Protection Program loan

2 unchanged sentences

Proceeds from warrant exercise into common stock

Other financing activities, net

Net cash provided by financing activities

Decrease in Cash and Cash Equivalents

Increase 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.

CREATIVE REALITIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share

All currency is rounded to the nearest thousands except share

and per share amounts

accompanying Notes to Consolidated Financial Statements.

REALITIES, INC.

TO CONSOLIDATED FINANCIAL STATEMENTS

thousands, except share and per share amounts)

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

NATURE OF ORGANIZATION AND OPERATIONS

Unless the context otherwise indicates,

references in these Notes to the accompanying Consolidated Financial Statements to “we,”

“us,”

“our”

and “the Company”

refer to Creative Realities, Inc.

the context otherwise indicates, references in these Notes to the accompanying Consolidated Financial Statements to “we,”

“us,” “our” and “the Company” refer to Creative Realities, Inc.

and its subsidiaries.

Nature of the Company’s Business

Creative Realities, Inc.

is a Minnesota

corporation that 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 has expertise in a

broad range of existing and emerging digital marketing technologies, as well as the related media management and distribution software

platforms and networks, device management, product management, customized software service layers, systems, experiences, workflows,

and integrated solutions.

of the Company’s Business

Realities, Inc.

is a Minnesota corporation that 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 has expertise

in a broad range of existing and emerging digital marketing technologies, as well as the related media management and distribution software

platforms and networks, device management, product management, customized software service layers, systems, experiences, workflows, and

integrated solutions.

Our technology and solutions include:

digital merchandising systems and omni-channel customer engagement

systems, 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 have expertise in a broad range of existing and emerging digital marketing technologies, as well as the following

related aspects of our business:

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.

expertise in a broad range of existing and emerging digital marketing technologies, as well as the following related aspects of our business:

content, network management, and connected device software and firmware platforms;

software service layers;

customized software service layers;

hardware platforms;

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and proprietary processes and automation tools.

Our main operations are conducted directly

through Creative Realities, Inc., and under our wholly owned subsidiaries Allure Global Solutions, Inc., a Georgia corporation,

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

The accompanying Consolidated Financial

Statements have been prepared on the basis of the realization of assets and the satisfaction of liabilities and commitments in

the normal course of business and do not include any adjustments to the recoverability and classifications of recorded assets and

liabilities as a result of uncertainties.

We produced net income for the year ended

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

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 January 11, 2021, Creative Realities,

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

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

Relief and Economic Security Act of 2020.

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

have been forgiven.

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

On February 18, 2021, the Company entered

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

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

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

The net proceeds from the Offering after paying estimated

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

The closing of the

Offering occurred on February 22, 2021.

On March 7, 2021, the Company and Slipstream

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

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

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

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

Management believes that, based on (i) the

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

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

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

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

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.

Our main operations are conducted directly through

Creative Realities, Inc., and under our wholly owned subsidiaries Allure Global Solutions, Inc., a Georgia corporation, and Creative Realities

Canada, Inc., a Canadian corporation, and Reflect Systems, Inc., a Delaware corporation, which was acquired on February 17, 2022.

Acquisition of Reflect

On November 12, 2021,

the Company and Reflect Systems, Inc., or “Reflect,” entered into an Agreement and Plan of Merger (as amended on as amended

on February 8, 2022, the “Merger Agreement)” pursuant to which a direct, wholly owned subsidiary of Creative Realities, CRI

Acquisition Corporation, or “Merger Sub,” would merge with and into Reflect, with Reflect surviving as a wholly owned subsidiary

of Creative Realities, and the surviving company of the merger, which transaction is referred to herein as the “Merger.” On

February 17, 2022, the parties consummated the Merger.

Reflect 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 North America.

Reflect offers digital signage platforms, including

ReflectView, a platform used by companies to power hundreds of thousands of active digital displays.

