What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-05-16 compared with 2021-11-15 · 321 added, 494 removed, 32 unchanged (96% of the section changed)

Management’s Discussion and Analysis of Financial

Condition and Results of Operations Forward-Looking Statements

The following discussion contains various forward-looking

statements within the meaning of Section 21E of the Exchange Act of 1934, as amended.

Although we believe that, in making any such statements,

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

and results to be materially different from those projected.

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

“believes,” “expects,” “intends,” “plans,” “estimates,” “projects,”

should,” “may,” “propose,” and similar expressions (or the negative versions of such words or expressions),

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

For example, forward-looking statements include any

statements regarding the strategies, prospects, plans, expectations or objectives of management of Creative Realities or Reflect for

future operations of the combined company, the risk that the conditions to the closing of the proposed Merger are not satisfied, including

the failure to timely or at all obtain approval of the Creative Realities Proposals and Reflect Proposal;

uncertainties as to the timing

of the consummation of the proposed Merger and the ability of each of Creative Realities and Reflect to consummate the proposed Merger;

risks related to Creative Realities’ ability to correctly estimate its operating expenses and expenses associated with the proposed

Merger, including any debt expenses related to any debt financing obtained in advanced of the closing of the proposed Merger;

Realities’ ability to obtaining any financing necessary to pay the $18,666,667 cash portion of the Merger consideration and fund

the $1,333,333 cash portion of the Reflect Retention Plan at the closing of the Merger, including the terms of any debt or equity financing;

risks related to the changes in market price of the Creative Realities shares of common stock;

competitive responses to the proposed

unexpected costs, charges or expenses resulting from the proposed Merger;

the effect of the COVID-19 pandemic and the steps taken

by governments and customers of Creative Realities and Reflect to address the pandemic, including business closures;

potential adverse

reactions or changes to business relationships resulting from the announcement or completion of the proposed Merger;

and legislative,

regulatory, political and economic developments.

The foregoing review of important factors that could cause actual events to differ from

expectations should not be construed as exhaustive and should be read in conjunction with statements that are included herein and elsewhere.

These forward-looking statements are subject to numerous

risks and uncertainties that could cause actual results to differ materially from those anticipated, and many of which are beyond our

Factors that could cause actual results to differ materially from those anticipated are set forth under the caption “Risk

Factors” in the Company’s Form 10-K for the year ended December 31, 2020, Form 10-Q for the quarter ended March 31, 2021,

and preliminary joint proxy statement/prospectus included in the Form S-4 registration statement, as filed with the Securities and Exchange

Commission on March 10, 2021 May 17, 2021, and November 12, 2021 respectively.

Our actual results, performance or achievements

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

Accordingly, we cannot be certain that any

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

you to keep in mind the cautions and risks described in this document and to refrain from attributing undue certainty to any forward-looking

statements, which speak only as of the date of this report.

Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements

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

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

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

When used in the following discussion,

the words “anticipates,” “believes,” “expects,” “intends,” “plans,” “estimates,”

“projects,” should,” “may,” “propose,” and similar expressions (or the negative versions of

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

These forward-looking

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

and many of which are beyond our control.

Factors that could cause actual results to differ materially from those anticipated are set

forth under the caption “Risk Factors” in the Company’s Form 10-K for the year ended December 31, 2021 as

filed with the Securities and Exchange Commission on March 22, 2022.

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

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

what impact they will have on us.

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

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

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

Creative Realities, Inc.

is a Minnesota corporation

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

throughout the United States and in certain international markets.

We have expertise in a broad range of existing and emerging digital

marketing technologies across a variety of strategic vertical markets, as well as the related media management and distribution software

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

and integrated solutions.

Our technology and solutions include:

digital merchandising systems and omni-channel customer engagement systems;

content creation, production and scheduling programs and systems;

a comprehensive series of recurring maintenance, support, and field

service offerings;

interactive digital shopping assistants, advisors and kiosks;

and, other interactive marketing technologies such as

mobile, social media, point-of-sale transactions, beaconing and web-based media that enable our customers to transform how they engage

with consumers.

Our main operations are conducted directly through

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

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.

We primarily generate revenue in our business by:

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

designing our customers’ digital marketing experiences, content and interfaces;

engineering the systems architecture delivering the digital marketing experiences we design – both software and hardware – and integrating those systems into a customized, reliable and effective digital marketing experience;

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

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

maintaining our customers’ digital marketing technology solutions by:

providing content production and related services;

creating additional software-based features and functionality;

hosting the solutions;

monitoring solution service levels;

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

These activities generate revenue through:

bundled-solution sales;

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

implementation, and field services;

software license fees;

and maintenance and support services related to our software, managed systems

and solutions.

Recent Developments

Entry into Merger Agreement

On November 12, 2021, Creative Realities and Reflect

Systems, Inc., or “Reflect,” entered into an Agreement and Plan of Merger, or the “Merger Agreement,” pursuant

to which a direct, wholly owned subsidiary of Creative Realities, CRI Acquisition Corporation, or “Merger Sub,” will 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.”

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.

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 the effective time of the Merger collectively will receive from Creative Realities,

in the aggregate the following Merger consideration:

(i) $18,666,667 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”), and (iii) 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 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.

