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Item 9A. Controls and Procedures

2025-03-14 compared with 2024-03-21 · 686 added, 517 removed, 682 unchanged (64% of the section changed)

11 unchanged sentences

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the year ended December 31, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B OTHER INFORMATION

5 unchanged sentences

This disclosure, including Exhibit 99.1 hereto, shall not be deemed “filed” for purposes of Section 18 of 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 9C DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is incorporated herein by reference to our definitive proxy statement for our 2024 Annual Meeting of Shareholders (the "Proxy Statement"), which will be filed with the SEC pursuant to Regulation 14A under the Exchange Act.

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

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

Richard Mills

Chief Executive Officer and Director

Stephen Nesbit

David Ryan Mudd

Interim Chief Financial Officer

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

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.

Bell has previously 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 was a Senior Advisor to AOL from 2008 to 2016 and has also served on the boards of multiple publicly traded companies, including Lighting Science Group Corporation and Point Blank Solutions, Inc., and Primedia, Inc., and served as President and CEO of The Interpublic Group of Companies Inc.

from 2003 to 2005.

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

from June 2014 to January 2018.

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

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

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

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

Harris served as the President of Comcast Cellular Communications Inc.

from March 1992 to March 1997.

Harris received a Bachelor of Science degree from the United States Military Academy and an MBA from Columbia University.

Harris’s experience in the telecommunications industry and his association with private equity funding is valuable to the Company.

Richard Mills is currently our Chief Executive Officer, a member of our Board of Directors and Chairman of the Board.

Mills has served as our Chief Executive Officer and a member of our Board of Directors since 2015, and has served as Chairman of the Board since November 2023.

Mills possesses over 32 years of industry experience.

He was previously Chief Executive Officer of ConeXus World Global, a leading digital media services company, which he founded in 2010, and which was acquired by the Company.

Prior to founding ConeXus, Mr.

Mills was President and Director at Beacon Enterprise Solutions Group, Inc., a public telecom and technology infrastructure services provider.

Previous to that, he joined publicly traded Pomeroy Computer Resources, Inc.

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

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

Mills was also a founder of Strategic Communications LLC.

Stephen Nesbit was appointed to our Board of Directors in 2019.

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.

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 (NASDAQ:

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

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

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

David Ryan Mudd has served as the Interim Chief Financial Officer of the Company since February 1, 2025.

Mudd joined the Company as Controller in November 2022.

From January 2012 until November 2022, Mr.

Mudd was employed by Ernst & Young in the assurance services group where he primarily worked with large publicly traded clients.

Mudd 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.

He has a B.S.

degree and a Masters in Accountancy from University of Kentucky and is a Certified Public Accountant.

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

When considering whether directors and nominees have the experience, qualifications, attributes and skills to enable the Board of Directors to satisfy its oversight responsibilities effectively in light of our business and structure, the Board of Directors focuses primarily on the industry and transactional experience, in addition to any unique skills or attributes associated with a director.

With regard to Mr.

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

With regard to Mr.

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

With regard to Mr.

Harris, the Board of Directors considered his extensive experience in the telecommunications industry and association with private equity investors.

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 1934.

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

Bell, Harris, and Nesbit.

Board Committee Membership

Our Board of Directors has created a standing Compensation Committee and Audit Committee, which are described below.

The Company’s committees have separately adopted charters that are available on the Company’s website at https://investors.cri.com.

Harris, and Mr.

Nesbit qualify as “independent” members of the board as described above.

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.

Compensation Committee Information .

Our Compensation Committee consists of Stephen Nesbit, Donald Harris, and David Bell.

Nesbit serves as chair of the committee.

Each of the members of the Compensation Committee is independent under the applicable Nasdaq listing standards.

The Compensation Committee did not meet during the fiscal year ended December 31, 2024.

The Compensation Committee has a written charter.

The Compensation Committee’s duties, which are specified in the Compensation Committee charter, include, but are not limited to:

reviewing and approving on an annual basis the corporate goals and objectives relevant to the Company’s Chief Executive Officer’s compensation, evaluating the Company’s Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of the Company’s Chief Executive Officer based on such evaluation;

reviewing and approving the compensation of all of our other executive officers;

reviewing our executive compensation policies and plans;

implementing and administering our incentive compensation equity-based remuneration plans;

assisting management in complying with our proxy statement and annual report disclosure requirements, and reviewing specific disclosures in the proxy statement and reports;

if required, producing a report on executive compensation to be included in our annual proxy statement;

reviewing, evaluating, and recommending changes, if appropriate, to the remuneration for directors;

reviewing and reassessing, on an annual basis, the adequacy of the charter and recommending to the Board any proposed changes to the charter.

Audit Committee Information .

Our Audit Committee consists of David Bell, Stephen Nesbit, and Donald Harris.

Bell serves as chair of the committee.

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 in his biography.

The Board of Directors has determined that each director serving on the Audit Committee is able to read and understand fundamental financial statements.

The audit committee met four times during the fiscal year ended December 31, 2024.

Pursuant to our audit committee charter, responsibilities of the Audit Committee include:

reviewing and discussing with management and the independent auditor the annual audited financial statements, and recommending to the board whether the audited financial statements should be included in our required disclosures;

reviewing and discussing interim financial statements prior to the filing of quarterly reports and earnings releases;

approving the committee report, as required by the SEC rules, to be included in the Company’s annual proxy statement or annual report;

discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of our financial statements;

discussing with management major risk assessment and risk management policies;

monitoring the independence of our independent auditor;

verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law;

inquiring and discussing with management our compliance with applicable laws and regulations;

pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms of the services to be performed;

appointing or replacing the independent auditor;

determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related work;

establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or reports which raise material issues regarding our financial statements or accounting policies;

reviewing and reassessing on an annual basis the adequacy of the charter and recommending to the Board any proposed changes to the charter.

Communications with Board Members

Our Board of Directors has provided the following process for shareholders and interested parties to send communications to our Board and/or individual directors.

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

100, Louisville, KY 40223, Attention:

Corporate Secretary.

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

All communications sent to any individual director will be received directly by such individuals and will not be screened or reviewed by any Company personnel.

Any communications sent to the Board in the care of the Corporate Secretary will be reviewed by the Corporate Secretary to ensure that such communications relate to the business of the Company before being reviewed by the Board.

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 is designed to help ensure our business is conducted in accordance with the highest standards of ethical behavior and satisfies the requirements of Item 406(b) of Regulation S-K.

Our Code of Business Conduct and Ethics is available, free of charge, on the Company’s website at https://investors.cri.com, or upon written request to our Corporate Secretary at 13100 Magisterial Drive, Ste.

100, Louisville, KY 40223.

Insider Trading Policy

We have adopted an insider trading policy applicable to members of the Board of Directors, executive officers of the Company, and all employees of the Company (“Insiders”).

The Company may also determine that other persons should be subject to the policy, such as contractors or consultants who have access to material non-public information.

The policy prohibits any Insider, as well as any family member of any Insider or any entities over which an Insider has influence or control, from engaging in transactions involving the purchase or sale of the Company’s securities while such person has access to material nonpublic information, as well as from trading in the securities of other companies in breach of a fiduciary duty or other relationship of trust and confidence while in possession of material nonpublic information about such company or its securities.

ITEM 11 EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference from the Proxy Statement.

Executive Compensation

Summary Compensation Table

The following table sets forth information concerning the compensation of our named executive officers for 2024 and 2023 (table and footnotes in whole dollars) :

Incentive Plan

Name and Principal Position(a)

Richard Mills

Chief Executive Officer and Director

Chief Financial Officer

Mills joined the Company effective October 15, 2015.

Logan joined the Company effective November 6, 2017 and resigned as Chief Financial Officer on January 31, 2025.

On November 13, 2024, the Company awarded Mr.

Logan, a $50,000 bonus for his services rendered in 2023.

The material terms of employment agreements of Richard Mills, Chief Executive Officer of the Company, and Will Logan, Chief Financial Officer of the Company, and payments to be made upon a change in control are discussed below.

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 or after-tax compensation to the plan in accordance with current maximum contribution levels proscribed by the Internal Revenue Service.

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

Richard Mills Employment Agreement

The Company employs Richard Mills as its Chief Executive Officer.

Mills and the Company 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 the Company or Mr.

Mills elects not to extend the term.

The agreement provided for an initial annual base salary of $330,000 subject to annual increases but generally not subject to decreases.

In accordance with the agreement, Mr.

Mills’ annual base salary was adjusted automatically on February 17, 2022 upon the closing of the Merger to $450,000, 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 Company senior executives.

Mills will participate in Company 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, 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.

On June 15, 2022, the Board approved an amendment to certain aspects of Mr.

Mills’ compensation as further described below.

Will Logan Employment Agreement

The Company employed Will Logan as its Chief Financial Officer until his resignation effective January 31, 2025.

Logan and the Company entered into an employment agreement on November 12, 2021.

The employment agreement was effective for a one-year term, which automatically renewed for additional one-year periods through Mr.

Logan’s resignation.

The agreement provided for an initial annual base salary of $249,000 subject to annual increases but generally not subject to decreases.

In accordance with the employment agreement, Mr.

Logan’s annual base salary was automatically adjusted upon the closing of the Merger to $350,000, subject to annual increases but not generally subject to decreases, and Mr.

Logan received a $75,000 cash bonus upon the closing of the Merger.

Under the agreement, Mr.

Logan was eligible to participate in performance-based cash bonus or equity award plans for Company senior executives.

Logan participated in Company employee benefit plans, policies, programs, perquisites, and arrangements to the extent he met applicable eligibility requirements.

Logan would have been entitled to receive aggregate severance payments equal to six months of his base salary.

The agreement provided 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.

On June 15, 2022, the Board approved an amendment to certain aspects of Mr.

Logan’s compensation as described below.

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, 2024:

Option Awards(a)

Non-Exercisable

Richard Mills

These stock options vested in three equal installments on June 1 annually, beginning in 2021 and ending in 2023.

These stock options (the “Performance Options”) become vested in increments of 16.67 percent of the total shares purchasable under this issuance subject to satisfying 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, with each target and vesting being independently achieved without regard for the other.

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.

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

Calendar Year

Revenue Target (millions)

EBITDA Target (millions)

The executives met the foregoing EBITDA target for calendar year 2021.

On June 15, 2022, the Board approved of an amendment to the Performance Options to provide that the revenue target for the calendar year 2022 set forth therein ($38 million) is eliminated, and the remaining shares that are available for vesting under the Performance Options (106,667 unvested shares for Mr.

Mills and 53,334 for Mr.

Logan) (including the unvested portions of shares based on the satisfaction of the revenue targets for 2020 and 2021 by virtue of the catch-up provisions in the Performance Options) will fully vest upon the achievement of the updated EBITDA target for calendar year 2022 of $3.6 million.

The Performance Options state that the calculation of EBITDA set forth in the Performance Options shall be calculated in a form consistent with the Company’s 2022 approved budget, which:

excludes any impact on EBITDA of:

the accounting treatment (including any “mark-to-market accounting”) of the Company’s warrants or the “Guaranteed Consideration” (as defined in the Merger Agreement),

non-recurring transaction expenses associated with the Merger and the capital raising financing activities of the Company to effectuate the Merger, and

any write-down or write-off of any Company inventory of Safe Space Solutions products.

includes deductions related to any cash or stock bonuses paid or payable to any employees of the Company for services provided in calendar year 2022 (even if such bonuses are actually paid after calendar year 2022), including bonuses paid pursuant to the terms of the 2022 Cash Bonus Plan (as described above) (collectively, the “EBITDA Calculations”).

The unvested portion of the Performance Options as of December 31, 2022 vested in full effective as of March 30, 2023 upon confirmation by the Board of Directors of achievement of the performance metrics for the year ended December 31, 2022.

Mills and Logan received ten-year options to purchase 333,334 and 200,000 shares of common stock, respectively (the “New Options”).

The New Options are eligible to vest at any time on or prior to the date on which the “Guaranteed Price” is agreed upon by the Company and RSI Exit Corporation, or finally determined in accordance with the terms of the Merger Agreement, if the trailing 10-trading day VWAP of the Company’s common stock, as reported on the Nasdaq Capital Market, exceeds the share price targets below, subject to such executive serving the Company as a director, officer, employee or consultant at such time:

Share Price Targets

Mills’ Shares Vested

Logan’s Shares Vested

Percentage of Shares Vested

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 2022.

