CREATIVE REALITIES INC

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share amounts)

See accompanying notes to condensed consolidated financial statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’** EQUITY**

(in thousands, except shares)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except shares and per share amounts)

(unaudited)

NOTE1: NATURE OF ORGANIZATION AND OPERATIONS

Unless the context otherwise indicates, references in these Notes to the accompanying Condensed Consolidated Financial Statements to“we,”* “us,” “our,”and“the Company” refer to Creative Realities, Inc. and its subsidiaries.*

Nature of the Company’s Business

Creative Realities, Inc. is a Minnesota corporation that provides innovative digital marketing technology and solutions to retail companies, individual retail brands, enterprises and organizations throughout the United States and in certain international markets. The Company has expertise in a broad range of existing and emerging digital marketing technologies, as well as the related media management and distribution software platforms and networks, device management, product management, customized software service layers, systems, experiences, workflows, and integrated solutions. Our technology and solutions include digital merchandising systems and omni-channel customer engagement systems, interactive digital shopping assistants, advisors and kiosks, and other interactive marketing technologies such as mobile, social media, point-of-sale transactions, beaconing and web-based media that enable our customers to transform how they engage with consumers. We have expertise in a broad range of existing and emerging digital marketing technologies, as well as the following related aspects of our business: content, network management, and connected device software and firmware platforms; customized software service layers; hardware platforms; digital media workflows; 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 (“Allure”), Creative Realities Canada, Inc., a Canadian corporation (“CRI Canada”), and Reflect Systems, Inc., a Delaware corporation (“Reflect”).

Liquidity and Financial Condition

In accordance with Accounting Standards Update (“ASU”)No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic205*-40) (“ASU205-40*”), 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 withinone year after the date that the Condensed Consolidated Financial Statements are issued.

At* September30,* 2024, the Company has an accumulated deficit of $54,016 and negative working capital of $11,552. For thethree andnine months ended* September30,* 2024, the Company generated operating income of $1,136 and $1,652, respectively. For thenine months ended* September 30, 2024,the Company generated positive net cash flows from operations of $4,750. The Company’s contingent consideration obligation is dependent upon the market value of the Company’s share price at a future date, February 17, 2025,and contractually must be settled in cash. The estimated liability for financial statement accounting purposes is $10,794 as of September 30, 2024.While the Company is currently generating cash from operations and has refinanced its debt, the Credit Agreement (as defined in Note7* below) limits, via specific reserve, utilization of the Company’s line of credit tono more than $4,000 for payments to satisfy the contingent consideration obligation. Should the contingent consideration require a cash payment at maturity in excess of the Company’s availability under the Credit Agreement, inclusive of such reserve, the Company* may**not* have sufficient liquidity to settle this obligation without receipt of a waiver under the Credit Agreement or 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 ASU205-40.

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 havenot been finalized, are subject to market conditions, in some respects arenot within the Company’s control, and therefore cannot be deemed probable. As a result, the Company has concluded that management's plans donot alleviate substantial doubt about the Company's ability to continue as a going concern.

The Condensed Consolidated Financial Statements donot 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.

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NOTE2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies consistently applied in the preparation of the accompanying Condensed Consolidated Financial Statements follows:

1. Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form10-Q and Article10 of Regulation S-X and include all of the information and disclosures required by generally accepted accounting principles in the United States of America (“GAAP”) for interim financial reporting. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements of the Company and related footnotes for the year ended* December 31, 2023,included in the Company’s Annual Report on Form10*-K filed with the Securities and Exchange Commission on* March 21, 2024,as amended on April 26, 2024.*

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

The results of operations for the interim periods arenot necessarily indicative of results of operations for a full year. Management believes the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, including normal recurring items, considered necessary for a fair statement of results for the interim periods presented.

2. Recently Issued Accounting PronouncementsNot Yet Adopted

In* November 2023,the Financial Accounting Standards Board (“FASB”) issued ASU2023*-07, Segment Reporting (Topic280*): 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 ASU2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC280 on an interim and annual basis. ASU2023-07 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 is currently evaluating the impact of adopting ASU2023*-07.

In* December 2023,the FASB issued ASU2023*-09, Income Taxes (Topic740*): 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. ASU2023-09 is effective for fiscal years beginning after* December 15, 2024,with early adoption permitted. The Company is currently evaluating the impact of adopting ASU2023*-09.