Under the terms of the Merger Agreement, Creative

Realities will adopt a retention bonus plan for key Reflect employees that will continue their services after the effective time of the

Merger in substantially the form attached as Exhibit C to the Merger Agreement (the “Retention Bonus Plan”), pursuant to

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

50% at the closing of the Merger, and subject to continuous employment with Reflect, 25% on the one-year anniversary of the closing of

the Merger and 25% on the two-year anniversary of the closing of the Merger.

The future cash payments due on the one-year and two-year

anniversaries of the closing of the Merger will be deposited into a “rabbi” trust at the closing of the Merger.

Retention Plan also will require Creative Realities to issue Creative Realities Shares having an aggregate value of $666,667 to the plan

participants as follows:

50% of the value of such shares will be issued at the closing of the Merger at the issuance price of $2.00 per

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

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

The shares to be issued on the one and two year anniversaries of the Merger will be determined based on dividing the value

of shares issuable on such date by the trailing 10-day volume weighed average price (VWAP) of the shares as of the such vesting date

as reported on the Nasdaq Capital Market.

The Merger Agreement contains customary closing

Among these conditions, the Merger Agreement requires that the stockholders of Reflect approve the Merger and other related

proposals (the “Reflect Proposals”), and that the shareholders of Creative Realities approve the issuance of the CREX Shares

Consideration, and the terms of the Retention Bonus Plan and other related proposals (the “Creative Realities Proposals”).

The parties intend to seek stockholder approvals of the Creative Realities Proposals and Reflect Proposal via a joint proxy statement/prospectus

on Form S-4 (the “Proxy Statement”) with the Securities Exchange Commission (the “SEC”), which will include audited

annual and unaudited interim historical financial information for the operations comprising the business of Reflect, together with pro

forma financial information, and such other information as required by applicable SEC rules.

The Merger Agreement contains customary representations,

warranties, covenants, escrow and indemnification provisions.

At closing of the Merger, $2.5 million of the cash Merger consideration

will be deposited into a one-year escrow account as the sole remedy to secure the indemnification obligations of Reflect stockholders;

provided that claims related to breaches of certain representations, warranties and covenants will not be limited by the escrow account

and will be limited by the Merger consideration paid to such stockholders.

Losses must exceed $200,000 before Reflect stockholders would

be liable for any indemnification obligations, in which event Reflect stockholders would be responsible for the amount of all losses above

Creative Realities may offset from the Guaranteed Consideration the amount of losses that Creative Realities is finally determined

to be entitled under the indemnification provisions of the Merger Agreement.

An additional $250,000 of the cash Merger consideration

will be deposited into an escrow account to secure any required payments by the Reflect stockholders as part of the post-closing purchase

price adjustments for closing date net working capital set forth in the Merger Agreement.

The Merger Agreement contains certain termination rights

for both Creative Realities and Reflect, including rights to terminate the Merger Agreement in the event of a breach by the other party

(which right includes the right to recover out-of-pocket costs incurred by the non-breaching party) and limited rights permitting Creative

Realities to terminate the Merger Agreement upon the failure to obtain sufficient financing to fund the cash portion of the Merger consideration,

and certain adverse developments in the Reflect’s business.

We expect the merger to close in the first quarter

For a discussion of the factors that may cause Creative

Realities’, Reflect’s and the combined company’s actual results, performance or achievements to differ materially from

any future results, performance or achievements expressed or implied in such forward-looking statements, and for a discussion of risk

associated with the ability of Creative Realities and Reflect to complete the Merger and the effect of the Merger on the business of Creative

Realities, Reflect and the combined company, see “Risk Factors” set forth in the preliminary Proxy Statement filed with the

SEC on November 12, 2021.

Readers are also urged to carefully review and consider the various disclosures we make in amendments to the

Proxy Statement filed with the SEC and that we will mail to our shareholders.

In addition, additional factors that could cause actual

results to differ materially from those expressed in the forward-looking statements are discussed in reports filed with the SEC by Creative

There can be no assurance that the proposed Merger will be completed, or if it is completed, that it will be consummated within

the anticipated time period or that the expected benefits of the proposed Merger will be realized.

COVID-19 Pandemic

In January 2020, an outbreak of a new strain of coronavirus,

COVID-19, was identified in Wuhan, China.

Through the first quarter of 2020, the disease became widespread around the world, and on March

11, 2020, the World Health Organization declared a pandemic.

Thereafter, state and local authorities in the United States and worldwide

have forced many businesses to temporarily reduce or cease operations to slow the spread of the COVID-19 pandemic.

As a result of the COVID-19 pandemic, we experienced

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

The elective and forced closures of, and implementation

of social distancing policies on, businesses across the United States resulted in materially reduced demand and customer budgets for our

services throughout 2020 and into 2021, as our customers purchase our products and services to engage with their end customers in a physical

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

Those conditions resulted

in downward revisions of our internal forecasts on current and future projected earnings and cash flows, resulting in a non-cash impairment

loss of $10,646 recorded during the first quarter of 2020 and reduced liquidity as described below.

