Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2020 | Aug. 14, 2020 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | CREATIVE REALITIES, INC. | |
Entity Central Index Key | 0001356093 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2020 | |
Document Fiscal Period Focus | Q2 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Year Focus | 2020 | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Emerging Growth Company | false | |
Entity Common Stock Shares Outstanding | 10,422,850 | |
Entity File Number | 001-33169 | |
Entity Interactive Data Current | Yes | |
Entity Incorporation State Country Code | MN |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 870 | $ 2,534 |
Accounts receivable, net of allowance of $1,361 and $617, respectively | 2,308 | 4,663 |
Unbilled receivables | 66 | 86 |
Work-in-process and inventories, net of reserve of $101 and $134, respectively | 2,631 | 379 |
Prepaid expenses and other current assets | 1,156 | 320 |
Total current assets | 7,031 | 7,982 |
Operating lease right-of-use assets | 1,467 | 1,728 |
Property and equipment, net | 1,532 | 1,553 |
Intangibles, net | 4,090 | 4,407 |
Goodwill | 7,525 | 18,171 |
Other assets | 141 | 135 |
TOTAL ASSETS | 21,786 | 33,976 |
CURRENT LIABILITIES | ||
Short-term seller note payable | 1,637 | 1,637 |
Short-term related party convertible loans payable, at fair value | 2,773 | 2,000 |
Short-term related party loans payable, net of $338 and $0 discount, respectively | 4,054 | |
Accounts payable | 2,521 | 1,849 |
Accrued expenses | 2,337 | 2,751 |
Deferred revenues | 1,083 | 772 |
Customer deposits | 1,173 | 755 |
Current maturities of operating leases | 653 | 646 |
Current maturities of finance leases | 11 | 21 |
Total current liabilities | 16,242 | 10,431 |
Long-term Paycheck Protection Program loans payable | 1,552 | |
Long-term related party loans payable, net of $0 and $507 discount, respectively | 3,757 | |
Long-term obligations under operating leases | 835 | 1,100 |
Deferred tax liabilities | 175 | |
Other long-term liabilities | 1 | 5 |
TOTAL LIABILITIES | 18,630 | 15,468 |
SHAREHOLDERS' EQUITY | ||
Common stock, $0.01 par value, 200,000 shares authorized; 9,855 and 9,775 shares issued and outstanding, respectively | 98 | 98 |
Additional paid-in capital | 54,342 | 54,052 |
Accumulated deficit | (51,284) | (35,642) |
Total shareholders' equity | 3,156 | 18,508 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 21,786 | $ 33,976 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Allowance receivable, net | $ 1,361 | $ 617 |
Reserve net | 101 | 134 |
Loans payable, net | 338 | 0 |
Related party loans payable, net | $ 0 | $ 507 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 200,000 | 200,000 |
Common stock, shares issued | 9,855 | 9,775 |
Common stock, shares outstanding | 9,855 | 9,775 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Sales | ||||
Hardware | $ 1,601 | $ 1,654 | $ 2,968 | $ 3,295 |
Services and other | 2,055 | 7,660 | 4,392 | 15,503 |
Total sales | 3,656 | 9,314 | 7,360 | 18,798 |
Cost of sales | ||||
Hardware | 1,296 | 1,311 | 2,279 | 2,716 |
Services and other | 543 | 3,775 | 1,657 | 8,173 |
Total cost of sales | 1,839 | 5,086 | 3,936 | 10,889 |
Gross profit | 1,817 | 4,228 | 3,424 | 7,909 |
Operating expenses: | ||||
Sales and marketing expenses | 371 | 610 | 798 | 1,307 |
Research and development expenses | 245 | 394 | 558 | 767 |
General and administrative expenses | 2,465 | 2,421 | 5,321 | 4,711 |
Depreciation and amortization expense | 380 | 308 | 746 | 594 |
Goodwill impairment | 10,646 | |||
Total operating expenses | 3,461 | 3,733 | 18,069 | 7,379 |
Operating income/(loss) | (1,644) | 495 | (14,645) | 530 |
Other income (expenses): | ||||
Interest expense | (260) | (213) | (487) | (417) |
Change in fair value of warrant liability | 22 | 21 | ||
Gain on settlement of obligations | 1 | 6 | 41 | 13 |
Change in fair value of Special Loan | (551) | (702) | ||
Other expense | (1) | |||
Total other expense | (811) | (185) | (1,148) | (383) |
Income/(loss) before income taxes | (2,455) | 310 | (15,793) | 147 |
Benefit/(provision) for income taxes | (4) | 107 | 151 | 86 |
Net income/(loss) | $ (2,459) | $ 417 | $ (15,642) | $ 233 |
Basic earnings/(loss) per common share | $ (0.25) | $ 0.04 | $ (1.59) | $ 0.02 |
Diluted earnings/(loss) per common share | $ (0.25) | $ 0.04 | $ (1.59) | $ 0.02 |
Weighted average shares outstanding - basic | 9,837 | 9,736 | 9,815 | 9,731 |
Weighted average shares outstanding - diluted | 9,837 | 9,736 | 9,815 | 9,731 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Operating Activities: | ||
Net income/(loss) | $ (15,642) | $ 233 |
Adjustments to reconcile net income/(loss) to net cash used in operating activities | ||
Depreciation and amortization | 746 | 577 |
Amortization of debt discount | 169 | 314 |
Stock-based compensation | 169 | 333 |
Change in warrant liability | (21) | |
Change in fair value of Special Loan | 702 | |
Deferred tax provision | (175) | (83) |
Allowance for doubtful accounts | 744 | 85 |
Increase in notes due to in-kind interest | 199 | |
Loss on goodwill impairment | 10,646 | |
Gain on settlement of obligations | (41) | (13) |
Changes to operating assets and liabilities: | ||
Accounts receivable and unbilled receivables | 1,631 | 507 |
Inventories | (2,252) | (389) |
Prepaid expenses and other current assets | (836) | 1,086 |
Operating lease right-of-use assets, net | 261 | 286 |
Other assets | (6) | 15 |
Accounts payable | 713 | (268) |
Deferred revenue | 311 | (5,142) |
Accrued expenses | (414) | 2,821 |
Deposits | 418 | (798) |
Operating lease liabilities, non-current | (258) | (276) |
Other liabilities | (3) | |