Through its strategic services, Reflect

assists its customers with designing, deploying and optimizing their digital signage networks, and through its media services, Reflect

assists customers with monetizing their digital advertising networks.

Subject to the terms and

conditions of the Merger Agreement, upon the closing of the Merger, Reflect stockholders as of to the effective time of the Merger collectively

received from the Company, in the aggregate, the following Merger consideration:

(i) $16,166 payable in cash, (ii) 2,333,334 shares of

common stock of Creative Realities (valued based on an issuance price of $2 per share) (the “CREX Shares”), (iii) the Secured

Promissory Note (as described below), and (iv) supplemental cash payments (the “Guaranteed Consideration”), if any, payable

on or after the three-year anniversary of the effective time of the Merger (subject to the Extension Option described below, the “Guarantee

Date”), in an amount by which the value of the CREX Shares on such anniversary is less 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, is less than $7.20 per

share (such applicable amount, the “Guaranteed Price”), multiplied by the amount of CREX Shares held by the Reflect stockholders

on the Guarantee Date (subject to the Extension Option described below), subject to the terms of the Merger Agreement.

Creative Realities may exercise an extension option

(the “Extension Option”) to extend the Guarantee Date from the three-year anniversary of the Closing Date to six (6) months

thereafter if (i) the Extension Threshold Price is greater than or equal to 70 % of the Guaranteed Price described above, and (ii) Creative

Realities provides written notice of its election to exercise the Extension Option at least ten (10) days prior to the three-year anniversary

of the Closing.

The “Extension Threshold Price” means the average closing price per share of Creative Realities Shares as

reported on the Nasdaq Capital Market (or NYSE) in the fifteen (15) consecutive trading day period ending fifteen (15) days prior to the

three-year anniversary of the Closing Date.

If the Extension Threshold Price is less than 80 % of the Guaranteed Price, then the Guaranteed

Price will be increased by $ 1.00 per share.

In connection with the Merger, the Company adopted

a Retention Bonus Plan and raised capital to, among other things, pay the cash portion of the Merger consideration.

On February 3, 2022, the Company entered into a

securities purchase agreement (the “Securities Purchase Agreement”) with a purchaser (the “Purchaser”), pursuant

to which the Company agreed to issue and sell to the Purchaser, in a private placement priced at-the-market under Nasdaq rules, (i) 1,315,000

shares (the “Shares”) of the Company’s common stock, par value $0.01 per share (the “Common Stock”) and

accompanying warrants to purchase an aggregate of 1,315,000 shares of Common Stock, and (ii) pre-funded warrants to purchase up to an

aggregate of 5,851,505 shares of Common Stock (the “Pre-Funded Warrants”) and accompanying warrants to purchase an aggregate

of 5,851,505 shares of Common Stock (collectively, the “Private Placement”).

The accompanying warrants to purchase Common

Stock are referred to herein collectively as the “Common Stock Warrants.” Under the Securities Purchase Agreement, each Share

and accompanying warrants to purchase Common Stock were sold together at a combined price of $1.535, and each Pre-Funded Warrant and accompanying

warrants to purchase Common Stock were sold together at a combined price of $1.5349, for gross proceeds of approximately $11,000 before

deducting placement agent fees and estimated offering expenses payable by the Company.

The net proceeds from the Private Placement were

used to fund, in part, payment of the closing cash consideration in the Merger.

February 17, 2022, the Company and its subsidiaries (collectively, the “Borrowers”) refinanced their current debt facilities

with Slipstream, pursuant to the Credit Agreement, and raised $ 10,000 in gross proceeds with a maturity date of February 1, 2025 .

Credit Agreement also provides that the Company’s outstanding loans from Slipstream, consisting of its pre-existing $ 4,767 senior

secured term loan and $ 2,418 secured convertible loan, with an aggregate of $ 7,185 in outstanding principal and accrued and unpaid interest

under such loans, were consolidated into a Consolidation Term Loan with a maturity date of February 1, 2025.