While we have experienced an intense curtail in demand,

our long-term outlook for the digital signage industry remains strong and we believe that the COIVD-19 pandemic has accelerated the long-term

adoption of digital solutions.

Semiconductor Chip Shortage

The Company’s suppliers of digital displays,

the primary hardware component in the Company’s digital systems, have informed the Company that, due to semiconductor chip shortages

in the industry, such suppliers expect delays and potentially increased costs for the Company to obtain digital displays necessary to

fulfill and install the Company’s digital solutions.

Historically, such digital displays have been readily available for purchase

and delivery, to be purchased by the Company from distributors from such distributor’s existing inventory.

Such delays will likely

result in a longer sales cycles and prolonged periods in which the Company will be able to recognize revenues compared to historical time

The increased costs for such displays may also reduce the margins in which the Company has received on account of the purchase

and installation of such displays as part the Company’s digital signage product offerings.

Although we believe that such shortage

will be alleviated during the first half of 2022, the Company is unable to confirm how long such delays may exist, the effect such delays

and increased demand may have on the cost to procure such digital screens, or the adverse impacts on our financial results.

Our Sources of Revenue

We primarily generate revenue through digital marketing

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

deployment, and maintenance and support services.

We currently market and sell our technology and

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

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

Our expenses are primarily comprised of three categories:

(“Creative Realities,” “we,”

“us,” or the “Company”) transforms environments through digital solutions by providing innovative digital signage

solutions for key market segments and use cases, including:

● Entertainment

and Sports Venues

● Restaurants,

including quick-serve restaurants (“QSR”)

● Convenience

and Healthcare Facilities

Use Developments

Communications, Employee Experience

out of Home (DOOH) Advertising Networks

serve market-leading companies, so there is a good chance that if you leave your home today to shop, work, eat or play, you will encounter

one or more of our digital signage experiences.

Our solutions are increasingly visible because we help our enterprise customers achieve

a range of business objectives including:

brand awareness

customer support

employee productivity and satisfaction

revenue and profitability

guest experience

customer/guest engagement

patient outcomes

a combination of organically grown platforms and a series of strategic acquisitions, including our recent acquisition of Reflect Systems,

in February 2022, the Company assist clients to design, deploy, manage, and monetize their digital signage networks.

sources leads and opportunities for its solutions through its digital and content marketing initiatives, close relationships with key

industry partners, specifically equipment manufacturers, and the direct efforts of its in-house industry sales experts.

Client engagements

focus on consultative conversations that ensure the Company’s solutions are positioned to help clients achieve their business objectives

in the most cost-effective manner possible.

comparing Creative Realities to other digital signage providers, our customers value the following competitive advantages:

Breadth of solutions

– Creative Realities is one of only a few companies in the industry capable of providing the full portfolio of products

and services required to implement and run an effective digital signage network.

We leverage a ‘single vendor’ approach,

providing clients with a one-stop-shop for sourcing digital signage solutions from design through day two services.

Managed labor pool

– Unlike most companies in our industry, we have a curated labor pool including thousands of qualified and vetted field technicians

available to service clients quickly nationwide.

We can meet tight schedules even in exceptionally large deployments and still ensure

quality and consistency.

In-house creative resources

– We assist clients in repurposing existing content for digital signage experiences or creating new content, an activity

for which the Company has won several design awards in recent years.

In each instance, our services can be essential in helping clients

develop an effective content program.

Network scalability

and reliability – Our software as a service (“SaaS”) content management platforms power some of the largest

and most complex digital signage networks in North America evidencing our ability to manage enterprise scale projects.

provides us purchasing power to source products and services for our customers, enabling us to deliver cost effective, reliable and

powerful solutions to small and medium size business clients.

Ad management platform

– Our customers are increasingly interested in monetizing their digital signage networks through advertising content.

efficiently scheduling advertising content into digital signage playlists to meet campaign objectives can be a challenging and labor-intensive

AdLogic, our home-grown, content management-agnostic platform, automates this process, allowing network owners to capture

more revenue with less expense.

Media sales –

Few, if any other digital signage solution providers, can offer their clients media sales as a service.

We have in-house media sales

expertise to elevate conversations with clients interested in better understanding network monetization.

We believe this meaningful

differentiation in the sales process provides an additional revenue stream to Creative Realities compared to our competitors.

Market sector expertise

– Creative Realities has in-house experts in key market segments such as automotive, retail, quick-serve restaurants (QSR),

convenience stores, and Digital Out of Home (DOOH) advertising.

Our expertise in these business segments enables our teams to provide

meaningful business conversations and offer tailored solutions with prospects and customers to their unique business objectives.

These experts build industry relationships and create thought leadership that drives lead flow and new opportunities for our business.

Implementing a large digital signage project can be a logistics nightmare that can stall an initiative even before deployment.

expertise in logistics improves deployment efficiency, reduces delays and problems, and saves customers time and money.

Technical support

– Digital signage networks present unique challenges for corporate IT departments.

Creative Realities helps simplify and improve

end user support by leveraging our own Network Operations Center (“NOC”) in Louisville, Kentucky.

The NOC resolves many

issues remotely and when field support is required, it can be dispatched from the NOC, leveraging our managed labor pool to resolve

customer issues quickly and effectively.