Net cash used in operating activities | (2,915) | (736) |
Investing activities | ||
Purchases of property and equipment | (408) | (382) |
Proceeds from net working capital settlement | 210 | |
Net cash used in investing activities | (408) | (172) |
Financing activities | ||
Principal payments on finance leases | (14) | (15) |
Proceeds from Paycheck Protection Program loan | 1,552 | |
Issuance of common stock – warrant exercise | 121 | |
Issuance of common stock – vendor payments | 30 | |
Other financing activities, net | (1) | |
Net cash provided by financing activities | 1,659 | 14 |
Increase/(decrease) in Cash and Cash Equivalents | (1,664) | (894) |
Cash and Cash Equivalents, beginning of period | 2,534 | 2,718 |
Cash and Cash Equivalents, end of period | $ 870 | $ 1,824 |
Consolidated Statements of Shar
Consolidated Statements of Shareholders' Equity - USD ($) $ in Thousands | Common Stock | Additional paid in capital | Accumulated (Deficit) | Total |
Balance at Dec. 31, 2018 | $ 97 | $ 53,575 | $ (36,851) | $ 16,821 |
Balance, Shares at Dec. 31, 2018 | 9,724,826 | |||
Shares issued for services | 30 | 30 | ||
Shares issued for services, shares | 17,960 | |||
Stock-based compensation | 82 | 82 | ||
Vesting of performance shares previously granted to CEO | 250 | 250 | ||
Adoption of ASU 2016-02 | 171 | 171 | ||
Net income (loss) | 233 | 233 | ||
Balance at Jun. 30, 2019 | $ 97 | 53,937 | (36,447) | 17,587 |
Balance, Shares at Jun. 30, 2019 | 9,742,786 | |||
Balance at Mar. 31, 2019 | $ 97 | 53,616 | (36,864) | 16,849 |
Balance, Shares at Mar. 31, 2019 | 9,724,826 | |||
Shares issued for services | 30 | 30 | ||
Shares issued for services, shares | 17,960 | |||
Stock-based compensation | 41 | 41 | ||
Vesting of performance shares previously granted to CEO | 250 | 250 | ||
Net income (loss) | 417 | 417 | ||
Balance at Jun. 30, 2019 | $ 97 | 53,937 | (36,447) | 17,587 |
Balance, Shares at Jun. 30, 2019 | 9,742,786 | |||
Balance at Dec. 31, 2019 | $ 98 | 54,052 | (35,642) | 18,508 |
Balance, Shares at Dec. 31, 2019 | 9,774,546 | |||
Stock-based compensation | 119 | 119 | ||
Shares issued to directors as compensation | 50 | 50 | ||
Shares issued to directors as compensation, shares | 52,477 | |||
Exercise of warrants | 121 | 121 | ||
Exercise of warrants, shares | 27,600 | |||
Net income (loss) | (15,642) | (15,642) | ||
Balance at Jun. 30, 2020 | $ 98 | 54,342 | (51,284) | 3,156 |
Balance, Shares at Jun. 30, 2020 | 9,854,623 | |||
Balance at Mar. 31, 2020 | $ 98 | 54,102 | (48,825) | 5,375 |
Balance, Shares at Mar. 31, 2020 | 9,794,971 | |||
Stock-based compensation | 100 | 100 | ||
Shares issued to directors as compensation | 19 | 19 | ||
Shares issued to directors as compensation, shares | 32,052 | |||
Exercise of warrants | 121 | 121 | ||
Exercise of warrants, shares | 27,600 | |||
Net income (loss) | (2,459) | (2,459) | ||
Balance at Jun. 30, 2020 | $ 98 | $ 54,342 | $ (51,284) | $ 3,156 |
Balance, Shares at Jun. 30, 2020 | 9,854,623 |
Nature of Organization and Oper
Nature of Organization and Operations | 6 Months Ended |
Jun. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF ORGANIZATION AND OPERATIONS | 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. We believe we are one of the world's leading interactive marketing technology companies that focuses on the retail shopper experience by helping retailers and brands use the latest technologies to create better shopping experiences. On November 20, 2018, we closed on our acquisition of Allure Global Solutions, Inc. (the "Allure Acquisition"). While the Allure Acquisition expanded our operations, geographical footprint and customer base and also enhanced our current product offerings, the core business of Allure is consistent with the existing operations of Creative Realties, Inc. and as a result of the Allure Acquisition we did not add different operating activities to our business. Our main operations are conducted directly through Creative Realities, Inc., and under our wholly owned subsidiaries Allure Global Solutions, Inc., a Georgia corporation, Creative Realities Canada, Inc., a Canadian corporation, and ConeXus World Global, LLC, a Kentucky limited liability company. Our other wholly owned subsidiary, Creative Realities, LLC, a Delaware limited liability company, has been effectively dormant since October 2015, the date of the merger with ConeXus World Global, LLC. Liquidity and Financial Condition The accompanying Condensed Consolidated Financial Statements have been prepared on the basis of the realization of assets and the satisfaction of liabilities and commitments in the normal course of business and do not include any adjustments to the recoverability and classifications of recorded assets and liabilities as a result of uncertainties. We produced net income for the year ended December 31, 2019 but incurred a net loss for the year ended December 31, 2018 and had negative cash flows from operating activities for both the year-ended December 31, 2019 and the six months ended June 30, 2020. For the three months ended June 30, 2020 and 2019 we have recognized/(incurred) net income/(losses) of ($2,459) and $417, respectively. For the six months ended June 30, 2020 and 2019, we recognized/(incurred) net income/(losses) of ($15,642) and 233, respectively. As of June 30, 2020, we had cash and cash equivalents of $870 and working capital deficit of $9,211, which includes $653 representing current maturities of operating leases recorded January 1, 2019 upon adoption of Accounting Standards Update ("ASU") 2016-02. While our outlook for the digital signage industry over the long term remains strong, we have experienced rapid and immediate deterioration in our short term business as a result