Financial Analysis

"NOTE 5: BUSINESS COMBINATIONS Cineplex Digital Media On October 15, 2025, the Company entered into a Share Purchase Agreement (the ""Share Purchase Agreement"") with its wholly-owned subsidiary, 1001372953 Ontario Inc., an Ontario corporation (""Buyer""), and Cineplex Entertainment Limited Partnership (""Cineplex"") to acquire 100% of the issued and outstanding common shares of DDC Group International, Inc. (""DDC""), an Ontario corporation and wholly owned subsidiary of Cineplex. DDC is the parent company of Cineplex Digital Media Inc. (""CDMI""), a digital solutions provider offering end-to-end digital signage and place-based media network services, and Cineplex Digital Media U.S. Inc. (""CDMUS""). DDC, CDMI and CDMUS are collectively referred to herein as ""CDM"". The Company pursued the acquisition to expand its digital signage capabilities and geographic presence into Canada, gain access to CDM's proprietary SaaS technology platform and diversified recurring-revenue customer base, and realize cross-selling synergies across the combined business. The Share Purchase Agreement provided for a base purchase price of approximately CAD $70,000 in exchange for all of the issued and outstanding common shares of DDC, subject to customary purchase price adjustments based on net working capital, closing cash, transaction expenses, CDM closing indebtedness and planned capital expenditures (the ""Purchase Price""). The Share Purchase Agreement also included customary closing conditio …

BusinessCombinationDisclosureTextBlock · excerpt; the full note is in the filing

NOTE 12: COMMITMENTS AND CONTINGENCIES The Company is not party to any material legal proceedings, other than ordinary routine litigation incidental to the business, and there were no other such proceedings pending during the period covered by this Report.

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NOTE 18: PROFIT-SHARING PLAN We have a defined contribution 401 (k) retirement plans for eligible associates in the United States. Associates may contribute up to 15% of their pretax compensation to the plan subject to IRS limitations. The Company contributes an employer contribution match of 50% of employee wages up to 6%, for an effective match of 3%. We have a Registered Retirement Savings Plan for eligible associates in Canada. Associates may contribute up to 18% of earned income reported on their tax return in the previous year, subject to legal contribution limits. The Company contributes an employer contribution match of 50% of employee wages up to 6%, for an effective match of 3%. The Company contributed $341 and $288 to employee retirement plans for the year-ended December 31, 2025 and 2024, respectively.

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NOTE 11: DEBT Debt consisted of the following: Issuance Maturity December 31, December 31, Interest Date Date 2025 2024 Rate Prior Credit Agreement: Revolving Credit Facility 5/23/2024 5/23/2027 $ - $ 13,044 See below Amended and Restated Credit Agreement: New Revolving Credit Facility 11/6/2025 11/6/2028 4,940 - See below Term Loan Facility 11/6/2025 11/6/2028 35,700 - See below Promissory Note 3/14/2025 9/14/2027 3,810 - 14% Total debt 44,450 13,044 Less: debt issuance costs 497 - Total debt, net 43,953 13,044 Less: current portion of debt, net 4,430 - Total non-current portion of debt, net $ 39,523 $ 13,044 Deferred financing costs related to the New Revolving Credit Facility and Revolving Credit Facility of $435 and $243 as of December 31, 2025 and 2024, respectively, are included in other non-current assets on the consolidated balance sheets. Prior Credit Agreement On May 23, 2024, the Company entered into a secured credit agreement (the Prior Credit Agreement) with First Merchants Bank (FMB) which provided the Company with a three -year secured revolving credit facility of up to $22,100 (the Revolving Credit Facility), with an uncommitted accordion feature that provided for additional borrowing capacity of up to $5,000, subject to FMBs approval and other customary terms and conditions set forth in the Prior Credit Agreement. The Revolving Credit Facility has a maturity date of May 23, 2027, and the Company is required to pay the entire unpaid principal balance of the Re …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

For the Years Ended December 31, 2025 2024 Recognition Policy: Hardware $ 21,232 $ 18,259 Point in time Services: Managed Services 17,896 19,547 Over time Digital Media Advertising 9,549 - Over time Installation Services 5,617 8,968 Point in time Other 2,938 4,080 Point in time Total Services 36,000 32,595 Total Hardware and Services $ 57,232 $ 50,854