Director Compensation

The Company’s Board of Directors had a director compensation plan to compensate non-officer directors as follows:

Annual grant of shares of unrestricted common stock of the Company, issuable on November 17, 2021, 2022 and 2023, having an annual value of $24,000, 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.

No shares were issued on November 17, 2023 as the Company’s ability to issue shares under the 2014 Stock Incentive Plan expired.

An option issuable to each non-executive director to purchase 60,000 shares of Company common stock (or in the case of Dennis McGill, prior Chairman of the Company Board, 75,000 shares), which vested 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 the Company’s common stock as reported on Nasdaq on the date of adoption of such plan.

The table below sets forth the compensation paid to Company non-employee directors during 2024:

Director Compensation (table and footnotes in whole dollars)

incentive plan

Option awards

Stephen Nesbit

The Company is evaluating the terms by which its directors may be compensated for their services in 2024 and for subsequent years.

As of the date of this Report, the Company has not adopted any plan for director compensation.

Pay Versus Performance

As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K, we are providing the following information about the relationship between executive compensation actually paid to our Principal Executive Officer (“PEO”) and our Principal Financial Officer (“PFO”) and certain financial performance of the Company.

Pay Versus Performance

Value of Initial Fixed $100

Table Total for

Actually Paid to

Investment Based On:

Net Income(6)

Paid to PEO(2)

Non-PEO NEO(3)

Non-PEO NEO(4)

Total Shareholder Return(5)

(in thousands)

The dollar amounts reported in column (b) are the amounts of total compensation reported for Richard Mills (our Chief Executive Officer) for each corresponding year in the “Total” column of the Summary Compensation Table.

Refer to “Executive Compensation—Summary Compensation Table."

The dollar amounts reported in column (c) represent the amounts of “compensation actually paid” to Mr.

Mills, as computed in accordance with Item 402(v) of Regulation S-K.

The dollar amounts do not reflect the actual amount of compensation earned by or paid to Mr.

Mills during the applicable year.

In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Mr.

Mills’ total compensation for each year to determine the compensation actually paid:

Value of Equity

Actually Paid to

Adjustments(b)

The grant date fair value of equity awards represents the total of the amounts reported in the “Stock Awards” and “Option Awards” columns in the Summary Compensation Table for the applicable year.

The equity award adjustments for each applicable year include the addition (or subtraction, as applicable) of the following:

(i) the year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of the year;

(ii) the amount of change as of the end of the applicable year (from the end of the prior fiscal year) in fair value of any awards granted in prior years that are outstanding and unvested as of the end of the applicable year;

(iii) for awards that are granted and vest in same applicable year, the fair value as of the vesting date;

(iv) for awards granted in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value;

(v) for awards granted in prior years that are determined to fail to meet the applicable vesting conditions during the applicable year, a deduction for the amount equal to the fair value at the end of the prior fiscal year;

and (vi) the dollar value of any dividends or other earnings paid on stock or option awards in the applicable year prior to the vesting date that are not otherwise reflected in the fair value of such award or included in any other component of total compensation for the applicable year.

The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant.

The amounts deducted or added in calculating the equity award adjustments are as follows:

Fair Value of

Dividends or other

Year Change in

Earnings Paid on

Year Change in

Fair Value as of

Fair Value of

of the Prior Year

Stock or Option

Fair Value of

Vesting Date of

Equity Awards

of Equity Awards

Equity Awards

that Failed to

Otherwise Reflected

in Fair Value

The dollar amounts reported in column (d) represent the amounts reported for the NEO (excluding our PEO) in the “Total” column of the Summary Compensation Table in each applicable year.

The NEO (excluding our PEO) included for purposes of calculating the amounts in each applicable year was Will Logan, our Chief Financial Officer as of the applicable time periods.

The dollar amounts reported in column (e) represent the amounts of “compensation actually paid” to the NEO (excluding our PEO), as computed in accordance with Item 402(v) of Regulation S-K.

The dollar amounts do not reflect the actual average amount of compensation earned by or paid to the NEO (excluding our PEO) during the applicable year.

In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to average total compensation for the NEO (excluding our PEO) for each year to determine the compensation actually paid, using the same methodology described above in Note (2):

Actually Paid

Equity Awards(a)

Adjustments(b)

The equity award adjustments for each applicable year include the addition (or subtraction, as applicable) of the following:

(i) the year-end fair value of any equity awards granted in the applicable year that are outstanding and unvested as of the end of the year;

(iii) for awards that are granted and vest in same applicable year, the fair value as of the vesting date;

(iv) for awards granted in prior years that vest in the applicable year, the amount equal to the change as of the vesting date (from the end of the prior fiscal year) in fair value;

The valuation assumptions used to calculate fair values did not materially differ from those disclosed at the time of grant.

The amounts deducted or added in calculating the equity award adjustments are as follows:

Year over Year

Dividends or other

at the End of the

Earnings Paid on

Fair Value of

Prior Year of

Stock or Option

Fair Value of

Equity Awards

Equity Awards that

Outstanding and

Granted in Prior

Failed to Meet

Otherwise Reflected

Years that Vested

Vesting Conditions

in Fair Value or

Equity Awards

Total Compensation

Cumulative total shareholder return (Cumulative TSR) is calculated by dividing the sum of the cumulative amount of dividends for the measurement period, assuming dividend reinvestment, and the difference between the Company’s share price at the end and the beginning of the measurement period by the Company’s share price at the beginning of the measurement period.

The dollar amounts reported represent the amount of net income reflected in the Company’s audited financial statements for the applicable year.

Analysis of the Information Presented in the Pay versus Performance Table

In accordance with Item 402(v) of Regulation S-K, we are providing the following descriptions of the relationships between information presented in the Pay Versus Performance table above.

Compensation Actually Paid and Cumulative TSR

The following graph sets forth the relationship between Compensation Actually Paid to our PEO, the Compensation Actually Paid to our Non-PEO NEO, and the Company’s cumulative TSR over the three most recently completed fiscal years.

Compensation Actually Paid and Net Income

The following graph sets forth the relationship between Compensation Actually Paid to our PEO, the Compensation Actually Paid to our Non-PEO NEO, and the Company’s net income over the three most recently completed fiscal years.

Policies and Practices for Granting Certain Equity Awards

While the granting of options and other equity awards to officers, directors and other employees is not expressly addressed in our Insider Trading Policy, we generally follow the same principles set forth in the Insider Trading Policy when granting equity awards, including options, to our officers, directors and other employees with access to material nonpublic information.

Generally our Board of Directors or Compensation Committee does not approve grants of such awards during a blackout period and does not take material nonpublic information into account when determining the timing and terms of such an award.

Further, we do not have a policy or practice of timing the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation.

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

The table below sets forth certain information with respect to beneficial ownership of our common stock as of March 14, 2025, on which date there were 10,446,659 shares of issued and outstanding common stock.

The following table sets forth the number of common shares, and percentage of outstanding common shares, beneficially owned by:

each director of the Company;

each named executive officer;

all current directors and officers of the Company as a group;

each person or entity known by the Company to beneficially own more than 5% of our common stock.

Unless otherwise indicated in the table or its footnotes, the address of each of the following persons or entities 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.

Percentage of

Name and Address

Slipstream Funding, LLC (2)

c/o Pegasus Capital Advisors, L.P.

750 E Main St., Suite 600

Stamford, CT 06902

Slipstream Communications, LLC (3)

c/o Pegasus Capital Advisors, L.P.

750 E Main St., Suite 600

Stamford, CT 0690

Stephen Nesbit (4)

David Bell (6)

Richard Mills (7)

Will Logan (8)

David Ryan Mudd (9)

All current executive officers and directors as a group (5 persons) (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 March 14, 2025, 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 10,466,659, the total number of outstanding shares of the Company as of March 14, 2025.

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

Because the calculation of each person’s beneficial ownership set forth in the “Percentage of Common Shares” column of the table may include shares that are not presently outstanding, the sum total of the percentages set forth in such column may exceed 100%.

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

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

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.

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

The share figure includes the 317,455 shares of common stock issued to and held by Slipstream Funding, LLC in connection with the merger transaction with Creative Realities, LLC.

Share figure also includes 1,731,499 common shares purchasable upon exercise of outstanding warrants issued to and held by Slipstream Communications, LLC.

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 20,000 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, Chairman of the Board and Chief Executive Officer.

Share figure includes 320,000 shares purchasable upon the exercise of outstanding options and 333,334 shares purchasable upon the exercise of outstanding performance-restricted options upon which vesting requires achievement of certain targeted share trading prices.

Logan served as the Chief Financial Officer of the Company until January 31, 2025.

Share figure includes 171,945 shares purchasable upon the exercise of outstanding options and 200,000 shares purchasable upon the exercise of outstanding performance-restricted options upon which vesting requires achievement of certain targeted share trading prices.

Mudd became the Interim Chief Financial Officer of the Company on February 1, 2025.

Includes Messrs.

Mills, Bell, Harris, Nesbit and Mudd.

Securities Authorized for Issuance Under Equity Compensation Plans

The table below sets forth certain information, as of the close of business on December 31, 2024, regarding equity compensation plans (including individual compensation arrangements) under which our securities were then authorized for issuance.

Available for

Securities to be

Issuance Under

Number of Securities to be

Weighted-Average

Number of Securities Remaining

Issued Upon Exercise of

Exercise Price of

Plans (excluding

Equity compensation plans approved by shareholders

Equity compensation plans not approved by shareholders

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

Available for Issuance Under Equity

Outstanding Options,

Compensation Plans (excluding

Warrants and Rights

securities reflected in column (a))

Equity compensation plans approved by stockholders

Equity compensation plans not approved by stockholders

Shares reflected are issuable upon exercise of outstanding stock options issued under the 2014 Stock Incentive Plan.

The Company’s ability to issue new awards under its 2014 Stock Incentive Plan expired in 2023.

On November 8, 2023, our Board of Directors adopted the 2023 Plan that authorizes the issuance of up to 1,500,000 shares under such plan.

The Company intends to seek shareholder approval of such plan at our 2024 annual shareholder meeting.

At this time, no awards have been issued under the 2023 Plan.

On October 18, 2024, the Company’s shareholders approved the Company’s 2023 Stock Incentive Plan, which authorizes the issuance of up to 2,500,000 shares.

No awards have been issued under the Plan as of December 31, 2024.

For information regarding the material features of each of the above plans see Note 11 Stock-based Compensation in our Consolidated Financial Statements included in this Report.

All other information required by this Item is incorporated by reference from the Proxy Statement.

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated by reference from the Proxy Statement.

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

(All currency in this Item 13 is rounded to the nearest thousand, except share and per share amounts.)

Merger Agreement

On February 17, 2025 and February 23, 2025, the parties to the Merger Agreement entered into the fourth and fifth amendments to the Merger Agreement, respectively, pursuant to which the commencement date of the 30-day period for which Reflect stockholders may seek payment of the Guaranteed Consideration was delayed from February 17, 2025 to February 24, 2025 and thereafter March 17, 2025.

The foregoing transactions were approved by our Board of Directors after full disclosure of any conflicts of interest.

No directors had any conflicting interest in the transactions.

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.

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

Bell, Harris, and Nesbit.

ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated by reference from the Proxy Statement.

The following table presents fees (in thousands) for audit and other services provided by our principal accountant for 2023, Deloitte & Touche LLP (“Deloitte”), and by our principal accountant for 2024, Grant Thornton LLP (“Grant Thornton”).

Audit fees (a)

Audit related fees

All other fees

Audit fees for 2024 and 2023 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.

Our Board of Directors pre-approved the audit services rendered by our principal accountant during 2024 and 2023 and concluded that such services were compatible with maintaining the auditor’s independence.

Pre-Approval Policies and Procedures of Audit Committee

All services provided by our current independent registered public accounting firm, Grant Thornton, are subject to pre-approval by our Audit Committee.

The Audit Committee has authorized each of its members to approve services by our independent registered public accounting firm in the event there is a need for such approval prior to the next full Audit Committee meeting.

Any interim approval given by an Audit Committee member must be reported to the Audit Committee no later than its next scheduled meeting.

Before granting any approval, the Audit Committee (or a committee member if applicable) gives due consideration to whether approval of the proposed service will have a detrimental impact on the independence of our independent registered public accounting firm.

The Audit Committee pre-approved all services provided by Deloitte during 2023, and provided by Grant Thornton during 2024.

ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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and RSI Exit Corporation (incorporated by reference to Exhibit 10.1 to the registrant ’ s Current Report on Form 8-K filed February 15, 2023)

Articles of Incorporation, as amended

Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on March 21, 2024)

Amended and Restated Bylaws (incorporated by reference to the registrant’s Current Report on Form 8-K filed on November 2, 2011)

Specimen certificate evidencing shares of Common Stock (incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form SB-2 (File No.

Description of Securities

Description of Securities (incorporated by reference to Exhibit 4.2 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on March 21, 2024)

Warrant dated January 16, 2018, issued in favor of Slipstream Communications, LLC (incorporated by reference to the registrant’s Form S-1 filed with the SEC on June 25, 2018)

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Investor Warrant dated June 30, 2022 (incorporated by reference to Exhibit 10.3 of the registrant ’ s Current Report on Form 8-K filed July 7, 2022)

Lender Warrant dated October 17, 2024 (incorporated by reference to the registrant’s Registration Statement on Form S-3 filed with the SEC on October 17, 2024)

Employment Agreement dated as of November 12, 2021 by and between the registrant and Rick Mills (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed November 15, 2021).

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2014 Stock Incentive Plan, as amended (incorporated by reference to Exhibit A to the registrant ’ s definitive proxy statement on Schedule 14A filed with the SEC on June 12, 2020)

2023 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 of the registrant's Quarterly Report on Form 10-Q filed November 9, 2023)

Retention Bonus Plan (incorporated by reference to Exhibit 10.5 of the registrant’s Current Report on Form 8-K filed February 18, 2022)

Form of Retention Bonus Plan Award Agreement (incorporated by reference to Exhibit 10.6 of the registrant’s Current Report on Form 8-K filed February 18, 2022)

2023 Stock Incentive Plan, as amended

Amendment to Stock Option Agreement dated June 15, 2022 between the Company and Rick Mills (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on June 17, 2022)

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Stock Option Agreement dated June 15, 2022 between the Company and Will Logan (incorporated by reference to Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed with the SEC on June 17, 2022)

Placement Agency Agreement (incorporated by reference to Exhibit 10.1 of the registrant's Current Report on Form 8-K filed with the SEC on August 21, 2023

Credit Agreement dated May 23, 2024 by and among Creative Realities, Inc., First Merchants Bank and other parties thereto (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on May 28, 2024)

$22,100,000 Revolving Credit Note dated May 23, 2024 (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on May 28, 2024)

Security Agreement dated May 23, 2024 by and among Creative Realities, Inc., First Merchants Bank and other parties thereto (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the SEC on May 28, 2024)

Guaranty dated May 23, 2024 by Creative Realities Canada, Inc.

in favor of First Merchants Bank (incorporated by reference to Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed with the SEC on May 28, 2024)

Security Agreement dated May 23, 2024 granted by Creative Realities Canada, Inc.

in favor of First Merchants Bank (incorporated by reference to Exhibit 10.5 to the registrant’s Current Report on Form 8-K filed with the SEC on May 28, 2024)

Form of Indemnification Agreement (incorporated by reference to Exhibit 10.6 to the registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 14, 2024)

Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 of the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018)

Insider Trader Policy

Insider Trading Policy (incorporated by reference to Exhibit 19.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on March 21, 2024)

List of Subsidiaries

Consent of Grant Thornton LLP

Consent of Deloitte & Touche LLP

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Section 1350.

Clawback Policy.

Press Release dated March 14, 2025

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Compensatory Plan or arrangement required to be filed pursuant to Item 15(b) of Form 10-K.

This exhibit shall not be deemed “filed” for purposes of Section 18 of 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.

FORM 10-K SUMMARY .

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Chief Executive Officer

/s/ Will Logan

Chief Financial Officer

/s/ David Ryan Mudd

David Ryan Mudd

Interim Chief Financial Officer

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

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and Chairman of the Board of Directors

/s/ Will Logan

Chief Financial Officer (Principal Financial and

/s/ David Ryan Mudd

Interim Chief Financial Officer (Principal Financial and

March 14, 2025

David Ryan Mudd

Principal Accounting Officer)

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

Consolidated Financial Statements

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Report of Independent Registered Public Accounting Firm

To the shareholders and the Board of Directors of Creative Realities, Inc.

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, 2023 and 2022, the related consolidated statements of operations, shareholders' equity, and cash flows, for each of the two years in the period ended December 31, 2023, and the related notes to the financial statements (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, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

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

(a Minnesota corporation) and subsidiaries (the “Company”) as of December 31, 2024, the related consolidated statements of operations, shareholders’ equity, and cash flows for the year ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Going concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the Company is experiencing difficulty in generating sufficient cash flow to service its debt and contingent consideration obligations, which raises substantial doubt about its ability to continue as a going concern.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the financial statements, the Company is experiencing difficulty in generating sufficient cash flow to service its contingent consideration obligations, which raises substantial doubt about its ability to continue as a going concern.

These conditions, along with other matters as set forth in Note 1, raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

1 unchanged sentence

Basis for opinion

These 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.

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

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

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 the PCAOB.

We 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 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.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

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 those risks.

Our 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 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.

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

The 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.

Goodwill – Refer to Notes 2 and 7 to the Financial Statements

Critical Audit Matter Description

The 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 on a discounted cash flow model and market 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 and forecasts of future revenue and EBITDA margins.

The market approach requires management to make assumptions regarding guideline public company transactions and estimated market multiples.

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, 2023.

The estimated fair value of the reporting unit exceeded the carrying value as of September 30, 2023 and, therefore, no impairment was recognized.

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

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the significant estimates and assumptions included in the discounted cash flow model, including projected revenues, gross profit, EBITDA, working capital as a percentage of revenue, and capital expenditures, and the selection of the long-term growth rate and discount rate for the reporting unit included the following, among others:

We evaluated the design and implementation of management's controls around the valuation of the reporting unit and the selection and review of critical assumptions used in the discounted cash flow and market approaches.

We evaluated the reasonableness of management’s forecasts of revenue, gross profit, operating income/EBITDA, and capital expenditures by comparing the forecasts to:

historical revenue, gross profit, EBITDA, working capital as a percentage of revenue and capital expenditures;

internal communications to management and the Board of Directors, and;

forecasted information included in industry reports for the Company.

We evaluated management's historical contract win experience to assess whether forecasted revenues are reasonable.

We performed a retrospective review of forecasted assumptions from the prior year to evaluate the credibility of management's forecasting process.

For significant new revenue contracts, we obtained evidence of the executed contract, project timeline, and project scope, as applicable.

We evaluated changes in forecasted information from the previous quantitative assessment to the annual assessment date and obtained supporting evidence for any significant changes in forecasted information.

With the assistance of our internal fair value specialists:

o We evaluated the reasonableness of the discounted cash flow valuation methodology and performed underlying procedures on the mathematical accuracy of the calculations.

o We evaluated the selection of guideline public companies and selection of multiples utilized within the market approach.

o We 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.

o We 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.

o We evaluated the reasonableness of the company-specific risk premium used in the discounted cash flow model by comparing the risk premium to a range based on our independent research of the facts and circumstances.

o We evaluated the reasonableness of the control premiums used by management and management’s valuation specialists by developing an independent range of control premiums and comparing that range to the rate selected by the Company.

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

We have served as the Company’s auditor since 2024.

/s/ Grant Thornton LLP

Cincinnati, Ohio

March 14, 2025

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Creative Realities, Inc.

Opinion on the Financial Statements

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

and subsidiaries (the "Company") as of December 31, 2023, the related consolidated statements of operations, shareholders' equity, and cash flows, for the year ended December 31, 2023, and the related notes to the financial statements (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, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The 2023 financial statements of the Company were prepared assuming that the Company would continue as a going concern.

As of the date of issuance of the Company's 2023 financial statements, the Company was experiencing difficulty in generating sufficient cash flow to service its debt and contingent consideration obligations, which raised substantial doubt about its ability to continue as a going concern.

Management's plans in regard to these matters were also described in the 2023 financial statements.

The 2023 financial statements did not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These 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.

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

We 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 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 audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

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.

/s/ Deloitte & Touche LLP

1 unchanged sentence

March 21, 2024

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

We began serving as the Company’s auditor in 2020.

In 2024 we became the predecessor auditor.

CREATIVE REALITIES, INC.

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Accounts receivable, net

10,605 12,468

Inventories, net

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Current maturities of operating leases

Short-term portion of Secured Promissory Note

Short-term portion of related party Consolidation Term Loan, net of $ 747 and $ 745 discount, respectively

Short-term related party Term Loan (2022)

Short-term portion of related party term debt

Short-term contingent consideration, at fair value

Total Current Liabilities

26,163 20,197

Long-term Secured Promissory Note

Long-term related party Acquisition Term Loan, net of $ 787 and $ 1,484 discount, respectively

Long-term related party Consolidation Term Loan, net of $ 94 and $ 840 discount, respectively

Revolving credit facility

Long-term related party term debt

Long-term obligations under operating leases

Contingent consideration, at fair value

Long-term contingent consideration, at fair value

Other non-current liabilities

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Sales and marketing

Research and development

General and administrative

17,058 15,590

Depreciation and amortization

Deal and transaction costs

Total operating expenses

23,073 20,837

Operating income (loss)

1,346 ( 2,480 )

Operating income

Other expense (income):

Interest expense, including amortization of debt discount

Change in fair value of contingent consideration

1,419 ( 1,074 )

Change in fair value of warrant liability

Loss on debt waiver consent

Loss on warrant amendment

Loss on settlement of obligations

Loss on change in fair value of contingent consideration

Loss on debt extinguishment

Other expenses (income), net

Total other expense (income)

( 102 ) ( 211 )

Net (loss) income before income taxes

Total other expense (income)

Net loss before income taxes

( 3,402 ) ( 2,854 )

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( 106 ) ( 83 )

Net (loss) income

$ ( 3,508 ) $ ( 2,937 )

Net (loss) income per common share - basic

Net loss per common share - basic

$ ( 0.34 ) $ ( 0.35 )

Net (loss) income per common share - diluted

Net loss per common share - diluted

$ ( 0.34 ) $ ( 0.35 )

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Stock-based compensation

- - 445 - 445

Shares issued to directors as compensation

51,616 1 95 - 96

Shares issued to vendors as compensation

28,554 - 55 - 55

Shares issued to employees pursuant to the Retention Bonus Plan

37,632 - 124 - 124

Issuance of common stock, net

- - - ( 3,508 ) ( 3,508 )

- - - ( 2,937 ) ( 2,937 )

Balance as of December 31, 2024

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- - 445 - 445

Shares issued to vendors as compensation

41,369 - 100 - 100

Shares issued and warrants exercised in private investment in public entity ("PIPE")

Shares issued to directors as compensation

51,616 1 95 - 96

Shares issued in Reflect Systems, Inc.

Shares issued to vendors as compensation

28,554 - 55 - 55

Warrant repricing events

Shares issued to employees pursuant to the Retention Bonus Plan

62,475 1 138 - 139

Warrant amendment

Issuance of common stock, net

3,000,000 30 5,424 - 5,454

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Operating Activities:

Net (loss) income

$ ( 3,508 ) $ ( 2,937 )

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

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

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Amortization of stock-based compensation

Amortization of deferred financing costs

Loss on extinguishment of debt

Bad debt expense

Loss (gain) on change in fair value of contingent consideration

1,419 ( 1,074 )

Provision for inventory reserves

Loss on change in fair value of contingent consideration

Deferred income taxes

Gain on change in fair value of warrants

Loss on debt waiver consent

Loss on warrant amendment

Loss on settlement of obligations

Changes to operating assets and liabilities:

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1,850 ( 4,358 )

Inventories, net

( 300 ) ( 197 )

Prepaid expenses and other current assets

Accounts payable

( 1,388 ) 4,486

Accrued expenses and other current liabilities

Deferred revenue

( 395 ) ( 47 )

Deferred revenue

Customer deposits

( 1,052 ) 755

Net cash provided by (used in) operating activities

5,167 ( 708 )

Net cash provided by operating activities

Investing activities

Acquisition of business, net of cash acquired

Purchases of property and equipment

( 11 ) ( 306 )

Capitalization of internal and external labor for software development

Capitalization of labor for software development

( 2,790 ) ( 3,721 )

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Proceeds from sale of common stock, net of offering expenses

Proceeds from Acquisition Term Loan, net of offering expenses

Proceeds from sale & exercise of pre-funded warrants in PIPE, net of offering expenses

Proceeds from Term Loan (2022)

Proceeds from sale of common stock in PIPE, net of offering expenses

Repayment of Consolidated Term Loan

Repayment of Term Loan (2022)

Repayment of Secured Promissory Note

Proceeds from borrowings under revolving credit facility

Repayment of borrowings under revolving credit facility

Payment of deferred financings costs

Repayment of term debt

( 15,147 ) ( 5,294 )

Principal payments on finance leases

Net cash provided by financing activities

( 44 ) ( 23 )

Net cash (used in) provided by financing activities

( 2,453 ) 137

Increase (decrease) in Cash and Cash Equivalents

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

("Reflect"), a Delaware corporation.