Integrations and Application

Development – The future of digital signage is not still images and videos on a screen.

Interactive applications and integrations

with other data sources will dominate the future.

From social media feeds to corporate data stores to Point of Sale (“POS”)

systems, our proven ability to build scalable applications and integrations is a key advantage clients can leverage to deliver more

compelling and engaging experiences for their customers.

Hardware support

– A number of digital signage providers sell a proprietary media player or align themselves with just one operating system.

We utilize a range of media players including Windows, Android and BrightSign to provide clients the flexibility they need to select

the appropriate hardware for any application knowing the entire network can still be served by a single digital signage platform,

reducing complexity and improving the productivity of their teams.

three primary sources of revenue for the Company are:

sales from reselling digital signage hardware from original equipment manufacturers such

as Samsung and BrightSign.

revenue from helping customers design, deploy and manage their digital signage network, including:

system design/engineering

Hardware installation

Content development

Content scheduling

Post-deployment network

and field support

Media sales, as a result

of our acquisition of Reflect

subscription licensing and support revenue from our digital signage software platforms, which

are generally sold via a SaaS model.

These include:

○ ReflectView ,

the Company’s core digital signage platform for most applications, scalable and cost

effective from 10 to 100,000+ devices

Reflect Xperience ,

a web-based interface that allows customers to give content scheduling access to local users via the web or mobile devices, while

still maintaining centralized programming control

Reflect AdLogic ,

the Company’s ad management platform for digital signage networks, which presently delivers approximately 50 million ads daily

Reflect Clarity ,

the Company’s menu board solution, which has become a market leader for a range of restaurant and convenience store applications

Reflect Zero Touch ,

which allows customers to turn any screen into an interactive experience by allowing guests to engage using their mobile device

iShowroomProX ,

an omni-channel digital sales support platform targeted at original equipment manufacturers in the

transportation sector, which integrates with dozens of key data services including dealer inventory

OSx+ , a digital

VIN-level checklist used to assist in the tracking and delivery of new vehicles in the transportation sector, providing measurable

lift in customer satisfaction scores and connected vehicle enrollments and subscription activations.

hardware sales and support services revenues can fluctuate more significantly year over year based on new, large-scale network deployments,

the Company expects to see continuous growth in recurring SaaS revenue for the foreseeable future as digital signage adoption/utilization

continues to expand across the vertical markets we serve.

Please see Note 1 Nature of Organization and

Operations to the Company’s Condensed Consolidated Financial Statements contained in this report for a description of recent

developments of the Company that occurred during the three months ended March 31, 2022.

Sources of Revenue

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

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

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

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

expenses are primarily comprised of three categories:

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

Sales and marketing expenses include salaries and benefits

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

This category also includes

amounts spent on marketing networking events, promotional materials, hardware and software to prospective new customers, including those

expenses incurred in trade shows and product demonstrations, and other related expenses.

Our research and development expenses represent

the salaries and benefits of those individuals who develop and maintain our proprietary software platforms and other software applications

we design and sell to our customers.

Our general and administrative expenses consist of corporate overhead, including administrative salaries,

real property lease payments, salaries and benefits for our corporate officers and other expenses such as legal and accounting fees.

Critical Accounting Policies and Estimates

The Company’s significant accounting policies

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

included elsewhere in this filing.

The Company’s Condensed Consolidated Financial Statements are prepared in conformity with accounting

principles generally accepted in the United States.

Certain accounting policies involve significant judgments, assumptions, and estimates

by management that could have a material impact on the carrying value of certain assets and liabilities and disclosure of contingent assets

and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during

the reporting period.

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

and commissions paid on sales.

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

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

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

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

Our general and administrative expenses

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

officers and other expenses such as legal and accounting fees.

Accounting Policies and Estimates

Company’s significant accounting policies are described in Note 2 Summary of Significant Accounting Policies of the Company’s

Condensed Consolidated Financial Statements included elsewhere in this report.

The Company’s Condensed Consolidated Financial Statements

are prepared in conformity with accounting principles generally accepted in the United States.

Certain accounting policies involve significant

judgments, assumptions, and estimates by management that could have a material impact on the carrying value of certain assets and liabilities

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

of revenue and expenses during the reporting period.

Our actual results could differ from those estimates.

Results of Operations

All dollar amounts reported in Results

of Operations are in thousands, except per-share information.

Three Months Ended September 30, 2021 Compared to Three Months Ended

September 30, 2020

The tables presented below compare our results

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

For the three months

ended September 30,

Cost of sales

Sales and marketing expenses

Research and development expenses

General and administrative expenses

Depreciation and amortization expense

Total operating expenses

Operating (loss)

Other income/(expenses):

Interest expense

Gain on settlement of debt

Other income/(expense)

Total other income/(expense)

Net income/(loss) before income taxes

Provision from income taxes

Net income/(loss)

Sales decreased by $354, or 7%, during the three

months ended September 30, 2021 as compared to the same period in 2020 primarily driven by a reduction of $635 in hardware sales resulting

from limited supply chain availability of semiconductor chips delaying the delivery of digital displays and media players to the Company,

combined with a reduction in Safe Space Solutions hardware in 2021 following wide distribution of the COVID-19 vaccine.

