Creative Realities (NASDAQ: CREX) surges 66% in sales but swings to loss
Rhea-AI Filing Summary
Creative Realities, Inc. reported strong top-line growth but continued losses for the quarter and six months ended June 30, 2026. Total sales were $21.5 million for the quarter and $37.9 million for the first half of 2026, up 65% and 66% year over year, driven mainly by the November 2025 acquisition of Cineplex Digital Media and higher services revenue.
The company posted a quarterly net loss of $3.9 million and a six‑month net loss of $11.4 million, versus income of $1.6 million in the prior-year period, as operating expenses nearly doubled and interest expense more than tripled. Gross margin compressed to 37% for the six months.
Liquidity improved: cash and cash equivalents rose to $10.7 million from $1.6 million at year‑end, aided by a $10.8 million underwritten equity and pre-funded warrant offering and positive operating cash flow of $1.0 million. Management states that these actions and emerging CDM synergies have alleviated prior substantial doubt about the company’s ability to continue as a going concern for at least twelve months, though leverage remains significant with total debt of $47.1 million and redeemable preferred stock with a $31.0 million liquidation preference.
Positive
- Prior going-concern substantial doubt alleviated as of June 30, 2026, with management expecting existing cash, operating cash flows and credit availability to fund operations for at least twelve months.
- Sales grew 66% year over year for the six months to $37.9 million, largely from the Cineplex Digital Media acquisition and services growth.
- Operating cash flow turned positive at $1.0 million for the first half of 2026, compared with $0.8 million in the prior-year period, despite a sizeable net loss.
- $10.8 million in net equity proceeds from a June 2026 underwritten offering strengthened liquidity and were applied to term loan and revolver repayments after quarter-end.
Negative
- Net results deteriorated sharply to a six‑month net loss of $11.4 million from net income of $1.6 million a year earlier.
- Operating expenses nearly doubled, with general and administrative expenses up 97% to $17.9 million for the first half, pressuring profitability.
- Interest expense rose 247% to $2.9 million for the six months, reflecting a higher debt load under the new credit facilities.
- Gross margin compressed to 37% for the six months ended June 30, 2026, down from 42%, driven by lower-margin hardware mix and service margin declines.
Filing Explained
The offering added 2,528,571 shares, then 428,614 more on July 8; 900,000 pre-funded warrants remained outstanding June 30.
This Form 10-Q is an unaudited interim report. It states that the June 30 offering issued
The 900,000 pre-funded warrants were immediately exercisable at
After quarter-end, the offering’s net proceeds were applied on
The filing also identifies 7,932,750 shares reserved for options and warrants and 10,000,000 common shares issuable on conversion of Series A Preferred as excluded from diluted loss-per-share calculations because the company reported a net loss; these figures are not presented as issued shares.
Key Figures
Key Terms
going concern financial
Series A Redeemable Convertible Preferred Stock financial
Amended and Restated Credit Agreement financial
right-of-use assets financial
ASC 606 financial
Business Combinations (ASC 805) financial
Earnings Snapshot
FAQ
How did Creative Realities (CREX) perform financially for the six months ended June 30, 2026?
Has the going-concern risk improved for Creative Realities (CREX)?
What drove revenue growth at Creative Realities (CREX) in the first half of 2026?
What is the debt position of Creative Realities (CREX) as of June 30, 2026?
How much cash and liquidity does Creative Realities (CREX) have?
What is the impact of the Series A Redeemable Convertible Preferred Stock on CREX?
AI-generated analysis. How Rhea-AI works. Not financial advice.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark one)
For the quarterly period ended
OR
For the transition period from ___________ to ___________
Commission file number
Creative Realities, Inc.
(Exact name of registrant as specified in its charter)
| | | |
| State or other jurisdiction of | I.R.S. Employer | |
| | | |
| Address of principal executive offices | Zip Code |
(
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which | ||
| | | The |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | ||
| | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
APPLICABLE ONLY TO CORPORATE ISSUERS
As of August 11, 2026, the registrant had
TABLE OF CONTENTS
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| PART I – FINANCIAL INFORMATION |
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| Item 1. Financial Statements |
1 |
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| Condensed Consolidated Balance Sheets as of June 30, 2026 (unaudited) and December 31, 2025 |
1 |
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| Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2026 and 2025 |
2 |
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| Unaudited Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three and Six Months Ended June 30, 2026 and 2025 |
3 |
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| Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Three and Six Months Ended June 30, 2026 and 2025 |
4 |
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| Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2026 and 2025 |
5 |
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| Notes to Unaudited Condensed Consolidated Financial Statements |
6 |
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| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
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| Item 3. Quantitative and Qualitative Disclosures about Market Risk |
29 |
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| Item 4. Controls and Procedures |
29 |
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| PART II – OTHER INFORMATION |
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| Item 1. Legal Proceedings |
30 |
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| Item 1A. Risk Factors |
30 |
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| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
30 |
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| Item 3. Defaults Upon Senior Securities |
30 |
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| Item 4. Mine Safety Disclosures |
30 |
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| Item 5. Other Information |
30 |
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| Item 6. Exhibits |
31 |
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| SIGNATURES |
32 |
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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
CREATIVE REALITIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventories, net | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Goodwill | ||||||||
| Other intangible assets, net | ||||||||
| Finance lease right-of-use assets | ||||||||
| Operating lease right-of-use assets | ||||||||
| Other non-current assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES, TEMPORARY EQUITY, AND SHAREHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Deferred revenues | ||||||||
| Customer deposits | ||||||||
| Current maturities of operating leases | ||||||||
| Current maturities of finance leases | ||||||||
| Short-term debt | ||||||||
| Total Current Liabilities | ||||||||
| Revolving credit facility | ||||||||
| Term debt, net of deferred financing costs | ||||||||
| Non-current operating lease liabilities | ||||||||
| Non-current finance lease liabilities | ||||||||
| Deferred tax liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies (Note 10) | ||||||||
| Series A Redeemable Convertible Preferred stock, $ stated value, shares authorized; shares issued and outstanding as of June 30, 2026 and December 31, 2025 Liquidation preference of $ and $ as of June 30, 2026 and December 31 2025, respectively | ||||||||
| Shareholders' Equity: | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding as of June 30, 2026 and December 31, 2025, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive (loss) income | ( | ) | ||||||
| Total Shareholders’ Equity | ||||||||
| Total Liabilities, Temporary Equity, and Shareholders' Equity | $ | $ | ||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
CREATIVE REALITIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Sales: | ||||||||||||||||
| Hardware | $ | $ | $ | $ | ||||||||||||
| Services and other | ||||||||||||||||
| Total sales | ||||||||||||||||
| Cost of sales: | ||||||||||||||||
| Hardware | ||||||||||||||||
| Services and other | ||||||||||||||||
| Total cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Sales and marketing expenses | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other expenses (income): | ||||||||||||||||
| Interest expense, including amortization of debt discount | ||||||||||||||||
| Gain on settlement of contingent consideration | ( | ) | ||||||||||||||
| Other expense (income), net | ( | ) | ||||||||||||||
| Total other expenses (income), net | ( | ) | ||||||||||||||
| (Loss) income before income taxes | ( | ) | ( | ) | ( | ) | ||||||||||
| Income tax (expense) benefit | ( | ) | ||||||||||||||
| Net (loss) income | ( | ) | ( | ) | ( | ) | ||||||||||
| Series A Redeemable Convertible Preferred Stock dividends | ( | ) | ( | ) | ||||||||||||
| Net (loss) income attributable to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Basic (loss) earning per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Diluted (loss) earning per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Weighted average shares outstanding - basic | ||||||||||||||||
| Weighted average shares outstanding - diluted | ||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
CREATIVE REALITIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands)
(Unaudited)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net (loss) income | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
| Other comprehensive loss: | ||||||||||||||||
| Foreign currency translation adjustments | ( | ) | ( | ) | ||||||||||||
| Total comprehensive (loss) income | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
CREATIVE REALITIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except shares)
(Unaudited)
| Common Stock | Accumulated Other |
| ||||||||||||||||||||||
| Shares | Amount | Additional Paid- in Capital | Comprehensive Income (Loss) | Accumulated Deficit | Total | |||||||||||||||||||
| Three Months Ended June 30, 2026 | ||||||||||||||||||||||||
| Balance at March 31, 2026 | $ | $ | $ | $ | ( | ) | $ | |||||||||||||||||
| Series A Redeemable Convertible Preferred Stock dividends | - | ( | ) | ( | ) | |||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||
| Common stock issued upon cashless exercise of warrants | ||||||||||||||||||||||||
| Registered offering of common stock and warrants [1] | ||||||||||||||||||||||||
| Other comprehensive loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||||||
| Balance at June 30, 2026 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Common Stock |
Accumulated Other |
|||||||||||||||||||||||
| Shares |
Amount |
Additional Paid- in Capital |
Comprehensive Income (Loss) |
Accumulated Deficit |
Total | |||||||||||||||||||
| Six Months Ended June 30, 2026 |
||||||||||||||||||||||||
| Balance at January 1, 2026 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
| Series A Redeemable Convertible Preferred Stock dividends |
- | ( |
) | ( |
) | |||||||||||||||||||
| Stock-based compensation |
47,733 | |||||||||||||||||||||||
| Common stock issued upon cashless exercise of warrants |
||||||||||||||||||||||||
| Registered offering of common stock and warrants [1] |
||||||||||||||||||||||||
| Repurchase of common stock warrants |
- | ( |
) | ( |
) | |||||||||||||||||||
| Other comprehensive loss |
- | ( |
) | ( |
) | |||||||||||||||||||
| Net loss |
- | ( |
) | ( |
) | |||||||||||||||||||
| Balance at June 30, 2026 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
| Common Stock |
Accumulated Other |
|||||||||||||||||||||||
| Shares |
Amount |
Additional Paid- in Capital |
Comprehensive Income |
Accumulated Deficit |
Total | |||||||||||||||||||
| Three Months Ended June 30, 2025 |
||||||||||||||||||||||||
| Balance at March 31, 2025 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
| Stock-based compensation |
- | |||||||||||||||||||||||
| Shares issued to directors as compensation |
||||||||||||||||||||||||
| Net loss |
- | ( |
) | ( |
) | |||||||||||||||||||
| Balance at June 30, 2025 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
| Common Stock |
Accumulated Other |
|||||||||||||||||||||||
| Shares |
Amount |
Additional Paid- in Capital |
Comprehensive Income |
Accumulated Deficit |
Total | |||||||||||||||||||
| Six Months Ended June 30, 2025 |
||||||||||||||||||||||||
| Balance at January 1, 2025 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
| Stock-based compensation |
- | |||||||||||||||||||||||
| Shares issued to directors as compensation |
||||||||||||||||||||||||
| Issuance of warrants |
- | |||||||||||||||||||||||
| Net income |
- | |||||||||||||||||||||||
| Balance at June 30, 2025 |
$ | $ | $ | $ | ( |
) | $ | |||||||||||||||||
| [1] Includes gross proceeds of $11,991 less issuance costs of $1,207. |
See accompanying Notes to Condensed Consolidated Financial Statements.
CREATIVE REALITIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| For the Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Operating Activities: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Non-cash lease expense | ||||||||
| Amortization of deferred financing costs | ||||||||
| Stock-based compensation | ||||||||
| Provision for credit losses | ||||||||
| Provision for inventory reserves | ||||||||
| Gain on settlement of contingent consideration | ( | ) | ||||||
| Deferred income taxes | ( | ) | ||||||
| Changes to operating assets and liabilities, net of acquisitions: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Inventories | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Accounts payable | ( | ) | ( | ) | ||||
| Accrued expenses and other current liabilities | ( | ) | ( | ) | ||||
| Deferred revenue | ( | ) | ||||||
| Customer deposits | ( | ) | ||||||
| Other assets | ||||||||
| Lease liabilities | ( | ) | ( | ) | ||||
| Other non-current liabilities | ( | ) | ||||||
| Net cash provided by operating activities | ||||||||
| Investing Activities: | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Capitalization of costs for software development | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing Activities: | ||||||||
| Repayment of term debt and promissory note | ( | ) | ||||||
| Proceeds from registered offering of common stock and warrants | ||||||||
| Proceeds from borrowings under revolving credit facility | ||||||||
| Repayment of borrowings under revolving credit facility | ( | ) | ( | ) | ||||
| Payment of contingent consideration | ( | ) | ||||||
| Repurchase of common stock warrants | ( | ) | ||||||
| Repayment of finance lease obligations | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate on cash and cash equivalents | ||||||||
| Net increase in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
See accompanying Notes to Condensed Consolidated Financial Statements.
CREATIVE REALITIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
(unaudited)
NOTE 1: 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, Cineplex Digital Media Inc., a Canadian corporation (“CDMI”), and Cineplex Digital Media U.S. Inc., a Delaware corporation (“CDMUS”).
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 (Subtopic 205-40) (“ASU 205-40”), the Company is required to evaluate 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 within one year after the date that the condensed consolidated financial statements are issued.
As disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, there was substantial doubt about the ability of the Company to continue as a going concern for at least one year from the date those respective financial statements were issued. These conclusions resulted from a combination of factors, including recurring net losses and cash used in operating activities, the ongoing integration of the Cineplex Digital Media business that the Company acquired on November 7, 2025 (see Note 4), which expected synergies and financial impacts were not yet fully known, and the dependence on improving cash flows from operations or securing additional sources of liquidity (or both), to fund ongoing operations to meet the Company’s financial obligations.
As of June 30, 2026, the Company has an accumulated deficit of $
The Company continues to monitor ongoing compliance with its credit facilities and will continue to monitor its ability to meet its obligations as they become due. The Company may need to seek additional forms of debt or equity financing in the future. If the Company is unable to obtain adequate financing on terms that are satisfactory to the Company, when the Company requires it, the Company’s ability to continue to grow or support the business and to respond to business challenges could be significantly limited, which may adversely affect the Company’s business plans.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Since the Annual Report for the year ended December 31, 2025, there have been no material changes to the Company’s significant accounting policies, except as disclosed in this note.
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for complete financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the condensed consolidated financial statements of the Company as of June 30, 2026 and for the three and six months then ended. The results of operations for the three and six months ended June 30, 2026 are not necessarily indicative of the operating results for the full year ending December 31, 2026 or any other period.
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, 2025, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 15, 2026.
2. Recently Issued and Adopted Accounting Pronouncements
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments introduce a practical expedient that permits entities to assume current conditions as of the balance sheet date do not change for the remaining life of current accounts receivable and current contract assets within the scope of Accounting Standards Codification (“ASC 606”), Revenue from Contracts with Customers when developing reasonable and supportable forecasts of expected credit losses, thereby removing the requirement to incorporate macroeconomic forecasts for those assets. The ASU also provides an accounting policy election to consider post-balance-sheet collection activity in estimating expected credit losses; this election is available only to entities other than public business entities and is therefore not available to the Company. The amendments are effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual periods, with early adoption permitted. The Company adopted this standard on January 1, 2026. The adoption of ASU 2025-05 did not have a material impact on its condensed consolidated financial statements and related disclosures.
In April 2026, the FASB issued ASU 2026-01, Equity (Topic 505): Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock. The amendments in this update require entities to initially measure paid-in-kind (“PIK”) dividends on equity-classified preferred stock using the PIK dividend rate stated in the preferred stock agreement, rather than at fair value. The ASU is effective for annual periods beginning after December 15, 2026, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of ASU 2026-01 on its condensed consolidated financial statements and related disclosures.
3. Cash Concentrations
Cash consists of cash on deposit in financial institutions in both the United States and Canada. The Company does not hold any investments that qualify as cash equivalents as of June 30, 2026 or December 31, 2025. Balances may exceed the Federal Deposit Insurance Corporation (“FDIC”) limit of $250 USD in the United States and may exceed the Canada Deposit Insurance Corporation (“CDIC”) limit of $100 CAD in Canada. As of June 30, 2026 and December 31, 2025, the Company had USD cash in excess of FDIC limits of $
4. Revenue Recognition
We recognize revenue in accordance with ASC 606 applying the five-step model. The Company evaluates each customer contract to identify the distinct performance obligations promised therein. A performance obligation is considered distinct if the customer can benefit from the good or service on its own or together with other resources that are readily available, and if the Company's promise to transfer the good or service is separately identifiable from other promises in the contract. If an individual promised good or service is not distinct from another promised good or service, the Company combines those promised goods or services into a single combined performance obligation. The total contract transaction price is allocated to the identified distinct 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. For contracts when one or more performance obligations have observable standalone selling prices, the residual approach is applied to determine the allocation for highly variable components, including SaaS and support pricing, which both vary based on engagement size.
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 will not 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. The Company generally does not accept returns or provide refunds related to its customer contracts.
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 between thirty and ninety days. In those instances where the Company offers material extended payment terms (most commonly in multi-year arrangements), the Company determines whether a significant financing component exists. Where the Company acts as an agent to a transaction on behalf of its customers (primarily for the sale of extended warranties that are performed by the equipment manufacturer), the Company recognizes revenue on a net basis. Observable prices are used to determine the standalone selling price of separate performance obligations or a cost plus margin approach when one is not available. Sales, value-added and other taxes collected concurrently with revenue producing activities are excluded from revenue.
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 or as the Company satisfies 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 do not exceed one year.
5. 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 the six months ended June 30, 2026 and 2025:
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2026 | 2025 | |||||||
| Balance as of beginning of period | $ | $ | ||||||
| Amounts accrued | ||||||||
| Provision for credit losses | ||||||||
| Write-offs charged against the allowance | ( | ) | ( | ) | ||||
| Balance as of end of period | $ | $ | ||||||
6. Inventories
Inventories are stated at the lower of cost or net realizable value, determined by the first-in, first-out (FIFO) method, and consist of the following:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Raw materials | $ | $ | ||||||
| Work-in-process | ||||||||
| Total inventories | $ | $ | ||||||
7. Basic and Diluted Net (Loss) Income per Common Share
The Company’s net (loss) income per common share is calculated using the two-class method in accordance with ASC 260, Earnings Per Share. The two-class method allocates net income between common stockholders and holders of participating securities. The Company’s Series A Redeemable Convertible Preferred Stock are deemed to be participating securities due to their rights to participate in dividends with common stock. However, the two-class method has no impact on the calculation of net loss per common share during periods when the Company has a net loss, because the holders of participating securities are not required to absorb losses.
Basic net (loss) income per common share is computed by dividing net (loss) income attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net (loss) income per common share is computed by dividing net (loss) income attributable to common stockholders by the weighted average number of common shares outstanding, plus fully vested shares that are subject to issuance for little or no monetary consideration and the number of additional common shares that would have been outstanding if the potential common shares had been issued (computed using the more dilutive of the treasury stock or the if converted method, as applicable, and the two-class method).
Shares reserved for outstanding stock options, including stock options with performance restricted vesting, and warrants totaling
8. Foreign Currency Translation
The functional currency of the Company's Canadian subsidiaries is the Canadian dollar. The financial statements of these subsidiaries are translated into U.S. dollars in accordance with ASC 830, Foreign Currency Matters. Assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. Revenue and expense accounts are translated at the average exchange rates during the period. The resulting translation adjustments are recorded as a component of accumulated other comprehensive income (loss) within shareholders' equity. Gains and losses arising from foreign currency transactions are included in other expense (income), net in the condensed consolidated statements of operations.
9. 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: the fair value of assets acquired and liabilities assumed in business combinations, including identifiable intangible assets; allowance for credit losses; valuation allowances related to deferred tax assets, including the realizability of acquired Canadian deferred tax assets; assumptions and estimates used to evaluate the recoverability of goodwill and other intangible assets and the related amortization methods and periods; the incremental borrowing rate used to measure right-of-use assets and lease liabilities; the fair value of stock-based compensation awards; and the assessment of the Company's ability to continue as a going concern, including projected cash flows and available liquidity. Actual results could differ from those estimates.
10. Reclassifications
Certain prior year amounts in the condensed consolidated financial statements and accompanying notes have been reclassified to conform to the current year presentation. These reclassifications had no effect on previously reported net loss, total assets, total liabilities, shareholders’ equity, or cash flows from operations. Management has evaluated these reclassifications and determined that they are not material, individually or in the aggregate, to the condensed consolidated financial statements taken as a whole.
NOTE 3: REVENUE RECOGNITION
The Company applies ASC 606 for revenue recognition. The table below disaggregates the Company’s revenue by major source as follows:
| For the | For the | For the | For the | |||||||||||||
| Three Months | Three Months | Six Months | Six Months | |||||||||||||
| Ended | Ended | Ended | Ended | |||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Hardware | $ | $ | $ | $ | ||||||||||||
| Services: | ||||||||||||||||
| Managed Services | ||||||||||||||||
| Digital Media Advertising | ||||||||||||||||
| Installation Services | ||||||||||||||||
| Other Services | ||||||||||||||||
| Total Services | ||||||||||||||||
| Total Hardware and Services | $ | $ | $ | $ | ||||||||||||
The following table presents the activities in deferred revenue for the six months ended June 30, 2026:
| 2026 | ||||
| Balance, January 1 | $ | |||
| Amounts billed and deferred during the period | ||||
| Revenue recognized that was included in the beginning balance | ( | ) | ||
| Revenue recognized from amounts deferred during the period | ( | ) | ||
| Foreign currency translation adjustment on Canadian deferred revenue | ( | ) | ||
| Balance, June 30 | $ | |||
There were no significant revenues recognized during the six months ended June 30, 2026 and 2025 from performance obligations that were satisfied (or partially satisfied) in prior periods as a result of contract price changes, changes in estimates or variable consideration true-ups.
As of June 30, 2026, the aggregate amount of the transaction price allocated to remaining performance obligations (i.e., unsatisfied or partially unsatisfied performance obligations) was $
| Recognition Period | Amount | |||
| Within year | $ | |||
|
| ||||
| $ | ||||
The remaining performance obligations in the table above primarily consist of non-cancellable multi-year SaaS and maintenance agreements, under which the Company recognizes SaaS and maintenance revenue ratably over the contract term. The Company has elected the optional exemption under ASC 606-10-50-14 and does not disclose information about remaining performance obligations for contracts with an original expected duration of one year or less, which primarily consist of short-term digital media advertising contracts, month-to-month support agreements, media revenue, and transactional arrangements (e.g., hardware and installation, software design and development, content creation).
NOTE 4: BUSINESS COMBINATION
On November 7, 2025, the Company completed the acquisition of DDC Group International, Inc. (“DDC”), the parent of Cineplex Digital Media Inc. and Cineplex Digital Media U.S. Inc. (collectively, “CDM”), from Cineplex Entertainment Limited Partnership for cash consideration of approximately CAD $
During the six months ended June 30, 2026, the Company recorded measurement period adjustments to the preliminary purchase price allocation related to the acquired net deferred tax liability. At the acquisition date, certain amounts in the preliminary purchase price allocation, including the acquired net deferred tax liability, were recorded on a provisional basis pending the receipt of additional information. During the six months ended June 30, 2026, the Company obtained additional information about facts and circumstances that existed as of the acquisition date, which resulted in a measurement period adjustment that decreased the acquired net deferred tax liability by $
| Purchase Price | Measurement | Purchase Price | ||||||||||
| Purchase Consideration: | ||||||||||||
| Cash (net of cash acquired of $) | $ | $ | - | $ | ||||||||
| Less: | ||||||||||||
| Technology platform | - | |||||||||||
| Customer relationships | - | |||||||||||
| Non-compete covenant | - | |||||||||||
| Unfavorable lease | ( | ) | - | ( | ) | |||||||
| Operating lease right-of-use assets | - | |||||||||||
| Finance lease right-of-use assets | - | |||||||||||
| Operating lease liabilities | ( | ) | - | ( | ) | |||||||
| Finance lease liabilities | ( | ) | - | ( | ) | |||||||
| Property and equipment | - | |||||||||||
| Deferred tax liability | ( | ) | ( | ) | ||||||||
| Debt-free net working capital deficit | ( | ) | - | ( | ) | |||||||
| Fair Value of Identified Net Assets | $ | $ | $ | |||||||||
| Remaining Goodwill Value | $ | $ | ( | ) | $ | |||||||
| Fair Value of Net Assets Acquired | $ | $ | - | $ | ||||||||
The measurement period adjustment recorded during the six months ended June 30, 2026 reflects new information obtained about facts and circumstances that existed as of the acquisition date and did not have a material impact on the Company’s results of operations in any prior period. The preliminary purchase price allocation, including the items identified above, remains subject to further adjustment during the remainder of the measurement period as additional information is obtained, and any such adjustments will be recognized in the reporting period in which they are determined.
NOTE 5: SUPPLEMENTAL CASH FLOW STATEMENT INFORMATION
| For the Six Months Ended | ||||||||
| 2026 | 2025 | |||||||
| Supplemental non-cash investing and financing activities: | ||||||||
| Issuance costs related to common stock and warrants sold in registered offering | $ | $ | ||||||
| Effect of measurement period adjustments to goodwill | $ | $ | ||||||
| Capitalized software in accounts payable | $ | $ | ||||||
| Property and equipment in accounts payable | $ | $ | ||||||
| Issuance of notes payable as partial settlement of contingent consideration | $ | $ | ||||||
| Issuance of warrants as partial settlement of contingent consideration | $ | $ | ||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | $ | ||||||
| Tenant allowance receivable recognized under lease incentive | $ | $ | ||||||
| Supplemental disclosure information for cash flow | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Operating leases | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
NOTE 6: PREPAID EXPENSES AND OTHER CURRENT ASSETS
As of June 30, 2026 and December 31, 2025, prepaid expenses and other current assets consisted of the following:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Vendor, project and hardware prepayments | $ | $ | ||||||
| Severance receivable | ||||||||
| MAG reimbursement receivable | ||||||||
| Other receivables | ||||||||
| Prepaid subscriptions | ||||||||
| Prepaid marketing | ||||||||
| Prepaid other | ||||||||
| Tax receivables | ||||||||
| Prepaid insurance | ||||||||
| $ | $ | |||||||
NOTE 7: SERIES A REDEEMABLE CONVERTIBLE PREFERRED STOCK
Dividend Rights
The Series A Redeemable Convertible Preferred Stock (“Series A Preferred”) ranks senior to the Company’s common stock with respect to dividend rights and rights upon liquidation. Each share has a liquidation preference equal to $
The Series A Preferred bears cumulative dividends at a rate of
Dividends are recorded as an increase to the carrying value of the Series A Preferred and as an adjustment to net loss attributable to common shareholders in the calculation of basic and diluted net (loss) income per common share. The Company recorded $
Conversion Rights
Each share of Series A Preferred is convertible at the holder’s option into shares of common stock at a conversion price of $
Redemption Rights
A fundamental transaction includes, among other events, a merger, consolidation, sale of substantially all assets, tender offer resulting in a change of control, recapitalization or similar transaction (a “Fundamental Transaction”). Upon the occurrence of a Fundamental Transaction, holders are entitled to receive the greater of (i) the liquidation preference, including accrued dividends and the make-whole amount, or (ii) the amount they would have received on an as-converted basis, based on the consideration paid per common share in the Fundamental Transaction or, if that consideration is not cash, the market price of the common stock. The redemption amounts of the Series A Preferred, measured as if the balance sheet dates were the redemption dates, were $
Since the redemption of the Series A Preferred is contingently or optionally redeemable and therefore not certain to occur, the Series A Preferred is not required to be classified as a liability under ASC 480, Distinguishing Liabilities from Equity. As the Series A Preferred is redeemable in certain circumstances upon the occurrence of an event that is not solely within the Company’s control, the Company has classified the Series A Preferred in temporary equity in the condensed consolidated balance sheets. Because redemption is contingent and not currently probable, the Company has not accreted the carrying value to the redemption amount as of June 30, 2026 and December 31, 2025.
Registration Rights
In connection with the issuance, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) requiring the Company to file and maintain an effective registration statement covering the resale of the shares of common stock issuable upon conversion. The Registration Rights Agreement provides for liquidated damages of up to
NOTE 8: ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
As of June 30, 2026 and December 31, 2025, accrued expenses and other current liabilities consisted of the following:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Accrued compensation | $ | $ | ||||||
| Sales and use taxes payable | ||||||||
| Accrued interest | ||||||||
| Accrued purchases | ||||||||
| Other accrued expenses | ||||||||
| $ | $ | |||||||
NOTE 9: DEBT
As of June 30, 2026 and December 31, 2025, debt consisted of the following:
| Issuance | Maturity | June 30, | December 31, | Interest | |||||||||||
| Date | Date | 2026 | 2025 | Rate | |||||||||||
| Amended and Restated Credit Agreement: | |||||||||||||||
| Revolving Credit Facility |
|
| $ | $ | See below | ||||||||||
| Term Loan Facility |
|
| See below | ||||||||||||
| Promissory Note |
|
| |||||||||||||
| Total debt | |||||||||||||||
| Less: debt issuance costs | |||||||||||||||
| Total debt, net | |||||||||||||||
| Less: current portion of debt, net | |||||||||||||||
| Total non-current portion of debt, net | $ | $ | |||||||||||||
Deferred financing costs related to the Revolving Credit Facility of $
Amended and Restated Credit Agreement
On November 6, 2025 (the “Refinancing Date”), the Company and certain of its subsidiaries entered into the Amended and Restated Credit Agreement (the “Amended Credit Agreement”), with FMB acting as agent (“Agent”), and a new syndicate of lenders (“Lenders”) which included FMB and two additional creditors, Northwest Bank (“NWB”) and Axos Bank (“Axos”; together with NWB, the “New Lenders”). The Amended Credit Agreement provides the Company, CDMI and CDMUS (collectively, “Borrowers”) with two debt facilities, including a three-year term loan of $
Additionally, monthly interest payments for both facilities of the Amended Credit Agreement are due and payable on the first day of each successive calendar month following the Refinancing Date, which commenced on December 1, 2025, at a rate equal to the sums of (a) the one-month Term SOFR, (b) base rate of and (c) a floating margin ranging between (i)
| Margin | ||||||||||
| Senior | Applicable | |||||||||
| Debt to | to | Margin | ||||||||
| Pricing | Adjusted | Revolving | Applicable | |||||||
| Grid | EBITDA | Credit | to the | |||||||
| Level | Ratio | Advances | Term Loan | |||||||
| I |
| |||||||||
| II | > 2.50x | |||||||||
On February 16, 2026, and in conjunction with the Warrant Repurchase Agreement (see Note 13), the Company and certain of its subsidiaries entered into a First Amendment to Amended and Restated Credit Agreement (the “Amendment”) with the Lenders and FMB as Agent for the Lenders. Pursuant to the Amendment, the Agent and Lenders provided requisite consent to the Company for the Warrant Repurchase and the parties agreed that payment of the Warrant Repurchase price would not reduce the amount of “Excess Cash Flow” of the Company for purposes of determining certain Company prepayment obligations.
On June 26, 2026, the Agent and the Lenders provided the requisite consent under the Amended Credit Agreement for the Company to complete its underwritten public offering of common stock (see Note 12) and pre-funded warrants (see Note 13). The consent did not amend or waive any other provision of the Amended Credit Agreement, and the net proceeds of the offering were used to prepay borrowings of debt under the Amended Credit Agreement on July 1, 2026 in accordance with the existing terms thereof (see Note 17).
During the six months ended June 30, 2026, the Company recorded amortization of debt discount on the Term Loan of $
During the six months ended June 30, 2026, the Company repaid $
Promissory Note
The Promissory Note was issued on March 14, 2025 as part of the Settlement Agreement to resolve a contingent consideration liability. It is an unsecured obligation of the Company. The Promissory Note bears interest at a fixed annual rate of
The Stockholders' Representative's rights under the Promissory Note are subject to a Subordination Agreement dated March 14, 2025, by and among the Company, FMB and the Stockholders' Representative (the “Subordination Agreement”). Under the terms of the Subordination Agreement, during any period in which an event of default exists under the Amended Credit Agreement, the Company is prohibited from making any payments on the Promissory Note unless FMB provides prior written consent, and the Stockholders' Representative is prohibited from accepting or enforcing any payments during the subordination period. As of June 30, 2026, the Company is in compliance with the monthly required payments of the Promissory Note and there have been no events of default.
NOTE 10: 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.
NOTE 11: INCOME TAXES
The Company’s deferred tax assets are primarily related to net federal and state operating loss carryforwards (“NOLs”). The Company has substantial NOLs that are limited in usage by IRC Section 382. IRC Section 382 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. The Company has performed a preliminary analysis of the annual NOL carryforwards and limitations that are available to be used against taxable income. Deferred tax assets are evaluated quarterly for recoverability based on available positive and negative evidence. Based on the history of losses the Company continues to maintain a full valuation allowance against U.S. deferred tax assets with definite lives as management determined that realization of such assets does not meet the more-likely-than-not threshold. In Canada, while CDM is in an overall net deferred tax liability position, a partial valuation allowance has been established against specific net operating loss carryforwards that are not expected to be realized due to statutory restrictions and limitations on future utilization.
For interim periods, the Company has historically utilized the estimated annual effective tax rate method under which the Company determined its provision for income taxes based on the current estimate of its annual effective tax rate. For the six months ended June 30, 2026, the Company utilized the discrete effective tax rate method, as allowed under ASC 740, Income Taxes—Interim Reporting when the application of the estimated annual tax rate method is impractical and does not provide a reliable estimate of the annual effective tax rate. The discrete method treats the year-to-date period as if it were the annual period and determines the interim income taxes on that basis. The Company determined that since small changes in estimated annual pre-tax (loss) income would result in significant changes in the estimated annual effective tax rate and significant variations in the customary relationship between the benefit (expense) from income taxes and pre-tax accounting (loss) income, the historical method would not provide a reliable estimate of the effective tax rate for the six months ended June 30, 2026. The Company will reevaluate the use of this method until the Company believes a return to the estimated annual effective tax rate method is deemed appropriate.
For the three months ended June 30, 2026 and 2025, the Company recorded income tax benefit of $
NOTE 12: COMMON STOCK
June 2026 Public Offering
On June 30, 2026, the Company completed an underwritten public offering of
Warrant Exercises
During the six months ended June 30, 2026, holders of
NOTE 13: WARRANTS
The Company had outstanding warrants classified as equity instruments in the Company’s condensed consolidated financial statements totaling
On February 16, 2026, the Company entered into a Warrant Repurchase Agreement (the “Warrant Repurchase Agreement”) with Slipstream Communications, LLC (the “Warrant Holder”). Under the Warrant Repurchase Agreement, the Company agreed to repurchase from the Warrant Holder a warrant (the “Warrant”) to purchase shares of the Company’s common stock, par value $
Pre-Funded Warrants
On June 30, 2026, in connection with the public offering described in Note 12, the Company issued pre-funded warrants to purchase
There were
NOTE 14: STOCK-BASED COMPENSATION
Time Vesting Options
On April 1, 2025, the Company granted stock options to purchase an aggregate of
On June 2, 2025, the Company granted stock options to purchase an aggregate of
On April 17, 2026, the Company granted stock options to purchase
On May 27, 2026, the Company granted stock options to purchase an aggregate of
A summary of time vesting options is included below:
| Weighted | ||||||||||||||||||||||
| Average | Weighted | Weighted | ||||||||||||||||||||
| Remaining | Average | Average | ||||||||||||||||||||
| Range of Exercise | Number | Contractual | Exercise | Options | Exercise | |||||||||||||||||
| Prices Between | Outstanding | Life | Price | Exercisable | Price | |||||||||||||||||
|
| - | $ | 286,000 | $ | 2.43 | |||||||||||||||||
|
| - | $ | $ | |||||||||||||||||||
|
| $ | $ | ||||||||||||||||||||
| $ | $ | |||||||||||||||||||||
Performance Vesting Options
A summary of performance vesting options is included below:
| Weighted | |||||||||||||||||
| Average | Weighted | Weighted | |||||||||||||||
| Remaining | Average | Average | |||||||||||||||
| Number | Contractual | Exercise | Options | Exercise | |||||||||||||
| Outstanding | Life | Price | Exercisable | Price | |||||||||||||
| $ | $ | ||||||||||||||||
Market Vesting Options
On June 2, 2025, the Company accelerated the vesting of the market-vesting options to purchase
A summary of market vesting options is included below:
| Weighted | |||||||||||||||||
| Average | Weighted | Weighted | |||||||||||||||
| Remaining | Average | Average | |||||||||||||||
| Number | Contractual | Exercise | Options | Exercise | |||||||||||||
| Outstanding | Life | Price | Exercisable | Price | |||||||||||||
| $ | $ | ||||||||||||||||
A summary of total outstanding options is included below:
| 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, 2026 | $ | $ | $ | |||||||||||||||||||||
| Granted | $ | $ | $ | |||||||||||||||||||||
| Forfeited or expired | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | |||||||||||||||||||||
The weighted average remaining contractual life for total exercisable options is
Employee Awards
Stock-based compensation expense recognized related to stock options and restricted stock units to employees for the three months ended June 30, 2026 and 2025 was $
Stock-based compensation expense recognized related to stock options and restricted stock units to employees for the six months ended June 30, 2026 and 2025 was $
As of June 30, 2026, there was $
Director Awards
Compensation expense recognized for the issuance of stock options awarded to our Board of Directors for the three months ended June 30, 2026 and 2025 was $
Compensation expense recognized for the issuance of stock options awarded to our Board of Directors for the six months ended June 30, 2026 and 2025 was $
As of June 30, 2026 there was $
NOTE 15: SEGMENT REPORTING
We currently operate in 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 disaggregated revenue as disclosed in Note 3, Revenue Recognition, and customer growth to ensure that our strategic decisions are aligned with long-term performance goals.
The measure used by our CODM to assess performance and make operating decisions is net loss as reported on our condensed consolidated statements of operations. Significant segment expenses are reported as total expenses on the condensed consolidated statements of operations. Segment assets are disclosed in the condensed consolidated balance sheets.
Significant Customers
We had customer that accounted for
We had customers that accounted for
We had customer that accounted for
Revenues by Geographical Area
The following table summarizes our revenue recognized in the condensed consolidated statements of operations by geographical area:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues by Geographical Area: | ||||||||||||||||
| United States | $ | $ | $ | $ | ||||||||||||
| Canada | ||||||||||||||||
| Total Revenues | $ | $ | $ | $ | ||||||||||||
Significant Vendors
No vendors accounted for more than 10% of outstanding accounts payable at June 30, 2026, and vendors accounted for
Long Lived Assets by Geographical Region
The following table sets forth our long-lived assets by geographic area, which consists of property and equipment, net and operating and finance lease right-of-use assets:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| United States | $ | $ | ||||||
| Canada | ||||||||
| Total | $ | $ | ||||||
NOTE 16: LEASES
The Company's lease portfolio primarily comprises operating leases for office space and finance leases for computer equipment and DOOH media assets from the acquisition of CDM. At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on whether the contract conveys the right to control the use of identified property or equipment for a period of time in exchange for consideration. Leases are classified as operating or finance leases at the commencement date of the lease. Leases may include one or more options to renew. We do not assume renewals in our determination of the lease term unless the renewals are deemed to be reasonably assured at lease commencement. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company determines the discount rate used to measure lease liabilities based on the rate implicit in the lease, if readily determinable. If the implicit rate is not available, the Company uses its incremental borrowing rate, which is determined based on the rate at which the Company could borrow on a collateralized basis over a similar term and in a similar economic environment to the lease.
The following table summarizes the classification of operating and finance lease assets and liabilities in the Company's condensed consolidated balance sheet:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Assets: | ||||||||
| Finance lease assets | $ | $ | ||||||
| Operating lease assets | ||||||||
| Total lease assets | $ | $ | ||||||
| Liabilities: | ||||||||
| Operating lease liabilities: | ||||||||
| Current portion of operating lease liabilities | $ | $ | ||||||
| Non-current portion of operating lease liabilities | ||||||||
| Finance lease liabilities: | ||||||||
| Current portion of finance lease liabilities | ||||||||
| Non-current portion of finance lease liabilities | ||||||||
| Total lease liabilities | $ | $ | ||||||
The following table summarizes the operating and financing lease expenses in the Company's condensed consolidated statements of operations:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Operating lease expense | $ | $ | $ | $ | ||||||||||||
| Finance lease expense: | ||||||||||||||||
| Amortization of right-of-use assets | ||||||||||||||||
| Interest on lease liabilities | ||||||||||||||||
| Total lease expense | $ | $ | $ | $ | ||||||||||||
The following table provides lease term and discount rate information related to operating and finance leases:
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| Weighted average remaining lease term (years): | ||||||||
| Operating leases | ||||||||
| Finance leases | ||||||||
| Weighted average discount rate: | ||||||||
| Operating leases | % | % | ||||||
| Finance leases | % | % | ||||||
The following sets forth future minimum lease payments:
| Operating | Finance | Total | ||||||||||
| Leases | Leases | Leases | ||||||||||
| Future minimum payments: | ||||||||||||
| Remainder of 2026 | $ | $ | $ | |||||||||
| 2027 | ||||||||||||
| 2028 | ||||||||||||
| 2029 | ||||||||||||
| 2030 | ||||||||||||
| Total undiscounted cash flows | ||||||||||||
| Less imputed interest | ( | ) | ( | ) | ( | ) | ||||||
| Present value of lease liabilities | $ | $ | $ | |||||||||
Supplemental cash flow information and non-cash activity related to leases include the following:
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||||||
| Operating cash flows paid for operating leases | $ | $ | ||||||
| Operating cash flows paid for finance leases | $ | $ | ||||||
| Financing cash flows paid for finance leases | $ | $ | ||||||
NOTE 17: SUBSEQUENT EVENTS
The Company evaluated subsequent events occurring after the balance sheet date through the date these condensed consolidated financial statements were issued and identified the following:
Prepayments of Borrowings Under the Amended Credit Agreement from the Public Offering
On July 1, 2026, net proceeds of the June 2026 public offering (see Note 12) were applied to repay outstanding borrowings under the Amended Credit Agreement through normal operations, including a payment of $
Exercise of Underwriter Option to Purchase Common Stock
On July 7, 2026, the underwriter fully exercised its option to purchase additional shares of common stock granted in connection with the June 2026 public offering (see Note 12). At the closing of the over-allotment option, which occurred on July 8, 2026, the Company issued
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion contains various forward-looking statements within the meaning of Section 21E of the Exchange Act. Although we believe that, in making any such statement, our expectations are based on reasonable assumptions, any such statement may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. When used in the following discussion, the words “anticipates,” “believes,” “expects,” “intends,” “plans,” “estimates,” “projects,” “should,” “may,” “proposes,” and similar expressions (or the negative versions of such words or expressions), as they relate to us or our management, are intended to identify such forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from those anticipated, and many of which are beyond our control. Factors that could cause actual results to differ materially from those anticipated are set forth under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, as filed with the Securities and Exchange Commission on April 15, 2026.