February 17, 2022, in connection with the closing of the acquisition of Reflect, the Company issued to RSI Exit Corporation (“Stockholders’

Representative”), the representative of Reflect stockholders, a $ 2,500 Note and Security Agreement (the “Secured Promissory

The Secured Promissory Note accrues interest at 0.59 % (the applicable federal rate) and requires the Company and Reflect

to pay equal monthly principal installments of $ 104 on the fifteenth (15th) day of each month, commencing on March 17, 2022, for twelve

months with any remaining or unpaid principal due and payable on February 15, 2023.

See Note 8 Loans Payable to the Consolidated

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

refinancing activities subsequent to the year-end date.

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

refinancing activities subsequent to December 31, 2021.

believes that, based on (i) the execution of the Equity Financing, (ii) the refinancing of our debt as part of the Debt Financing, including

extension of the maturity date on our term loans, and (iii) our operational forecast through 2022 following completion of the Reflect

Acquisition, that we can continue as a going concern through at least March 31, 2023.

However, given our historical net losses and cash

used in operating activities, we obtained a continued support letter from Slipstream through March 31, 2023.

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

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting

policies consistently applied in the preparation of the accompanying Consolidated Financial Statements follows:

summary of the significant accounting policies consistently applied in the preparation of the accompanying Consolidated Financial Statements

Basis of Presentation

The accompanying Consolidated Financial

Statements have been prepared in accordance with the instructions to Form 10-K and Article 8 of Regulation S-X and include all

of the information and disclosures required by generally accepted accounting principles in the United States of America (“GAAP”)

for annual financial reporting.

The Consolidated Financial Statements include

the accounts of Creative Realities, Inc., our wholly owned subsidiaries Allure, ConeXus World Global LLC, Creative Realities (Canada),

Inc., and Creative Realities, LLC.

accompanying Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-K and Article 8 of Regulation

S-X and include all of the information and disclosures required by generally accepted accounting principles in the United States of America

(“GAAP”) for annual financial reporting.

Consolidated Financial Statements include the accounts of Creative Realities, Inc.

and our wholly owned subsidiaries Allure, and Creative

Realities (Canada), Inc.

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

Revenue Recognition

We recognize revenue in accordance with

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

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.

recognize revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)

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

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.

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.

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 quantities.

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.

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.

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

Observable 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

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

Company recognizes contract assets or unbilled receivables related to revenue recognized for services completed but not yet invoiced

to the clients.

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.

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.

are stated at the lower of cost or net realizable value, determined by the first-in, first-out (FIFO) method, and consist of the following:

Raw materials, net of reserve of $ 502 and $ 104 , respectively

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Impairment of Long-Lived Assets

We review the carrying value of all long-lived

assets, including property and equipment, for impairment in accordance with ASC 360, Accounting for the Impairment or Disposal

of Long-Lived Assets .

Under ASC 360, impairment losses are recorded whenever events or changes in circumstances indicate the

carrying value of an asset may not be recoverable.

If the impairment tests indicate that the

carrying value of the asset is greater than the expected undiscounted cash flows to be generated by such asset, an impairment loss

would be recognized.

The impairment loss is determined as the amount by which the carrying value of such asset exceeds its fair

We generally measure fair value by considering sale prices for similar assets or by discounting estimated future cash flows

from such assets using an appropriate discount rate.

Assets to be disposed of are carried at the lower of their carrying value

or fair value less costs to sell.

review the carrying value of all long-lived assets, including property and equipment, for impairment in accordance with ASC 360, Accounting

for the Impairment or Disposal of Long-Lived Assets .

Under ASC 360, impairment losses are recorded whenever events or changes

in circumstances indicate the carrying value of an asset may not be recoverable.

the impairment tests indicate that the carrying value of the asset is greater than the expected undiscounted cash flows to be generated

by such asset, an impairment loss would be recognized.