3. Revenue Recognition

We recognize revenue in accordance with Accounting Standards Codification ("ASC")606, Revenue from Contracts with Customers, applying thefive-step model.

If an arrangement involves multiple performance obligations, the obligations are analyzed to determine the separate units of accounting, whether the obligations have value on a standalone basis and whether there is objective and reliable evidence of their standalone selling price. The total contract transaction price is allocated to the identified performance obligations based upon the relative standalone selling prices of the performance obligations. The standalone selling price is based on an observable price for services sold to other comparable customers, when available, or an estimated selling price using a cost plus margin approach.

The Company estimates the amount of total contract consideration it expects to receive for variable arrangements by determining the most likely amount it expects to earn from the arrangement based on the expected quantities of services it expects to provide and the contractual pricing based on those quantities. The Company only includes some or a portion of variable consideration in the transaction price when it is probable that a significant reversal in the amount of cumulative revenue recognized willnot occur when the uncertainty associated with the variable consideration is subsequently resolved. The Company considers the sensitivity of the estimate, its relationship and experience with the customer and variable services being performed, the range of possible revenue amounts and the magnitude of the variable consideration to the overall arrangement. The Company receives variable consideration in very few instances.

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Revenue is recognized when a customer obtains control of promised goods or services under the terms of a contract and is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. The Company has very few contracts with material extended payment terms as payment is typically due at or shortly after the time of the sale, typically ranging betweenthirty andninety days. In those instances where the Company has material extended payment terms (most commonly in multi-year arrangements where the Company acts as an agent to a transaction on behalf of its customers), the Company evaluates and applies constraints to arrive at the revenue recognized in the period in which a contract is entered. Observable prices are used to determine the standalone selling price of separate performance obligations or a cost plus margin approach whenone isnot available. Sales, value-added and other taxes collected concurrently with revenue producing activities are excluded from revenue.

The Company recognizes contract assets or unbilled receivables related to revenue recognized for services completed butnot yet invoiced to the customers. A contract liability is recognized as deferred revenue when the Company invoices customers in advance of performing the related services under the terms of a contract. Deferred revenue is recognized as revenue when the Company has satisfied the related performance obligation.

The Company uses the practical expedient for recording an immediate expense for incremental costs of obtaining contracts, including certain design/engineering services, commissions, incentives, and payroll taxes, as these incremental and recoverable costs have terms that donot exceedone year.

4. Allowance for Credit Losses

The allowance for credit losses is the Company's best estimate of the amount of expected lifetime credit losses in the Company's accounts receivable. The Company regularly reviews the adequacy of its allowance for credit losses. The Company estimates losses over the contractual life using assumptions to capture the risk of loss, even if remote, based principally on how long a receivable has been outstanding. Account balances are charged off against the allowance for credit losses after all reasonable means of collection have been exhausted and the potential for recovery is considered remote. Other factors considered include historical write-off experience, current economic conditions, customer credit, and past transaction history with the customer. The allowance for credit losses is included in accounts receivable, net in the accompanying Condensed Consolidated Balance Sheets.

The Company had the following activity for its allowance for credit losses for thenine months ended* September 30, 2024and2023:*

5. Inventories

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

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6. Impairment of Long-Lived Assets

We review the carrying value of all long-lived assets, including property and equipment, for impairment in accordance with ASC360, Accounting for the Impairment or Disposal of Long-Lived Assets. Under ASC360, impairment losses are recorded whenever events or changes in circumstances indicate the carrying value of an asset* may**not* be recoverable.

If the impairment tests indicate that the carrying value of the asset is greater than the expected undiscounted cash flows to be generated by such asset, an impairment loss would be recognized. The impairment loss is determined as the amount by which the carrying value of such asset exceeds its fair value. We generally measure fair value by considering sale prices for similar assets or by discounting estimated future cash flows from such assets using an appropriate discount rate. Assets to be disposed of are carried at the lower of their carrying value or fair value less costs to sell. Considerable management judgment is necessary to estimate the fair value of assets, and accordingly, actual results could vary significantly from such estimates.

7. Basic and Diluted Earning (Loss) per Common Share

Basic and diluted earning (loss) per common share for all periods presented is computed using the weighted average number of common shares outstanding. Basic weighted average shares outstanding includes only outstanding common shares. Diluted weighted average shares outstanding includes outstanding common shares and potential dilutive common shares outstanding in accordance with the treasury stock method.

