Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, and the Company's Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the Securities and Exchange Commission on May 14, 2025 and March 14, 2025, respectively.

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:

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Retail;

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Entertainment and Sports Venues;

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Restaurants, including quick-serve restaurants ("QSR");

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Convenience Stores;

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Financial Services;

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Automotive;

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Medical and Healthcare Facilities;

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Mixed Use Developments;

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Corporate Communications, Employee Experience; and

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Digital out of Home ("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:

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Increased brand awareness;

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Improved customer support;

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Enhanced employee productivity and satisfaction;

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Increased revenue and profitability;

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Improved guest experience; and

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Increased customer/guest engagement.

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 networks. The Company sources leads and opportunities for its solutions through its digital and content marketing initiatives, close relationships with key industry partners, specifically equipment manufacturers, and the direct efforts of its in-house industry sales experts. 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:

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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 network. We leverage a 'single vendor' approach, providing customers with a one-stop-shop for sourcing digital signage solutions from design through day two services.

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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.

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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.

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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.

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AdTech platforms - The Company has developed and deployed the AdLogic and Adlogic 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.

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Market sector expertise - Creative Realities has in-house experts in key market segments such as automotive, 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.

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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.

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Technical support - Digital signage networks present unique challenges for corporate IT departments. We simplify and improve end user support by leveraging our own 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.

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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 point of sale 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.

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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 flexibility 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.

Our Sources of Revenue

The three primary sources of revenue for the Company are:

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Hardware sales from reselling digital signage hardware from original equipment manufacturers such as Samsung and BrightSign.

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Services revenue from helping customers design, deploy and manage their digital signage network, including:

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Hardware system design/engineering;

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Hardware installation;

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Content development;

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Content scheduling; and

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Post-deployment network and field support.

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Recurring subscription licensing and support revenue from our digital signage software platforms, which are generally sold via a SaaS model. Our platforms include:

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

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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;

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Reflect AdLogic, the Company's ad management platform for digital signage networks, which presently delivers approximately 50 million ads daily;

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Clarity, the Company's menu board solution, which has become a market leader for a range of restaurant and convenience store applications;

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Reflect Zero Touch, which allows customers to turn any screen into an interactive experience by allowing guests to engage using their mobile device;

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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; and

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OSx+, a digital VIN-level checklist used to assist in the tracking and delivery of new vehicles in the transportation sector, providing measurable lift in customer satisfaction scores and connected vehicle enrollments and subscription activations.

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

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.

Critical Accounting Policies and Estimates

The Company's significant accounting policies are described in Note 2 Summary of Significant Accounting Policies of the Company's Condensed Consolidated Financial Statements included elsewhere in this Report. The Company's Condensed Consolidated Financial Statements are prepared in conformity with GAAP. Certain accounting policies involve significant judgments, assumptions, and estimates by management that could have a material impact on the carrying value of certain assets and liabilities and disclosure of contingent assets and liabilities at the date of the Condensed Consolidated Financial Statements and the reported amounts of revenue and expenses during the reporting period. Our actual results could differ from those estimates.

Results of Operations

Note: All dollar amounts reported in Results of Operations are in thousands, except share and per-share information.

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

The tables presented below compare our results of operations 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 September 30,								Change
		2025				2024				$				%
Sales		$	10,547			$	14,442			$	(3,895	)			27	%
Cost of sales			5,770				7,853			$	(2,083	)			27	%
Gross profit			4,777				6,589				(1,812	)			28	%
Sales and marketing expenses			1,372				1,525				(153	)			10	%
General and administrative expenses			4,963				3,928				1,035				26	%
Impairment of software asset			5,712				-				5,712				100	%
Total operating expenses			12,047				5,453				6,594				121	%
Operating (loss) income			(7,270	)			1,136				(8,406	)			740	%
Other expenses (income):
Interest expense			530				303				227				75	%
Loss on change in fair value of contingent consideration			-				598				(598	)			100	%
Other expense (income)			144				(11	)			155				1409	%
Total other expenses (income)			674				890				(216	)			24	%
Net (loss) income before income taxes			(7,944	)			246				(8,190	)			3329	%
Benefit (provision) for income taxes			82				(192	)			274				143	%
Net loss		$	(7,862	)		$	54				(7,916	)			14659	%

Sales

Sales decreased $3,895, or 27%, for the three months ending September 30, 2025 as compared to the same period in 2024. Hardware revenues were $4,168, a decrease of $1,073, or 20%, for the three months ending September 30, 2025 as compared to the same period in 2024. The decrease in hardware revenues was primarily driven by a significant sports and entertainment installation in the prior year that did not occur in 2025. Services and other revenues were $6,379, a decrease of $2,822 or 31%. Installation services revenue decreased $1,802, or 62% for the three months ending September 30, 2025 as compared to the same period in 2024, due to fewer deployments in the period. Managed services revenue, which includes the Company's SaaS subscription services, were $4,456, a decrease of $429, or 9%, as compared to the same period in 2024, as a result of reductions in the quantity of licenses subject to software subscriptions on our platforms driven by a single customer which insourced a portion of their hosted environment. Other services revenue decreased $591, or 42% for the three months ending September 30, 2025 as compared to the same period in 2024, as a result of the Company exiting media sales effective October 1, 2024.

Gross Profit

Gross profit margin was 45% and 46% for the three months ending September 30, 2025 and 2024, respectively. Hardware gross margin increased 6% as a result of deployments utilizing hardware with more favorable margins due to the Company's purchasing power. Services and other gross margin decreased 3% as a result of a reduction in our SaaS subscription services and our exit from media sales effective October 1, 2024.

Sales and Marketing Expenses

Sales and marketing expenses generally include the salaries, taxes, and benefits of our sales and marketing personnel, as well as trade show activities, travel, and other related sales and marketing costs. Sales and marketing expenses decreased by $153, or 10%, for the three-month period ended September 30, 2025 as compared to the same period in 2024, driven primarily by a decreases of $265 in fixed and variable salaries, taxes and benefits of our sales and marketing personnel, partially offset by an increase of $111 related to an increased investment in trade show and marketing activities during the quarter.

General and Administrative Expenses

General and administrative expenses increased by $1,036 or 26%, for the three months ending September 30, 2025 as compared to the same period in 2024. The increase was driven by (1) a $331 rise in stock-based compensation expense for employees and directors and (2) $766 in expenses related to deal and transaction costs incurred in relation to the announced acquisition of Cineplex Digital Media, which is expected to close in the fourth quarter of 2025.

Impairment of software asset

During the three months ended September 30, 2025, the Company recognized a non-cash impairment charge of $5,712 related to a proprietary software platform capitalized as an intangible asset under ASC 350-40. The impairment was recorded after management determined that expected future cash flows associated with the platform were not sufficient to recover its carrying amount, primarily due to uncertainty regarding the renewal of an existing software license agreement. The uncertainty arose in September 2025 when the customer communicated that it was unable to renew its license agreement with the Company due to budget constraints, representing a triggering event under ASC 350-40. The impairment loss was measured as the excess of the asset's carrying amount over its estimated fair value, which was determined using an income approach based on discounted cash flows and Level 3 inputs under ASC 820. The impairment did not impact cash flows or liquidity, but it did result in a significant increase in total operating expenses for the three months ended September 30, 2025 compared to the same periods in 2024.

Interest Expense

See Note 8 Debt to the Condensed Consolidated Financial Statements for a discussion of the Company's debt and related interest expense obligations.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

The tables presented below compare our results of operations 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 Nine Months
		Ended September 30,								Change
		2025				2024				$				%
Sales		$	33,311			$	39,842			$	(6,531	)			16	%
Cost of sales			19,064				20,701				(1,637	)			8	%
Gross profit			14,247				19,141				(4,894	)			26	%
Sales and marketing expenses			3,775				4,655				(880	)			19	%
General and administrative expenses			14,083				12,834				1,249				10	%
Impairment of software asset			5,712				-				5,712				100	%
Total operating expenses			23,570				17,489				6,081				35	%
Operating (loss) income			(9,323	)			1,652				(10,975	)			664	%
Other expenses (income):
Interest expense			1,364				1,479				(115	)			8	%
Gain on settlement of contingent consideration			(4,775	)			-				(4,775	)			100	%
Gain on change in fair value of contingent consideration			-				(414	)			414				100	%
Loss on debt extinguishment			-				1,059				(1,059	)			100	%
Other expense (income)			408				(28	)			436				1557	%
Total other expenses (income)			(3,003	)			2,096				(5,099	)			243	%
Net loss before income taxes			(6,320	)			(444	)			(5,876	)			1323	%
Provision from income taxes			9				(226	)			235				104	%
Net loss		$	(6,311	)		$	(670	)			(5,641	)			842	%

Sales

Sales decreased $6,531, or 16%, for the nine months ending September 30, 2025 as compared to the same period in 2024. Hardware revenues were $14,635, an increase of $226, or 2%, for the nine months ending September 30, 2025 as compared to the same period in 2024. The increase in hardware revenues was primarily driven by purchases from customers in our QSR and sports and entertainment verticals. Services and other revenues were $18,676, a decrease of $6,758 or 27%. Installation services revenue decreased $3,166, or 45% for the nine months ending September 30, 2025 as compared to the same period in 2024, due to fewer deployments in the period. Managed services revenue, which includes the Company's SaaS subscription services, were $13,187, a decrease of $1,319, or 9%, as compared to the same period in 2024, as a result of reductions in the quantity of licenses subject to software subscriptions on our platforms driven by a single customer which insourced a portion of their hosted environment. Other services revenue decreased $2,272, or 60% for the nine months ending September 30, 2025 as compared to the same period in 2024, as a result of the Company exiting media sales effective October 1, 2024.

Gross Profit

Gross profit margin was 43% and 48% for the nine months ending September 30, 2025 and 2024, respectively. Hardware gross margin increased 2% as a result of deployments utilizing hardware with more favorable margins due to the Company's purchasing power, combined with increased pricing on certain hardware-only purchases by customers. Services and other gross margin decreased 6% as a result of a reduction in our SaaS subscription services and our exit from media sales effective October 1, 2024.

Sales and Marketing Expenses

Sales and marketing expenses generally include the salaries, taxes, and benefits of our sales and marketing personnel, as well as trade show activities, travel, and other related sales and marketing costs. Sales and marketing expenses decreased by $880, or 19%, for the nine-month period ended September 30, 2025 as compared to the same period in 2024, driven primarily by decreases of (1) $839 in fixed and variable salaries, taxes and benefits of our sales and marketing personnel, and (2) $41 in trade show and marketing activities.

General and Administrative Expenses

General and administrative expenses increased by $1,249 or 10%, for the nine months ending September 30, 2025 as compared to the same period in 2024. The increase was primarily driven by (1) a $1,669 rise in stock-based compensation expense for employees and directors and (2) $766 in expenses related to deal and transaction costs incurred in relation to the announced acquisition of Cineplex Digital Media, which is expected to close in the fourth quarter of 2025. Excluding stock-based compensation and deal and transaction expenses, general and administrative expenses decreased by $1,186, reflecting the impact of various cost containment efforts. These included a $700 reduction in fixed and variable salaries, benefits, and payroll taxes for general and administrative personnel, as well as broad-based savings achieved across multiple spending categories. The Company implemented a number of low-cost restructuring measures and targeted vendor spend reductions, none of which were individually material, but which collectively contributed to a more efficient back-office cost structure. These actions were further supported by the retirement of legacy software platforms and the transition to a unified ERP system, which has enabled modest improvements in workflow efficiency and systems integration.

Impairment of software asset

During the nine months ended September 30, 2025, the Company recognized a non-cash impairment charge of $5,712 related to a proprietary software platform capitalized as an intangible asset under ASC 350-40. The impairment was recorded after management determined that expected future cash flows associated with the platform were not sufficient to recover its carrying amount, primarily due to uncertainty regarding the renewal of an existing software license agreement. The uncertainty arose in September 2025 when the customer communicated that it was unable to renew their license agreement due to budget constraints, representing a triggering event under ASC 350-40. The impairment loss was measured as the excess of the asset's carrying amount over its estimated fair value, which was determined using an income approach based on discounted cash flows and Level 3 inputs under ASC 820. The impairment did not impact cash flows or liquidity, but it did result in a significant increase in total operating expenses for the nine months ended September 30, 2025 compared to the same periods in 2024.

Interest Expense

See Note 8 Debt to the Condensed Consolidated Financial Statements for a discussion of the Company's debt and related interest expense obligations.

Gain on Settlement of Contingent Consideration

See Note 5 Business Combinations to the Condensed Consolidated Financial Statements for a discussion of the Company's gain on settlement of contingent consideration.

Other expenses (income)

The Company recognized $408 in other expenses for the nine months ending September 30, 2025 , consisting primarily of (1) $121 in legal expenses incurred in connection with the contingent consideration settlement and (2) $283 in severance-related expenses in connection with the termination of certain employees as part of a cost-reduction initiative.

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, 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) income to EBITDA and Adjusted EBITDA:

		Quarters Ended
		September 30				June 30				March 31				December 31				September 30
Quarters ended		2025				2025				2025				2024				2024
GAAP net (loss) income		$	(7,862	)		$	(1,817	)		$	3,368			$	(2,838	)		$	54
Interest expense, net			530				513				321				296				303
Depreciation/amortization:
Amortization of intangible assets			1,171				1,165				1,136				1,128				1,081
Amortization of employee share-based awards			308				1,249				2				4				3
Depreciation of property & equipment			54				52				51				49				51
Income tax (benefit) expense			(82	)			(26	)			99				(120	)			192
EBITDA		$	(5,881	)		$	1,136			$	4,977			$	(1,481	)		$	1,684
Adjustments
Loss (Gain) on fair value of contingent consideration			-				-				-				2,022				598
Gain on settlement of contingent consideration			-				-				(4,775	)			-				-
Stock-based compensation - Director grants			27				93				-				-				-
Deal & transaction expenses			766				-				-				-				-
Loss on impairment of software asset			5,712				-				-				-				-
Other (income) expense			144				(1	)			265				(74	)			(11	)
Adjusted EBITDA		$	768			$	1,228			$	467			$	467			$	2,271

Liquidity and Capital Resources

Overview

As of September 30, 2025, we had an accumulated deficit of $63,165 and positive working capital of $526. For the three months ended September 30, 2025, the Company generated an operating loss of $7,270. During the nine months ended September 30, 2025, the Company used $834 of net cash in operating activities. We remain dependent on improving cash flows from operations, securing additional sources of liquidity, or both, to fund ongoing operations to meet our financial obligations, including our debt obligations under our credit facilities.

Going Concern

In response to our accumulated deficit and capital requirements, we continue to evaluate our available options for amending our debt facilities or accessing the capital markets via equity financing. However, these plans have not been finalized, are subject to market conditions, and in some respects are outside of our control. Therefore, they cannot be deemed probable as of September 30, 2025. As a result of the matters discussed above, including our losses, current liquidity level and projected capital needs, we have concluded that management's plans do not alleviate substantial doubt about our ability to continue as a going concern within one year after the issuance date of the Condensed Consolidated Financial Statements included in this Report.

To the extent revenues from operations are insufficient to meet our liquidity requirements, our ability to continue as a going concern will depend on our ability to effectively raise capital through private or public placement of our equity securities. If we are unable to maintain sufficient financial resources, our business, financial condition and results of operations, as well as our ability to continue to execute on our business plan, and satisfy our obligations as they become due, will be materially and adversely affected. Failure to obtain additional financing will have a material, adverse impact on our business operations. There can be no assurance that we will be able to obtain the financing needed to achieve our goals on acceptable terms or at all. Additionally, any equity or equity-linked financings would likely have a dilutive effect on the holdings of our existing stockholders. Our current level of cash and cash equivalents are not sufficient to execute our business plan. For the foreseeable future, we will incur significant operating expenses, capital expenditures and working capital funding that will deplete our cash on hand.

Market conditions, including our current stock price and the dilutive impact of equity-linked financing, significantly limit our ability to raise capital. Without alternative funding sources, we may need to further scale back operations or defer strategic initiatives. If we are unable to identify other sources of funding, we may need to further adjust our operations. Considering the cumulative impact of our historical losses, constrained liquidity, and projected capital needs, substantial doubt exists about our ability to continue as a going concern over the next twelve months from the date of issuance of the accompanying Condensed Consolidated Financial Statements.

Summary of Cash Flows

Operating Activities

The net cash used by operating activities during the nine months ended September 30, 2025 was $834, compared to net cash provided by operating activities of $4,750 for the same period in 2024. During the nine month period ending September 30, 2025, the Company generated a net loss of $6,311, which included a $4,775 gain on settlement of contingent liability, depreciation and amortization expense (including amortization of stock compensation expense) of $5,308, and impairment expense of software asset of $5,712. The Company used $1,054 in cash due to changes in operating assets and liabilities.

Investing Activities

Net cash used in investing activities during the nine months ended September 30, 2025 was $1,973, compared to $2,302 during the same period in 2024. We currently do not have any material commitments for capital expenditures as of September 30, 2025.

Financing Activities

Net cash provided by financing activities during the nine months ended September 30, 2025 was $2,084, compared to net cash used in financing activities of $4,490 for the same period in 2024. Net cash provided by financing activities during the nine month period ended September 30, 2025 is primarily the result of net proceeds of $5,119 from borrowings and payments under the Company's revolving credit facility, partially offset by $3,000 in cash payments made to former Reflect stockholders pursuant to the Settlement Agreement.

Debt

Credit Facilities

On May 23, 2024, we entered into a Credit Agreement (the "Prior Credit Agreement") with First Merchants Bank (the "Bank"). The Prior Credit Agreement provided us with a $22,100 secured revolving credit facility, with an uncommitted accordion feature that provides for additional borrowing capacity of up to $5,000, subject to the Bank's approval and other customary terms and conditions set forth in the Prior Credit Agreement. The Prior Credit Agreement was amended effective March 31, 2025 to temporarily modify our Senior Funded Debt to EBITDA covenant, allowing a ratio of less than 4.0 to 1 through June 30, 2025 and less than 3.75 to 1 thereafter. The Prior Credit Agreement matured in May 2027 and required us to pay the entire unpaid principal balance upon maturity. The Prior Credit Agreement also included customary events of default, including the occurrence of a material adverse effect, which could accelerate repayment of outstanding amounts at the Bank's discretion.

The revolving credit facility accrued interest at a floating rate equal to the 1-month SOFR, plus 0.11%, plus a floating margin ranging from 2.00% to 3.50% that adjusted quarterly, depending upon our Senior Funded Debt to EBITDA Ratio. The effective interest rate at September 30, 2025 was 7.74%. We pay accrued interest monthly on the first day of each successive calendar month.

We had $18,163 in outstanding borrowings under the revolving credit facility as of September 30, 2025. Total availability under the revolving facility was $3,937. Effective June 30, 2025, we entered into a second amendment to the Prior Credit Agreement that modifies the borrowing base margin over time, decreasing from 95% to 90% on September 30, 2025 and to 85% on October 31, 2025.