The impairment loss is determined as the amount by which the carrying value of

such asset exceeds its fair value.

We generally measure fair value by considering sale prices for similar assets or by discounting estimated

future cash flows from such assets using an appropriate discount rate.

Assets to be disposed of are carried at the lower of their carrying

value or fair value less costs to sell.

Considerable management judgment is necessary to estimate the fair value of assets, and accordingly,

1 unchanged sentence

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, 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

the financial statements for the tax consequences in future years of differences between the tax basis of assets and liabilities

and their financial reporting amounts based on enacted tax laws and statutory tax rates.

Temporary differences arise from net operating

losses, differences in basis of intangibles, stock-based compensation, reserves for uncollectible accounts receivable and inventory,

differences in depreciation methods, and accrued expenses.

Valuation allowances are established when necessary to reduce deferred

tax assets to the amount expected to be realized.

The Company accounts for uncertain tax positions utilizing an established recognition

threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected

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 6,972,020

and 7,040,709 at December 31, 2021 and 2020, 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 2021.

In calculating diluted

earnings per share for the years ended December 31, 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 Special Loan as the Company has both

the intent and ability to make the scheduled amortization payments on the Special Loan.

income taxes are recognized in the financial statements for the tax consequences in future years of differences between the tax basis

of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates.

Temporary differences

arise from net operating losses, differences in basis of intangibles, stock-based compensation, reserves for uncollectible accounts receivable

and inventory, differences in depreciation methods, and accrued expenses.

Valuation allowances are established when necessary to reduce

deferred tax assets to the amount expected to be realized.

The Company accounts for uncertain tax positions utilizing an established

recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected

to be taken in a tax return.

We had no uncertain tax positions as of December 31, 2021 and December 31, 2020.

Goodwill and Definite-Lived Intangible

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

tested for impairment at least annually.

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

Assets and Goodwill ).

Goodwill and Definite-Lived Intangible Assets

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 tested for impairment at least annually.

The Company uses an annual measurement date of September

30 (see Note 7 Intangible Assets and Goodwill ).

Use of Estimates

The preparation of financial statements

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

and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues

and expenses during the reporting periods.

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

amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the

reported amounts of revenues and expenses during the reporting periods.

Our significant estimates include:

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.

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

Actual results could differ from those estimates.

Property and Equipment

Property and equipment are carried at cost,

less accumulated depreciation and amortization.

Depreciation is provided for in amounts sufficient to relate the cost of depreciable

assets to operations over the estimated service lives, principally using straight-line methods.

Leasehold improvements are amortized

over the shorter of the life of the improvement or the lease term, using the straight-line method.

Property and equipment consist of the following

at December 31, 2020 and 2019:

and equipment are carried at cost, less accumulated depreciation and amortization.

Depreciation is provided for in amounts sufficient

to relate the cost of depreciable assets to operations over the estimated service lives, principally using straight-line methods.

improvements are amortized over the shorter of the life of the improvement or the lease term, using the straight-line method.

and equipment consist of the following at December 31, 2021 and 2020:

Leasehold improvements

Purchased and developed software

Furniture and fixtures

3 unchanged sentences

Net property and equipment

The estimated useful lives used to compute

depreciation and amortization are as follows:

Useful life assigned

estimated useful lives used to compute depreciation and amortization are as follows:

life assigned

Furniture and fixtures

Purchased and developed software

Leasehold improvements

Shorter of 5 years or term of lease

Depreciation expense was $837 and $564 for

the years ended December 31, 2020 and 2019, respectively.

Depreciation expense was $ 109 and $ 124 for the

years ended December 31, 2021 and 2020, respectively.

Research and Development and Software Development Costs

Research and development expenses consist

primarily of development personnel and non-employee contractor costs related to the development of new products and services, enhancement

of existing products and services, quality assurance and testing.

The Company capitalizes its costs incurred for additional functionality

to its internal software.

Research and development expenses consist primarily

of development personnel and non-employee contractor costs related to the development of new products and services, enhancement of existing

products and services, quality assurance and testing.

The Company capitalizes its costs incurred for additional functionality to its internal

We capitalized approximately $ 1,140 and $ 603 for the years ended December 31, 2021 and 2020, respectively.

These software development costs include both enhancements and upgrades of our client-based systems including functionality of

our internal information systems to aid in our productivity, profitability and customer relationship management.

We are amortizing

these costs over 3 years once the new projects are completed and placed in service.

These costs are included in property and equipment,

net on the Consolidated Balance Sheets.

We account for leases in accordance with

These software development

costs include both enhancements and upgrades of our client-based systems including functionality of our internal information systems to

aid in our productivity, profitability and customer relationship management.

We are amortizing these costs over 3 years once the new projects

are completed and placed in service.

These costs are included in intangible assets, net on the Consolidated Balance Sheets.

account for leases in accordance with ASU No.

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.

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

lease right-of-use assets, current maturities of operating leases, and long-term obligations under operating leases on our Consolidated

Balance Sheets.

Finance leases are included in property and equipment, net, current maturities of financing leases, and long-term

obligations under financing leases on our Consolidated Balance Sheets.

RECENTLY ISSUED ACCOUNTING

PRONOUNCEMENTS

Recently adopted

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.

2018-13, 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 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

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.

leases are included in operating lease right-of-use assets, current maturities of operating leases, and long-term obligations under operating

leases on our Consolidated Balance Sheets.

Finance leases are included in property and equipment, net, current maturities of financing

leases, and long-term obligations under financing leases on our Consolidated Balance Sheets.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract

Liabilities from Contracts with Customers (ASU 2021-08), which clarifies that an acquirer of a business should recognize and

measure contract assets and contract liabilities in a business combination in accordance with Accounting Standards Codification (ASC)

Topic 606, Revenue from Contracts with Customers (Topic 606) .

This guidance will be effective for us in the first quarter

of 2023 on a prospective basis, with early adoption permitted.

We are currently evaluating the impact of the new guidance on our consolidated

financial statements.

In June 2016, the FASB issued ASU No.

2016-13, Financial

Instruments—Credit Losses .

The main objective is to provide financial statement users with more decision-useful information

about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at

each reporting date.

The amendments in this update replace the incurred loss methodology with a methodology that reflects expected

credit losses and requires consideration of a broader range of reasonable and supportable information to calculate credit loss

May 2021, the FASB issued ASU No.

2021-04, Modification of equity-classified written call options , which clarifies how an

issuer should account for modifications made to equity-classified written call options (e.g., warrants to purchase an issuer’s

common stock).

The guidance in the ASU requires the issuer to treat a modification of an equity-classified warrant that does not cause

the warrant to become liability-classified as an exchange of the original warrant for a new warrant.

This guidance applies whether the

modification is structured as an amendment to the terms and conditions of the warrant or as termination of the original warrant and issuance

of a new warrant.

This guidance will be effective for us in the first quarter of 2022.

We are currently evaluating the disclosure requirements

and potential impact on our consolidated financial statements, but anticipate there may be impacts as the Company has issued warrants

in prior debt financing activities, including in both our Equity Financing and Debt Financings.

August 2020, the FASB issued Accounting Standards Update 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.

guidance will be effective for us in the first quarter of 2024 on a full or modified retrospective basis, with early adoption

We are currently evaluating the disclosure requirements and potential impact on our consolidated financial statements.

June 2016, the FASB issued ASU No.

2016-13, Financial Instruments—Credit Losses .

The main objective is to provide financial

statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments

to extend credit held by a reporting entity at each reporting date.

The amendments in this update replace the incurred loss methodology

with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information

to calculate credit loss estimates.

For trade receivables and loans, entities will be required to estimate lifetime expected credit losses.

The amendments

are effective for public business entities that qualify as smaller reporting companies for fiscal years and interim periods beginning

after December 15, 2022.

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.

The amendments are effective for public business entities that qualify as smaller reporting companies for fiscal years and interim periods

beginning after December 15, 2022.

We are currently evaluating the disclosure and accounting requirements related to adopting this guidance,

given the transition from an incurred loss to an expected loss model.

REVENUE RECOGNITION

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

Company applies ASC 606 for revenue recognition.

The following table disaggregates the Company’s revenue by major source for the

years ended December 31, 2021 and 2020:

(in thousands)

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Total Hardware and Services

System hardware sales

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

The Company performs outsourced installation

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

services to be performed by the Company, the goods and services in the contract are not distinct, so the arrangement is accounted

for as a single performance obligation.

Our customers control the work-in-process and can make changes to the design specifications

over the contract term.

Revenues are recognized over time as the installation services are completed based on the relative portion

of labor hours completed as a percentage of the budgeted hours for the installation.

Installation services revenues are classified

as “Installation Services”

within our disaggregated revenue.

Software design and development services

Software and software license sales are

revenue when a fixed fee order has been received and delivery has occurred to the customer.

Revenue is recognized generally upon

customer acceptance (point-in-time) of the software product and verification that it meets the required specifications.

is delivered to customers electronically.

Software design and development revenues are classified as “Software Development

Services”

within our disaggregated revenue.

Software as a service

Software as a service includes revenue from

software licensing and delivery in which software is licensed on a subscription basis and is centrally hosted.

These services often

include software updates which provide customers with rights to unspecified software product upgrades and maintenance releases

and patches released during the term of the support period.

Contracts for these services are generally 12-36 months in length.

hardware sales

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.

Company performs outsourced installation services for customers and recognizes revenue upon completion of the installations.

services also includes engineering services performed as part of an installation project.

system hardware sales include installation services to be performed by the Company, the goods and services in the contract are not distinct,

so the arrangement is accounted for as a single performance obligation.

Our customers control the work-in-process and can make changes

to the design specifications over the contract term.

Revenues are recognized over time as the installation services are completed based

on the relative portion of labor hours completed as a percentage of the budgeted hours for the installation.

Installation services revenues

are classified as “Installation Services” within our disaggregated revenue.

design and development services

and software license sales are revenue when a fixed fee order has been received and delivery has occurred to the customer.

recognized generally upon customer acceptance (point-in-time) of the software product and verification that it meets the required specifications.

Software is delivered to customers electronically.

Software design and development revenues are classified as “Software Development

Services” within our disaggregated revenue.

as a service includes revenue from software licensing and delivery in which software is licensed on a subscription basis and is centrally

These services often include software updates which provide customers with rights to unspecified software product upgrades and

maintenance releases and patches released during the term of the support period.

Contracts for these services are generally 12-36 months

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

The Company sells support services which

include access to technical support personnel for software and hardware troubleshooting.

The Company offers a hosting service through

our network operations center, or NOC, allowing the ability to monitor and support its customers’

networks 7 days a week,

24 hours a day.

Software as a service revenue are classified as “Managed Services” within our disaggregated revenue.

and support services

Company sells support services which include access to technical support personnel for software and hardware troubleshooting.

offers a hosting service through our network operations center, or NOC, allowing the ability to monitor and support its customers’

networks 7 days a week, 24 hours a day.

These contracts are generally 12-36 months in length.

Revenue is recognized over the term of the agreement in proportion

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

the level of service provided to end customers, which can range from monitoring the health of a customer’s network to supporting

a sophisticated web-portal to managing the end-to-end hardware and software of a digital marketing system.

These agreements are

renewable by the customer.

Rates for maintenance and support, including subsequent renewal rates, are typically established based

upon a fee per location, per device, or a specified percentage of net software license fees as set forth in the arrangement.