These reductions

were partially offset by an increase in installation activity related to a continued customer rollout of previously purchased hardware.

The supply disruption for digital displays prevented the Company from delivery of hardware and execution of installation activities during

As of September 30, 2021, the Company had customer purchase orders for equipment and installation activities in excess of

$1,200 which were delayed as a result of product availability.

The Company expects to experience continued disruptions and delays related

to fulfillment of inventory purchases from vendors throughout the remainder of 2021, which may impact our results for the remainder of

We expect a full recovery in the timely availability of equipment during the first half of 2022.

During the three months ended September

30, 2021 and 2020, of our Safe Space Solutions products and services (inclusive of the portion of revenue recognized during the three

months ended September 30, 2021 related to annual contracts sold in prior periods), were $182 and $2,067, respectively.

Gross profit decreased $97, or 4% during the three

months ended September 30, 2021 as compared to the same period in 2020 driven by the decrease in sales but offset by an increase in gross

profit margin.

Gross profit margin increased to 49.4% in 2021 from 47.9% during the same period in 2020 as a result of an increase in

managed services as a percentage of total revenue during the period and headcount reductions in personnel servicing customers as a result

of cost reductions executed throughout 2020.

Sales and Marketing Expenses

Sales and marketing expenses generally include

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

and marketing costs.

Sales and marketing expenses decreased by $81, or 20%, in 2021 compared to 2020.

The decrease was driven by $50 of

Employee Retention Credits related to the retention and payment of salaries to sales personnel during the period.

The remaining reduction

was the result of reduced commissions and bonuses.

Research and Development Expenses

Research and development expenses generally include

personnel and development tools costs associated with the continued development of the Company’s content management systems and

other related application development.

Research and development decreased by $3, or 1%, in 2021 compared to 2020.

The decrease was driven

by $49 of Employee Retention Credits related to the retention and payment of salaries to sales personnel throughout 2020 and the three

months ended September 30, 2021, partially offset by increased headcount as we began re-investment into our content management platforms.

General and Administrative Expenses

Total general and administrative expenses were

flat for the three months ended September 30, 2021 as compared to the same period in 2020.

There was a decrease of $186 from Employee

Retention Credits related to the retention and payment of salaries to sales personnel during the period, offset by $95 in expenses related

to one-time deal and transaction expenses and an increase of $83 in non-cash stock compensation expenses from employee stock option awards

with time and performance-based vesting.

Depreciation and Amortization Expenses

Depreciation and amortization expenses decreased

by $30, or 8%, in 2021 compared to 2020.

This decrease was the result of a trade name asset becoming fully amortized during 2020, while

no amortization was recorded during the three months ended September 30, 2021.

Interest Expense

See Note 8 Loans Payable to the Condensed

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

Gain on Settlement of Debt

During the three months ended September 30, 2021

the statute of limitations passed related to the remaining liability on a lease abandoned by the Company in 2015, resulting in a gain

Nine Months Ended September 30, 2021 Compared to Nine Months Ended

September 30, 2020

The tables presented below compare our results

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

For the Nine Months

Ended September 30,

of Operations

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

Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

The tables presented below compare our results of operations and present

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

Reflect via the Merger during the three months ended March 31, 2022, on February 17, 2022.

As a result, our consolidated financial results

for such period include the operations of Reflect for 44 days, between February 17, 2022 and March 31, 2022.

Three months ended

Cost of sales

2 unchanged sentences

General and administrative expenses

Bad debt (recovery) / expense

Bad debt expense/(recovery)

Depreciation and amortization expense

Goodwill impairment

Deal and Transaction expenses

Total operating expenses

Operating (loss)

Operating income/(loss)

Other income/(expenses):

Interest expense

Change in fair value of Convertible Loan

Change in fair value of Special Loan

Gain on settlement of debt

Loss on disposal of assets

Change in Fair Value of Warrant Liability

Other income/(expense)

3 unchanged sentences

Net income/(loss)

Sales increased by $567, or 5%, in the nine months

ended September 30, 2021 as compared to the same period in 2020 driven by an increase of $509 in hardware sales as compared to the same

period in 2020, despite a decrease of $1,385 in the sale of our Safe Space Solutions products, which launched in April 2020.

signage sales expanded by $976 in the period despite constraints from further growth due to limited supply chain availability of semiconductor

chips delaying the delivery of digital displays and media players to the Company.

The supply disruption for digital displays prevented

the Company from delivery of hardware and execution of installation activities during the quarter.

As of September 30, 2021, the Company

had customer purchase orders for equipment and installation activities in excess of $1,200 which were delayed as a result of product availability.

The Company expects to experience continued disruptions and delays related to fulfillment of inventory purchases from vendors throughout

the remainder of 2021, which may impact our results for the remainder of 2021.

We expect a full recovery in the timely availability of

equipment during the first half of 2022.

Gross profit increased $588, or 10%, during the

nine months ended September 30, 2021 as compared to the same period in 2020, driven by both an increase in sales, which contributed $322

of incremental gross profit on a constant gross profit margin basis, and an increase in gross profit margin, which contributed $266 of

incremental gross profit.