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NOTE 15: STOCK-BASED COMPENSATION A summary of outstanding options as of December 31, 2025 is included below: Time Vesting Options Weighted Average Weighted Weighted Remaining Average Average Range of Exercise Number Contractual Exercise Options Exercise Prices between Outstanding Life Price Exercisable Price $0.01 - $4.00 1,064,000 9.44 $ 2.44 - $ - $4.01 - $8.00 480,005 4.67 7.39 480,005 7.39 8.01+ 22,225 2.00 22.33 22,225 22.33 1,566,230 7.87 $ 4.24 502,230 $ 8.05 Performance Vesting Options Weighted Average Weighted Weighted Remaining Average Average Number Contractual Exercise Options Exercise Outstanding Life Price Exercisable Price 240,000 4.42 $ 7.59 240,000 $ 7.59 Market Vesting Options Weighted Average Weighted Weighted Remaining Average Average Number Contractual Exercise Options Exercise Outstanding Life Price Exercisable Price 733,334 6.46 $ 3.00 733,334 $ 3.00 Market Vesting Options Time Vesting Options Performance Vesting Options Weighted Weighted Weighted Average Average Average Options Exercise Options Exercise Options Exercise Date/Activity Outstanding Price Outstanding Price Outstanding Price Balance, January 1, 2025 733,334 3.00 591,897 $ 9.57 240,000 $ 7.59 Granted - - 1,170,500 2.46 - - Forfeited or expired - - (196,167 ) 9.72 - - Balance, December 31, 2025 733,334 3.00 1,566,230 $ 4.24 240,000 $ 7.59 The weighted average remaining contractual life for options exercisable is 5.48 years as of December 31, 2025. No options were exercised during 2025. The a …

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NOTE 3: FAIR VALUE MEASUREMENT We measure certain financial assets, including cash equivalents, at fair value on a recurring basis. In accordance with ASC 820 - 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, ASC 820 - 10 - 35 establishes a three -level hierarchy that prioritizes the inputs used in measuring fair value. The three hierarchy levels are defined as follows: Level 1 Valuations based on unadjusted quoted prices in active markets for identical assets. Level 2 Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly. Level 3 Valuations based on inputs that are unobservable and involve management judgment and the reporting entitys own assumptions about market participants and pricing. The Company previously recorded warrant liabilities that were measured at fair value on a recurring basis using a binomial option pricing model. The calculation of the fair value of the contingent consideration contained inputs which were unobservable and involved management judgment and were considered Level 3 estimates. Additionally, the separately identifiable intangible assets and goodwill rely on a discounted cash flow model which ut …

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NOTE 8: INTANGIBLE ASSETS AND GOODWILL Intangible Assets Intangible assets consisted of the following as of December 31, 2025 and 2024: December 31, 2025 2024 Gross Gross Carrying Accumulated Carrying Accumulated Amount Amortization Amount Amortization Technology platform $ 13,961 3,858 $ 7,140 3,041 Purchased and developed software 8,815 5,921 13,780 5,006 Customer relationships 28,561 5,889 13,910 4,350 Trademarks and trade names 1,260 1,044 1,260 852 Noncompete 22 1 - - Total amortizable intangible assets 52,619 16,713 36,090 13,249 Less: Accumulated amortization (16,713 ) (13,249 ) Net book value of amortizable intangible assets $ 35,906 $ 22,841 For the years ended December 31, 2025 and 2024, amortization of intangible assets charged to operations was $4,822 and $3,877, respectively. For the year ended December 31, 2024, the Company wrote-off a $30 fully amortized noncompete asset and the related accumulated amortization. There was no impact on the Companys consolidated balance sheet or consolidated statement of operations as a result of this write-off during the period. During the year ended December 31, 2025, the Company recognized an impairment charge of $5,712 related to a proprietary software platform capitalized as an intangible asset under ASC 350 - 40. The impairment was recorded after management determined that expected future cash flows associated with the platform were not sufficient to recover its carrying amount, primarily due to uncertainty regarding the re …

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NOTE 13: INCOME TAXES The composition of (loss) income before income tax expense for the years ended December 31, 2025 and 2024 was as follows: For the Years Ended December 31, 2025 2024 Federal $ (10,490 ) $ (2,757 ) Foreign 3,380 (645 ) (Loss) income before income taxes $ (7,110 ) $ (3,402 ) Income tax expense consisted of the following: For the Years Ended December 31, 2025 2024 Tax provision summary: State income tax expense (benefit) $ 27 $ 46 Deferred tax expense (benefit) federal (39 ) 41 Deferred tax expense (benefit) state (12 ) 19 Deferred tax expense (benefit) foreign 1,190 - Tax expense $ 1,166 $ 106 The income tax expense includes federal and state income taxes currently payable and those deferred or prepaid because of temporary differences between financial statement and tax bases of assets and liabilities. The Company records income taxes under the liability method. Under this method, deferred income taxes are recognized for the estimated future tax effects of differences between the tax bases of assets and liabilities and their financial reporting amounts based on enacted tax laws. A reconciliation (reflective of the provisions of ASU 2023 - 09 ) of the statutory income tax rate to the effective income tax rates as a percentage of income before income taxes is as follows: For the Years Ended December 31, 2025 2024 Amount Percent Amount Percent US Federal Statutory Tax Rate $ (1,493 ) 21.0 % $ (732 ) 21.0 % State and local income taxes, net of federal benefit* …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

