(All currencies are rounded to the nearest thousand, except per share and per share amounts.)



The following discussion should be read in conjunction with the financial
statements and related for the years ended December 31, 2021 and 2020, which are
included elsewhere in this Annual Report on Form 10-K. This Management's
Discussion and Analysis of Financial Condition and Results of Operations
contains statements that are forward-looking. These statements are based on
current expectations and assumptions that are subject to risk, uncertainties and
other factors. These statements are often identified by the use of words such as
"may," "will," "expect," "believe," "anticipate," "intend," "could," "estimate,"
or "continue," and similar expressions or variations. Actual results could
differ materially because of the factors discussed in "Risk Factors" elsewhere
in this Annual Report on Form 10-K, and other factors that we have not
identified.



Overview



Creative Realities, Inc. ("Creative Realities", or the "Company") transforms
environments through digital solutions by providing innovative digital signage
solutions for key market segments and use cases, including:



  ? Retail


? Entertainment and sports venues

? Restaurants, including quick-service restaurants (“QSR”)


  ? Convenience Stores



  ? Financial Services



  ? Automotive


? Medical and healthcare facilities


  ? Mixed Use Developments


? Corporate communications, employee experience

? Digital Out-of-Home (DOOH) Ad Networks




We serve market-leading companies, so there is a good chance that if you leave
your home today to shop, work, eat or play, you will encounter one or more of
our digital signage experiences. Our solutions are increasingly visible because
we help our enterprise customers achieve a range of business objectives
including:



  ? Increased brand awareness



  ? Improved customer support


? Improved productivity and employee satisfaction

? Increased revenue and profitability


  ? Improved guest experience


? Increased customer/guest engagement


 ? Improved patient outcomes




                                      25





Through a combination of organically grown platforms and a series of strategic
acquisitions, including our recent acquisition of Reflect Systems, Inc. in
February 2022, the Company assist clients to design, deploy, manage, and
monetize their digital signage networks. The Company sources leads and
opportunities for its solutions through its digital and content marketing
initiatives, close relationships with key industry partners, specifically
equipment manufacturers, and the direct efforts of its in-house industry sales
experts. Client engagements focus on consultative conversations that ensure the
Company's solutions are positioned to help clients achieve their business
objectives in the most cost-effective manner possible.



When comparing Creative Realities to other digital signage vendors, our customers appreciate the following competitive advantages:

? Scope of Solutions – Creative Realities is one of the few

           companies in the industry capable of providing the full 

portfolio of

           products and services required to implement and run an effective
           digital signage network. We leverage a 'single vendor' approach,
           providing clients with a one-stop-shop for sourcing digital 

signage

           solutions from design through day two services.



? Managed Labor Pool – Unlike most companies in our industry, we have a

           curated labor pool including thousands of qualified and vetted 

field

           technicians available to service clients quickly nationwide. We 

can

           meet tight schedules even in exceptionally large deployments and 

always

           ensure quality and consistency.



? Internal Creative Resources – We help our clients reuse existing content

for digital signage experiences or the creation of new content, an activity for which

the company has won several design awards in recent years. In each case,

our services can be essential in helping clients develop effective content

   program.




                                      26




? Network Scalability and Reliability – Our Software as a Service (“SaaS”)

Content management platforms power some of the largest and most complex

digital signage networks in North America proof of our ability to manage

enterprise-wide projects. It also gives us purchasing power to source

products and services for our customers, allowing us to provide cost

efficient, reliable and powerful solutions for small and medium-sized businesses

    clients.




  ? Ad management platform - Our customers are increasingly interested in
    monetizing their digital signage networks through advertising content.

However, effectively planning advertising content in digital signage

playlists to achieve campaign goals can be difficult and laborious

to treat. AdLogic, our in-house independent content management platform,

automates this process, allowing network owners to generate more revenue with

    less expense.



? Media Sales – Few, if any, digital signage solution providers can offer

selling media as a service to their customers. We have in-house media sales expertise

to elevate conversations with interested customers to better understand

network monetization. We believe that this significant differentiation in sales

process provides an additional revenue stream to Creative Realities over

    to our competitors.



? Market Sector Expertise – Creative Realities has in-house experts in key

market segments such as automotive, retail, fast food (QSR),

convenience stores and digital outdoor advertising (DOOH). Our expertise

in these business sectors enables our teams to make a significant contribution

conversations and propose tailor-made solutions with prospects and customers to

their unique business goals. These experts build relationships with industry

and create thought leadership that drives the flow of leads and new opportunities for

    our business.



? Logistics – Implementing a large digital signage project can be a logistical

nightmare that can block an initiative even before it is deployed. Our expertise

in logistics improves deployment efficiency, reduces delays and problems, and

    saves customers time and money.



? Technical Support – Digital signage networks present unique challenges for

company IT services. Creative Realities helps simplify and enhance the ending

user support relying on our own Network Operations Center (“CNP”) in

Louisville Kentucky. The NOC solves many problems remotely and in the field

support is required, it can be sent from the NOC, leveraging our management

    labor pool to resolve customer issues quickly and effectively.



? Integrations and app development – The future of digital signage is

not still images and videos on a screen. Interactive apps and

integrations with other data sources will dominate the future. social networks

media streams to enterprise data stores to point-of-sale (“POS”) systems, our

    proven ability to build scalable applications and integrations is a key
    advantage clients can leverage to deliver more compelling and engaging
    experiences for their customers.



? Hardware Support – A number of digital signage vendors sell a

media player or align with a single operating system. We use a

range of media players including Windows, Android and BrightSign to provide

customers the flexibility they need to select the right hardware for any

application knowing that the entire network can always be served by a single

signaling platform, reducing complexity and improving the productivity of their

    teams.




                                      27




The company’s three main sources of income are:

? Hardware sales from resale of digital signage hardware from original equipment

manufacturers such as Samsung and BrightSign.

? Services revenue from helping customers design, deploy, and manage their

signaling network, including:

o Hardware system design/engineering


  o Hardware installation



  o Content development



  o Content scheduling


o Post-deployment network and field support

o Media sales, following our acquisition of Reflect

? Recurring subscription licenses and support revenue from our digital signage

software platforms, which are typically sold through a SaaS model. These include:



  o ReflectView, the Company's core digital signage platform for most
    applications, scalable and cost effective from 10 to 100,000+ devices


o Reflect Xperience, a web interface that allows customers to give content

plan access to local users via the web or mobile devices, while

    maintaining centralized programming control


o Reflect AdLogic, the company’s ad management platform for digital signage

    networks, which presently delivers approximately 50 million ads daily


o Reflect Clarity, the company’s menu board solution, which has become a marketplace

    leader for a range of restaurant and convenience store applications



  o Reflect Zero Touch, which allows customers to turn any screen into an

interactive experience by allowing customers to engage using their mobile device

o iShowroomProX, an omnichannel digital sales support platform for

original equipment manufacturers in the transport sector, which

integrates with dozens of key data services, including dealer inventory at

    VIN level



o OSx+, a digital VIN-level checklist used to facilitate tracking and delivery

new vehicles in the transport sector, bringing a measurable increase

customer satisfaction scores and connected vehicle registrations and subscriptions

   activations.




While hardware sales and support services revenues can fluctuate more
significantly year over year based on new, large-scale network deployments, the
Company expects to see continuous growth in recurring SaaS revenue for the
foreseeable future as digital signage adoption/utilization continues to expand
across the vertical markets we serve.



                                      28





Recent Developments



Acquisition of Reflect


On November 12, 2021, the Company and Reflect Systems, Inc., or "Reflect,"
entered into an Agreement and Plan of Merger (as amended on February 8, 2022,
the "Merger Agreement)" pursuant to which a direct, wholly owned subsidiary of
Creative Realities, CRI Acquisition Corporation, or "Merger Sub," would merge
with and into Reflect, with Reflect surviving as a wholly owned subsidiary of
Creative Realities, , 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, upon the closing of
the Merger, 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 payable in cash, (ii) 2,333,334 shares of common
stock of Creative Realities (valued based on an issuance price of $2 per share)
(the "CREX Shares"), (iii) the Secured Promissory Note (as described below), and
(iv) supplemental cash payments (the "Guaranteed Consideration"), if any,
payable on or after the three-year anniversary of the effective time of the
Merger (subject to the Extension Option described below, the "Guarantee Date"),
in an amount by which the value of the CREX Shares on such anniversary is less
than $6.40 per share, or if certain customers of Reflect collectively achieve
over 85,000 billable devices online at any time on or before December 31, 2022,
is less than $7.20 per share (such applicable amount, the "Guaranteed Price"),
multiplied by the amount of CREX Shares held by the Reflect stockholders on the
Guarantee Date (subject to the Extension Option described below), subject to the
terms of the Merger Agreement.



Creative Realities may exercise an extension option (the "Extension Option") to
extend the Guarantee Date from the three-year anniversary of the Closing Date to
six (6) months thereafter if (i) the Extension Threshold Price is greater than
or equal to 70% of the Guaranteed Price described above, and (ii) Creative
Realities provides written notice of its election to exercise the Extension
Option at least ten (10) days prior to the three-year anniversary of the
Closing. The "Extension Threshold Price" means the average closing price per
share of Creative Realities Shares as reported on the Nasdaq Capital Market (or
NYSE) in the fifteen (15) consecutive trading day period ending fifteen (15)
days prior to the three-year anniversary of the Closing Date. If the Extension
Threshold Price is less than 80% of the Guaranteed Price, then the Guaranteed
Price will be increased by $1.00 per share.



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, all of which is summarized below.


Retention Bonus Plan



On February 17, 2022, in connection with the closing of the Merger, 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 $1,333 in cash,
which was paid 50% at the closing of the Merger (the "Closing"), and subject to
continuous employment with Reflect or Creative Realities, 25% on the one-year
anniversary of Closing and 25% on the two-year anniversary of the Closing. The
future cash payments due on the one-year and two-year anniversaries of the
Closing have been 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 will be issued on the
one-year anniversary of Closing and the remaining 25% of the value of such
shares will be issued on the two-year anniversary of the Closing. The shares
issued on the Closing were valued at $2.00 per share, and the shares to be
issued after the Closing will be determined based on dividing the value of
shares issuable on such date divided by the trailing 10-day volume weighed
average price (VWAP) of the shares as of such date as reported on the Nasdaq
Capital Market.



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.



                                      29





Equity Financing



On February 3, 2022, the Company entered into a securities purchase agreement
(the "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) 1,315,000 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 1,315,000
shares of Common Stock, and (ii) pre-funded warrants to purchase up to an
aggregate of 5,851,505 shares of Common Stock (the "Pre-Funded Warrants") and
accompanying warrants to purchase an aggregate of 5,851,505 shares of Common
Stock (collectively, the "Private Placement"). 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
$1.535, and each Pre-Funded Warrant and accompanying warrants to purchase Common
Stock were sold together at a combined price of $1.5349, for gross proceeds of
approximately $11,000 before deducting placement agent fees and estimated
offering expenses payable by the Company. The net proceeds from the Private
Placement were used to fund, in part, payment of the closing cash consideration
in the Merger.


Each pre-funded warrant has an exercise price of $0.0001 per share, is exercisable immediately until the pre-funded warrant is exercised in full. The common stock warrants expire five years from the date of issue, have an exercise price of $1.41 per share and are immediately exercisable.



On February 17, 2022, in connection with obtaining a waiver of certain
restrictions in the Securities Purchase Agreement in order to consummate the
financing contemplated by the Credit Agreement (defined below), the Company paid
consideration to such investor in the form of a warrant (the "Purchaser
Warrant") to purchase 1,400,000 shares of Company common stock. The number of
shares of Company common stock subject to the Purchaser Warrant is equal to the
waiver fee ($175) divided by $0.125 per share. The exercise price of the
Purchaser Warrant is $1.41 per share, and the Purchaser Warrant is not
exercisable until August 17, 2022. The Purchaser Warrant expires five years
from
the date of issuance.



Debt Financing



On February 17, 2022, the Company and its subsidiaries (collectively, the
"Borrowers") refinanced their current debt facilities with Slipstream, pursuant
to a Second Amended and Restated Credit and Security Agreement (the "Credit
Agreement"). The Borrowers include Reflect, which became a wholly owned
subsidiary of the Company as a result of the closing of the Merger. The debt
facilities continue to be fully secured by all assets of the Borrowers.



The Company raised $10,000 in gross proceeds, or $9,950 in net proceeds, from
entry into a new, 36-month senior secured term loan (the "Acquisition Loan")
with Slipstream as part of the Credit Agreement, which matures on February 17,
2025 (the "Maturity Date"). The Acquisition Loan has an interest rate of 8.0%,
with 50.0% warrant coverage (or 2,500,000 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 Loan (estimated to be $67 per
monthly payment). No principal payments on the Acquisition Loan are payable
until the Maturity Date.



The Credit Agreement also provides that the Company's outstanding loans from
Slipstream, consisting of its pre-existing $4,767 senior secured term loan and
$2,418 secured convertible loan, with an aggregate of $7,185 in outstanding
principal and accrued and unpaid interest under such loans, were consolidated
into a term loan (the "Consolidation Term Loan"). The Consolidation Term Loan
has an interest rate of 10.0%, with 75.0% warrant coverage (or 2,694,495
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
Consolidation Term Loan (estimated to be $60 per monthly payment). 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 (estimated to be $399 per
monthly installment).


As part of the Warrant Coverage of the Acquisition Loan and the Consolidation Term Loan, the Company issued to Slipstream a warrant to purchase an aggregate of 5,194,495 common shares of the Company (the “Warrant loan from the lender”). The lender has a term of five years, an initial strike price of $2.00 per share, subject to adjustments in the lender, and may not be exercised until
August 17, 2022.


                                      30





Secured Promissory Note



On February 17, 2022, pursuant to the terms of the Merger, the Company issued to
RSI Exit Corporation ("Stockholders' Representative"), the representative of
Reflect stockholders, a $2,500 Note and Security Agreement (the "Secured
Promissory Note").



The Secured Promissory Note accrues interest at 0.59% (the applicable federal
rate) and requires the Company and Reflect to pay equal monthly principal
installments of $104 on the fifteenth (15th) day of each month, commencing on
March 17, 2022. Any remaining or unpaid principal shall be due and payable on
February 15, 2023. All payments under the Secured Promissory Note will be paid
to the escrow agent in the Merger Agreement to be placed into the escrow account
to secure the Reflect stockholders' indemnification obligations until released
on the one-year anniversary of the closing of the Merger, at which time any
remaining proceeds not subject to a pending indemnification claim will be paid
to the exchange agent for payment to the Reflect Stockholders. The obligations
of the Company and Reflect set forth in the Secured Promissory Note are secured
by a first-lien security interest in various contracts of Reflect, together with
all accounts arising under such contracts, supporting obligations related to the
accounts arising under such contracts, all related books and records, and
products and proceeds of the foregoing. Slipstream subordinated its security
interest in such collateral, and the recourse for any breach of the Secured
Promissory Note by the Company or Reflect will be against such collateral.

Our Sources of Revenue


We generate revenue through sales of digital signage solutions, which include system hardware, professional and implementation services, software design and development, software licensing, deployment, and support services. maintenance and support.

We currently market and sell our technology and solutions primarily through our
sales and business development personnel, but we also utilize agents, strategic
partners, and lead generators who provide us with access to additional sales,
business development and licensing opportunities.



Our Expenses



Our expenses are primarily comprised of three categories: sales and marketing,
research and development, and general and administrative. Sales and marketing
expenses include salaries and benefits for our sales, business development
solution management and marketing personnel, and commissions paid on sales. This
category also includes amounts spent on marketing networking events, promotional
materials, hardware and software to prospective new customers, including those
expenses incurred in trade shows and product demonstrations, and other related
expenses. Our research and development expenses represent the salaries and
benefits of those individuals who develop and maintain our proprietary software
platforms and other software applications we design and sell to our customers.
Our general and administrative expenses consist of corporate overhead, including
administrative salaries, real property lease payments, salaries and benefits for
our corporate officers and other expenses such as legal and accounting fees.



Significant Accounting Policies and Estimates



Our management is responsible for our financial statements and has evaluated the
accounting policies to be used in their preparation. Our management believes
these policies are reasonable and appropriate. The Company's significant
accounting policies are described in Note 2 Summary of Significant Accounting
Policies of the Company's Consolidated Financial Statements included within Part
II, ITEM 8 of this Annual Report. The following discussion identifies those
accounting policies that we believe are critical in the preparation of our
financial statements, the judgments and uncertainties affecting the application
of those policies and the possibility that materially different amounts will be
reported under different conditions or using different assumptions.



                                      31





The preparation of financial statements in conformity with GAAP requires that
management make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of commitments and contingencies at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Our actual results could differ from
those
estimates.



Revenue Recognition



We recognized revenue in accordance with Financial Accounting Standards Board
("FASB") Accounting Standards Codification ("ASC") 606, Revenue from Contracts
with Customers ("ASC 606"). Under ASC 606, we account for revenue using the
following steps:



  ? Identify the contract, or contracts, with a customer




  ? Identify the performance obligations in the contract




  ? Determine the transaction price



? Allocate the transaction price to the identified performance obligations



  ? Recognize revenue when, or as, we satisfy our performance obligations




See Note 2 Summary of Significant Accounting Policies and Note 4 Revenue
Recognition in our Consolidated Financial Statements, included in Part II, ITEM
8 of this Annual Report, for a complete discussion of our revenue recognition
policies.


Allowance for doubtful accounts

We have not made any material changes in the accounting methodology we use to
measure the estimated liability for doubtful accounts during the past two fiscal
years. The Company's methodology for calculating the allowance for doubtful
accounts consists of (1) reserving for specific receivables which (a) are known
to be facing serious financial problems, (b) have a trade dispute with the
Company, or (c) are significantly aged and/or unresponsive, and (2) a general
reserve for unaged accounts receivable based on a percentage of revenue each
period. We do not believe there is a reasonable likelihood that there will be a
material change in the future estimates or assumptions we use to establish the
liability for doubtful accounts. However, if actual results are not consistent
with our estimates or assumptions, we may be exposed to losses or gains that
could be material.



Goodwill



Goodwill is evaluated for impairment annually as of September 30 and whenever
events or circumstances make it more likely than not that impairment may have
occurred. We have no other indefinite-lived intangible assets. We test goodwill
for impairment by comparing the book value to the fair value at the reporting
unit level. We have only one reporting unit, and therefore the entire goodwill
is allocated to that reporting unit. The fair value of the reporting unit is
determined by using 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. We use these same expectations in other valuation models
throughout the business. In addition to the discounted cash flow analysis, we
utilize a leveraged buy-out model, trading comps and market capitalization to
ultimately determine an estimated fair value of our reporting unit based on
weighted average calculations from these models. We base our fair value
estimates on assumptions we believe to be reasonable but that are unpredictable
and inherently uncertain. If the carrying amount exceeds the fair value, further
analysis is performed to measure the impairment loss.



                                      32





In addition, our market capitalization could fluctuate from time to time. Such
fluctuation may be an indicator of possible impairment of goodwill if our market
capitalization falls below its book value. If this situation occurs, we perform
the required detailed analysis to determine if there is impairment.



During the first quarter of 2020, we determined that the reduced cash flow
projections and the significant decline in our market capitalization as a result
of the COVID-19 pandemic during the three months ended March 31, 2020 indicated
that an impairment loss may have been incurred during the period. We
qualitatively assessed and concluded that it was more likely than not that
goodwill was impaired as of March 31, 2020. We reviewed our previous forecasts
and assumptions based on our updated projections that were subject to various
risks and uncertainties, including: (1) forecasted revenues, expenses and cash
flows, including the duration and extent of impact to our business and our
alliance partners from the COVID-19 pandemic, (2) current discount rates, (3)
the reduction in our market capitalization, (4) changes to the regulatory
environment and (5) the nature and amount of government support that will be
provided. As a result of this qualitative assessment, we concluded that
indicators of impairment were present. The subsequent quantitative interim
impairment assessment of our goodwill as of March 31, 2020 resulted in recording
an impairment of $10,646 as of March 31, 2020.



No further impairment was recorded during the remainder of 2020, nor following our annual assessment performed as of September 30, 2021and no indication of impairment has been identified at December 31, 2021.



We have not made any material changes in our reporting units or the accounting
methodology we used to assess impairment of goodwill since September 30, 2021.
The valuation of goodwill is subject to a high degree of judgment, uncertainty
and complexity. We do not believe there is a reasonable likelihood that there
will be a material change in the future estimates or assumptions we use to test
for impairment losses on goodwill. However, if actual results are not consistent
with our estimates or assumptions, we may be exposed to an impairment charge
that could be material.



Income Taxes



Accounting for income taxes requires recognition of deferred tax liabilities and
assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are determined based on the difference between the
financial statement and tax bases of assets and liabilities. These deferred
taxes are measured by applying the provisions of tax laws in effect at the
balance sheet date, including the impact of the Tax Cuts and Jobs Act (the "Tax
Act") enacted on December 22, 2017.



We recognize in profit or loss the effect of a change in tax rates on deferred tax assets and liabilities during the period that includes the effective date.

As of December 31, 2021, a full valuation allowance is recorded against our
deferred tax. The valuation allowance is based, in part, on our estimate of
future taxable income, the expected utilization of federal and state tax loss
carryforwards, and credits and the expiration dates of such tax loss
carryforwards. Significant assumptions are used in developing the analysis of
future taxable income for purposes of determining the valuation allowance for
deferred tax assets which, in our opinion, are reasonable under the
circumstances.



Impact of recently issued accounting pronouncements



Refer to Note 3 Recently Issued Accounting Pronouncements in our Consolidated
Financial Statements included in Part II, ITEM 8 of this Annual Report, for a
full description of recent accounting pronouncements, including the expected
dates of adoption and estimated effects on results of operations and financial
condition, which is incorporated herein by reference.



Results of Operations


Note: All dollar amounts shown in results of operations are in thousands, except per share information.


                                      33




Year ended December 31, 2021 Compared to the year ended December 31, 2020



The tables presented below compare our results of operations from one period to
another, and present the results for each period and the change in those results
from one period to another in both dollars and percentage change.



                                             Year Ended December 31,                Change
                                               2021             2020                          %
Sales                                      $     18,437       $  17,457     $     980             6 %
Cost of sales                                    10,080           9,336           744             8 %
Gross profit                                      8,357           8,121           236             3 %
Sales and marketing expenses                      1,153           1,676          (523 )         -31 %
Research and development expenses                   550           1,083          (533 )         -49 %
General and administrative expenses               7,598           8,465          (867 )         -10 %
Bad debt                                           (277 )           828        (1,105 )        -133 %
Depreciation and amortization expense             1,364           1,474    
     (110 )          -7 %
Lease termination expense                             -              18           (18 )        -100 %
Loss on disposal of assets                            -              13           (13 )        -100 %
Goodwill impairment                                   -          10,646       (10,646 )        -100 %
Deal and transaction                                518               -           518           100 %
Total operating expenses                         10,906          24,203       (13,297 )         -55 %
Operating loss                                   (2,549 )       (16,082 )      13,533           -84 %
Other income/(expenses):
Interest expense                                   (805 )        (1,023 )         218           -21 %
Gain on settlement of debt                        3,449             209         3,240         1,550 %
Gain/(loss) on fair value of debt                   166             (93 )  
      259          -278 %
Other income/(expense)                               (7 )           (13 )           6           -46 %
Total other income/(expense)                      2,803            (920 )       3,723          -405 %
Net income/(loss) before income taxes               254         (17,002 )  
   17,256          -101 %
Income tax benefit/(expense)                        (22 )           158          (180 )        -114 %
Net income/(loss)                          $        232       $ (16,844 )   $  17,076           101 %




                                      34





Sales



Sales increased by $980, or 6%, in 2021 as compared to 2020 driven by an
increase of $459 in hardware sales as compared to the same period in 2020,
despite a decrease of $2,135 in the sale of our Safe Space Solutions products
year-over-year, which launched in April 2020. Core digital signage sales
(inclusive of hardware, installation, and services) expanded by $3,115 in 2021
despite constraints and headwinds due to limited supply chain availability of
semiconductor chips delaying the delivery of digital displays and media players
to the Company. The supply disruption for digital displays prevented the Company
from delivery of hardware and execution of installation activities during the
year. As of December 31, 2021, the Company had customer purchase orders for
equipment and installation activities in excess of $1,000 which were delayed as
a result of product availability. The Company expects to experience continued
disruptions and delays related to fulfillment of inventory purchases from
vendors during 2022, but we expect a full recovery in the timely availability of
equipment no later than the end of the second quarter of 2022.



Gross Profit


Gross profit increased $236 in absolute dollars to $8,357 in 2021 from $8,121 in 2020, or 3% thanks to a combination of a 6% increase in revenue and a 1.2% reduction in gross margin percentage, thanks to an increase in revenues from hardware revenues, which generally represent a lower-margin revenue stream than our services, as a percentage of total revenue in 2021 compared to the prior year.



Sales and Marketing Expenses



Sales and marketing expenses generally include the salaries, taxes, and benefits
of our sales and marketing personnel, as well as trade show activities, travel,
and other related sales and marketing costs. Sales and marketing expenses
decreased by $523, or 31%, for the year ended December 31, 2021 as compared to
the same period in 2020 driven by (1) a current year Employee Retention Credit
of $232 related to the retention and payment of salaries to sales personnel
throughout 2020 and 2021, which was all recorded when filed in 2021, (2)
reduction of $105 in sales lead generation tools, and (3) the result of reduced
personnel costs, partially offset by an increase of $47 on trade show activity
and related travel costs following a return to participation in industry trade
shows and events after the elimination of such costs in 2020 as a result of
the
COVID-19 pandemic.


Research and development costs



Research and development expenses decreased by $533, or 49%, for the year ended
December 31, 2021 as compared to the same period in 2020 as the result of (1) a
current year Employee Retention Credit of $196 related to the retention and
payment of salaries to development personnel throughout 2020 and 2021, which was
all recorded when filed in 2021, (2) a reduction in personnel costs during the
period following reduced headcount and salary reductions in March 2020 through
salary reinstatements in October 2021, and (3) an increase in capitalization of
development activities for new features/functionality.



General and administrative expenses



Total general and administrative expenses decreased by $867, or 10%, in 2021
compared to 2020. The decrease was driven by $694 of Employee Retention Credits
related to the retention and payment of salaries to sales personnel throughout
2020 and 2021, each of which were recorded in 2021 when the tax credits were
filed. Excluding the consideration of those Employee Retention Credits recorded
in the period, total general and administrative expenses decreased $173, or 2%,
during 2021 as compared to 2020. The comparable year-over-year expenses included
reductions of (a) $262 in non-ERC-related personnel costs, including salaries,
benefits, and travel-related expenses, (b) $334 in rent expense following
closure, downsizing, or restructuring of four leases during 2020, and (c)
reductions in legal expenses of $366 following settlement of the Amended and
Restated Seller Note, partially offset by an increase in stock compensation
amortization expense of $1,213 related to incremental employee and directors'
awards granted during 2020, which are being amortized over a nineteen (19) month
remaining vesting period, and 2021, which are being amortized over twelve (12)
and (24) month vesting periods, based on the grant date fair value calculated
using the Black Scholes method. Personnel costs were reduced following
completion of a reduction-in-force and salary reductions for remaining personnel
in March 2020.



                                      35





Bad Debt



Expenses related to the Company's allowance for bad debts decreased by $1,105,
or 133%, in 2021 as compared to 2020. This decrease was primarily driven by a
cash recovery of $555 in 2021 related to a customer bankruptcy for which the
Company previously recorded a reserve beginning in second quarter 2020. The
remaining reduction was the result of reduced credits and cancellations in 2021
as compared to the prior year in which the COVID-19 pandemic resulted in
material customer closures.



Depreciation and amortization



Depreciation and amortization expenses decreased by $110, or 7%, in 2021
compared to 2020. This decrease was the result of a trade name asset becoming
fully amortized during 2020, while no amortization was recorded during the 2021.
Depreciation was consistent in both periods.



Lease Termination Expense



On December 31, 2020, we exited our office facilities located in Dallas, TX. In
ceasing use of these facilities, we recorded a one-time non-cash charge of $18.
There were no such lease terminations during 2021.



Goodwill impairment



See Note 7 Intangible Assets, Including Goodwill to the Consolidated Financial
Statements for a discussion of the Company's interim impairment test and the
non-cash impairment charge recorded in 2020.



Interest Expense


Refer to Note 8 Loans payable to the consolidated financial statements for a discussion of the Company’s debt and related interest expense.

Gain on settlement of obligations

During 2021, (i) the full principal amount of the PPP Loan and the accrued
interest of $1,552 were forgiven and recorded as a gain on settlement, (ii) the
Company settled the Amended and Restated Seller Note and related accrued
interest for $100, recording a gain on settlement of $1,624, representing $1,538
related to the Amended and Restated Seller Note and $86 of related interest
thereon, and (iii) the statute of limitations passed related to the remaining
liability on a lease abandoned by the Company in 2015, resulting in a gain
of
$256.



During the year ended December 31, 2020, the Company settled and/or wrote off
obligations of $348 for aggregate cash payments of $139 and recognized a gain of
$209 related to legacy accounts payable deemed to no longer be legal obligations
to vendors.



                                      36




Additional operating results on a non-GAAP basis



The following non-GAAP data, which adjusts for the categories of expenses
described below, is a non-GAAP financial measure. Our management believes that
this non-GAAP financial measure is useful information for investors,
shareholders and other stakeholders of our Company in gauging our results of
operations on an ongoing basis. We believe that EBITDA is a performance measure
and not a liquidity measure, and therefore a reconciliation between net
loss/income and EBITDA and Adjusted EBITDA has been provided. EBITDA should not
be considered as an alternative to net loss/income as an indicator of
performance or as an alternative to cash flows from operating activities as an
indicator of cash flows, in each case as determined in accordance with GAAP, or
as a measure of liquidity. In addition, EBITDA does not take into account
changes in certain assets and liabilities as well as interest and income taxes
that can affect cash flows. We do not intend the presentation of these non-GAAP
measures to be considered in isolation or as a substitute for results prepared
in accordance with GAAP. These non-GAAP measures should be read only in
conjunction with our Consolidated Financial Statements prepared in accordance
with GAAP that are included elsewhere in this Annual Report.



                                                                              Quarters Ended
                                     Year Ended       December 31,       September 30,       June 30       March 31,
Quarters ended                          2021              2021               2021             2021           2021
GAAP net income (loss)              $        232     $       (1,722 )   $          (343 )   $   1,025     $     1,272
Interest expense:
Amortization of debt discount                159                 29                  29            29              72
Other interest, net                          648                160                 158           153             177

Depreciation and amortization:

Amortization of intangible assets          1,251                302        
        320           317             312
Amortization of finance lease
assets                                         4                  -                   -             -               4
Amortization of employee
share-based awards                         1,494                324                 329           329             512
Depreciation of property and
equipment                                    109                 27                  27            27              28
Income tax expense/(benefit)                  22                 13                   1             7               1
EBITDA                              $      3,919               (867 )   $           521         1,887           2,378
Adjustments
Change in fair value of Special
Loan                                        (166 )                -                   -             -            (166 )
Gain on settlement of obligations         (3,449 )                -        
       (256 )      (1,628 )        (1,565 )
Deal and transaction costs                   518                518                   -             -               -
Stock-based compensation -
Director grants                              399                318                  27            27              27
Adjusted EBITDA                     $      1,221                (31 )   $           292           286             674




                                                                              Quarters Ended
                                      Year Ended       December 31,       September 30,       June 30      March 31,
Quarters ended                           2020              2020               2020             2020           2020
GAAP net loss                        $    (16,844 )   $         (617 )   $          (585 )   $  (2,459 )   $  (13,183 )
Interest expense:
Amortization of debt discount                 339                 85                  85            84             85
Other interest, net                           683                186                 179           176            142
Depreciation/amortization:
Amortization of intangible assets           1,330                319                 340           344            327
Amortization of finance lease
assets                                         20                  3                   5             5              7
Amortization of share-based awards            617                250       
         248           100             19
Depreciation of property and
equipment                                     124                 29                  33            30             32
Income tax expense/(benefit)                 (158 )               (6 )                (1 )           4           (155 )
EBITDA                               $    (13,889 )              249     $           304     $  (1,716 )   $  (12,726 )
Adjustments
Change in fair value of Special
Loan                                           93               (609 )                 -           551            151
Gain on settlement of obligations            (209 )              (54 )     
        (114 )          (1 )          (40 )
Loss on disposal of assets                     13                  -                  13             -              -
Loss on lease termination                      18                 18                   -             -              -
Loss on goodwill impairment                10,646                  -                   -             -         10,646
Stock-based compensation -
Director grants                               102                 27                  25            19             31
Adjusted EBITDA                      $     (3,226 )             (369 )   $           228     $  (1,147 )   $   (1,938 )




                                      37




Cash and capital resources



We produced net income and positive cash flows from operating activities for the
year ended December 31, 2021 but incurred a net loss and had negative cash flows
from operating activities for the year ended December 31, 2020. As of December
31, 2021, we had cash and cash equivalents of $2,883 and a working capital
surplus of $2,913.