Gross profit margin increased to 49.5% from 47.1% driven primarily by increased hardware margins driven by increased

purchasing power with distributors as our purchases of digital displays have increased.

Sales and Marketing Expenses

Sales and marketing expenses generally include

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

and marketing costs.

Sales and marketing expenses decreased by $375, or 31%, in 2021 compared to 2020.

The decrease was driven by $232

of Employee Retention Credits related to the retention and payment of salaries to sales personnel throughout 2020 and the nine months

ended September 30, 2021.

The remaining reduction was the result of reduced personnel costs, partially offset by an increase of $78 on

trade show activity and related travel costs following a return to participation in industry trade shows and events after the elimination

of such costs in 2020 as a result of the COVID-19 pandemic.

Revenues were $10,757, representing an increase of $5,753, or 115%,

as compared to the same period in 2021 despite a reduction in revenues generated from the sale of our Safe Space Solutions products and

services of $894.

Revenues generated from our core digital signage products and services increased $6,647, or 133% in 2022 as compared

to 2021, despite continued supply chain disruptions related to semiconductor chips delaying the delivery of digital displays and media

players to the Company.

The Company acquired Reflect

on February 17, 2022, and the Company’s consolidated results for the three months ended March 31, 2022 include 44 days of Reflect’s

Hardware revenues were $6,459

in 2022, an increase of $3,643, or 129%, as compared to the prior year, driven primarily delivering Phase I of our previously announced

a large customer transaction expected to exceed $10,000 in revenues.

The Company began providing services and deliverables on the customer

transaction in February 2022 and is anticipated to complete the project by the end of the first quarter of 2023, subject to the customer’s

capacity to receive such products and services.

Excluding Safe Space Solutions hardware, which reduced $768 year-over-year, core digital

signage hardware sales increased $4,411 million, or 158%.

Services and other revenues were $4,298 in the three months ended March

31,2022, an increase of $2,110, or 96%, with the inclusion of 44 days of Reflect’s operations in the Company’s consolidated

results for such period.

Managed services revenue, which includes both software-as-a-service (“SaaS”) and help desk technical

subscription services, were $2,703 in the three months ended March 31, 2022 as compared to $1,339 in the same period in 2021, with the

inclusion of 44 days of Reflect’s operations in the Company’s consolidated results for such period.

Gross profit increased by

$1,658, or 74% driven by an increase in revenue but offset by a reduction in gross profit margin.

Gross profit margin decreased to 36.2%

from 44.6% driven by a shift in revenue mix to 60% hardware in the first quarter of 2022 related to a material customer rollout underway.

We expect this contraction in gross profit margin to be less severe as we move into the second quarter of 2022 and beyond, with significant

pressure in the current quarter driving by a single, large-scale/hardware-heavy deployment.

Sales and Marketing

Sales and marketing expenses increased by $372, or 111%, driven by

the acquisition of Reflect during the three months ended March 31, 2022period.

Immediately following the acquisition of Reflect, the Company

integrated the sales and marketing functions and does not disaggregate these expenses between the two legacy companies.

Following the

Merger and through integration activities, the Company has adopted certain tools, technology, and processes – particularly with

respect to lead generation and brand marketing – that were minimally invested in historically by the Company.

Additionally, the

Company engaged an Investor Relations firm and has increased investor relations activities, including conferences and presentations.

a result, we expect the sales and marketing expenses of the Company to continue at the current pace for future periods.

Research and Development

Research and development expenses

Research and development expenses generally include

personnel and development tools costs associated with the continued development of the Company’s content management systems and

other related application development.

Research and development decreased by $332, or 44%, in 2021 compared to 2020.

The decrease was

driven by $196 of Employee Retention Credits related to the retention and payment of salaries to sales personnel throughout 2020 and the

nine months ended September 30, 2021.

The remaining reduction was the result of reduced personnel costs following the reduction of personnel

and salary reductions implemented throughout 2020.

General and Administrative Expenses

Total general and administrative expenses decreased

by $717, or 11%, in 2021 compared to 2020.

The decrease was driven by $694 of Employee Retention Credits related to the retention and

payment of salaries to sales personnel throughout 2020 and the nine months ended September 30, 2021.

Excluding the consideration of those

Employee Retention Credits recorded in the period, total general and administrative expenses decreased $23, or 0%, during the nine months

ended September 30, 2021 as compared to the same period in 2020.

The comparable year-over-year expenses included reductions of (a) $157

in non-ERC-related personnel costs, including salaries, benefits, and travel-related expenses, (b) $280 in rent expense following closure,

downsizing, or restructuring of four leases during 2020, and (c) reductions in legal expenses of $255 following settlement of the Amended

and Restated Seller Note, partially offset by an increase in stock compensation amortization expense of $849 related to incremental employee

and directors’ awards granted during 2020 which are being amortized over a nineteen (19) month remaining vesting period based on

the grant date fair value calculated using the Black Scholes method.

Personnel costs were reduced following completion of a reduction-in-force

and salary reductions for remaining personnel in March 2020.

Expenses related to the Company’s allowance

for bad debts decreased by $1,293, or 156%, for the nine months ended September 30, 2021 compared to 2020.

