crex20240930c

crex20240930c_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 September 30, 2024

☐

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

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 November 12, 2024, the registrant had 10,446,659 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)

	*September 30,*			*December 31,*
	*2024*			*2023*
	(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	868		$	2,910
Accounts receivable, net		11,300			12,468
Inventories, net		3,054			2,567
Prepaid expenses and other current assets		743			665
Total Current Assets	$	15,965		$	18,610
Property and equipment, net		369			499
Goodwill		26,453			26,453
Other intangible assets, net		23,519			24,062
Operating lease right-of-use assets		901			1,041
Other non-current assets		355			112
Total Assets	$	67,562		$	70,777

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	6,446		$	7,876
Accrued expenses and other current liabilities		3,649			3,761
Deferred revenues		2,769			1,132
Customer deposits		3,398			3,233
Current maturities of operating leases		461			505
Short-term portion of related party term debt		-			3,690
Short-term portion of contingent consideration, at fair value		10,794			-
Total Current Liabilities		27,517			20,197
Revolving credit facility		10,979			-
Long-term related party term debt		-			9,829
Long-term obligations under operating leases		463			536
Long-term contingent consideration, at fair value		-			11,208
Other non-current liabilities		309			176
Total Liabilities		39,268			41,946

Shareholders' Equity
Common stock, $0.01 par value, 66,666 shares authorized; 10,447 and 10,409 shares issued and outstanding, respectively		104			104
Additional paid-in capital		82,206			82,073
Accumulated deficit		(54,016	)		(53,346	)
Total Shareholders’ Equity		28,294			28,831
Total Liabilities and Shareholders' Equity	$	67,562		$	70,777

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*						*For the Nine Months Ended*
	*September 30,*						*September 30,*
	*2024*			*2023*			*2024*			*2023*
Sales
Hardware	$	5,241		$	4,847		$	14,409		$	12,606
Services and other		9,201			6,721			25,433			18,102
Total sales		14,442			11,568			39,842			30,708
Cost of sales
Hardware		3,979			3,384			10,682			9,314
Services and other		3,874			2,881			10,019			6,704
Total cost of sales		7,853			6,265			20,701			16,018
Gross profit		6,589			5,303			19,141			14,690
Operating expenses:
Sales and marketing expenses		1,525			1,301			4,655			3,666
General and administrative expenses		3,928			3,842			12,834			11,654
Total operating expenses		5,453			5,143			17,489			15,320
Operating income (loss)		1,136			160			1,652			(630	)

Other expenses (income):
Interest expense, including amortization of debt discount		303			734			1,479			2,324
(Gain) loss on change in fair value of contingent consideration		598			1,369			(414	)		1,461
Loss on debt extinguishment		-			-			1,059			-
Other expense (income)		(11	)		3			(28	)		(132	)
Total other expenses (income)		890			2,106			2,096			3,653
Net income (loss) before income taxes		246			(1,946	)		(444	)		(4,283	)
Benefit (provision) for income taxes		(192	)		15			(226	)		(73	)
Net income (loss)	$	54		$	(1,931	)	$	(670	)	$	(4,356	)
Basic earning (loss) per common share	$	0.01		$	(0.22	)	$	(0.06	)	$	(0.56	)
Diluted earning (loss) per common share	$	0.01		$	(0.22	)	$	(0.06	)	$	(0.56	)
Weighted average shares outstanding - basic		10,447			8,713			10,438			7,775
Weighted average shares outstanding - diluted		10,634			8,713			10,438			7,775

See accompanying notes to condensed consolidated financial statements.

CREATIVE REALITIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

	*Nine Months Ended*
	*September 30,*
	*2024*			*2023*
Operating Activities:
Net loss	$	(670	)	$	(4,356	)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization		2,901			2,393
Amortization of debt discount		569			1,078
Amortization of stock-based compensation		9			539
Amortization of deferred financing costs		37			-
Loss on extinguishment of debt		1,059			-
Bad debt expense		186			318
Provision for inventory reserves		(65	)		141
(Gain) loss on change in fair value of contingent consideration		(414	)		1,461
Deferred income taxes		157			44
Changes to operating assets and liabilities:
Accounts receivable		982			2,080
Inventories		(422	)		(180	)
Prepaid expenses and other current assets		(78	)		859
Accounts payable		(1,360	)		(53	)
Accrued expenses and other current liabilities		8			683
Deferred revenue		1,637			2,284
Customer deposits		165			1,054
Other, net		49			(39	)
Net cash provided by operating activities		4,750			8,306
Investing activities
Purchases of property and equipment		(9	)		(287	)
Capitalization of labor for software development		(2,293	)		(2,851	)
Net cash used in investing activities		(2,302	)		(3,138	)
Financing activities
Proceeds from sale of common stock, net of offering expenses		-			5,454
Proceeds from borrowings under revolving credit facility		21,854			-
Repayment of borrowings under revolving credit facility		(10,875	)		-
Payment of deferred financing costs		(289	)		-
Repayment of term debt		(15,147	)		(3,865	)
Principal payments on finance leases		(33	)		(14	)
Net cash used in financing activities		(4,490	)		1,575
Increase (decrease) in cash and cash equivalents		(2,042	)		6,743
Cash and cash equivalents, beginning of period		2,910			1,633
Cash and cash equivalents, end of period	$	868		$	8,376

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*
Three Months Ended September 30, 2024
Balance as of June 30, 2024		10,446,659	$	104	$	82,203	$	(54,070	)	$	28,237
Stock-based compensation		-		-		3		-			3
Net income		-		-		-		54			54
Balance as of September 30, 2024		10,446,659	$	104	$	82,206	$	(54,016	)	$	28,294

					*Additional*
	*Common Stock*				*paid in*		*Accumulated*
	*Shares*		*Amount*		*capital*		*Deficit*			*Total*
Nine Months Ended September 30, 2024
Balance as of December 31, 2023		10,409,027	$	104	$	82,073	$	(53,346	)	$	28,831
Stock-based compensation		-		-		9		-			9
Shares issued to employees pursuant to the Retention Bonus Plan		37,632		-		124		-			124
Net loss		-		-		-		(670	)		(670	)
Balance as of September 30, 2024		10,446,659	$	104	$	82,206	$	(54,016	)	$	28,294

					*Additional*
	*Common Stock*				*paid in*		*Accumulated*
	*Shares*		*Amount*		*capital*		*Deficit*			*Total*
Three Months Ended September 30, 2023
Balance as of June 30, 2023		7,409,027	$	74	$	76,618	$	(52,834	)	$	23,858
Stock-based compensation		-		-		22		-			22
Issuance of common stock, net		3,000,000		30		5,424		-			5,454
Net loss		-		-		-		(1,931	)		(1,931	)
Balance as of September 30, 2023		10,409,027	$	104	$	82,064	$	(54,765	)	$	27,403

Additional

Common Stock

paid in

Accumulated

Shares

Amount

capital

Deficit

Total

Nine Months Ended September 30, 2023

Balance as of December 31, 2022

SEC Form 10-Q filed by Creative Realities Inc.