On November 6, 2025, we amended and restated the Prior Credit Agreement (the "New Credit Agreement"), pursuant to which the Company obtained a $36,000 term loan and a $22,500 secured revolving credit facility. See Note 14 Subsequent Events to the Condensed Consolidated Financial Statements for a description of the New Credit Agreement.

Promissory Note

The Promissory Note was issued on March 14, 2025 in the original principal amount of $4,000, as a component of the settlement of our contingent consideration obligations related to the Reflect Merger. The note was not issued to raise new capital, but rather to satisfy a portion of a previously accrued liability. The Promissory Note is subordinated to the Company's senior secured credit facility pursuant to a Subordination Agreement executed with First Merchants Bank and the Stockholders' Representative and bears interest at a fixed annual rate of 14%. The interest rate increases to 17% per annum during any event of default (as defined in the Promissory Note) or during any period in which payments are restricted under the related Subordination Agreement. The effective interest rate at June 30, 2025 was 14%. The Promissory Note requires monthly payments of interest only commencing April 14, 2025 and continuing through September 14, 2025. Commencing October 14, 2025, we are required to pay principal and interest in accordance with an amortization schedule that requires equal monthly payments of $109 on the 14th day of each calendar month through maturity on September 14, 2027. On the maturity date, we are required to make a final balloon payment of $2,277, representing the remaining principal and accrued but unpaid interest outstanding at maturity.

The principal balance of the Promissory Note (together with accrued but unpaid interest on such amounts) may be prepaid in whole or in part at any time prior to maturity, subject to our payment of a make-whole amount, which approximates the foregone interest the holders would have earned through the maturity date, based on a comparison to a benchmark "yield maintenance treasury rate." The make-whole payment is equal to the aggregate monthly payments of interest on the prepayment amount that would be due after the prepayment date and through the maturity date, using the percentage, if any, by which the applicable interest rate exceeds a prescribed "yield maintenance treasury rate."

Equity

We had outstanding warrants accounted for as equity instruments in our Condensed Consolidated Financial Statements totaling 5,364,802 and 4,587,002 at September 30, 2025 and December 31, 2024, respectively. The weighted average exercise price of the outstanding warrants was $4.66 and $4.90 at September 30, 2025 and December 31, 2024, respectively. The weighted average remaining contractual life of the outstanding warrants was 2.81 and 3.11 years at September 30, 2025 and December 31, 2024, respectively.

On March 14, 2025, as part of the negotiated settlement of our contingent consideration obligations related to the Reflect merger, we issued to the former Reflect stockholders the Settlement Warrants to purchase their pro rata share of an aggregate of 777,800 shares of our common stock at an exercise price equal to $3.25 per share, subject to adjustment for stock dividends, distributions, subdivisions, combinations, or reclassifications. The Settlement Warrants are exercisable immediately, expire six years from the date of issuance, and may be exercised for cash or, at the holder's election, on a cashless (net settlement) basis. The fair value of the Settlement Warrants was estimated at $1.34 per share as of the issuance date, using the Black-Scholes option pricing model. Key assumptions included: expected volatility of 94%, expected term of 6 years (matching the exercise term), risk-free interest rate of 4.15%, dividend yield of 0%, and our stock price of $1.88 as of the valuation date.

On October 15, 2025, we entered into a Securities Purchase Agreement with certain accredited investors to issue 30,000 shares of a newly designated Series A Convertible Preferred Stock (the "Preferred Stock") for aggregate gross proceeds of $30,000, which has a stated value of $1,000 per share (the "Stated Value")(the "Offering"). The Offering was completed on November 6, 2025. See Note 14 Subsequent Events to the Condensed Consolidated Financial Statements for a description of the Offering and the Preferred Stock.

Off-Balance Sheet Arrangements

During the three and nine months ended September 30, 2025, we did not engage in any off-balance sheet arrangements set forth in Item 303(a)(4) of Regulation S-K.