This decrease was primarily

driven by a cash recovery of $555 related to a customer bankruptcy for which the Company previously recorded a reserve during the three

months ended June 30, 2020.

Goodwill impairment

See Note 7 Intangible Assets, Including Goodwill

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

impairment charge recorded.

Depreciation and Amortization Expenses

Depreciation and amortization expenses decreased

by $88, or 8%, in 2021 compared to 2020.

This decrease was the result of a trade name asset becoming fully amortized during 2020, while

no amortization was recorded during the nine months ended September 30, 2021.

Interest Expense;

Change in fair value of Convertible Loan

See Note 8 Loans Payable to the Condensed

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

We updated our fair value analysis of the Convertible

Loan quarterly, resulting in recognition of a $166 gain and a $702 loss during the nine months ended September 30, 2021 and 2020, respectively.

See Note 8 Loans Payable to the Condensed Consolidated Financial Statements for a discussion of the Company’s Convertible

Gain on Settlement of Debt

On January 11, 2021, the

Company 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 Aid, 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,

resulting in a gain of $1,552 during the three months ended March 31, 2021.

On May 13, 2021, the Company and Seller entered

into a settlement agreement wherein neither party admitted liability, and the Company agreed to pay, and Seller agreed to accept, $100

as settlement in full for the outstanding balance of principal and accrued interest under the Amended and Restated Seller Note and a mutual

release of all claims related to the Amended and Restated Seller Note and sale transaction under the Allure Purchase Agreement and all

related agreements.

As a result of this settlement, the full principal

amount of the Amended and Restated Seller Note and the accrued interest have been eliminated, resulting in a gain in the Condensed Consolidated

Financial statements of $1,624, representing $1,538 related to the Amended and Restated Seller Note and $86 of related interest thereon,

during the three months ended June 30, 2021.

During the three months ended September 30, 2021

the statute of limitations passed related to the remaining liability on a lease abandoned by the Company in 2015, resulting in a gain

Summary Unaudited Quarterly Financial Information

The following represents unaudited financial information

derived from the Company’s quarterly financial statements:

Quarters Ended

Quarters ended

September 30,

Cost of sales

Operating expenses, excluding depreciation and amortization

Depreciation/amortization

Operating income (loss)

Other expenses/(income)

Income tax expense/(benefit)

Net income (loss)

Supplemental Operating Results on a Non-GAAP Basis

The following non-GAAP data, which adjusts for

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

Our management believes that this non-GAAP financial measure

is useful information for investors, shareholders and other stakeholders of the Company in evaluating our results of operations on an

ongoing basis.

We believe that earnings before interest, taxes, depreciation, and amortization (“EBITDA”) is a performance

measure and not a liquidity measure, and therefore a reconciliation between net loss/income and EBITDA and Adjusted EBITDA, which is calculated

by removing the impact of non-recurring and primarily non-cash transactions from EBITDA, has been provided.

Neither EBITDA nor Adjusted

EBITDA should be considered as an alternative to net loss/income as an indicator of performance, or as an alternative to cash flows from

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

In addition, neither EBITDA nor Adjusted EBITDA takes into account changes in certain assets and liabilities as well as interest and income

taxes that can affect cash flows.

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

for results prepared in accordance with GAAP.

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

statements prepared in accordance with GAAP.

increased $70, or 41% in 2022, driven primarily by the acquisition of Reflect.

Through the acquisition of Reflect, we acquired a fully

staffed, experienced software development team and elected to keep that team in-tact, in full, particularly given employment market conditions

with respect to talented software engineers.

We have integrated the pre-existing CRI development team with the acquired team and have

experienced enhanced speed to market on new feature and functionality development activities from increasing this resource pool.

this elevated level of expense to continue into the future as we continue to develop our current and future product set.

General and Administrative

General and administrative expenses – excluding bad debt expense

– increased $645, or 31%, driven by the acquisition of Reflect.

While the Company anticipates carrying higher G&A expenses moving

forward as a result of the acquisition, the integration activities include several projects (including but not limited to consolidation

of CMS tools, cloud hosting environments, IT tools, and rightsizing leases for office space) that we expect will be realized by the end

Bad debt expense returned to a more normalized rate of $106 during the first quarter of 2022, representing an increase of $618

as compared to the comparable period in 2021 as the result of a bankruptcy recovery in 2021.

related to the Company’s allowance for bad debts increased by $618, or 121%, in 2022 compared to 2021.

This return to expense is

the result of standard operations.

The prior year included a cash recovery of $555 related to a customer bankruptcy for which the Company

previously recorded a reserve.

and Amortization Expenses

Depreciation and amortization

expenses increased by $363, or 106%, in 2022 compared to 2021.

This was driven by the addition of $21,500 in amortizing intangible assets

as a result of the Merger.

Expense, Change in fair value of warrant liability, Other expense

Note 8 Loans Payable to the Condensed Consolidated Financial Statements for a discussion of the Company’s debt and related

interest expense obligations.

the three months ended March 31, 2022, the Company recorded a gain of $5,469 as the result of assessing the fair value of warrant

liabilities associated with the Company’s issuance of warrants in its debt and equity offerings completed in February 2022

to finance the Merger.