of the COVID-19 pandemic, generating increased uncertainty across our customer base in each of our key vertical markets. The elective and forced closures of businesses across the United States and Canada has resulted in reduced demand for our services, which primarily assist business in engaging with their end customers in a physical space through digital technology. The elimination and minimizing of public gatherings has materially impacted demand for products and services in our theater, sports arena and large entertainment markets. These conditions have resulted in downward revisions of our internal forecasts on current and future projected earnings and cash flows. The effective halting of pending and anticipated projects caused our projected incoming cash to be delayed, and consequently cash flows have slowed, including a slowdown in payments by customers for previously completed projects, which has further limited cash collections. We have implemented various cost cutting measures, including slowing our payments of accounts payable and accrued liabilities, negotiated extensions for certain currently and past due payments to key vendors, and implemented compensation reductions for most personnel retained following the reduction-in-force activities taken by the Company in mid-March 2020. On April 28, 2020, we announced the joint launch of an AI-integrated non-contact temperature inspection kiosk known as the Thermal Mirror with our partner, InReality, LLC ("InReality"), for use by businesses as COVID-19 related workplace restrictions are reduced or eliminated. Although we have experience in providing customers digital integration solutions, our launch of the Thermal Mirror involves the development, marketing and sale of a new product to new customers involving a joint effort with InReality. The product also uses hardware and technologies that have not been used with our other customers. Although we believe this product and our launch will be successful, there are a number of risks involved in such launch, including investing significant time and resources in the launch, which may ultimately not be successful. While market response has been encouraging, we remain in the early stages of this product launch as of the date of this report. On June 19, 2020, the Company entered into a Sales Agreement (the "Agreement") with Roth Capital Partners, LLC ("Roth") under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, par value $0.01 per share (the "Common Stock"), having an aggregate offering price of up to $8,000,000 through Roth as the Company's sales agent. Roth may sell the Common Stock by any method permitted by law deemed to be an "at the market offering" as defined in Rule 415 of the Securities Act of 1933, as amended. Subject to the terms of the Agreement, Roth will use its commercially reasonable efforts to sell the Common Stock from time to time, based upon instructions from the Company (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company or Roth may suspend the offering of the Common Stock being made through Roth under the Agreement upon proper notice to the other party. The Company will pay Roth a commission of 3.0% of the gross sales proceeds of any Common Stock sold through Roth under the Agreement, and also has provided Roth with customary indemnification rights. The sale of Common Stock under the Agreement is registered on a Form S-3 registration statement (Registration No. 333-238275) and related prospectus supplement filed with the SEC on June 19, 2020, and pursuant to the "baby shelf" rules that apply to such registration statement, we cannot sell more our common stock in a public primary offering (including under the Agreement) with a value exceeding more than one-third of our public float in any 12 calendar month period so long as our public float remains below $75.0 million. The Company is not obligated to make any sales of Common Stock under the Agreement. The offering of shares of Common Stock pursuant to the Agreement will terminate upon the earlier of (i) the sale of all Common Stock subject to the Agreement or (ii) termination of the Agreement in accordance with its terms. As of June 30, 2020, the Company has not sold any shares of common stock under the Agreement. Through August 6, 2020, we received gross proceeds under the Agreement of $1,300 from the issuance of 558,183 shares of our common stock, and paid an aggregate of $38 to Roth in commissions, yielding net proceeds of $1,160 after commissions and offering expenses. On April 27, 2020, the Company entered into a Promissory Note with Old National Bank (the "Promissory Note"), which provided for an unsecured loan of $1,552 pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act and applicable regulations (the "CARES Act"). The Promissory Note has a term of two years with a 1% per annum interest rate. While the Promissory Note currently has a two-year term, the amended law permits the Company to request a five-year maturity from Old National Bank. Payments are deferred for six months from the date of the Promissory Note and the Company can apply for forgiveness of the Promissory Note after 60 days. Forgiveness of the Promissory Note will be determined in accordance with the provisions of the CARES Act and applicable regulations. Any principal and interest amount outstanding after the determination of amounts forgiven will be repaid on a monthly basis. The Company is in process of finalizing their calculation of amounts forgivable in accordance with guidance issued by the Small Business Administration and anticipates applying for forgiveness during the fourth quarter of 2020. No assurance is provided that we will be able to obtain forgiveness of the Promissory Note in whole or in part. On November 6, 2019, Slipstream Communications, LLC ("Slipstream") extended the maturity date of our term loan and revolver loan to June 30, 2021 through the Sixth Amendment to the Loan and Security Agreement, aligning the maturity date of our term loan and revolver loan with the Secured Disbursed Escrow Promissory Note. On December 30, 2019, we entered into the Secured Convertible Special Loan Promissory Note ("Special Loan") as part of the Seventh Amendment of the Loan and Security Agreement with Slipstream, under which we obtained $2,000, with interest thereon at 8% per annum payable 6% in cash and 2% via the issuance of paid-in-kind ("SLPIK") interest, provided however that upon occurrence of an event of default the interest rate shall automatically be increased by 6% per annum payable in cash. The entry into the Seventh Amendment adjusted the interest rate on the Company's Term Loan and Revolving Loan to 8% per annum, provided, however, at all times when the aggregate outstanding principal amount of the Term Loan and the Revolving Loan exceeds $4,100 then the Loan Rate shall be 10%, of which eight percent 8% shall be payable in cash and 2% shall be paid by the issuance of and treated as additional PIK. Upon the earlier to occur of an Event of Default or October 1, 2020, if any of the principal amount of the Special Loan is then outstanding, the principal and accrued but unpaid interest of the Special Loan and the outstanding SLPIK shall be automatically converted into shares of a new series of Senior Convertible Preferred Stock of CRI ("New Preferred") having an Appraised Value equal to three times the then outstanding principal amount and accrued but unpaid interest of the Special Loan and the outstanding SLPIK and having the following terms and conditions, as reasonably determined by CRI and the Lender, the New Preferred shall: ● be the most senior equity security of CRI, including with respect to the payment of dividends and other distributions; ● be on substantially the same terms and conditions as CRI's Series A-1 6% Convertible Preferred Stock as set forth in its Certificate of Designation immediately before the same was cancelled pursuant to a Certificate of Cancellation dated as of March 13, 2019; ● not be subject to a right of redemption upon the part of a holder thereof; ● accrue and pay quarterly dividends at the rate of twelve percent (12%) per annum which shall be payable in cash; ● have a Stated Value that is an amount mutually agreed by CRI and the Lender at the time of issuance; ● Conversion Price shall be an amount equal to 80% of the average for the 30-day period ending two days prior to the required conversion date of the daily average of the range of CRI's common stock (calculated pursuant to information on The Wall Street Journal Online Edition), subject to appropriate adjustments; and ● neither section 6(e) of the Series A-1 Certificate of Designation nor any similar provision shall apply to the New Preferred. On April 1, 2020, the Company entered into an Eighth Amendment to Loan and Security Agreement (the "Eighth Amendment") with its subsidiaries and Slipstream to amend the terms of the payments and interest accruing on the Company's Term Loan, Secured Revolving Promissory Note, and Special Loan. The Eighth Amendment increased the interest rates of these loans from 8% to 10%, effective April 1, 2020. Until January 1, 2021, rather than cash payments of accrued interest under the term and revolving loans, interest will be paid by the issuance of and treated as additional principal thereunder. Commencing January 2, 2021, such interest will be payable in cash. Interest on the special loan will no longer be paid in cash, but by the issuance of and treated as additional principal thereunder. Management believes that, based on (i) our receipt of approximately $1,552 of funding through the Paycheck Protection Program on April 27, 2020, of which a significant portion we believe will ultimately be forgiven, (ii) our operational forecast through 2021, (iii) our access to capital markets through the Agreement with Roth, and (iv) a commitment of continued support from Slipstream, we can continue as a going concern through at least August 15, 2021. However, given our history of net losses, cash used in operating activities and working capital deficit, each of which continued as of and for the six months ended June 30, 2020, we can provide no assurance that our ongoing operational efforts or ability to access the public markets for capital will be successful, particularly in consideration of the business interruptions and uncertainty generated as a result of the COVID-19 pandemic ,which has materially adverse affected our results of operations and cash flows. See Note 8 Loans Payable |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies consistently applied in the preparation of the accompanying Condensed Consolidated Financial Statements follows: 1. Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the applicable instructions to Form 10-Q and Regulation S-X and include all of the information and disclosures required by generally accepted accounting principles in the United States of America ("GAAP") for interim financial reporting. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements of the Company and related footnotes for the year ended December 31, 2019, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 13, 2020. The results of operations for the interim periods are not necessarily indicative of results of operations for a full year. Management believes the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, including normal recurring items, considered necessary for a fair statement of results for the interim periods presented. 2. Revenue Recognition We recognize revenue in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers If an arrangement involves multiple performance obligations, the items are analyzed to determine the separate units of accounting, whether the items have value on a standalone basis and whether there is objective and reliable evidence of their standalone selling price. The total contract transaction price is allocated to the identified performance obligations based upon the relative standalone selling prices of the performance obligations. The standalone selling price is based on an observable price for services sold to other comparable customers, when available, or an estimated selling price using a cost plus margin approach. The Company estimates the amount of total contract consideration it expects to receive for variable arrangements by determining the most likely amount it expects to earn from the arrangement based on the expected quantities of services it expects to provide and the contractual pricing based on those quantities. The Company only includes some or a portion of variable consideration in the transaction price when it is probable that a significant reversal in the amount of cumulative revenue recognized 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 client 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. 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 does not have any material extended payment terms as payment is due at or shortly after the time of the sale, typically ranging between thirty and ninety days. 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. The Company recognizes contract assets or unbilled receivables related to revenue recognized for services completed but not yet invoiced to the clients. Unbilled receivables are recorded as accounts receivable when the Company has an unconditional right to contract consideration. A contract liability is recognized as deferred revenue when the Company invoices clients in advance of performing the related services under the terms of a contract. Deferred revenue is recognized as revenue when the Company has satisfied the related performance obligation. The Company uses the practical expedient for recording an immediate expense for incremental costs of obtaining contracts, including certain design/engineering services, commissions, incentives and payroll taxes, as these incremental and recoverable costs have terms that do not exceed one year. 3. Inventories Inventories are stated at the lower of cost or market (net realizable value), determined by the first-in, first-out (FIFO) method, and consist of the following: June 30, December 31, 2020 2019 Raw materials, net of reserve of $101 and $134, respectively $ 1,996 $ 200 Inventory on consignment with distributors 360 - Work-in-process 275 179 Total inventories $ 2,631 $ 379 4. Impairment of Long-Lived Assets We review the carrying value of all long-lived assets, including property and equipment, for impairment in accordance with ASC 360, Accounting for the Impairment or Disposal of Long-Lived Assets If the impairment tests indicate that the carrying value of the asset is greater than the expected undiscounted cash flows to be generated by such asset, an impairment loss would be recognized. The impairment loss is determined as the amount by which the carrying value of such asset exceeds its fair value. We generally measure fair value by considering sale prices for similar assets or by discounting estimated future cash flows from such assets using an appropriate discount rate. Assets to be disposed of are carried at the lower of their carrying value or fair value less costs to sell. Considerable management judgment is necessary to estimate the fair value of assets, and accordingly, actual results could vary significantly from such estimates. 5. Basic and Diluted Income/(Loss) per Common Share Basic and diluted income/(loss) per common share for all periods presented is computed using the weighted average number of common shares outstanding. Basic weighted average shares outstanding includes only outstanding common shares. Diluted weighted average shares outstanding includes outstanding common shares and potential dilutive common shares outstanding in accordance with the treasury stock method. Shares reserved for outstanding stock options, including stock options with performance restricted vesting, and warrants totaling approximately 7,309,998 and 5,320,162 at June 30, 2020 and 2019, respectively were excluded from the computation of income/(loss) per share as all options and warrants were anti-dilutive due to the net loss in each period. In calculating diluted earnings per share for the three and six months ended June 30, 2020, in accordance with ASC 260 Earnings per share 6. Income Taxes Deferred income taxes are recognized in the financial statements for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates. Temporary differences arise from net operating losses, differences in basis of intangibles, stock-based compensation, reserves for uncollectible accounts receivable and inventory, differences in depreciation methods, and accrued expenses. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company accounts for uncertain tax positions utilizing an established recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We had no uncertain tax positions as of June 30, 2020 and December 31, 2019. 7. Goodwill We follow the provisions of ASC 350, Goodwill and Other Intangible Assets. Pursuant to ASC 350, goodwill acquired in a purchase business combination is not amortized, but instead tested for impairment at least annually. The Company uses a measurement date of September 30 (see Note 7 Intangible Assets and Goodwill 8. 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 allowance for doubtful accounts, valuation allowances related to deferred taxes, the fair value of acquired assets and liabilities, the fair value of liabilities reliant upon the appraised fair value of the Company, valuation of stock-based compensation awards and other assumptions and estimates used to evaluate the recoverability of long-lived assets, goodwill and other intangible assets and the related amortization methods and periods. Actual results could differ from those estimates. 9. Leases We account for leases in accordance with ASU No. 2016-02, Leases We determine if an arrangement is a lease at inception. Right of use ("ROU") assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, we consider only payments that are fixed and determinable at the time of commencement. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our incremental borrowing rate is a hypothetical rate based on our understanding of what our credit rating would be. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. Operating leases are included in operating lease right-of-use assets, current maturities of operating leases, and long-term obligations under operating leases on our condensed consolidated balance sheets. Finance leases are included in property and equipment, net, current maturities of financing leases, and long-term obligations under financing leases on our condensed consolidated balance sheets. |
Recently Issued Accounting Pron
Recently Issued Accounting Pronouncements | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Changes and Error Corrections [Abstract] | |
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | NOTE 3: RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Recently adopted On January 1, 2020, we adopted ASU 2018-15 Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract On January 1, 2020, we adopted ASU No. 2018-13, Changes to Disclosure Requirements for Fair Value Measurements (Topic 820) Not yet adopted In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses |
Revenue Recognition
Revenue Recognition | 6 Months Ended |
Jun. 30, 2020 | |
Revenue Recognition and Deferred Revenue [Abstract] | |
REVENUE RECOGNITION | NOTE 4: REVENUE RECOGNITION The Company applies ASC 606 for revenue recognition. The following table disaggregates the Company's revenue by major source for the three and six months ended June 30, 2020 and 2019: (in thousands) Three Months Three Months Six Months Six Months Hardware $ 1,601 $ 1,654 $ 2,968 $ 3,295 Services: Installation Services 463 1,791 1,332 4,163 Software Development Services 37 4,259 179 8,235 Managed Services 1,555 1,610 2,881 3,105 Total Services 2,055 7,660 4,392 15,503 Total Hardware and Services $ 3,656 $ 9,314 $ 7,360 $ 18,798 System hardware sales System hardware revenue is recognized generally upon shipment of the product or customer acceptance depending upon contractual arrangements with the customer in instances in which the sale of hardware is the sole performance obligation. Shipping charges billed to customers are included in hardware sales and the related shipping costs are included in hardware cost of sales. The cost of freight and shipping to the customer is recognized in cost of sales at the time of transfer of control to the customer. System hardware revenues are classified as "Hardware" within our disaggregated revenue. Installation services The Company performs outsourced installation services for customers and recognizes revenue upon completion of the installations. Installation services also includes engineering services performed as part of an installation project. When system hardware sales include installation services to be performed by the Company, the goods and services in the contract are not distinct, so the arrangement is accounted for as a single performance obligation. Our customers control the work-in-process and can make changes to the design specifications over the contract term. Revenues are recognized over time as the installation services are completed based on the relative portion of labor hours completed as a percentage of the budgeted hours for the installation. Installation services revenues are classified as "Installation Services" within our disaggregated revenue. The aggregate amount of the transaction price allocated to installation service performance obligations that are partially unsatisfied as of June 30, 2020 and 2019 were $0. Software design and development services Software and software license sales are revenue when a fixed fee order has been received and delivery has occurred to the customer. Revenue is recognized generally upon customer acceptance (point-in-time) of the software product and verification that it meets the required specifications. Software is delivered to customers electronically. Software design and development revenues are classified as "Software Development Services" within our disaggregated revenue. Software as a service Software as a service includes revenue from software licensing and delivery in which software is licensed on a subscription basis and is centrally hosted. These services often include software updates which provide customers with rights to unspecified software product upgrades and maintenance releases and patches released during the term of the support period. Contracts for these services are generally 12-36 months in length. We account for revenue from these services in accordance with ASC 985-20-15-5 and recognize revenue ratably over the performance period. Software as a service revenues are classified as "Managed Services" within our disaggregated revenue. Maintenance and support services The Company sells support services which include access to technical support personnel for software and hardware troubleshooting. The Company offers a hosting service through our network operations center, or NOC, allowing the ability to monitor and support its customers' networks 7 days a week, 24 hours a day. These contracts are generally 12-36 months in length. Revenue is recognized over the term of the agreement in proportion to the costs incurred in fulfilling performance obligations under the contract. Maintenance and Support revenues are classified as "Managed Services" within our disaggregated revenue. Maintenance and support fees are based on the level of service provided to end customers, which can range from monitoring the health of a customer's network to supporting a sophisticated web-portal to managing the end-to-end hardware and software of a digital marketing system. These agreements are renewable by the customer. Rates for maintenance and support, including subsequent renewal rates, are typically established based upon a fee per location, per device, or a specified percentage of net software license fees as set forth in the arrangement. These contracts are generally 12-36 months in length. Revenue is recognized ratably and evenly over the service period. The Company also performs time and materials-based maintenance and repair work for customers. Revenue is recognized at a point in time when the performance obligation has been fully satisfied. |
Fair Value Measurement
Fair Value Measurement | 6 Months Ended |
Jun. 30, 2020 | |
Fair Value Disclosures [Abstract] | |
FAIR VALUE MEASUREMENT | NOTE 5: FAIR VALUE MEASUREMENT We measure certain financial assets, including cash equivalents, at fair value on a recurring basis. In accordance with ASC 820-10-30, fair value is a market-based measurement that should be determined based on the assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820-10-35 establishes a three-level hierarchy that prioritizes the inputs used in measuring fair value. The three hierarchy levels are defined as follows: Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets. Level 2 — Valuations based on observable inputs (other than Level 1 prices), such as quoted prices for similar assets at the measurement date; quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly. Level 3 — Valuations based on inputs that are unobservable and involve management judgment and the reporting entity's own assumptions about market participants and pricing. The Company previously recorded warrant liabilities that were measured at fair value on a recurring basis using a binomial option pricing model. The fair value of the warrant liabilities had decreased to $0 as of June 30, 2019. All of the Company's outstanding warrants classified as liabilities expired during the three months ended September 30, 2019. As part of the Allure Acquisition, the Purchase Agreement contemplated additional consideration of $2,000 to be paid by us to Christie Digital Systems, USA ("Seller") in the event that acquiree revenue exceeds $13,000, as defined in the underlying agreement, for any of the trailing twelve-month periods measured as of December 31, 2019, March 31, 2020, June 30, 2020, September 30, 2020 and December 31, 2020. The fair value of the earnout liability was determined to be $250 at the time of acquisition. As part of our finalization of opening balance sheet accounting at the close of the measurement period in November 2019, we recorded an adjustment to reflect the earnout liability to $0. The fair value estimate remains at $0 as of June 30, 2020. The liability is deemed to be Level 3 as the valuation is based on revenue projections and estimates developed by management as informed by historical results. As discussed in Note 8 Loans Payable |
Supplemental Cash Flow Statemen
Supplemental Cash Flow Statement Information | 6 Months Ended |
Jun. 30, 2020 | |
Supplemental Cash Flow Statement Information [Abstract] | |
SUPPLEMENTAL CASH FLOW STATEMENT INFORMATION | NOTE 6: SUPPLEMENTAL CASH FLOW STATEMENT INFORMATION Six Months Ended June 30, 2020 2019 Supplemental Cash Flow Information Non-cash Investing and Financing Activities Right of offset settlement of Amended and Restated Seller Note $ - $ 498 Cash paid during the period for: Interest $ - $ 181 Income taxes, net $ 2 $ - |
Intangible Assets, Including Go
Intangible Assets, Including Goodwill | 6 Months Ended |
Jun. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
INTANGIBLE ASSETS, INCLUDING GOODWILL | NOTE 7: INTANGIBLE ASSETS, INCLUDING GOODWILL Intangible Assets Intangible assets consisted of the following at June 30, 2020 and December 31, 2019: June 30, December 31, 2020 2019 Gross Gross Carrying Accumulated Carrying Accumulated Amount Amortization Amount Amortization Technology platform $ 4,635 3,273 $ 4,635 3,147 Customer relationships 5,330 2,775 5,330 2,679 Trademarks and trade names 1,020 847 1,020 752 10,985 6,895 10,985 6,578 Accumulated amortization 6,895 6,578 Net book value of amortizable intangible assets $ 4,090 $ 4,407 For the three months ended June 30, 2020 and 2019, amortization of intangible assets charged to operations was $158 and $147, respectively. For the six months ended June 30, 2020 and 2019 amortization of intangible assets charged to operations was $317 and $303, respectively. Goodwill The following is a rollforward of the Company's goodwill since December 31, 2019: Total Balance as of December 31, 2019 $ 18,171 Adjustments due to impairment loss (10,646 ) Balance as of June 30, 2020 $ 7,525 Goodwill represents the excess of the