Our main operations are conducted directly through Creative Realities, Inc., and under our wholly owned subsidiaries Allure Global Solutions, Inc., a Georgia corporation (“Allure”), Creative Realities Canada, Inc., a Canadian corporation (“CRI Canada”), and Reflect Systems, Inc., a Delaware corporation (“Reflect”).

Public Offering

On August 17, 2023, the Company conducted a public offering for the sale by the Company of an aggregate of 3,000,000 shares of common stock, par value $ 0.01 per share at a public offering price of $ 2.00 per share and received approximately $ 5,454 in net proceeds, after deducting underwriting fees of $ 478 and offering costs of $ 68 .

Reverse stock split

On March 23, 2023, the Company filed Articles of Amendment with the Secretary of State of the State of Minnesota to effectuate, effective March 27, 2023, a 1 -for- 3 reverse stock split of the shares of the Company's common stock, par value $ 0.01 per share.

All share and per share information (including share and per share information related to share-based compensation) has been retroactively adjusted to reflect the reverse stock split within this Report.

On March 27, 2023, the Company effected a 1 -for- 3 stock split of the shares of the Company’s common stock, par value $ 0.01 per share.

As a result of the reverse stock split, effective 12:01 am on March 27, 2023, every three shares of common stock then-issued and outstanding automatically combined into one share of common stock, with no change in par value per share.

No fractional shares were outstanding following the reverse stock split and any fractional shares resulting from the reverse split were rounded up to the nearest whole share of common stock.

In connection with the reverse stock split, the total number of shares of common stock authorized for issuance was reduced from 200,000,000 shares to 66,666,666 shares in proportion to the reverse stock split.

All fractional shares resulting from the reverse split were rounded up to the nearest whole share of common stock.

Effective as of the same time as the reverse stock split, the number of shares of common stock available for issuance under the Company’s equity compensation plans were reduced in proportion to the reverse stock split.

The reverse stock split also resulted in reductions in the number of shares of common stock issuable upon exercising or vesting of equity awards in proportion to the reverse stock split and proportionate increases in exercise price or share-based performance criteria, if any, applicable to such awards.

Similarly, the number of shares of common stock issuable upon exercise of outstanding warrants were reduced in proportion to the reverse stock split, and the exercise prices of outstanding warrants were proportionately increased.

Public Offering

On August 17, 2023, the Company completed a public offering for the sale by the Company of an aggregate of 3,000,000 shares of common stock, par value $ 0.01 per share at a public offering price of $ 2.00 per share and received approximately $ 5,454 in net proceeds, after deducting underwriting fees of $ 478 and offering costs of $ 68 .

The reverse stock split also resulted in the number of shares of shares of common stock issuable upon exercise of outstanding warrants, or the exercise or vesting of equity awards, in proportion to the reverse stock split and caused a proportionate increase in exercise price or share-based performance criteria, where applicable.

Liquidity and Financial Condition

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2014 - 15, Disclosure of Uncertainties about an Entity ’ s Ability to Continue as a Going Concern (Subtopic 205 - 40 ) ( “ ASU 205 - 40 ” ) , the Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the Consolidated Financial Statements are issued.

At December 31, 2023, the Company has an accumulated deficit of $ 53,346 , negative working capital of $ 1,587 , including current debt obligations of $ 3,690 , and cash of $ 2,910 .

At December 31, 2024, the Company has an accumulated deficit of $ 56,854 , and negative working capital of $ 11,667 .

For the year ended December 31, 2024, the Company generated operating income of $ 938 and generated positive net cash flows from operations of $ 3,381 .

Pursuant to the Second Amended and Restated Credit and Security Agreement (the "Credit Agreement") between the Company and Slipstream Communications, LLC ("Slipstream"), the Company is required and began to make monthly repayments of principal on the Consolidation Term Loan on September 1, 2023.

The monthly principal payment is approximately $ 370 and will continue on the first day of each month thereafter until the Maturity Date on February 17, 2025, with total principal repayments of $ 4,037 during the twelve months subsequent to the reporting date of these Consolidated Financial Statements.

In addition, the Company is required to repay the principal balance on the Acquisition Term Loan of $ 10,000 at maturity and resolve the contingent consideration, currently estimated for accounting purposes at $ 11,208 , each of which mature on February 17, 2025.

The Company does not have sufficient cash on hand or liquidity to make these principal repayments.

The Company’s contingent consideration obligation was dependent upon the market value of the Company’s share price at February 17, 2025, and contractually must be settled in cash.

The estimated liability for financial statement accounting purposes is $ 12,815 as of December 31, 2024 .

While the Company is currently generating cash from operations and refinanced its debt in 2024, the Credit Agreement (as defined in Note 7 Debt below) limits, via specific reserve, utilization of the Company’s line of credit to no more than $ 4,000 (or such lesser amount determined by the lender in its sole and absolute discretion) for payments to satisfy the contingent consideration obligation.

Should the contingent consideration require a cash payment in excess of the specific reserve, the Company may not have sufficient liquidity to settle this obligation without (i) receipt of a waiver under the Credit Agreement, (ii) an amendment to the Credit Agreement to permit additional funds from the line of credit to be used for payment of the contingent consideration obligation, (iii) raising additional capital on the capital markets, the proceeds of which would be used, in whole or in part, to satisfy the contingent consideration obligation, or (iv) a reduction in the amount of the contingent consideration obligation.

The conditions and events raise substantial doubt about the Company's ability to continue as a going concern under the technical framework within ASU 205 - 40 .

In response to these conditions, the Company plans to evaluate its available options for refinancing, via recapitalization, debt financing or equity financing, its upcoming obligations associated with the Acquisition Term Loan, Consolidation Term Loan, and contingent consideration.

However, these plans have not been finalized, are subject to market conditions, and are not within the Company’s control, and therefore cannot be deemed probable.

In response to these conditions, the Company continues to evaluate its available options for amending its debt facilities or accessing the capital markets via equity financing.

However, these plans have not been finalized, are subject to market conditions, in some respects are not within the Company’s control, and therefore cannot be deemed probable.

As a result, the Company has concluded that management's plans do not alleviate substantial doubt about the Company's ability to continue as a going concern.

The Consolidated Financial Statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Subsequent events

The Company has evaluated subsequent events occurring after the balance sheet date through the date the Consolidated Financial Statements were issued and has determined that there were no such events that would require recognition or disclosure in the financial statements.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

and our wholly owned subsidiaries Allure Global Solutions, Inc., Creative Realities Canada, Inc., and Reflect Systems, Inc.

and our wholly owned subsidiaries Allure, CRI Canada, and Reflect.

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

Certain amounts have been reclassified to conform to current period presentation.

Recently Issued and Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No.

2016 - 13, Financial Instruments — Credit Losses , which requires entities to estimate expected lifetime credit losses on financial assets and provide expanded disclosures.

This ASU replaced the incurred loss methodology with one that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

We adopted ASU No.

2016 - 13 on January 1, 2023.

The adoption of this guidance did not have a material impact on the Company's Consolidated Financial Statements, as the Company's primary financial assets are its trade accounts receivable, which are short-term financings under industry standard credit and trade terms.

In 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.

This guidance will be effective for us in the first quarter of 2024 on a full or modified retrospective basis.

We do not expect the adoption of this guidance to have a material impact on our Consolidated Financial Statements.

In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023 - 07, Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures , which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis.

Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023 - 07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis.

ASU 2023 - 07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company adopted the new standard for the fiscal year ending December 31, 2024.

See Note 12 Segment Reporting for new required disclosures.

In December 2023, the FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ):

Improvements to Income Tax Disclosures , which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction.

ASU 2023 - 09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The Company is currently evaluating the impact of adopting ASU 2023 - 09.

Cash and cash equivalents

Cash and cash equivalents consist of cash on deposit in financial institutions, in both the United States and Canada.

The Company does not hold any investments that qualify as cash equivalents as of December 31, 2024.

As of December 31, 2024, the Company had approximately $ 981 in cash that was held in a Canadian financial institution.

The Company does not believe the balance presents a material concentration of credit risk, as the cash is held with a reputable financial institution.

Revenue Recognition

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Balance as of December 31, 2022

Amounts accrued

Provision for credit losses

Write-offs charged against the allowance

Balance as of December 31, 2023

Amounts accrued

Provision for credit losses

Write-offs charged against the allowance

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The reserve for obsolete inventory at December 31, 2024 and 2023 was $ 112 and $ 160 , respectively.

The Company disposed of $ 1,707 related to Safe Space Solutions during the year ended December 31, 2023, all of which was fully reserved at December 31, 2022.

The Company is no longer actively promoting the sale of our Safe Space Solutions or purchasing inventory to support such solutions.

Impairment of Long-Lived Assets

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Considerable management judgment is necessary to estimate the fair value of assets, and accordingly, actual results could vary significantly from such estimates.

Basic and Diluted Income/(Loss) per Common Share

Basic and Diluted Loss per Common Share

Basic and diluted loss income per common share for all periods presented is computed using the weighted average number of common shares outstanding.

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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 6,223,134 and 7,360,271 at December 31, 2023 and 2022 , respectively were excluded from the computation of (loss) income per share as the strike price on the options and warrants were higher than the Company's market price and therefore anti-dilutive.

Shares reserved for outstanding stock options, including stock options with performance restricted vesting, and warrants totaling approximately 6,152,233 and 6,223,134 at December 31, 2024 and 2023 , respectively were excluded from the computation of loss per share as the strike price on the options and warrants were higher than the Company's market price and therefore anti-dilutive.

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.

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Our significant estimates include:

contingent purchase consideration valuation, allowance for credit losses, 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.

contingent purchase consideration valuation, allowance for credit losses, valuation allowances related to deferred taxes, and assumptions and estimates used to evaluate the recoverability of goodwill and other intangible assets and the related amortization methods and periods.

Actual results could differ from those estimates.

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Depreciation expense was $ 201 and $ 166 for the years ended December 31, 2024 and 2023 , respectively.

During the year ended December 31, 2023, the Company disposed of certain fully depreciated fixed assets with an acquisition value of $ 150 , no such disposals occurred during the year ended December 31, 2022.

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.

We capitalized approximately $ 3,366 and $ 4,444 for the years ended December 31, 2023 and 2022 , respectively.

These software development costs include both enhancements and upgrades of our customer-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 other intangible assets, net on the Consolidated Balance Sheets.

The Company disposed of certain fully depreciated fixed assets with an acquisition value of $ 310 and $ 150 for the years ended December 31, 2024 and 2023 , respectively.

Contingent Consideration

The Company has contingent consideration arrangements related to certain acquisitions to potentially pay additional cash amounts in future periods based on the lack of achievement of certain share price performance goals of our common stock.

Such contingent consideration arrangements are recorded at fair value and are classified as liabilities on the acquisition date and are remeasured at each reporting period in accordance with ASC 805 - 30 - 35 - 1 using a Monte Carlo simulation model.

On November 12, 2021, the Company, Reflect, CRI Acquisition Corporation, a direct wholly owned subsidiary of the Company (“CRI Acquisition”), and RSI Exit Corporation, representative of the former Reflect stockholders (“RSI”), entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”), pursuant to which CRI Acquisition merged with and into Reflect, with Reflect surviving the merger and becoming our wholly owned subsidiary (the “Merger”).

At the effective time of the Merger, which occurred on February 17, 2022, all shares of Reflect’s capital were converted into the right to receive cash and a total of 2,333,334 shares of Creative Realities common stock (the “Merger Shares”).

The Merger Agreement also requires the Company to pay to the former Reflect stockholders additional contingent cash payments (the “Guaranteed Consideration”), if any, payable on or after February 17, 2025 ( subject to the Extension Option described below, the “Guarantee Date”), in an amount by which the value of the Merger Shares on the Guarantee Date is less than $ 6.40 per share (such applicable amount, the “Guaranteed Price”), multiplied by the number of Merger Shares held by the Reflect stockholders on the Guarantee Date.

On March 23, 2023, after the closing of the Merger, the Company completed a 1 -for- 3 reverse stock split (the “Reverse Split”) primarily intended to bring the Company into compliance with the minimum bid price requirements to maintain the listing of its common stock on the Nasdaq Capital Market.

As a result of the Reverse Split, the number of Merger Shares decreased from 2,333,334 to 777,778 .

The Company and RSI have engaged in discussions regarding the impact that the Reverse Split had on the calculation of the Guaranteed Consideration, given that the Merger Agreement provides for a Guaranteed Price of $6.40 per share and does not provide for any adjustment to the Guaranteed Price as a result of the Reverse Stock Split or other similar transaction with respect to the Company’s common stock.

To date, the Company and RSI have not reached any agreement regarding the methodology for calculating Guaranteed Consideration under the plain terms of the Merger Agreement, and commencing March 17, 2025, former Reflect stockholders seeking payment of Guaranteed Consideration may submit written demands to the Company for a 30 -day period.

The contingent liability associated with the Guaranteed Consideration is recorded in the Company’s Consolidated Balance Sheets at fair value and is remeasured at each reporting period in accordance with ASC 805 - 30 - 35 - 1 using a Monte Carlo simulation model.

For financial statement purposes, consistent with prior reporting periods since the Reverse Split, the Company has and continues to book a contingent liability as of December 31, 2024 related to the Guaranteed Consideration as though the Reverse Split increased the Guaranteed Price from $6.40 per share to $ 19.20 per share, thereby recording an estimated potential liability for contingent consideration, at fair value of $ 12,815 .

The contingent liability, at fair value, as of December 31, 2024 related to the Guaranteed Consideration that would be calculated using a Guaranteed Price of $6.40 per share would result in an estimated liability of $ 3,017 .

The Company engaged an outside independent valuation firm to calculate the fair value of the Guaranteed Consideration at both the $6.40 and $19.20 Guaranteed Prices.

While we believe that the Merger Agreement provides no adjustment to the Guaranteed Price as a result of the Reverse Split, resulting in a lower amount of Guaranteed Consideration than the contingent liability reflected in our financial statements, no assurance can be provided that our interpretation of the Merger Agreement will ultimately be accepted by RSI and the former Reflect stockholders, or by any arbitrator or court that ultimately adjudicates the matter.

The Company may exercise an extension option (the “Extension Option”) to extend the Guarantee Date by six ( 6 ) months, from February 17, 2025 to August 17, 2025, if (i) the Extension Threshold Price is greater than or equal to 70 % of the Guaranteed Price described above, and (ii) the Company provides written notice of its election to exercise the Extension Option no later than February 7, 2025.

The “Extension Threshold Price” means the average closing price per share of Creative Realities common stock as reported on the Nasdaq Capital Market (or NYSE) in the fifteen ( 15 ) consecutive trading day period ending February 2, 2025.

The Merger Agreement provides that 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 (which amount has not been adjusted as a result of the Reverse Split).

FAIR VALUE MEASUREMENT

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$ 50,854 $ 45,166

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.

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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.

Managed Services

Software as a service license sales

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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.

Contracts for these services are generally 12 - 36 months in length and typically have perpetual autorenewal terms.

We account for revenue from these services in accordance with ASC 985 - 20 - 15 - 5 and recognize revenue ratably over the performance period.

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

Maintenance and support services

The Company sells support services that 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.

These contracts are generally 12 - 36 months in length.

The Company offers a hosting service through our network operations center, or NOC, allowing the ability to monitor and support our customers’ networks 7 days a week, 24 hours a day.

These contracts are generally 12 - 36 months in length and typically have autorenewal terms.

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.

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

These agreements are renewable by the customer.

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In each instance, installation services are recognized at the time of completion.

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

Other Services

Software design and development services

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Software is delivered to customers electronically.

Software design and development revenues are classified as “Other Services” within our disaggregated revenue.

Media revenues are derived from selling (i) promotion and sponsorship packages to monetize customer infrastructure assets, including mobile takeover or physical presence, or (ii) digital advertising inventory to advertisers on digital displays or other outdoor structures, owned or controlled by our customers, each within physical venues.

We generally do not own the physical structures on which digital advertising we sell is displayed but instead sell advertising or sponsorship opportunities on behalf of our media network owners to our brands and advertisers..

We sell advertising or sponsorship opportunities on behalf of our media network owner customers to brands and advertisers.

We generally do not own the devices that display the sold digital advertising.

The Company has concluded that it acts as an agent and reports media revenues on a net basis, with the Company recording its commission, which typically is between thirty percent ( 30 %) and forty percent ( 40 %) of the total media sales contract, as revenue in the consolidated financial statements.

The media sales contracts we facilitate on behalf of our customers range from a single day to eight years.

The Company facilitates billing advertisers on behalf of our customers and does not remit the net cash to our customer until the advertiser has paid the Company the fees owed for such advertising.

The Company invoices advertisers on behalf of our customers and remits the net cash to our customer after the advertiser has paid the Company the fees owed for such advertising.

Media revenue services are recognized when the Company has completed its performance obligations under the contract with our customers, which typically has concluded upon facilitating execution of contracts between our customer and a brand/advertiser.

The Company applies time-based constraints in accordance with ASC 606 to evaluate the earned portion of the contract to record at execution.

Media revenues are classified as “Other Services” within our disaggregated revenue.

For revenues generated through the use of a subcontracted advertising agency, commissions are calculated based on a stated percentage of gross advertising revenue and reported in the Consolidated Statement of Operations within Sales and Marketing expenses.

Software as a service perpetual license sales

Rarely, the Company sells perpetual licenses to its software products under legacy contractual arrangements (as opposed to subscription licenses).

These sales include revenue from the sale of a perpetual license to customers that host their own instances of our software.

These services traditionally are accompanied by the sale of maintenance and support services contracts.

Perpetual license revenue is classified as "Other Services" within our disaggregated revenue.

BUSINESS COMBINATION

On November 12, 2021, the Company and Reflect, entered into an Agreement and Plan of Merger (as amended on February 8, 2022 and February 11, 2023, the “Merger Agreement") pursuant to which a direct, wholly owned subsidiary of Creative Realities, CRI Acquisition Corporation, would merge with and into Reflect, with Reflect surviving the merger and becoming our wholly owned subsidiary, 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, at the Closing, Reflect stockholders as of the effective time of the Merger collectively received from the Company, in the aggregate, the following Merger consideration:

(i) $ 16,166 in cash, (ii) 777,778 shares of common stock of Creative Realities (valued based on an issuance price of $ 6 per share) (the “CREX Shares”), and (iii) the Secured Promissory Note (as described below).

In addition, the Merger Agreement requires the Company to pay to the Reflect stockholders additional contingent supplemental cash payments (the “Guaranteed Consideration”), if any, payable on or after February 17, 2025 ( 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).

The Company has recorded contingent liabilities related to the Guaranteed Consideration to reflect the Company's 1 -for- 3 reverse stock split that occurred on March 23, 2023.

At or before December 31, 2022, the condition of certain customers of Reflect collectively to achieve over 85,000 billable devices online was not met.

Accordingly, the amount of the Company's potential liability related to the contingent consideration was reduced at December 31, 2022 from $ 21.60 per share to $ 19.20 per share, a reduction of $ 2.40 per share.

The Merger Agreement provides that 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.

The Retention Bonus Plan is described below.

Retention Bonus Plan

On February 17, 2022, in connection with the Closing, the Company adopted a Retention Bonus Plan, pursuant to which the Company is required to pay to key members of Reflect’s management team an aggregate of $ 1,334 in cash, which was paid 50 % at the Closing, and subject to continuous employment with Reflect or Creative Realities, 25 % was paid on February 17, 2023 ( the one -year anniversary of Closing) and 25 % was paid on February 17, 2024 ( the two -year anniversary of the Closing).

In connection with the closing of the Merger, the future cash payments due on the one -year and two -year anniversaries of the Closing were deposited into an escrow agreement.

The Retention Bonus Plan also requires the Company to issue Common Stock having an aggregate value of $ 667 to the plan participants as follows:

50 % of the value of such shares were issued at the Closing, and subject to continuous employment with Reflect or Creative Realities, 25 % of the value of such shares was issued on February 17, 2023 ( the one -year anniversary of Closing) and the remaining 25 % of the value of such shares will be issued on February 17, 2024 ( the two -year anniversary of the Closing).

The shares issued on the Closing were valued at $ 6.00 per share.

The shares issued on the one -year anniversary were valued at $ 2.22 based on the value of shares issuable divided by the trailing 10 -day volume weighted average price ("VWAP") of the shares as of February 17, 2023 as reported on the Nasdaq Capital Market.

The Company issued 62,475 shares to key members of Reflect's management team pursuant to the Retention Bonus Plan.

Certain participants made an election to have stock withheld to cover applicable withholding taxes.

In such cases, the Company reduced the stock award issued to the employee and settled the employees tax liability by remitting cash to the applicable taxing authorities.

The shares issued on the two -year anniversary were valued at $ 3.29 based on the value of shares issuable divided by the trailing 10 -day volume weighted average price ("VWAP") of the shares as of February 17, 2024 as reported on the Nasdaq Capital Market.

The Company issued 37,632 shares to key members of Reflect's management team pursuant to the Retention Bonus Plan.

Certain participants made an election to have stock withheld to cover applicable withholding taxes.

In such cases, the Company reduced the stock award issued to the employee and settled the employees tax liability by remitting cash to the applicable taxing authorities.

Upon the resignation of a participant’s employment for “good reason,” or termination of the employment of a participant without “cause,” each as defined in the Retention Bonus Plan, the participant will be fully vested and will receive all cash and shares allocated to such participant under the Retention Bonus Plan.

Any amounts unpaid by reason of a lapse in continuous employment or otherwise will be reallocated among the remaining Retention Bonus Plan participants.

Purchase price

The preliminary purchase price of Reflect consisted of the following items:

Consideration

Cash consideration for Reflect stock

Cash consideration for Retention Bonus Plan

Common stock issued to Reflect shareholders

Common stock issued to Retention Bonus Plan

Secured Promissory Note

Contingent consideration

Total consideration

Vendor deposit with the Company

Cash acquired

Net consideration transferred

Cash consideration for outstanding shares of Reflect capital stock per Merger Agreement.

Cash consideration utilized to fund the Retention Bonus Plan per Merger Agreement.

Company common stock issued in exchange for outstanding shares of Reflect capital stock per Merger Agreement.

Company common stock issued to fund initial issuances under the Retention Bonus Plan per Merger Agreement.

The Secured Promissory Note accrued interest at 0.59 % (the applicable federal rate at the time of issuance of the Secured Promissory Note) and required the Company and Reflect to collectively pay equal monthly principal installments of $ 104 on the fifteenth ( 15th ) day of each month, commencing on March 15, 2022.

On February 11, 2023, the Company and the Stockholders’ Representative executed an amendment (the “Note Amendment”) to the Secured Promissory Note.

The Note Amendment eliminated the balloon payment, extending the maturity date for a one -year period, to February 17, 2024.

During the extended period, the Company continued to make monthly principal payments of $ 104 , and the annual interest rate on the outstanding principal increased from 0.59 % to 4.60 %, which will accrue and is payable in full on the new maturity date.

Represents an estimate of the fair value of the Guaranteed Consideration as of the Merger, which, if any, is payable on or after February 17, 2025 ( subject to the Extension Option), in an amount by which the value of the CREX Shares on such anniversary is less than $ 6.40 per share, multiplied by the amount of CREX Shares held by the Reflect stockholders on the Guarantee Date (subject to the Extension Option), subject to the terms of the Merger Agreement.

The Company has recorded contingent liabilities related to the Guaranteed Consideration to reflect the Company's 1 -for- 3 reverse stock split that occurred on March 23, 2023.

Prior to the Merger, Reflect had engaged the Company on a project and paid the Company a deposit of $ 818 .

These amounts reduced consideration paid by the Company in accordance with ASC 805.

Represents the Reflect cash balance acquired at Closing.

The Company incurred $ 444 of direct transaction costs related to the Reflect Merger for the year ended December 31, 2022.

These costs are included in deal and transaction expense in the accompanying Consolidated Statements of Operations.

The Company accounted for the Merger using the acquisition method of accounting.

The final allocation of the purchase price is based on the fair value of assets acquired and liabilities assumed as of February 17, 2022, which included the following:

Accounts receivable

Prepaid expenses & other current assets

Property and equipment

Operating right of use assets

Identified intangible assets:

Definite-lived trade names

Definite-lived developed technology

Definite-lived customer relationships

Definite-lived noncompete agreements

Accounts payable

Accrued expenses

Customer deposits

Deferred revenues

Current maturities of operating leases

Long-term obligations under operating leases

Other liabilities

Net consideration transferred

The Company engaged a third -party valuation specialist to assist in the identification and calculation of the fair value of those separately identifiable intangible assets.

The Company completed its valuation procedures by asset utilizing the following approaches:

( 1 ) Customer relationship asset was estimated using the income approach through a discounted cash flow analysis wherein the cash flows will be based on estimates used to price the Merger.

Discount rates were benchmarked with reference to the implied rate of return from the Company’s pricing model and the weighted average cost of capital.

( 2 ) Trade name asset represents the “Reflect” brand name as marketed primarily as a full services digital software solution, marketed in numerous verticals with the exception of food service.

The Company applied the income approach through an excess earnings analysis to determine the fair value of the trade name asset.

The Company applied the income approach through a relief-from-royalty analysis to determine the fair value of this asset.

( 3 ) The developed technology assets are primarily comprised of know-how and functionality embedded in Reflect’s proprietary content management applications, which drive currently marketed products and services.

The Company applied the income approach through a relief-from-royalty analysis to determine the preliminary fair value of this asset.

The Company is amortizing the identifiable intangible assets on a straight-line basis over the weighted average lives ranging from 2 to 10 years as outlined in the table below.

The table below sets forth the valuation and amortization period of identifiable intangible assets:

Identifiable definite-lived intangible assets:

$ 960 5 years

Developed technology

5,130 10 years

Customer relationships

11,040 10 years

The Company estimated the preliminary fair value of the acquired property, plant and equipment using a combination of the cost and market approaches, depending on the component.

The preliminary fair value of such property, plant and equipment is $ 96 .

The excess of the purchase price over the fair value of the tangible net assets and identifiable intangible assets acquired was recorded as goodwill.

The factors contributing to the recognition of the amount of goodwill are based on several strategic and synergistic benefits that are expected to be realized from the Merger.

These benefits include a comprehensive portfolio of iconic customer brands, complementary product offerings, enhanced national footprint, and attractive synergy opportunities and value creation.

None of the goodwill is expected to be deductible for income tax purposes.

For revenues generated through the use of a subcontracted advertising agency, commissions are calculated based on a stated percentage of gross advertising revenue and reported in the Consolidated Statements of Operations within Sales and Marketing Expenses.

SUPPLEMENTAL CASH FLOW STATEMENT INFORMATION

Supplemental non-cash Investing and Financing activities

Capitalized software in accounts payable

Property and equipment in accounts payable

Capitalized software labor in accounts payable

Supplemental disclosure information for cash flow

9 unchanged sentences

In-Process internally developed software platform

6,080 - 4,074 -

Customer relationships

8 unchanged sentences

For the years ended December 31, 2024 and 2023 , amortization of intangible assets charged to operations was $ 3,877 and $ 3,055 , respectively.

For the year ended December 31, 2024, the Company wrote-off a $ 30 fully amortized noncompete asset and the related accumulated amortization.

For the year ended December 31, 2023, the Company wrote-off a $ 340 fully amortized trade name asset, a $ 1,090 fully amortized customer list asset, a $ 2,864 fully amortized technology asset , a $ 758 fully amortized capitalized software and the related accumulated amortization.

11 unchanged sentences

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 its reporting unit.

Fair value of the reporting unit was estimated using both ( 1 ) a market approach, leveraging recent industry merger and acquisition activity as well as comparable public company information, and ( 2 ) 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 current and preceding three years, further informed by known backlog and customer acquisitions.

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, 2023.

While our overall business performance has been consistent with our expectations, both before and after the acquisition of Reflect, we believe a significant portion of the decline in our market price as of our assessment date related primarily to both macroeconomic and recent capital transaction factors including:

( 1 ) market wide recessionary fears, ( 2 ) a lack of comprehension by the markets of the contingent consideration issued in the Merger with Reflect, and ( 3 ) the Company’s recent execution of a public offering of 3,000,000 shares of our common stock at a discount to then-market prices, resulting in significant short-term negative volume and price pressure on our common stock unrelated to the Company fundamentals.

We do not believe these factors are consistent with or reflective of the underlying value of the business, and there were no other indicators of potential impairment as of September 30, 2023.

Based on the improvement of our share price and market capitalization, along with improving Company fundamentals, we believe our implied fair value continues to exceed our total carrying value as of December 31, 2023.

Using the quantitative approach, fair value of the reporting unit is estimated using both ( 1 ) a market approach, leveraging recent industry merger and acquisition activity as well as comparable public company information, and ( 2 ) 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 gives significant consideration to actual historic financial results, including revenue growth rates in the current and preceding three years, further informed by known backlog and customer acquisitions.

Using the qualitative approach, the Company reviews macroeconomic conditions, industry and market conditions and entity specific factors, including strategies and financial performance for potential indicators of impairment.

The Company performed its annual impairment of goodwill qualitatively in 2024, and quantitatively in 2023 to determine whether it is more likely than not that the fair value of our reporting unit is below its carrying amount.

Based on the Company’s assessment, we determined that the fair value of our reporting unit exceeded its carrying value, and accordingly, the goodwill associated with the reporting unit was not considered to be impaired at September 30, 2024 and 2023.

No indicators of potential impairment were identified as of December 31, 2024.

We believe our implied fair value continues to exceed our total carrying value as of December 31, 2024.

The Company recognizes that any changes in our projected 2025 results could potentially have a material impact on our assessment of goodwill impairment.

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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.

Further discussion of the notes follows.

As of December 31, 2023

Debt of the Company consists of the following:

Interest Rate

Debt Instrument

Revolving Credit Facility

$ 13,044 $ - None

Acquisition Term Loan

$ - $ 10,000 833,334 8 %

833,334 8.0% interest (1)

Consolidation Term Loan

- 5,147 898,165 10 %

898,165 10.0% interest (2)

Total debt, gross

$ 13,044 $ 15,147

Debt discount

Deferred financing costs

Total debt, net

Less current maturities

Long term debt

As of December 31, 2022

Interest Rate

$ 12,801 $ 13,519

833,334 8.0% interest (1)

7,185 2/15/2025

898,165 10.0% interest (2)

1,456 2/17/2024

- 0.59% interest (3)

2,000 9/1/2023

- 12.5% interest (4)

Total debt, gross

Current portion

Total long-term debt, net

$ 12,801 $ 9,829

Debt discount

Total debt, gross

Less current maturities

Total debt, net

A – Acquisition Term Loan with related party

B – Consolidation Term Loan with related party

C – Secured Promissory Note

D – Term Loan ( 2022 ) with related party

8.0 % cash interest per annum through maturity at February 15, 2025

10.0 % cash interest per annum through maturity date at February 15, 2025.

0.59 % cash interest per annum (the applicable federal rate) through February 17, 2023.

Annual interest rate on the outstanding principal increased from 0.59 % to 4.60 % per annum through maturity.

12.5 % cash interest per annum through maturity at September 1, 2023.

Secured Promissory Note

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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.

The Company assessed the combination of the pre-existing senior secured term loan and secured convertible loan in accordance with ASC 470 Debt and determined the transaction should be accounted for as an extinguishment, in part as the Consolidation Term Loan eliminated a substantive conversion feature.

In aggregate the Company recorded a loss on extinguishment of $ 295 during the year ending December 31, 2022, primarily associated with the write-off of pre-existing debt discounts.

In addition to refinancing the existing debt with Slipstream, the Company issued to Slipstream a $ 10,000 , 36 -month senior secured term loan (the “Acquisition Term Loan”) resulting in $ 10,000 in gross proceeds, or $ 9,950 in net proceeds.

The Acquisition Term Loan matures on February 17, 2025 ( the “Maturity Date”) and has an interest rate of 8.0 %, with 50.0 % warrant coverage (or 833,334 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 Term Loan.

No principal payments on the Acquisition Term Loan are payable until the Maturity Date.

The Acquisition Term Loan matured on February 17, 2025 ( the “Maturity Date”) and had an interest rate of 8.0 %, with 50.0 % warrant coverage (or 833,334 warrants).

On the first day of each month, commencing March 1, 2022 through February 1, 2025, the Borrowers were required to make interest-only payments on the Acquisition Term Loan.

No principal payments on the Acquisition Term Loan were payable until the Maturity Date.

In connection with the Acquisition Term Loan and Consolidation Term Loan warrant coverage, the Company issued to Slipstream a warrant to purchase an aggregate of 1,731,499 shares of Company common stock (the “Lender Warrant”).

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In recording the warrant liability, the Company recorded a debt discount associated with each of the Acquisition and Consolidation Term Loans in an amount of $ 2,032 and $ 2,190 , respectively.

These amounts are being amortized straight-line through interest expense over the life of the loans, resulting in incremental interest expense of $ 1,443 and $ 1,268 for the years ended December 31, 2023 and 2022 , respectively.

The Company has deemed straight-line amortization to be materially consistent with the effective interest method.

These amounts are amortized straight-line through interest expense over the life of the loans.

In certain circumstances, upon a fundamental transaction of the Company (e.g., a disposal or sale of all or the greater part of the assets or undertaking of the Company, an amalgamation or merger with another company, or implementation of a scheme of arrangement), 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;

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As of December 31, 2023, the Term Loan 2022 has been repaid in full to Slipstream.

Revolving credit facility

On May 23, 2024, the Company entered into a Credit Agreement (the "Credit Agreement") with First Merchants Bank (the "Bank").

The Credit Agreement provides the Company with a $ 22,100 secured revolving credit facility, with an uncommitted accordion feature that provides for additional borrowing capacity of up to $ 5,000 , subject to the Bank's approval and other customary terms and conditions set forth in the Credit Agreement.

The revolving credit facility matures on May 23, 2027, subject to any earlier default under the Credit Agreement.

The Credit Agreement requires the Company to pay the entire unpaid principal balance of the revolving credit facility on the maturity date, subject to any earlier default under the Credit Agreement.

The Credit Agreement includes, among other things, the occurrence of any event which could reasonably be anticipated to cause or result in a “Material Adverse Effect” (as defined in the Credit Agreement) as an event of default under which the outstanding balance could become due and payable to the Bank.

The Company has determined that the risk of such event is not probable and therefore has classified the outstanding balance in long-term liabilities in the Consolidated Balance Sheets based on the maturity date.

Obligations under the Credit Agreement are secured by all assets of the Company.

On May 23, 2024, the Company borrowed $ 13,667 under the revolving credit facility to repay all obligations owing to its prior lender, Slipstream Communications, LLC, including the outstanding principal balance of $ 10,000 on the Acquisition Term Loan, the outstanding principal balance of $ 3,593 on the Consolidation Term Loan and accrued interest expense incurred through the payoff date of $ 74 .

The Company recognized a $ 1,059 loss on extinguishment of debt equal to the unamortized portion of debt discount at May 23, 2024 associated with the Acquisition Term Loan and Consolidation Term Loan.

The revolving credit facility accrues interest at a floating rate equal to the 1 -month SOFR, plus 0.11 %, plus a floating margin ranging from 2.00 % to 3.50 % that adjusts quarterly, depending upon the Company's Senior Funded Debt to EBITDA Ratio.

The floating margin is determined as follows:

Senior Funded Debt to EBITDA Ratio

Floating Margin

≥ 1.00 to 1.00 but < 2.00 to 1.00

≥ 2.00 to 1.00 but < 3.00 to 1.00

≥ 3.00 to 1.00

The effective interest rate at December 31, 2024 was 7.16 %.

The Company pays accrued interest monthly on the first day of each successive calendar month.

The Company incurred $ 306 of deferred financing costs that were capitalized and recorded as other non-current assets within the Consolidated Balance Sheets.

Deferred financing costs are being amortized as interest expense over the respective debt instrument period, 36 months.

The Company had $ 13,044 in outstanding borrowings under the revolving credit facility as of December 31, 2024.

Total availability under the revolving facility was $ 5,056 , after accounting for $ 4,000 reserved under the Credit Agreement until resolution of the Contingent Consideration.

As of December 31, 2024, the Company was in compliance with all applicable debt covenants.

COMMITMENTS AND CONTINGENCIES

On August 2, 2019, the Company filed suit in Jefferson Circuit Court, Kentucky, against a supplier of the Company’s wholly owned subsidiary, Allure, for breach of contract, breach of warranty, and negligence with respect to equipment installations performed by such supplier for an Allure customer.

On October 10, 2019, the Allure customer that is the basis of our claim above sent a demand to the Company for payment of $ 3,200 as settlement for an alleged breach of contract related to hardware failures of equipment installations performed by Allure between November 2017 and August 2018.

On March 10, 2023, the Company, the supplier and the Allure customer reached a Settlement Agreement and Release of Claims ("Settlement Agreement").

Pursuant to the Settlement Agreement, the Company was obligated to pay $733;

however, its insurer agreed to pay $ 700 of that amount.

Thus, the Company paid $ 33 of the settlement amount in April 2023.

Except as noted above, the Company is not party to any other material legal proceedings, other than ordinary routine litigation incidental to the business, and there were no other such proceedings pending during the period covered by this Report.

The Company is not party to any material legal proceedings, other than ordinary routine litigation incidental to the business, and there were no other such proceedings pending during the period covered by this Report.

Income tax expense consisted of the following:

3 unchanged sentences

Deferred tax expense – federal

Deferred tax expense (benefit) – state

Deferred tax expense – state

The income tax expense includes federal and state income taxes currently payable and those deferred or prepaid because of temporary differences between financial statement and tax bases of assets and liabilities.

5 unchanged sentences

State taxes, net of federal benefit

1.28 % ( 2.02 )%

Foreign rate differential

1.05 % ( 2.51 )%

Fair value of Warrant Liability/Contingent Consideration

Fair value of Contingent Consideration

( 9.7 )% ( 6.5 )%

Discrete items, Transaction items, and Other

Provision-to-return adjustments ( 5.6 )% 0.5 %

Net operating loss expirations ( 24.5 )% ( 2.5 )%

Deferred tax true-ups ( 0.2 )% ( 1.0 )%

State rate changes

( 0.5 )% 2.0 %

Other permanent ( 1.6 )% ( 1.2 )%

Changes in valuation allowance

14 unchanged sentences

Net foreign carryforwards

Research and development credits 2,312 2,312

US net operating loss and contribution carryforwards

13 unchanged sentences

Our deferred tax assets are primarily related to net federal and state operating loss carryforwards (NOLs).

As of December 31, 2023 , the Company has federal and state net operating loss carryforwards expiring between 2024 and 2043, $ 13,808 of which has an indefinite carryforward period.

As of December 31, 2024 , the Company has federal net operating loss carryforwards of $ 36,433 , federal contribution carryforwards of $ 13 , and state net operating loss carryforwards of $ 991 expiring between 2025 and 2044, $ 2,631 of which have an indefinite carryforward period but are subject to limitation on usage such that they cannot be utilized to offset more than 80% of taxable income in a given tax year.

The federal statute of limitations remains open for tax years 2020 through 2023 and state tax jurisdictions generally have statutes of limitations open for tax years 2020 through 2023.

3 unchanged sentences

Based on the history of losses of the Company, there continues to be a full valuation allowance against the net deferred tax assets of the Company.

A summary of outstanding warrants for the years ended December 31, 2023 and 2022 is included below:

Year Ended December 31, 2023

Warrants (Equity)

A summary of outstanding warrants accounted for as equity instruments in the Company's Consolidated Financial Statements for the years ended December 31, 2024 and 2023 is included below:

Average Exercise

Contractual Life

Balance January 1, 2023

Balance December 31, 2022

5,824,027 $ 6.56 4.21

3 unchanged sentences

4,587,002 $ 4.90 4.11

Year Ended December 31, 2022

Warrants (Equity)

Average Exercise

Contractual Life

Balance January 1, 2022

1,367,737 $ 13.44 1.73

Warrants issued

1,950,502 4.60 5.00

Warrants exercised

( 1,950,502 ) 4.60 4.86

Warrants expired

( 130,712 ) 10.44 -

Warrants reclassified

4,587,002 4.90 4.73

Balance December 31, 2024

4,587,002 $ 4.90 3.11

On February 3, 2022, the Company entered into a 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) 438,334 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 438,334 shares of Common Stock, and (ii) pre-funded warrants to purchase up to an aggregate of 1,950,502 shares of Common Stock (the “Pre-Funded Warrants”) and accompanying warrants to purchase an aggregate of 1,950,502 shares of Common Stock.

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 $ 4.605 , and each Pre-Funded Warrant and accompanying warrants to purchase Common Stock were sold together at a combined price of $ 4.6047 , for gross proceeds of approximately $ 11,000 , before deducting placement agent fees and estimated offering expenses payable by the Company.

In 2022, each of the Pre-Funded Warrants were exercised.

The Common Stock Warrants expire five years from the date of issuance.

The Company evaluated the Pre-Funded Warrants and concluded that they met the criteria to be classified within stockholders’ equity, with proceeds recorded as common stock and additional paid-in-capital.

The Company evaluated the Common Stock Warrants and concluded they do not meet the criteria to be classified within stockholders’ equity.

The Common Stock Warrants included provisions which could result in a different settlement value for the Common Stock Warrants depending on the registration status of the underlying shares.

Because these conditions were not an input into the pricing of a fixed-for-fixed option on the Company’s ordinary shares, the Common Stock Warrants are not considered to be indexed to the Company’s own stock.

The Company recorded the Common Stock Warrants as liabilities on the Consolidated Balance Sheets at fair value, with subsequent changes in their respective fair values recognized in the Consolidated Statements of Operations at each reporting date.

At the date of issuance, the Company performed a Black-Scholes valuation of the Common Stock Warrants, resulting in a fair value of $ 3.2781 per Common Stock Warrant.

At June 30, 2022, the Company reassessed the fair value of the Common Stock Warrants via Black Scholes valuation methodology and determined that the fair value of the Common Stock Warrants was $ 1.2057 per Common Stock Warrant, resulting in the Company recording a gain on the fair value of the Common Stock Warrants of $ 4,950 in the Consolidated Statement of Operations for the year ended December 31, 2022.

On February 17, 2022, in connection with the Credit Agreement with Slipstream, the Company issued to Slipstream the Lender Warrants.

The Lender Warrants were not exercisable until 180 days after the issuance date.

The common shares underlying the Lender Warrants have not yet been registered for resale under the Securities Act of 1933, which provided Slipstream with an option for cashless exercise once the Lender Warrants became exercisable until such time as such registration occurs.

The Lender Warrants expire five years from the date of issuance.

The Company evaluated the Lender Warrants and concluded that they do not meet the criteria to be classified within stockholders’ equity.

The Lender Warrants include provisions which could result in a different settlement value, for the Lender Warrants depending on the registration status of the underlying shares.

Because these conditions are not an input into the pricing of a fixed-for-fixed option on the Company’s ordinary shares, the Lender Warrants are not considered to be indexed to the Company’s own stock.

The Company recorded the Lender Warrants as liabilities on the Consolidated Balance Sheets at fair value, with subsequent changes in their respective fair values recognized in the Consolidated Statements of Operations at each reporting date.

At the date of issuance, the Company performed a Black-Scholes valuation of the Lender Warrants, resulting in a fair value of $ 2.4387 per Lender Warrant.

In recording the Lender Warrants liability, the Company recorded an increase in debt discount in the Consolidated Balance Sheet associated with the issuance of the Lender Warrants of $ 4,223 , which is being amortized through interest expense in the Condensed Consolidated Statement of Operations over the life of the Acquisition Term Loan and Consolidation Term Loans.

At June 30, 2022, the Company reassessed the fair value of the Lender Warrants via Black Scholes valuation methodology and determined that the fair value of the Lender Warrants was $ 1.1097 per Lender Warrant, resulting in the Company recording a gain on the fair value of the Lender Warrants of $ 2,302 in the Consolidated Statement of Operations for the year ended December 31, 2022.

On February 17, 2022, in connection with obtaining a waiver of certain restrictions in investment documents between an investor and the Company in order to consummate the financing contemplated by the Credit Agreement, the Company paid consideration to such investor in the form of a warrant (the “Purchaser Warrants”) to purchase 466,667 shares of Company common stock in an at-the-market offering under Nasdaq rules.

The number of shares of Company common stock subject to the Purchaser Warrants is equal to the waiver fee ($ 175 ) divided by $ 0.375 per share.

The exercise price of the Purchaser Warrants is $ 4.23 per share, and the Purchaser Warrants were not exercisable until August 17, 2022.

The Purchaser Warrants expire five years from the date of issuance.

The Company evaluated the Purchaser Warrants and concluded that they do not meet the criteria to be classified within stockholders’ equity.

The Purchaser Warrants include provisions which could result in a different settlement value, for the Purchaser Warrants depending on the registration status of the underlying shares.

Because these conditions were not an input into the pricing of a fixed-for-fixed option on the Company’s ordinary shares, the Purchaser Warrants are not considered to be indexed to the Company’s own stock.

The Company recorded the Purchaser Warrants as liabilities on the Consolidated Balance Sheets at fair value, with subsequent changes in their respective fair values recognized in the Consolidated Statements of Operations at each reporting date.

At the date of issuance, the Company performed a Black-Scholes valuation of the Purchaser Warrants, resulting in a fair value of $ 2.5968 per Purchaser Warrant.

In recording the Purchaser Warrants liability, the Company recorded an expense in the Consolidated Statement of Operations associated with the issuance of the Purchaser Warrants of $ 1,211 .

At June 30, 2022, the Company reassessed the fair value of the Purchaser Warrants via Black Scholes valuation methodology and determined that the fair value of the Purchaser Warrants was $ 1.2051 per Purchaser Warrant, resulting in the Company recording a gain on the fair value of the Purchaser Warrants of $ 650 in the Consolidated Statement of Operations for the year ended December 31, 2022.

Effective June 30, 2022, the Company amended the terms of the Common Stock Warrants ( 2,388,836 warrants), Lender Warrants ( 1,731,499 warrants) and Purchaser Warrants ( 466,667 warrants).

The amendments to such warrants removes the holder’s option to determine the value of such warrants utilizing the VWAP of the Company’s common stock on the trading day immediately preceding the date of a notice in a cashless exercise, and removes the condition to exercising such warrants that the Company’s shareholders approve the exercise thereof (which had already been obtained).

The amendments to the warrants also extended the term of such warrants for an additional one year, such that the Common Stock Warrants will expire on February 3, 2028, and the Lender Warrants and Purchaser Warrants will expire on February 17, 2028.

As a result of the extension in term provided in exchange for the amendment, the Company reassessed the fair value of each of the Common Stock, Lender and Purchaser Warrants, resulting in the Company recording a loss on the fair value of these warrants of $ 345 in the Consolidated Statements of Operations for the year ended December 31, 2022.

The foregoing amendments to the warrants resulted in such warrants to be accounted for as equity instruments in the Company’s Consolidated Financial Statements.

As such, following recording the gains and losses with respect to these warrant amendments, the Company reclassified the warrant liability of $ 5,709 from noncurrent liabilities to additional paid-in-capital.

These amounts are reflected as additional paid-in-capital in the Consolidated Balance Sheet as of December 31, 2022.

The foregoing amendments to the warrants resulted in such warrants to be accounted for as equity instruments on the Company’s Consolidated Financial Statements as of June 30, 2022.

As such, the Company reclassified the warrant liability from noncurrent liabilities to additional paid-in-capital as of June 30, 2022.

These amounts are reflected as additional paid-in-capital in the Consolidated Balance Sheet as of December 31, 2022.

STOCK-BASED COMPENSATION

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Performance Vesting Options

Range of Exercise

Prices between

$4.01 - $8.00

Number Contractual Exercise Options Exercise

240,000 5.42 $ 7.59 240,000 $ 7.59

Market Vesting Options

Range of Exercise

Prices between

$0.01 - $4.00

Number Contractual Exercise Options Exercise

733,334 7.46 $ 3.00 - $ -

5 unchanged sentences

733,334 3.00 662,798 10.00 240,000 $ 7.59

100,000 3.00 - - - -

Forfeited or expired

3 unchanged sentences

The weighted average remaining contractual life for options exercisable is 5.1 years as of December 31, 2024 .

Valuation Information for Stock-Based Compensation

For purposes of determining estimated fair value under FASB ASC 718 - 10, Stock Compensation , the Company computed the estimated fair values of stock options using the Black-Scholes model.

Amendment to Performance Options

On June 1, 2020, Rick Mills, CEO, and Will Logan, CFO, were issued ten -year options to purchase 160,000 and 80,000 shares of common stock (the “Performance Options”), respectively, which vest in equal installments over a three -year period ( 2020 - 2022 ), subject to satisfying the Company revenue targets and EBITDA (earnings before interest, taxes, depreciation, and amortization) targets 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.

The 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.

On June 15, 2022, the Board approved of an amendment to the Performance Options to provide that the revenue target for the calendar year 2022 set forth therein ($ 38,000 ) was eliminated, and the remaining shares that are available for vesting under the Performance Options ( 106,667 unvested shares for Mr.

Mills and 53,334 for Mr.

Logan) (including the unvested portions of shares based on the satisfaction of the revenue targets for 2020 and 2021 by virtue of the catch-up provisions in the Performance Options) will fully vest upon the achievement of an updated EBITDA target for calendar year 2022 of $ 3,600 .

The Performance Options state that the calculation of EBITDA set forth in the Performance Options shall be calculated in a form consistent with the Company’s 2022 approved budget, which

(i) excluded any impact on EBITDA of:

(a) the accounting treatment (including any "mark-to-market accounting") of the Company's warrants or the "Guaranteed Consideration" (as defined in the Merger Agreement),

(b) non-recurring transaction expenses associated with the Merger and the capital raising financing activities of the Company to effectuate the Merger, and

(ii) included deductions related to any cash or stock bonuses paid or payable to any employees of the Company for services provided in calendar year 2022 (even if such bonuses are actually paid after calendar year 2022 ), including bonuses paid pursuant to the terms of the 2022 Cash Bonus Plan (as described below).

The unvested portion of the Performance Options as of December 31, 2022 vested in full effective March 30, 2023 upon confirmation by the Board of Directors of achievement of the performance metrics for the year ended December 31, 2022.

The exercise price of the foregoing options is $ 7.59 per share, the closing price of the Company’s common stock on the date of issuance (as adjusted by the Company's 1 -for- 3 reverse stock split in March 2023).

The options were issued from the 2014 Stock Incentive Plan.

Issuance of Options

On June 15, 2022, Messrs.

Mills and Logan received ten -year options to purchase 333,334 and 200,000 shares of common stock, respectively (the “New Options”).

The New Options are eligible to vest at any time on or prior to February 17, 2025 if the trailing 10 -trading day VWAP of the Company’s common stock, as reported on the Nasdaq Capital Market, exceeds the share price targets below, subject to such executive serving the Company as a director, officer, employee or consultant at such time:

Share Price Targets

$ 6.00 $ 9.00 $ 12.00 $ 15.00 $ 18.00 Price

Mills Shares Vested

16,667 33,334 50,000 66,667 83,334 83,334 333,334

Logan Shares Vested

10,000 20,000 30,000 40,000 50,000 50,000 200,000

Percentage of Shares Vested

5 % 10 % 15 % 20 % 25 % 25 %

The “Guaranteed Price” has the meaning ascribed to such term in the Merger Agreement.

The exercise price of the New Options is $ 3.00 per share, which exceeded the closing price of the Company’s common stock on the date of issuance (as adjusted by the Company's 1 -for- 3 reverse stock split in March 2023).

The New Options were issued from the Company’s 2014 Stock Incentive Plan, as amended.

An additional 100,000 options with identical market vesting restrictions were issued to non-executives.

The fair value of the options on the grant date varied between $ 0.63 and $ 1.11 per award as determined using the Monte Carlo model.

These values were calculated using the following weighted average assumptions:

Risk-free interest rate

Expected term (in years)

Expected price volatility

Dividend yield

At the grant date, the Company evaluated the probability of achieving the share price targets in each tranche based, in part, on work performed by the Company’s third party valuation specialist in conjunction with evaluating the contingent consideration.

As a result of that evaluation of probability, during the year-ended December 31, 2023, the Company recorded $ 13 of compensation expense.

These awards have not yet vested and are subject to actual share price performance through February 2025.

On November 17, 2021, Creative Realities’ Board of Directors updated its director compensation plan to compensate non-officer directors resulting in the Company granting 10 -year options to purchase an aggregate of 85,000 shares of its common stock to non-employee directors of the Company under the Company’s 2014 Stock Incentive Plan (the “Plan”).

One- third of the options vested immediately, with half of the remaining options vesting at each of the first and second anniversaries of the grant date.

The options have an exercise price of $ 6.63 , the market value of the Company’s common stock on the grant date.

The fair value of the options on the grant date was $ 5.23 and was determined using the Black-Scholes model.

These values were calculated using the following weighted average assumptions:

Risk-free interest rate

Expected term (in years)

Expected price volatility

Dividend yield

On June 1, 2020 the Board of Directors of the Company granted 10 -year options to purchase an aggregate of 526,667 shares of its common stock to employees of the Company subject to shareholder approval of an increase in the reserve of shares authorized for issuance under the Company’s 2014 Stock Incentive Plan (the “Plan”).

On July 10, 2020, the Company held a special meeting of the Company’s shareholders at which the shareholders approved the amendment to the Plan, which increased the reserve of shares authorized for issuance thereunder to 2,000,000 shares.

The options awarded vest over 3 years and have an exercise price of $ 7.59 , the market value of the Company’s common stock on the grant date.

The fair value of the options on the grant date was $ 5.61 and was determined using the Black-Scholes model.

These values were calculated using the following weighted average assumptions:

Risk-free interest rate

Expected term (in years)

Expected price volatility

Dividend yield

Stock Compensation Expense Information

ASC 718 - 10, Stock Compensation , requires measurement and recognition of compensation expense for all stock-based payments including warrants, stock options, restricted stock grants and stock bonuses based on estimated fair values.

Under the Amended and Restated 2006 Equity Incentive Plan, the Company reserved 573,334 shares for purchase by the Company’s employees and under the Amended and Restated 2006 Non-Employee Director Stock Option Plan the Company reserved 233,334 shares for purchase by the Company’s employees.

There are 3,890 options outstanding under the 2006 Equity Incentive Plan.

In October 2014, the Company’s shareholders approved the 2014 Stock Incentive Plan, under which 7,390,355 shares were reserved for purchase by the Company’s employees.

In August 2018, a special meeting of shareholders was held in which the shareholders voted to amend the Company’s 2014 Stock Incentive Plan to increase the reserve of shares authorized for issuance thereunder, from 7,390,355 shares to 18,000,000 shares.

Following a 1 -for- 30 reverse stock split, the shares authorized for issuance under the Company’s 2014 Stock Incentive Plan was reduced to 600,000 .

On July 10, 2020, the Company’s shareholders approved an amendment to the Company’s 2014 Stock Incentive Plan to increase the reserve of authorized for issuance thereunder to 6,000,000 .

Following a 1 -for- 3 reverse stock split, the shares authorized for issuance under the Company's 2014 Stock Incentive Plan was reduced to 2,000,000 .

Shares authorized for issuance under the Company's 2014 Stock Incentive Plan is 2,000,000 .

There are 1,565,231 options outstanding under the 2014 Stock Incentive Plan.

The Company’s ability to issue new awards under its 2014 Stock Incentive Plan expired in 2023.

On October 18, 2024, the Company’s shareholders approved the Company’s 2023 Stock Incentive Plan, which authorizes the issuance of up to 2,500,000 shares.

No awards have been issued under the Plan as of December 31, 2024.

Employee Awards

Compensation expense recognized for the issuance of stock options to employees for the years ended December 31, 2023 and 2022 of $ 383 and $ 1,689 , respectively, was included in general and administrative expense in the Consolidated Financial Statements.

At December 31, 2023 , there was $ 0 and $ 100 of total unrecognized compensation expense related to unvested share-based awards with time vesting and performance vesting criteria for employees, respectively.

Expense related to performance vesting options will be recognized over the next 14 months and will be adjusted for any future forfeitures as they occur.

Stock-based compensation expense recognized for the issuance of stock options to employees for the years ended December 31, 2024 and 2023 of $ 13 and $ 383 , respectively, was included in general and administrative expense in the Consolidated Financial Statements.

At December 31, 2024 , there was $ 2 of total unrecognized compensation expense related to unvested share-based awards with market vesting criteria for employees.

Compensation expense related to market vesting options will be recognized over the next 1.5 months and will be adjusted for any future forfeitures as they occur.

The fair value of options on the grant date varied between $ 0.63 and $ 1.11 per award as determined using the Monte Carlo model.

Non-Employee Awards

Compensation expense recognized for the issuance of stock options, including those options awarded to our Board of Directors, for the years ended December 31, 2024 and 2023 of $ 0 and $ 150 , respectively, was included in general and administrative expense in the Consolidated Financial Statements.

At December 31, 2023 , unrecognized compensation expense related to unvested share-based awards with time vesting criteria for non-employee directors was $ 0 .

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

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

During the year ended December 31, 2023 and December 31, 2022, the Company issued shares issuable in exchange for services in the amount of $ 55 and $ 100 , respectively.

SEGMENT INFORMATION AND SIGNIFICANT CUSTOMERS/VENDORS

At December 31, 2024 , there was no unrecognized compensation expense related to share-based awards to non-employees.

SEGMENT REPORTING

Segment Information

We currently operate in one reportable segment, marketing technology solutions.

Substantially all property and equipment is located at our offices in the United States, and a data center located in the United States.

All material sales for the years ended December 31, 2023 and 2022 were in the United States and Canada.

The marketing technology solutions segment generates revenue through three primary sources which includes ( 1 ) hardware sales from reselling digital signage hardware from original equipment manufacturers, ( 2 ) services from helping customers design, deploy, and manage their digital signage and ad-based networks, and ( 3 ) recurring subscription licensing and support revenue from our digital signage and ad-tech software platforms, which are generally sold via a SaaS model.

Our Chief Executive Officer is our chief operating decision maker (the “CODM”).

Our CODM evaluates performance and makes operating decisions about allocating resources based on financial data presented on a consolidated basis, accompanied by information about revenue disaggregated by service.

Our CODM uses the segment information primarily to evaluate the profitability and strategic growth potential of the segment.

The reported measures of profit or loss are benchmarked against historical performance and market expectations.

Based on this analysis, the CODM determines whether or not to invest in new technology or reallocate operating expenses - namely personnel.

In addition, the CODM reviews supplementary metrics such as disaggregated revenue as disclosed in Note 4 Revenue Recognition and customer growth to ensure that our strategic decisions are aligned with long-term performance goals.

The measure used by our CODM to assess performance and make operating decisions is net loss as reported on our Consolidated Statements of Operations.

Significant segment expenses are reported as total expenses on the Consolidated Statements of Operations.

Segment assets are disclosed in the Consolidated Balance Sheets.

Significant Customers

We had three customers that accounted for 15 %, 13 % and 10 % of revenue for the year ended December 31, 2024.

No customer accounted for more than 10% of revenue for the year ended December 31, 2023.

We had three customers that accounted for 44 % of revenue for the years ended December 31, 2022.

We had two and three customers that in the aggregate accounted for 50 % and 49 % of accounts receivable as of December 31, 2023 and 2022, respectively.

We had one customer that accounted for 16 % of accounts receivable at December 31, 2024 and two customers that accounted for 26 % and 23 % of accounts receivable at December 31, 2023.

Significant Vendors

We had one vendor that accounted for 38 % and 30 % of outstanding accounts payable at December 31, 2023 and 2022, respectively.

We had two vendors that accounted for 27 % and 10 % of outstanding accounts payable at December 31, 2024, and one vendor that accounted for 38 % of outstanding accounts payable at December 31, 2023.

The Company's lease portfolio is primarily comprised of operating leases for office space and finance leases for computer equipment.

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Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company determines the discount rate used to measure lease liabilities based on the rate implicit in the lease, if readily determinable.

If the implicit rate is not available, the Company an incremental borrowing rate, which is determined based on the rate at which the Company could borrow on a collateralized basis over a similar term and in a similar economic environment to the lease.

The following table summarizes the classification of operating and finance lease assets and obligations in the Company's Consolidated Balance Sheet as of December 31, 2024 and 2023:

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The following table provides lease term and discount rate information related to operating leases as of December 31, 2024:

Year Ended Year Ended

December 31, December 31,

Weighted average remaining lease term (years)

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

What changed 10-K

Item 9A. Controls and Procedures