Our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking statements. Accordingly, we cannot be certain that any of the events anticipated by forward-looking statements will occur or, if any of them do occur, what impact they will have on us. We caution you to keep in mind the cautions and risks described in this document and to refrain from attributing undue certainty to any forward-looking statements, which speak only as of the date of the document in which they appear. Except to the extent required by law, we expressly disclaim any obligation to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or change in events, conditions, or circumstances on which any statement is based.
Overview
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 |
| ● |
Lottery |
| ● |
Mixed Use Developments |
| ● |
DOOH Advertising 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; |
| ● |
Enhanced employee productivity and satisfaction; |
| ● |
Increased revenue and profitability; |
| ● |
Improved guest experience; |
| ● |
Increased customer/guest engagement; and |
| ● |
Traffic content and advertising |
Through a combination of organically grown platforms and a series of strategic acquisitions, the Company assists customers to design, deploy, manage, and monetize their digital signage and in-store retail media networks. The Company sources leads and opportunities for its solutions through its digital and content marketing initiatives, close relationships with key industry partners, including equipment manufacturers and a media sales agent, and the direct efforts of its in-house industry sales experts. Customer engagements focus on consultative conversations that ensure the Company’s solutions are positioned to help customers achieve their business objectives in the most cost-effective manner possible.
When comparing us to other digital signage providers, our customers value the following competitive advantages:
| ● |
Breadth of solutions – Creative Realities offers a wide breadth of solutions to our customers. Creative Realities is one of only a few companies in the industry capable of providing the full portfolio of products and services required to implement and run an effective digital signage and in-store retail media networks. We leverage a ‘single vendor’ approach, providing customers with a one-stop-shop for sourcing digital signage and media solutions from design through day two services. |
| ● |
Managed labor pool – Unlike most companies in our industry, we have a curated labor pool of qualified and vetted field technicians available to service customers quickly nationwide. We can meet tight schedules even in exceptionally large deployments and still ensure quality and consistency. |
| ● |
In-house creative resources – We assist customers in creating new content or repurposing existing content for digital signage experiences, an activity for which the Company has won several design awards in recent years. In each instance, our services can be essential in helping customers develop an effective content program. |
| ● |
Network scalability and reliability – Our SaaS content management platforms power some of the largest and most complex digital signage networks in North America, evidencing our ability to manage enterprise scale projects. This also provides us purchasing power to source products and services for our customers, enabling us to deliver cost effective, reliable and powerful solutions to small and medium size business customers. |
| ● |
AdTech platforms – The Company has developed and deployed the AdLogic and CPM+ platforms, which, working in conjunction with our CMS platforms, present completely integrated digital advertising solutions for existing and prospective customers seeking to monetize their in-store retail media networks. These platforms anchor the Company's vertical expansion into AdTech bringing new, and expanding existing, addressable markets. |
| ● |
Market sector expertise – Creative Realities has in-house experts in key market segments such as retail, QSRs, convenience stores, and DOOH advertising. Our expertise in these business segments enable our teams to provide meaningful business conversations and offer tailored solutions with prospects and customers to their unique business objectives. These experts build industry relationship and create thought leadership that drives lead flow and new opportunities for our business. |
| ● |
Logistics – Implementing a large digital signage project can be a logistical nightmare that can stall an initiative, even before deployment. 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 corporate IT departments. We simplify and improve end user support by leveraging our own network operations center (“NOC”) in Louisville, Kentucky. The NOC resolves many issues remotely and when field support is required, it can be dispatched quickly from the NOC, leveraging our managed labor pool to resolve customer issues quickly and effectively. |
| ● |
Integrations and Application Development – The future of digital signage is not still images and videos on a screen. We believe that interactive applications and integrations with other data sources will dominate the future. From social media feeds, mobile integrations, corporate data stores, or POS systems, our proven ability to build scalable applications and integrations is a key advantage that customers can leverage to deliver more compelling and engaging experiences for their customers. |
| ● |
Hardware support – A number of digital signage providers sell a proprietary media player or align themselves with just one operating system. We utilize a range of media players including Windows, Android and BrightSign to provide customers the flexibility they need to select the appropriate hardware for any application knowing the entire network can still be served by a single digital signage platform, reducing complexity and improving the productivity of our customers. |
| ● |
Retail Media Network – The Company owns and operates the largest mall shopping network in Canada. |
Our Sources of Revenue
The four primary sources of revenue for the Company are:
| ● |
Hardware sales from reselling digital signage hardware from original equipment manufacturers such as Samsung and BrightSign. |
| ● |
Services revenue from helping customers design, deploy and manage their digital signage and in-store retail media networks, including: |
| o |
Hardware system design/engineering |
| o |
Hardware installation |
| o |
Content development |
| o |
Content scheduling |
| o |
Post-deployment network and field support |
| o |
AdTech to traffic advertising and content directly and through programmatic channels |
| ● |
Recurring subscription licensing and support revenue from our digital signage software platforms, which are generally sold via a SaaS model. Our platforms: |
| 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-based interface that allows customers to give content scheduling access to local users via the web or mobile devices, while still maintaining centralized programming control; |
| o |
AdLogic, the Company’s ad management platform for digital signage networks, which presently delivers approximately 50 million ads daily; |
| o |
Clarity, the Company’s digital signage platform for menu board solutions, which has become a market leader for a range of restaurants, including QSRs and convenience store applications; and |
| o |
iShowroomProX, an omni-channel digital sales support platform targeted at original equipment manufacturers in the transportation sector, which integrates with dozens of key data services including dealer inventory at the VIN level. |
| ● |
Selling digital out-of-home (DOOH) advertising on infrastructure it owns or operates at retail malls, shopping centers, office buildings, and other commercial properties. |
While hardware sales and support services revenues can fluctuate more significantly year over year based on new, large-scale network deployments, the Company is focusing on maintaining and increasing recurring SaaS revenue as digital signage adoption/utilization expands across the vertical markets we serve.
Our Operating Expenses
Our operating expenses are comprised of sales and marketing, and general and administrative expenses. 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 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.
Results of Operations
Note: All dollar amounts reported in Results of Operations are in thousands, except per-share information.
Three Months Ended June 30, 2026 Compared to Three Months Ended June 30, 2025
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.
| For The Three Months Ended |
||||||||||||||||
| June 30, |
||||||||||||||||
| 2026 |
2025 |
Change $ |
Change % |
|||||||||||||
| Sales: |
||||||||||||||||
| Hardware |
$ | 7,475 | $ | 7,073 | $ | 402 | 6 | % | ||||||||
| Services and other |
14,030 | 5,957 | 8,073 | 136 | % | |||||||||||
| Total sales |
21,505 | 13,030 | 8,475 | 65 | % | |||||||||||
| Cost of sales: |
||||||||||||||||
| Hardware |
6,197 | 5,298 | 899 | 17 | % | |||||||||||
| Services and other |
7,011 | 2,715 | 4,296 | 158 | % | |||||||||||
| Total cost of sales |
13,208 | 8,013 | 5,195 | 65 | % | |||||||||||
| Gross profit |
8,297 | 5,017 | 3,280 | 65 | % | |||||||||||
| Operating expenses: |
||||||||||||||||
| Sales and marketing expenses |
2,024 | 1,156 | 868 | 75 | % | |||||||||||
| General and administrative expenses |
9,018 | 5,192 | 3,826 | 74 | % | |||||||||||
| Total operating expenses |
11,042 | 6,348 | 4,694 | 74 | % | |||||||||||
| Operating loss |
(2,745 | ) | (1,331 | ) | (1,414 | ) | 106 | % | ||||||||
| Other expenses (income): |
||||||||||||||||
| Interest expense, including amortization of debt discount |
1,426 | 513 | 913 | 178 | % | |||||||||||
| Other expense (income), net |
40 | (1 | ) | 41 | (4100 | %) | ||||||||||
| Total other (income) expenses, net |
1,466 | 512 | 954 | 186 | % | |||||||||||
| Loss before income taxes |
(4,211 | ) | (1,843 | ) | (2,368 | ) | 128 | % | ||||||||
| Income tax benefit (expense) |
315 | 26 | 289 | 1112 | % | |||||||||||
| Net loss |
$ | (3,896 | ) | $ | (1,817 | ) | $ | (2,079 | ) | 114 | % | |||||
Sales
Sales increased by $8,475 or 65%, to $21,505 for the three months ended June 30, 2026 compared to the same period in 2025. Hardware revenues during the second quarter of 2026 were $7,475, an increase of $402 as compared to the same period in 2025. The increase was due to the inclusion of CDM, which contributed $380 during the period. Services and other revenues were $14,030, an increase of $8,073 for the three months ended June 30, 2026, as compared to the same period in 2025, due to the acquisition of CDM. Managed services revenue, which includes the Company’s SaaS subscription services, was $4,991, an increase of $507, or 11%, as compared to the same period in 2025, largely driven by the inclusion of CDM in 2026, which represented approximately $1,813. This increase was offset by the expiration of certain customer contracts within the legacy operations of CRI. Other services revenue also increased as a result of the acquisition of CDM, up $1,326 for the three months ended June 30, 2026 as compared to the same period in 2025.
Gross Profit
Gross profit margin was 39% and 39% for the three months ended June 30, 2026 and 2025, respectively. Hardware gross margin decreased 8 points, due to an unusually higher mix of lower margin QSR deployments during the 2026 period. Services and other gross margin decreased 4 points in the quarter compared to the prior year period.
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 expenses. Costs increased by $868, or 75% for the three months ended June 30, 2026 as compared to the same period in 2025 primarily due to the inclusion of CDM.
General and Administrative Expenses
General and administrative expenses increased by $3,826 or 74%, for the three months ended June 30, 2026 as compared to the same period in 2025. The increase was primarily driven by the inclusion of CDM, which represented $4,241 of expense offset by lower stock compensation expense for the period.
Interest Expense
Interest expense increased by $913 or 178%, during the three months ended June 30, 2026 as compared to June 30, 2025 primarily as a result of the new Term Loan entered into during November 2025. See Note 9, Debt, to the condensed consolidated financial statements for a discussion of the Company’s debt and related interest expense obligations.
Other Expense (Income)
The Company recognized $40 in other expenses for the three months ended June 30, 2026 as compared to $(1) for the three months ended June 30, 2025. The increase is a result of the inclusion of CDM in 2026.
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
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.
| For The Six Months Ended |
||||||||||||||||
| 2026 |
2025 |
Change $ |
Change % |
|||||||||||||
| Sales: |
||||||||||||||||
| Hardware |
$ | 12,032 | $ | 10,467 | $ | 1,565 | 15 | % | ||||||||
| Services and other |
25,821 | 12,297 | 13,524 | 110 | % | |||||||||||
| Total sales |
37,853 | 22,764 | 15,089 | 66 | % | |||||||||||
| Cost of sales: |
||||||||||||||||
| Hardware |
10,116 | 7,602 | 2,514 | 33 | % | |||||||||||
| Services and other |
13,844 | 5,692 | 8,152 | 143 | % | |||||||||||
| Total cost of sales |
23,960 | 13,294 | 10,666 | 80 | % | |||||||||||
| Gross profit |
13,893 | 9,470 | 4,423 | 47 | % | |||||||||||
| Operating expenses: |
||||||||||||||||
| Sales and marketing expenses |
4,921 | 2,403 | 2,518 | 105 | % | |||||||||||
| General and administrative expenses |
17,923 | 9,120 | 8,803 | 97 | % | |||||||||||
| Total operating expenses |
22,844 | 11,523 | 11,321 | 98 | % | |||||||||||
| Operating loss |
(8,951 | ) | (2,053 | ) | (6,898 | ) | 336 | % | ||||||||
| Other expenses (income): |
||||||||||||||||
| Interest expense, including amortization of debt discount |
2,891 | 834 | 2,057 | 247 | % | |||||||||||
| Gain on settlement of contingent consideration |
- | (4,775 | ) | 4,775 | (100 | %) | ||||||||||
| Other expense, net |
360 | 264 | 96 | 36 | % | |||||||||||
| Total other (income) expenses, net |
3,251 | (3,677 | ) | 6,928 | (188 | %) | ||||||||||
| (Loss) income before income taxes |
(12,202 | ) | 1,624 | (13,826 | ) | (851 | %) | |||||||||
| Income tax benefit (expense) |
845 | (73 | ) | 918 | (1,258 | %) | ||||||||||
| Net (loss) income |
$ | (11,357 | ) | $ | 1,551 | $ | (12,908 | ) | (832 | %) | ||||||
Sales
Sales increased by $15,089 or 66%, to $37,853 for the six months ended June 30, 2026 compared to the same period in 2025. Hardware revenues during the first half of 2026 were $12,032, an increase of $1,565 as compared to the same period in 2025. Approximately 68% of the increase was due to the inclusion of CDM, with the remaining 32% driven by new customer deployments during the first half of 2026. The number of new deployments was lower than expected due to adverse weather conditions that delayed planned installations in multiple regions. Services and other revenues were $25,821, an increase of $13,524 for the six months ended June 30, 2026, as compared to the same period in 2025, due to the acquisition of CDM. Installation services revenue was $7,742, an increase of $4,908 for the six months ended June 30, 2026, as compared to the same period in 2025, driven by the inclusion of CDM in 2026 along with the continued roll-outs of QSR and lottery customers. Digital marketing advertising and other services revenues also increased as a result of the acquisition of CDM, up $8,979 for the six months ended June 30, 2026 as compared to the same period in 2025. Managed services revenue, which includes the Company’s SaaS subscription services, was $8,368, a decrease of $363, or 4%, as compared to the same period in 2025, due to the expiration of certain customer contracts in 2025.
Gross Profit
Gross profit margin was 37% and 42% for the six months ended June 30, 2026 and 2025, respectively. Hardware gross margin decreased 11 points, due to an unusually higher mix of lower margin QSR deployments during the 2026 period and $486 in costs associated with transitioning away from an outsourced installer of a large CDM customer. Services and other gross margin decreased 7 points in the period compared to the prior year period driven by the expiration of certain customer contracts in 2025.
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 expenses. Costs increased by $2,518, or 105% for the six months ended June 30, 2026 as compared to the same period in 2025, driven primarily by the inclusion of CDM which contributed $1,874 of expenses for the period.
General and Administrative Expenses
General and administrative expenses increased by $8,803 or 97%, for the six months ended June 30, 2026 as compared to the same period in 2025. The increase was primarily driven by the inclusion of CDM, which represented $8,020 of expense, and additional accounting, compliance, legal and other one-time fees and severance costs in connection with the integration of CDM.
Interest Expense
Interest expense increased by $2,057 or 247%, during the six months ended June 30, 2026 as compared to June 30, 2025 primarily as a result of the Amended Credit Agreement entered into during November 2025. See Note 9, Debt, to the condensed consolidated financial statements for a discussion of the Company’s debt and related interest expense obligations.
Other Expense (Income)
The Company recognized $360 in other expenses for the six months ended June 30, 2026 as compared to $264 for the six months ended June 30, 2025. The increase is a result of the inclusion of CDM in 2026.
Summary Unaudited Quarterly Financial Information (Non-GAAP)
A non-GAAP financial measure is generally defined as one that purports to measure historical or future financial performance, financial position, or cash flows, but excludes or includes amounts that would not be so excluded or included in the most comparable U.S. generally accepted accounting principles (“GAAP”) measure. Earnings before interest, taxes, depreciation, and amortization (“EBITDA”) and adjusted EBITDA (“Adjusted EBITDA”) are non-GAAP financial performance measures we believe offer a useful view of the overall operations of our business. These non-GAAP financial performance measures, which may not be comparable to, and may be defined differently than, similarly titled measures used or reported by other companies, should not be considered in isolation from or as a substitute for the related GAAP measures and should be read together with financial information presented on a GAAP basis.
EBITDA and Adjusted EBITDA are not measurements of financial performance under GAAP. We use non-GAAP financial performance measures to supplement our GAAP results in order to provide a more complete understanding of the factors and trends affecting our business. We believe these non-GAAP financial performance measures are helpful in identifying trends in our day-to-day performance because the items excluded have little or no significance on our day-to-day operations. These measures provide an assessment of core expenses and afford management the ability to make decisions which are expected to facilitate meeting current financial goals as well as achieve optimal financial performance. Our management believes that these non-GAAP financial measures provide additional information useful for investors, shareholders and other stakeholders of our Company in gauging our results of operations on an ongoing basis.
EBITDA and Adjusted EBITDA have limitations as analytical tools. They should not be viewed in isolation or as a substitute for net income (loss) or any other measure of performance derived in accordance with GAAP. EBITDA and Adjusted EBITDA exclude certain expenses that we believe may not be indicative of our business operating results. 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. EBITDA does not take into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows. In addition, Adjusted EBITDA excludes stock-based compensation, fair value adjustments and both cash and non-cash non-recurring gains and charges. We strongly urge you to review the following reconciliation of net (loss) income to EBITDA and Adjusted EBITDA, along with our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. We also strongly urge you not to rely on any single financial performance measure to evaluate our business.
The table below shows the reconciliation of the Company's net loss to EBITDA and Adjusted EBITDA:
| Quarters Ended |
||||||||||||||||||||
| June 30, |
March 31, |
December 31, |
September 30, |
June 30, |
||||||||||||||||
| 2026 |
2026 |
2025 |
2025 |
2025 |
||||||||||||||||
| GAAP net loss |
$ | (3,896 | ) | $ | (7,461 | ) | $ | (1,965 | ) | $ | (7,862 | ) | $ | (1,817 | ) | |||||
| Interest expense: |
||||||||||||||||||||
| Amortization of deferred financing costs |
80 | 83 | 60 | 26 | 25 | |||||||||||||||
| Interest expense, net |
1,385 | 1,382 | 1,055 | 504 | 488 | |||||||||||||||
| Depreciation/amortization: |
||||||||||||||||||||
| Amortization of intangible assets |
1,456 | 1,441 | 1,350 | 1,171 | 1,165 | |||||||||||||||
| Depreciation of property and equipment |
2,429 | 2,452 | 1,512 | 54 | 52 | |||||||||||||||
| Income tax expense (benefit) |
(315 | ) | (530 | ) | 1,175 | (82 | ) | (26 | ) | |||||||||||
| EBITDA |
$ | 1,139 | $ | (2,633 | ) | $ | 3,187 | $ | (6,189 | ) | $ | (113 | ) | |||||||
| Adjustments |
||||||||||||||||||||
| Stock-based compensation |
430 | 324 | 724 | 308 | 1,249 | |||||||||||||||
| Deal & transaction expenses |
105 | 43 | 1,188 | 766 | - | |||||||||||||||
| CDM related integration and transition costs |
240 | 1,452 | - | - | - | |||||||||||||||
| Loss on impairment of software asset |
- | - | - | 5,712 | - | |||||||||||||||
| Loss on modification of revolver |
- | - | 24 | - | - | |||||||||||||||
| Other expense (income) |
40 | 320 | 108 | 144 | (1 | ) | ||||||||||||||
| Adjusted EBITDA |
$ | 1,954 | $ | (494 | ) | $ | 5,231 | $ | 741 | $ | 1,135 | |||||||||
Liquidity and Capital Resources
Overview
See Note 1, Nature of Organization and Operations, to the accompanying condensed consolidated financial statements for a detailed discussion of liquidity and financial resources.
Operating Activities
Net cash provided by operating activities was $1,003 for the six months ended June 30, 2026 compared to net cash provided by operating activities of $773 for the six months ended June 30, 2025. Cash provided in 2026 was primarily attributable to a net loss of $11,357, offset by net non-cash charges of $8,461 and a $3,899 net source of cash from changes in operating assets and liabilities. Cash provided in 2025 was primarily attributable to net income of $1,551 reduced by net non-cash gain of $(591) (including a $4,775 gain on settlement of contingent consideration), in addition to a decrease in operating assets and liabilities of $187.
Investing Activities
Net cash used in investing activities was $3,220 for the six months ended June 30, 2026 compared to $1,264 for the six months ended June 30, 2025. Capitalization of internally developed software costs was $768 for the six months ended June 30, 2026 compared to $1,155 for the six months ended June 30, 2025. Purchases of property and equipment were $2,452 for the six months ended June 30, 2026 compared to $109 for the six months ended June 30, 2025. The Company did not have any material commitments for capital expenditures as of June 30, 2026.
Financing Activities
Net cash provided by financing activities was $11,325 for the six months ended June 30, 2026 compared to $23 for the six months ended June 30, 2025. Cash provided in 2026 was primarily attributable to $10,784 of net proceeds from the 2026 public offering of common stock and pre-funded warrants and net borrowings of $4,804 under the Revolving Credit Facility ($18,222 in proceeds and $13,418 in repayments), partially offset by $2,201 of scheduled principal payments on the Term Loan and the Promissory Note, $1,862 in repayments of finance lease obligations (which increased relative to the prior-year period as a result of finance leases assumed in the CDM Acquisition), and $200 used to repurchase Common Stock warrants pursuant to the Warrant Repurchase Agreement entered into on February 16, 2026. Remaining available amounts under the Revolving Credit Facility were $12,756 as of June 30, 2026. Cash provided in 2025 was primarily attributable to net borrowings of $3,049 under the Revolving Credit Facility under the Prior Credit Agreement ($18,334 in proceeds and $15,285 in repayments), partially offset by a $3,000 cash payment in connection with the partial settlement of the contingent consideration liability and $26 in repayments of finance lease obligations. See Note 9, Debt, and Note 12, Common Stock, to the condensed consolidated financial statements for further discussion.
Contractual Obligations and Commitments
As of June 30, 2026, we had operating and finance lease obligations of approximately $21,033 payable over the next five years. These obligations relate primarily to corporate office space, warehousing and light-assembly facilities used to stage and deploy digital signage hardware and leased equipment supporting our operations.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expense, and the related disclosures. We base our estimates on historical experience and on assumptions that we believe are reasonable under the circumstances; actual results may differ from these estimates.
Our critical accounting estimates are described in Part II, Item 7, Critical Accounting Estimates in our Annual Report on Form 10-K for the year ended December 31, 2025, and our significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, in our financial statements included elsewhere in this quarterly report. There have been no material changes to our critical accounting estimates or significant accounting policies since the filing of our Annual Report on Form 10-K for the year ended December 31, 2025.
Off-Balance Sheet Arrangements
During the six months ended June 30, 2026, we had no off-balance sheet arrangements, as defined in Item 303(a)(4) of Regulation S-K.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Foreign Currency Risk
We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar, primarily the Canadian dollar, causing both our revenue and our operating results to be impacted by fluctuations in the exchange rates. Gains or losses from the revaluation of certain cash balances, accounts receivable balances and intercompany balances that are denominated in these currencies impact our net loss. A hypothetical decrease in all foreign currencies against the U.S. dollar of 1% would not result in a material foreign currency loss on foreign-denominated balances, as of June 30, 2026. As our foreign operations expand, our results may be more materially impacted by fluctuations in the exchange rates of the currencies in which we do business. At this time, we do not enter into financial instruments to hedge our foreign currency exchange risk.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), as of the end of the period covered by this quarterly report. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of June 30, 2026, and were designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the three and six months ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
As a smaller reporting company, we are not required to provide the information required by this Item; however, the discussion of our business and operations should be read together with the Risk Factors set forth in our Annual Report on Form 10-K filed with the SEC on April 15, 2026, and subsequent filings made with the SEC. Such risks and uncertainties have the potential to affect our business, financial condition, results of operations, cash flow, strategies or prospects in a material and adverse manner.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Rule 10b5-1 Trading Plans
During the six months ended June 30, 2026, of the Company’s directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule
Item 6. Exhibits
INDEX TO EXHIBITS
| Exhibit Number |
Exhibit Description |
Form |
Exhibit |
Filing Date |
Filed Herewith |
| 10.1 |
Underwriting Agreement, dated June 29, 2026, between Creative Realities, Inc. and Craig-Hallum Capital Group LLC. |
8-K |
1.1 |
June 30, 2026 | — |
| 10.2 |
Form of Pre-Funded Warrant. | 8-K |
4.1 |
June 30, 2026 | — |
| 31.1 |
Chief Executive Officer Certification pursuant to Exchange Act Rule 13a-14(a). |
X |
|||
| 31.2 |
Chief Financial Officer Certification pursuant to Exchange Act Rule 13a-14(a). |
X |
|||
| 32.1 |
Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350. |
X |
|||
| 32.2 |
Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350. |
X |
|||
| 101.INS |
Inline XBRL Instance Document |
X |
|||
| 101.SCH |
Inline XBRL Taxonomy Extension Schema. |
X |
|||
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase. |
X |
|||
| 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase. |
X |
|||
| 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase. |
X |
|||
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase. |
X |
|||
| 104 |
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
X |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| CREATIVE REALITIES, INC. |
|
| Date: August 14, 2026 |
By: /s/ Richard Mills |
| Richard Mills |
|
| Chief Executive Officer |
|
| Date: August 14, 2026 |
By: /s/ Tamra Koshewa |
| Tamra Koshewa |
|
| Chief Financial Officer |