2. Recently Issued and Adopted Accounting Pronouncements In December 2023, the FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures , which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023 - 09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU 2023 - 09 effective January 1, 2025 on a retrospective basis. The adoption of ASU 2023 - 09 did not have a material impact on the Companys consolidated financial condition, results of operations or cash flows since the guidance pertains to disclosure only. See Note 11, Income Taxes for further information. In March 2024, the FASB issued ASU 2024 - 01, Compensation Stock Compensation (Topic 718 ): Scope Application of Profits Interest and Similar Awards . ASU 2024 - 01 clarifies how an entity should evaluate whether a profits interest or similar award issued as compensation is within the scope of ASC 718 by adding four illustrative examples to ASC 718 - 10 - 55. The ASU is effective for public business entities for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years, with early adoption permitted. The Company adopted ASU 2024 - 01 effective January 1, 2025. The adoption of ASU 2024 - 01 did not have a material impact on the Company's cons …

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NOTE 4: REVENUE RECOGNITION The Company applies ASC 606, Revenue from Contracts with Customers, for revenue recognition. The table below disaggregates the Companys revenue by major source as follows: For the Years Ended December 31, 2025 2024 Recognition Policy: Hardware $ 21,232 $ 18,259 Point in time Services: Managed Services 17,896 19,547 Over time Digital Media Advertising 9,549 - Over time Installation Services 5,617 8,968 Point in time Other 2,938 4,080 Point in time Total Services 36,000 32,595 Total Hardware and Services $ 57,232 $ 50,854 Hardware System hardware revenue is recognized at a point in time 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. The Company sells extended warranties to its customers in connection with its hardware sales. The equipment manufacturer performs the warranty services, and therefore manufacturer is considered the principal and the Company is an agent for extended warranty sales. Accordingly, extended warranty sales are presented on a net basis (gross revenue less cost) within hardware revenue and are recognized at the tim …

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NOTE 16: SEGMENT REPORTING We currently operate in one reportable segment, marketing technology solutions. The marketing technology solutions segment generates revenue through four primary sources which includes ( 1 ) hardware sales from reselling digital signage hardware from original equipment manufacturers, ( 2 ) services from helping customers design, deploy, and manage their digital signage and ad-based networks, ( 3 ) recurring subscription licensing and support revenue from our digital signage and ad-tech software platforms, which are generally sold via a SaaS model, and ( 4 ) selling digital out-of-home (DOOH) advertising on infrastructure it owns or operates at retail malls, shopping centers, office buildings, and other commercial properties. Our Chief Executive Officer is our chief operating decision maker (the CODM). Our CODM evaluates performance and makes operating decisions about allocating resources based on financial data presented on a consolidated basis, accompanied by information about revenue disaggregated by service. Our CODM uses the segment information primarily to evaluate the profitability and strategic growth potential of the segment. The reported measures of profit or loss are benchmarked against historical performance and market expectations. Based on this analysis, the CODM determines whether or not to invest in new technology or reallocate operating expenses - namely personnel. In addition, the CODM reviews supplementary metrics such as disaggreg …

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"NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows: 1. Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10 -K and Article 8 of Regulation S- X and include all of the information and disclosures required by GAAP for annual financial reporting. The consolidated financial statements include the accounts of Creative Realities, Inc. and our wholly owned subsidiaries CDMI and CDMUS. The CDM entities (CDMI and CDMUS), acquired through the Company's acquisition of DDC Group International, Inc. on November 7, 2025, have been consolidated from the acquisition date forward. All intercompany balances and transactions have been eliminated in consolidation. 2. Recently Issued and Adopted Accounting Pronouncements In December 2023, the FASB issued ASU 2023 - 09, Income Taxes (Topic 740 ): Improvements to Income Tax Disclosures , which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023 - 09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU 2023 - 09 effective January 1, 2025 on a retrospective basis. The adoption of ASU 2023 - 09 did not ha …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

NOTE 14: WARRANTS On March 14, 2025, as part of the contingent consideration settlement described in Note 5, the Company issued to the former Reflect stockholders, in their capacities as selling stockholders and not as outside investors, the Settlement Warrants to purchase their pro rata share of an aggregate of 777,800 shares of the Companys common stock at an exercise price equal to $3.25 per share, subject to adjustment for stock dividends, distributions, subdivisions, combinations, or reclassifications. The Settlement Warrants are exercisable immediately and expire six years from the date of issuance. They may be exercised for cash or, at the holders election, on a cashless (net settlement) basis. The Company evaluated the Settlement Warrants under ASC 815 - 40, Derivatives and Hedging - Contracts in Entitys Own Equity, and concluded that the Settlement Warrants meet the criteria for equity classification. As such, the Settlement Warrants are not subject to remeasurement. Accordingly, the fair value of the Settlement Warrants at issuance was recorded as a component of additional paid-in capital within shareholders equity. The fair value of the Settlement Warrants was estimated at $1.34 per share as of the issuance date, using the Black-Scholes option pricing model. Key assumptions included: expected volatility of 94%, expected term of 6 years (matching the exercise term), risk-free interest rate of 4.15%, dividend yield of 0%, and the Companys stock price of $1.88 as of t …

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NOTE 19: SUBSEQUENT EVENTS The Company has evaluated subsequent events occurring after the balance sheet date through the date the consolidated financial statements were issued and has determined that there were no such events that would require recognition or disclosure in the financial statements.

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