Shares reserved for outstanding stock options, including stock options with performance restricted vesting, and warrants totaling 6,219,244 and 7,391,651 at* September 30, 2024* and2023, respectively, were excluded from the computation of loss per share for thenine months ended* September 2024and2023,* as the options and warrants were anti-dilutive.

Shares reserved for outstanding stock options, including stock options with performance restricted vesting, and warrants totaling 3,363,741 at* September 30, 2024were excluded from the computation of earning per share for thethree* months ended* September 30, 2024,as the options and warrants were anti-dilutive. Shares reserved for outstanding stock options, including stock options with performance restricted vesting, and warrants totaling 7,391,651 at September 30, 2023were excluded from the computation of loss per share for thethree* months ended* September 30, 2023,*as the options and warrants were anti-dilutive.

8. Income Taxes

Deferred income taxes are recognized in the financial statements for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates. Temporary differences arise from a number of matters including, butnot limited to, net operating losses, differences in basis of intangibles, stock-based compensation, reserves for uncollectible accounts receivable and inventory, differences in depreciation methods, and accrued expenses. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company accounts for uncertain tax positions utilizing an established recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We hadno uncertain tax positions as of* September 30, 2024* and* December 31, 2023.*

9. Goodwill and Intangible Assets

We follow the provisions of ASC350, Goodwill and Other Intangible Assets. Pursuant to ASC350, goodwill acquired in a purchase business combination isnot amortized, but instead tested for impairment at least annually. The Company uses an annual measurement date of* September 30*to assess impairment of goodwill and indefinite-lived intangible assets, or as indicators are identified.

Definite-lived intangible assets are amortized straight-line in accordance with their identified useful lives.

10. Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Our significant estimates include: valuation of the contingent consideration, 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. Actual results could differ from those estimates.

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11. Contingent Consideration

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 on February 8, 2022and February 11, 2023,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 a1*-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 from2,333,334 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 doesnot 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 havenot reached any agreement regarding the methodology for calculating Guaranteed Consideration under the plain terms of the Merger Agreement.

The contingent liability associated with the Guaranteed Consideration is recorded in the Company’s Condensed Consolidated Balance Sheets at fair value and is remeasured at each reporting period in accordance with ASC805-30-35-1 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* September 30, 2024related 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 $10,794. The contingent liability, at fair value, as of* September 30, 2024related to the Guaranteed Consideration that would be calculated using a Guaranteed Price of$6.40* per share would result in an estimated liability of $1,447. 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 providesno 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* mayexercise an extension option (the “Extension Option”) to extend the Guarantee Date bysix* (6) months, from* February 17, 2025to 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 Optionno* 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 thefifteen* (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 hasnot* been adjusted as a result of the Reverse Split).

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NOTE3: FAIR VALUE MEASUREMENT

We measure certain financial assets, including cash equivalents, at fair value on a recurring basis. In accordance with ASC820-10-30, fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC820-10-35 establishes athree-level hierarchy that prioritizes the inputs used in measuring fair value. Thethree hierarchy levels are defined as follows:

Level1 — Valuations based on unadjusted quoted prices in active markets for identical assets.

Level2 — Valuations based on observable inputs (other than Level1 prices), such as quoted prices for similar assets at the measurement date; quoted prices in markets that arenot active; or other inputs that are observable, either directly or indirectly.

Level3 — Valuations based on inputs that are unobservable and involve management judgment and the reporting entity’s own assumptions about market participants and pricing.

The calculation of the fair value of the contingent consideration contains inputs which are unobservable and involve management judgment and are considered Level3 estimates. Additionally, the separately identifiable intangible assets rely on a discounted cash flow model which utilizes inputs including the calculation of the weighted average cost of capital and management’s forecast of future financial performance which are unobservable and involve management judgment and are considered Level3 estimates.

The calculation of the weighted average cost of capital and management’s forecast of future financial performance utilized within our discounted cash flow model for the impairment of goodwill contains inputs which are unobservable and involve management judgment and are considered Level3 estimates.

NOTE4: REVENUE RECOGNITION

The Company applies ASC606 for revenue recognition. The following table disaggregates the Company’s revenue by major source for thethree andnine months ended* September 30, 2024and2023*:

Hardware

System hardware revenue is recognized generally upon shipment of the product or customer acceptance depending upon contractual arrangements with the customer in instances in which the sale of hardware is the sole performance obligation. Shipping charges billed to customers are included in hardware sales and the related shipping costs are included in hardware cost of sales. The cost of freight and shipping to the customer is recognized in cost of sales at the time of transfer of control to the customer.