These warrants were initially assessed at fair value through Black Scholes calculation and were subsequently re-assessed

at March 31, 2022, resulting in the gain.

Operating Results on a Non-GAAP Basis

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

Our management

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

in gauging our results of operations on an ongoing basis.

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

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

EBITDA should not be considered

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

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

In addition, EBITDA does not

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

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

These non-GAAP measures should be read only in conjunction with our consolidated financial statements prepared in accordance

Quarters Ended

September 30,

Quarters ended

6 unchanged sentences

Amortization of finance lease assets

Amortization of share-based awards

Depreciation of property, equipment & software

Amortization of employee share-based awards

Depreciation of property, equipment

Income tax expense/(benefit)

Change in fair value of Special Loan

Gain on settlement of obligations

Loss on disposal of assets

Loss on lease termination

(Gain)/loss on fair value of debt

(Gain)/loss on fair value of warrant liability

(Gain)/loss on settlement of obligations

(Gain)/loss on debt waiver consent

Deal and transaction expenses

Stock-based compensation – Director grants

Adjusted EBITDA

Liquidity and Capital Resources

See Note 1 Nature of Organization and Operations

to the accompanying Condensed Consolidated Financial Statements for a detailed discussion of liquidity and financial resources.

Operating Activities

The cash flows used in operating activities were

($367) and ($4,110) for the nine months ended September 30, 2021 and 2020, respectively.

We produced net income during the nine months

ended September 30, 2021 of $1,954, which was primarily reduced via addback of the gain on forgiveness of the Company’s PPP Loan

in the amount of $1,552 and gain on the settlement of obligations in the amount of $1,624, representing $1,538 related to the Seller Note

and $86 of related interest thereon, partially offset by an addback for depreciation and amortization, including amortization of debt

discount and stock based compensation, of $2,417.

The change in cash flows used in operations year-over-year was driven primarily by the

current year gains on settlement of the Seller Note and forgiveness of the PPP loan, combined with a reduction in prepaid assets.

Investing Activities

Net cash used in investing activities during the

nine months ended September 30, 2021 was $432 compared to $559 during the same period in 2020.

The use of cash in both periods represents

payments made for capital assets, primarily related to the capitalization of both internal and external software development.

do not have any material commitments for capital expenditures as of September 30, 2021;

however, we anticipate an increase in our capital

expenditures of approximately $430 in excess of our historical trends throughout the balance of 2021 to maintain and enhance the software

platform for our customers and to enhance revenue generating activities through the platform.

Financing Activities

Net cash provided by financing activities during

the nine months ended September 30, 2021 and 2020 were $1,745 and $2,990, respectively.

On February 18, 2021, the Company entered into

a securities purchase agreement with an institutional investor for the issuance and sale of the Company’s common stock.

proceeds from the Offering after paying estimated offering expenses were approximately $1,849.

These proceeds were partially offset by

the settlement payment of $100 on the Seller Note.

The 2020 proceeds were driven by the Company’s receipt of a $1,552 Paycheck Protection

Program loan, execution of sales via an at-the-market offering of $1,335, and the exercise of 27,600 warrants.

Off-Balance Sheet Arrangements

During the three and nine months ended September

30, 2021, we did not engage in any off-balance sheet arrangements set forth in Item 303(a)(4) of Regulation S-K.

and Capital Resources

accompanying Condensed 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 three months ended March 31, 2022 and for the year ended December 31, 2021 and had positive cash flows from operating activities

for both periods.

As of March 31, 2022, we had cash and cash equivalents of $5,988 and a working capital surplus of $2,288.

Management 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 Merger, that we can continue as a going concern through at

least June 30, 2023.

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

letter from Slipstream through May 16, 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 flows.

The cash flows provided by operating

activities were $1,201 for the period ended March 31, 2022 as compared to cash flows used in operating activities of $21 for the

period ended March 31, 2021.

We produced net income of $2,502.

Following the Merger, our business has significantly expanded, particularly

with respect to managed services revenue.

Other than net income, cash provided by operating activities was driven by growth of $1,901

of deferred revenue and $2,292 of accounts payable, partially offset by an expansion of accounts receivable of $3,724.

Net cash used in investing activities during the three months ended

March 31, 2022 was $17,969 compared to $115 during the same period in 2021.

The use of cash in the current year was driven by (1)

completion of the Merger and (2) continued investments in our software platforms.

We currently do not have any material commitments for

capital expenditures as of March 31, 2022;

however, we anticipate continued elevated capital expenditures in excess of historical

trends through as a result of the Merger, which included acquisition of a software development team.

Net cash provided by financing activities during the three months ended

March 31, 2022 was $19,873 compared to $1,845 for the same period in 2021.

The increase is the result of the Company’s completion

of the Equity Financing and the Debt Financing (each as described in “Recent Developments” above) in the period to facilitate

the Merger, which provided net cash of $10,109 and $9,868, respectively.

We have no material commitments for capital expenditures, and we do

not anticipate any significant capital expenditures for the remainder of 2022.

Sheet Arrangements

the three months ended March 31, 2022, we did not engage in any off-balance sheet arrangements set forth in Item 303(a) (4)

of Regulation S-K.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis