crex20230331

crex20230331_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission File Number 001-33169

Creative Realities, Inc.

(Exact Name of Registrant as Specified in its Charter)

Minnesota		41-1967918
State or Other Jurisdiction of		I.R.S. Employer
Incorporation or Organization		Identification No.

13100 Magisterial Drive, Suite 100, Louisville KY		40223
Address of Principal Executive Offices		Zip Code

	(502) 791-8800
Registrant’s Telephone Number, Including Area Code

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	CREX	The Nasdaq Stock Market LLC
Warrants to purchase Common Stock	CREXW	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

APPLICABLE ONLY TO CORPORATE ISSUERS

As of May 15, 2023, the registrant had 7,409,027 shares of common stock outstanding.

PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

CREATIVE REALITIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

	*March 31,*			*December 31,*
	*2023*			*2022*
	(unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	3,905		$	1,633
Accounts receivable, net		6,849			8,263
Work-in-process and inventories, net		1,479			2,267
Prepaid expenses and other current assets		804			1,819
Total current assets	$	13,037		$	13,982
Property and equipment, net		245			201
Operating lease right-of-use assets		1,504			1,584
Intangibles, net		23,819			23,752
Goodwill		26,453			26,453
Other assets		44			43
TOTAL ASSETS	$	65,102		$	66,015

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	3,087		$	3,757
Accrued expenses		3,726			3,828
Deferred revenues		3,605			1,223
Customer deposits		785			2,478
Current maturities of operating leases		712			711
Short-term portion of Secured Promissory Note		1,146			1,248
Short-term portion of related party Consolidation Term Loan, net of $747 and $745 discount, respectively		2,048			1,251
Short-term related party Term Loan (2022)		1,750			2,000
Total current liabilities		16,859			16,496
Long-term Secured Promissory Note		-			208
Long-term related party Acquisition Term Loan, net of $1,312 and $1,484 discount, respectively		8,688			8,516
Long-term related party Consolidation Term Loan, net of $654 and $840 discount, respectively		3,736			4,349
Long-term obligations under operating leases		792			873
Contingent acquisition consideration, at fair value		9,865			9,789
Other liabilities		80			205
TOTAL LIABILITIES		40,020			40,436

SHAREHOLDERS’ EQUITY
Common stock, $0.01 par value, 66,666 shares authorized; 7,394 and 7,266 shares issued and outstanding, respectively		74			72
Additional paid-in capital		76,417			75,916
Accumulated deficit		(51,409	)		(50,409	)
Total shareholders’ equity		25,082			25,579
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	65,102		$	66,015

See accompanying notes to condensed consolidated financial statements

CREATIVE REALITIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

	*For the Three Months Ended*
	*March 31,*
	*2023*			*2022*
Sales
Hardware	$	4,322		$	6,459
Services and other		5,622			4,298
Total sales		9,944			10,757
Cost of sales
Hardware		3,206			5,382
Services and other		1,649			1,483
Total cost of sales		4,855			6,865
Gross profit		5,089			3,892
Operating expenses:
Sales and marketing expenses		1,136			707
Research and development expenses		366			241
General and administrative expenses		2,898			2,860
Depreciation and amortization expense		779			707
Deal and transaction expenses		-			391
Total operating expenses		5,179			4,906
Operating loss		(90	)		(1,014	)

Other income (expenses):
Interest expense, including amortization of debt discount		(803	)		(449	)
Change in fair value of warrant liability		-			5,469
Change in fair value of equity guarantee		(76	)		-
Loss on extinguishment/settlement of obligations		-			(295	)
Loss on debt waiver consent		-			(1,212	)
Other income		12			6
Total other income (expense)		(867	)		3,519
Net (loss) income before income taxes		(957	)		2,505
Provision for income taxes		(43	)		(3	)
Net (loss) income	$	(1,000	)	$	2,502
Basic (loss) earnings per common share	$	(0.14	)	$	0.51
Diluted (loss) earnings per common share	$	(0.14	)	$	0.51
Weighted average shares outstanding - basic		7,351			4,873
Weighted average shares outstanding - diluted		7,351			4,873

See accompanying notes to condensed consolidated financial statements.

CREATIVE REALITIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	*Three Months Ended*
	*March 31,*
	*2023*			*2022*
Operating Activities:
Net (loss) income	$	(1,000	)	$	2,502
Adjustments to reconcile net (loss) income to net cash provided by operating activities
Depreciation and amortization		779			707
Amortization of debt discount		356			181
Amortization of stock-based compensation		298			551
Employee Retention and other Government Credits		-			16
Loss on extinguishment of debt		-			295
Loss on debt waiver consent		-			1,212
Bad debt expense		237			116
Gain on change in fair value of warrants		-			(5,469	)
Loss on change in fair value of contingent consideration		76			-
Deferred income taxes		24			-
Changes to operating assets and liabilities:
Accounts receivable		1,177			(3,724	)
Work-in-process and inventories		788			52
Prepaid expenses and other current assets		1,015			777
Accounts payable		(486	)		2,292
Accrued expenses		(45	)		35
Deferred revenues		2,382			1,901
Customer deposits		(1,693	)		(213	)
Other		(40	)		(30	)
Net cash provided by operating activities		3,868			1,201
Investing activities
Acquisition of business, net of cash acquired		-			(17,184	)
Purchases of property and equipment		(31	)		(10	)
Capitalization of labor for software development		(1,003	)		(775	)
Net cash used in investing activities		(1,034	)		(17,969	)
Financing activities
Principal payments on finance leases		(2	)		-
Proceeds from sale of common stock in PIPE, net of offering expenses		-			1,814
Proceeds from sale & exercise of pre-funded warrants in PIPE, net of offering expenses		-			8,295
Proceeds from Acquisition Loan, net of offering expenses		-			9,868
Repayment of Term Loan (2022)		(250	)		-
Repayment of Secured Promissory Note		(310	)		(104	)
Net cash (used in) provided by financing activities		(562	)		19,873
Increase in Cash and Cash Equivalents		2,272			3,105
Cash and Cash Equivalents, beginning of period		1,633			2,883
Cash and Cash Equivalents, end of period	$	3,905		$	5,988

See accompanying notes to condensed consolidated financial statements.

CREATIVE REALITIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except shares)

(Unaudited)

					*Additional*
	*Common Stock*				*paid in*		*Accumulated*
	*Shares*		*Amount*		*capital*		*Deficit*			*Total*
Balance as of December 31, 2022		7,266,382	$	72	$	75,916	$	(50,409	)	$	25,579
Stock-based compensation		-		-		243		-			243
Shares issued to directors as compensation		51,616		1		95		-			96
Shares issued to vendors as compensation		13,934		-		25		-			25
Shares issued to employees pursuant to the Retention Bonus Plan		62,475		1		138		-			139
Net loss		-		-		-		(1,000	)		(1,000	)
Balance as of March 31, 2023		7,394,407	$	74	$	76,417	$	(51,409	)	$	25,082

Additional

Common Stock

paid in

Accumulated

Shares

Amount

capital

(Deficit)

Total

Balance as of December 31, 2021

4,002,843

SEC Form 10-Q filed by Creative Realities Inc.