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Managed Services

Software as a service (“SaaS”) license sales

Software as a service includes revenue from software licensing and delivery in which software is licensed on a subscription basis and is centrally hosted by the Company. 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. We account for revenue from these services in accordance with ASC985-20-15-5 and recognize revenue ratably over the performance period.

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 our customers’ networks7 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 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. Rates for maintenance and support, including subsequent renewal rates, are typically established based upon a fee per location, per device, or a specified percentage of net software license fees as set forth in the arrangement. These contracts are generally12-36 months in length. Revenue is recognized ratably and evenly over the service period.

The Company also performs time and materials-based maintenance and repair work for customers. Revenue is recognized at a point in time when the performance obligation has been fully satisfied.

Installation Services

The Company performs installation services associated with system hardware sales to customers and recognizes revenue upon completion of the installations. Installation services also include engineering and configuration services required to be performed to design and deploy a digital signage system that subsequently becomes an installation project.

When system hardware sales include installation services to be performed by the Company, the goods and services in the contract are, in certain instances,not distinct as the customer contract contemplates an installed solution, inclusive of system hardware. In those instances, the arrangement is accounted for as a single performance obligation. Our customers* may*control the work-in-process and can make changes to the design specifications over the contract term. In these circumstances, revenues are recognized over time as the installation services are completed based on the relative portion of labor hours completed as a percentage of the budgeted hours for the installation. Typically, in large scale deployments that include installation services, the contract terms segregate performance obligations related to hardware sales and installation services by providing for different legal transfer of title and risk of loss. In those circumstances, installation services are deemed to be a separate performance obligation. In each instance, installation services are recognized at the time of completion.

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Other Services

Software design and development services

Software design and custom development sales represent fixed fee orders for work on a time and materials basis and are recognized as revenue when the application, feature, or custom software code has been received and delivery has occurred to the customer. Revenue is recognized generally upon customer acceptance (point-in-time) of the software product and verification that it meets the required specifications. Software is delivered to customers electronically.

Media sales

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 sell advertising or sponsorship opportunities on behalf of our media network owner customers to brands and advertisers. We generally donot 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 betweenthirty percent (30%) andforty 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 toeight years. 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 ASC606 to evaluate the earned portion of the contract to record at execution.

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 Condensed Consolidated Statements of Operations within Sales and Marketing Expenses.

NOTE5: SUPPLEMENTAL CASH FLOW STATEMENT INFORMATION

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NOTE6: INTANGIBLE ASSETS, INCLUDING GOODWILL

Intangible Assets

Intangible assets consisted of the following at* September 30, 2024* and* December 31, 2023:*

For thethree months ended* September 30, 2024and2023*, amortization of intangible assets charged to operations was $1,081 and $766, respectively. For thenine months ended* September 30, 2024and2023*, amortization of intangible assets charged to operations was $2,749 and $2,274, respectively.

Goodwill

Goodwill represents the excess of the purchase price over the fair value of net assets acquired. Goodwill is subject to an impairment review at a reporting unit level, evaluated on an annual basis at* September**30th* each fiscal year, when an event occurs, or circumstances change that would indicate potential impairment. The assessment* maybe performed quantitatively or qualitatively. The Company has onlyone* reporting unit, and therefore the entire goodwill is allocated to that reporting unit. The Company assesses the carrying value of goodwill at the reporting unit level based on an estimate of the fair value of its reporting unit.

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* mayoccur. Specifically, the Company gives significant consideration to actual historic financial results, including revenue growth rates in the current and precedingthree* 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 in2024, and quantitatively in2023 to determine whether it is more likely thannot 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 wasnot considered to be impaired at* September 30, 2024and2023.*

The Company recognizes that any changes in our actualfourth quarter2024 or projected2025 results could potentially have a material impact on our assessment of goodwill impairment. The Company will continue to monitor the actual performance of its operations against expectations and assess indicators of possible impairment. The valuation of goodwill and intangible assets is subject to a high degree of judgment, uncertainty and complexity. Should any indicators of impairment occur in subsequent periods, the Company will be required to perform an analysis in order to determine whether goodwill is impaired.

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NOTE7: DEBT

Debt for the Company consists of the following:

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 isnot* probable and therefore has classified the outstanding balance in long-term liabilities in the Condensed Consolidated Balance Sheets based on the maturity date.