Equity Financing



As described more fully in the Recent Developments section above, on February 3,
2022, the Company entered into the Securities Purchase Agreement pursuant to
which the Company agreed to issue and sell 1,315,000 shares of the Company's
common stock and Common Stock Warrants to a Purchaser in a Private Placement
transaction for gross proceeds of $11,000 before deducting placement agent fees
and estimated offering expenses payable by the Company. The net proceeds from
the Private Placement were used to fund, in part, payment of the closing cash
consideration in the Merger.



Debt Financing



On February 17, 2022, the Company and its subsidiaries (collectively, the
"Borrowers") refinanced their current debt facilities with Slipstream, pursuant
to the Credit Agreement, and raised $10,000 in gross proceeds with a maturity
date of February 1, 2025.



The Credit Agreement also provides that the Company's outstanding loans from
Slipstream, consisting of its pre-existing $4,767 senior secured term loan and
$2,418 secured convertible loan, with an aggregate of $7,185 in outstanding
principal and accrued and unpaid interest under such loans, were consolidated
into a Consolidation Term Loan with a maturity date of February 1, 2025. On
February 17, 2022, in connection with the closing of the acquisition of Reflect,
the Company issued to RSI Exit Corporation ("Stockholders' Representative"), the
representative of Reflect stockholders, a $2,500 Note and Security Agreement
(the "Secured Promissory Note").



The Secured Promissory Note accrues interest at 0.59% (the applicable federal
rate) and requires the Company and Reflect to pay equal monthly principal
installments of $104 on the fifteenth (15th) day of each month, commencing on
March 17, 2022, for twelve months with any remaining or unpaid principal due and
payable on February 15, 2023.



Management believes that, based on (i) the execution of the Equity Financing,
(ii) the refinancing of our debt as part of the Debt Financing, including
extension of the maturity date on our term loans, and (iii) our operational
forecast through 2022 following completion of the Reflect Acquisition, that we
can continue as a going concern through at least March 31, 2023. However, given
our historical net losses and cash used in operating activities, we obtained a
continued support letter from Slipstream through March 31, 2023. We can provide
no assurance that our ongoing operational efforts will be successful which could
have a material adverse effect on our results of operations and cash flows.

                                      38





See Note 8 Loans Payable to the Consolidated Financial Statements and the Recent
Developments section earlier in Item 7 for an additional discussion of the
Company's debt obligations and further discussion of the Company's refinancing
activities subsequent to December 31, 2021.



Operating Activities



The cash flows provided by / (used in) operating activities were $471 and
$(3,530) for the years ended December 31, 2021 and 2020, respectively. Removing
the effect of non-cash items, cash provided by operations in 2021 was $1,723,
driven by an (1) increase in net customer/vendor deposits of $901 related to
upfront cash collections/payments for large-scale projects, (2) increase in net
accounts receivable and payables of $196 related to the timing of collections
and payments for ongoing hardware and installation sales and purchases, and (3)
a decrease in inventory of $471 as Safe Space Solutions inventory purchased in
the prior year was sold in 2021, partially offset by a $338 decrease in deferred
revenue.



Investing Activities



Net cash used in investing activities during the year ended December 31, 2021
was $1,159 as compared to $657 for the same period in 2020. Uses of cash in the
current and prior period relate primarily to internal and external costs
associated with software development. We currently do not have any material
commitments for capital expenditures as of December 31, 2021; however, we
anticipate an increase in our capital expenditures of approximately $430 in
excess of our historical trends through the first half of 2022 to maintain and
enhance the software platform for our customers and to enhance revenue
generating activities through the platform.



Financing Activities



Net cash provided by financing activities during the years ended December 31,
2021 and 2020 was $1,745 and $3,479, respectively. The current year results were
driven by completion of the Company's registered direct offering, while the
prior year results were driven by our receipt of a PPP Loan of $1,552 and
proceeds from our at-the-market offering of $1,831, partially offset by no
debt
proceeds during the year.


Off-balance sheet arrangements

During the year ended December 31, 2021we have not entered into any off-balance sheet arrangement contemplated by Section 303(a)(4) of Regulation SK.

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