Revenue is recognized over the term of

the agreement in proportion to the costs incurred in fulfilling performance obligations under the contract.

Maintenance and Support revenues

are classified as “Managed Services” within our disaggregated revenue.

and support fees are based on the level of service provided to end customers, which can range from monitoring the health of a customer’s

network to supporting a sophisticated web-portal to managing the end-to-end hardware and software of a digital marketing system.

agreements are renewable by the customer.

Rates for maintenance and support, including subsequent renewal rates, are typically established

based upon a fee per location, per device, or a specified percentage of net software license fees as set forth in the arrangement.

contracts are generally 12-36 months in length.

Revenue is recognized ratably and evenly over the service period.

The Company also performs time and materials-based

maintenance and repair work for customers.

Revenue is recognized at a point in time when the performance obligation has been fully

Company also performs time and materials-based maintenance and repair work for customers.

Revenue is recognized at a point in time when

the performance obligation has been fully satisfied.

FAIR VALUE MEASUREMENT

We measure certain financial assets, including

cash equivalents, at fair value on a recurring basis.

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

measure certain financial assets, including cash equivalents, at fair value on a recurring basis.

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.

As a basis for considering such assumptions, ASC 820-10-35 establishes a three-level hierarchy that prioritizes

the inputs used in measuring fair value.

The three hierarchy levels are defined as follows:

Level 1 —

Valuations based on unadjusted

quoted prices in active markets for identical assets.

Level 2 —

Valuations based on observable

inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date;

quoted prices in markets

that are not active;

1 — Valuations based on unadjusted quoted prices in active markets for identical assets.

2 — Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement

quoted prices in markets that are not active;

or other inputs that are observable, either directly or indirectly.

Level 3 —

Valuations based on inputs

that are unobservable and involve management judgment and the reporting entity’s own assumptions about market participants

The Company previously recorded warrant

liabilities that were measured at fair value on a recurring basis using a binomial option pricing model.

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 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 ,

the Special Loan is reported at fair value.

3 — Valuations based on inputs that are unobservable and involve management judgment and the reporting entity’s own assumptions

about market participants and pricing.

Company previously recorded warrant liabilities that were measured at fair value on a recurring basis using a binomial option pricing

All of the Company’s outstanding warrants classified as liabilities expired during 2019.

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.

discussed in Note 8 Loans Payable , the Special Loan is reported at fair value.

This liability is deemed to be a Level 3 valuation.

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.

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.

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

in recognition of a $ 166 gain during 2021 from the change in fair value of the liability and a corresponding decrease in the debt balance

recorded in the Condensed Consolidated Balance Sheet.

The Company recorded a $ 93 loss during 2020 related to the fair value of the Special

SUPPLEMENTAL CASH FLOW STATEMENT INFORMATION

Supplemental non-cash Investing and Financing activities

Conversion of disbursed escrow loan into common stock

Increase in debt related to financing fees

Decrease in debt discount via amended Credit Agreement

Supplemental disclosure information for cash flow

2 unchanged sentences

INTANGIBLE ASSETS AND GOODWILL

Intangible Assets

Intangible assets consisted

of the following at December 31, 2020 and December 31, 2019:

assets consisted of the following at December 31, 2021 and December 31, 2020:

Technology platform

Purchased and developed software

In-Process internally developed software platform

Customer relationships

4 unchanged sentences

amortization of intangible assets charged to operations was $ 1,251 and $ 1,330 , respectively.

Estimated amortization is as follows:

For the year ended December 31, 2021, the

Company wrote-off a $ 380 fully amortized trade name asset and a $ 1,370 fully amortized customer list asset and the related accumulated

amortization for each related to ConeXus World Global, LLC, an entity dissolved by the Company during 2021.