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 the1-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:

The effective interest rate at* September 30, 2024was 7.81%. The Company pays accrued interest monthly on thefirst* 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 Condensed Consolidated Balance Sheets. Deferred financing costs are being amortized as interest expense over the respective debt instrument period,36 months.

The Company had $10,979 in outstanding borrowings under the revolving credit facility as of* September 30, 2024.*Total availability under the revolving facility was $7,121, after accounting for $4,000 reserved under the Credit Agreement until resolution of the Contingent Consideration.

As of* September 30, 2024,*the Company was in compliance with all applicable debt covenants.

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NOTE8: COMMITMENTS AND CONTINGENCIES

The Company isnot party to any material legal proceedings, other than ordinary routine litigation incidental to the business, and there wereno other such proceedings pending during the period covered by this Report.

NOTE9: INCOME TAXES

Our deferred tax assets are primarily related to net federal and state operating loss carryforwards (“NOLs”). We have substantial NOLs that are limited in usage by IRC Section382. IRC Section382 generally imposes an annual limitation on the amount of NOLs that* may*be used to offset taxable income when a corporation has undergone significant changes in stock ownership within a statutory testing period. We have performed a preliminary analysis of the annual NOL carryforwards and limitations that are available to be used against taxable income. 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 with a definite life.

For thethree months ended* September 30, 2024,we reported tax expense of $192, compared to a tax benefit of $15 for thethree* months ended* September 30, 2023.For thenine* months ended* September 30, 2024and2023,* we reported tax expense of $226 and $73, respectively. At* September 30, 2024*, the net deferred tax liabilities were $229 after valuation allowance, compared to net tax liabilities of $73 at* December 31, 2023.*

NOTE10: WARRANTS

The Company had outstanding warrants accounted for as equity instruments in the Company's Condensed Consolidated Financial Statements totaling 4,587,002 at* September 30, 2024* and* December 31, 2023with a weighted average exercise price of $4.90. The weighted average remaining contractual life of the outstanding warrants was 3.36 and 4.11 years at September 30, 2024* and* December 31, 2023,*respectively.

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NOTE11: STOCK-BASED COMPENSATION

A summary of outstanding options is included below:

The weighted average remaining contractual life for options exercisable is 5.36 years as of* September 30, 2024*.

Employee Awards

Stock-based compensation expense recognized for the issuance of stock options to employees for thethree andnine months ended* September**30,* 2024 of $3 and $9, respectively, was included in general and administrative expense in the Condensed Consolidated Financial Statements. Stock-based compensation expense recognized for the issuance of stock options to employees for thethree andnine months ended* September 30, 2023*of$3 and $379, respectively, was included in general and administrative expense in the Condensed Consolidated Financial Statements.

At* September 30, 2024*, there was $5 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 next5 months and will be adjusted for any future forfeitures as they occur.

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Non-Employee Awards

Stock-based compensation expense recognized for the issuance of stock options to our non-employee Board of Directors, for thethree andnine months ended* September 30, 2024was$0 and included in general and administrative expense in the Condensed Consolidated Financial Statements. Stock-based compensation expense recognized for the issuance of stock options to our non-employee Board of Directors for thethree* andnine months ended* September 30, 2023*of $43 and $129, respectively, was included in general and administrative expense in the Condensed Consolidated Financial Statements.

At* September 30, 2024*, there wasno unrecognized compensation expense related to share-based awards for non-employee directors.

NOTE12: SIGNIFICANT CUSTOMERS/VENDORS

Significant Customers

We hadthree customers that accounted for 16%,15%, and 12% of accounts receivable at* September 30, 2024* andthree customers that accounted for 28%,25%, and 11% of accounts receivable at* December 31, 2023.*

We hadtwo customers that accounted for 14%, and 12% of revenue for thethree months ended* September 30, 2024*, compared totwo customers that accounted for 20%, and 14% of revenue for thethree months ended* September 30, 2023*.

We hadone customer that accounted for 12% of revenue for thenine months ended* September 30, 2024*, compared totwo customers that accounted for 13% and 10% of revenue for thenine months ended* September 30, 2023*.

Significant Vendors

We hadone vendor that accounted for 26% of outstanding accounts payable at* September 30, 2024*, andone vendor that accounted for 38% of outstanding accounts payable at* December 31, 2023.*

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