There was no impact on the

Company’s Condensed Consolidated Balance Sheet or Condensed Consolidated Statement of Operations during the period.

amortization is as follows:

Year ending December 31,

Estimated Future Amortization

Intangible assets include the following

and are being amortized over their estimated useful lives as follows:

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

Acquired Intangible Asset:

Technology platform and patents

Purchased and developed software

Customer relationships

The following is a rollforward of the Company’s

goodwill since December 31, 2019:

Balance as of January 1, 2020

Goodwill impairment

Balance as of December 31, 2020

Goodwill represents the excess of the purchase

price over the fair value of net assets acquired.

Goodwill is subject to an impairment review at a reporting unit level, on an

annual basis as of the end of September of each fiscal year, or when an event occurs, or circumstances change that would indicate

potential impairment.

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.

represents the excess of the purchase price over the fair value of net assets acquired.

Goodwill is subject to an impairment review at

a reporting unit level, on an annual basis as of the end of September of each fiscal year, or when an event occurs, or circumstances

change that would indicate potential impairment.

The Company has only one reporting unit, and therefore the entire goodwill is allocated

to that reporting unit.

The Company assessed the carrying value of goodwill

at the reporting unit level based on an estimate of the fair value of the respective reporting unit.

Fair value of the reporting unit

was estimated using a discounted cash flow analyses consisting of various assumptions, including expectations of future cash flows based

on projections or forecasts derived from analysis of business prospects and economic or market trends that may occur, specifically, the

Company gave significant consideration to actual historic financial results, including revenue growth rates in the preceding three years.

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 was not considered to be impaired at September 30, 2021.

Company recognizes that any changes in our projected 2022 and future 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

further indicators of possible impairment.

The valuation of goodwill and intangible assets is subject to a high degree of judgment, uncertainty

and complexity.

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.

Impairment Assessment – March 31, 2020

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

2 unchanged sentences

the duration and extent of impact to our business and our alliance partners from the COVID-19 pandemic, (2) current discount rates, (3)

(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.

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.

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.

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.

a discount rate of 14.5 % in our valuation completed as of March 31, 2020.

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.

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

of goodwill at the reporting unit level based on an estimate of the fair value of the respective reporting unit.

Fair value of

the reporting unit was estimated using a discounted cash flow analyses consisting of various assumptions, including expectations

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

that may occur, specifically, the Company gave significant consideration to actual historic financial results, including revenue

growth rates in the preceding three years.

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

Therefore, 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.

Impairment Assessment – September 30, 2020

Company assessed the carrying value of goodwill at the reporting unit level based on an estimate of the fair value of the respective

reporting unit.

Fair value of the reporting unit was estimated using a discounted cash flow analyses consisting of various assumptions,

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

or market trends that may occur, specifically, the Company gave significant consideration to actual historic financial results, including

revenue growth rates in the preceding three years.

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.

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 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.

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

The outstanding debt with detachable warrants,

as applicable, are shown in the table below.

outstanding debt with detachable warrants, as applicable, are shown in the table below.

Further discussion of the notes follows.

3 unchanged sentences

10.0% interest

3.5% interest

10.0% interest

4/27/2022 (3)

Total debt, gross

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Long term debt

As of December 31, 2019

Interest Rate Information

of December 31, 2020

Rate Information

0.0% interest

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10.0% interest

1.0% interest

Total debt, gross

Fair value (E)

Total debt, gross

Debt discount

Total debt, net

Less current maturities

Long term debt

Secured Disbursed Escrow Promissory Note with related

– Secured Disbursed Escrow Promissory Note with related party

– Secured Revolving Promissory Note with related party

– Term Loan with related party

Amended and Restated Seller Note from acquisition

Secured Convertible Special Loan Promissory Note,

at fair value

Paycheck Protection Program Loan from Small Business

Administration

– Amended and Restated Seller Note from acquisition of Allure

– Secured Convertible Special Loan Promissory Note, at fair value

– Paycheck Protection Program Loan from Small Business Administration

(1) 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.

7 unchanged sentences

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