purchase price over the fair value of net assets acquired. Goodwill is subject to an impairment review at a reporting unit level, on an annual basis as of the end of September of each fiscal year, or when an event occurs, or circumstances change that would indicate potential impairment. The Company has only one reporting unit, and therefore the entire goodwill is allocated to that reporting unit. Despite the excess fair value identified in our 2019 annual impairment assessment, we determined that the reduced cash flow projections and the significant decline in our market capitalization as a result of the COVID-19 pandemic during the three months ended March 31, 2020 indicated that an impairment loss may have been incurred during the first quarter. Therefore, we qualitatively assessed whether it was more likely than not that the goodwill was impaired as of March 31, 2020. We reviewed our previous forecasts and assumptions based on our current projections that are subject to various risks and uncertainties, including: (1) forecasted revenues, expenses and cash flows, including the duration and extent of impact to our business and our alliance partners from the COVID-19 pandemic, (2) current discount rates, (3) the reduction in our market capitalization, (5) changes to the regulatory environment and (6) the nature and amount of government support that will be provided. As a result of this qualitative assessment, we concluded that indicators of impairment were present and that a quantitative interim impairment assessment of our goodwill was necessary as of March 31, 2020. As a result of the adoption of ASU 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment The fair value of the reporting unit was estimated via the income approach. Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. We use our internal forecasts to estimate future cash flows and include an estimate of long-term future growth rates based on our most recent views of the long-term outlook for our industry. Actual results may differ from those assumed in our forecasts. We derive our discount rates using a capital asset pricing model and by analyzing published rates relevant to our business to estimate the cost of equity financing. We use discount rates that are commensurate with the risks and uncertainty inherent in the respective businesses and in our internally developed forecasts. We utilized a discount rate of 15.3% in our valuation completed as of March 31, 2020. While our outlook for the digital signage industry over the long term remains strong, we have experienced rapid and immediate deterioration in our short term business as a result of the COVID-19 pandemic, generating increased uncertainty across our customer base in each of our key vertical markets. The elective and forced closures of businesses across the United States has resulted in reduced demand for our services, which primarily assist business in engaging with their end customers in a physical space through digital technology. The elimination and minimization of public gatherings has materially impacted demand for products and services in our theater, sports arena and large entertainment markets. These conditions resulted in downward revisions of our internal forecasts on current and future projected earnings and cash flows, leading to an implied fair value of goodwill substantially below the carrying value. Therefore, during the three months ended March 31, 2020, we recorded a non-cash impairment loss of $10,646. We recorded the estimated impairment losses in the caption "Goodwill impairment" in our Condensed Consolidated Statement of Operations. After the impairment loss, there is $7,525 remaining goodwill as of March 31, 2020. As of June 30, 2020, we performed a qualitative impairment assessment in accordance with ASU 2011-08 Testing Goodwill for Impairment The Company recognizes that any changes in our projected 2020 results could potentially have a material impact on our assessment of goodwill impairment. The Company will continue to monitor the actual performance of its operations against expectations and assess further indicators of possible impairment. The valuation of goodwill and intangible assets is subject to a high degree of judgment, uncertainty and complexity. Should any indicators of impairment occur in subsequent periods, the Company will be required to perform an analysis in order to determine whether goodwill is impaired. |
Loans Payable
Loans Payable | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
LOANS PAYABLE | NOTE 8: LOANS PAYABLE The outstanding debt with detachable warrants, as applicable, are shown in the table below. Further discussion of the notes follows. Debt Type Issuance Principal Maturity Warrants Interest Rate Information A 6/30/2018 $ 264 6/30/2021 - 0.0% interest B 1/16/2018 1,032 6/30/2021 61,729 10.0% interest (1) C 8/17/2016 3,096 6/30/2021 588,236 10.0% interest (1) D 11/19/2018 1,637 2/15/2020 - 3.5% interest E 12/30/2019 2,773 6/30/2021 - 10.0% interest (2) F 4/27/2020 1,552 4/27/2022 - 1.0% interest (3) Total debt, gross 10,354 649,965 Debt discount (338 ) Total debt, net $ 10,016 Less current maturities (8,464 ) Long term debt 1,552 A – Secured Disbursed Escrow Promissory Note with related party B – Secured Revolving Promissory Note with related party C – Term Loan with related party D – Amended and Restated Seller Note from acquisition of Allure E – Secured Convertible Special Loan Promissory Note, at fair value F – Paycheck Protection Program Loan from Small Business Administration (1) 8.0% cash interest per annum through March 31, 2020. 10.0% paid-in-kind interest ("PIK") interest per annum from April 1, 2020 through December 31, 2020. 8.0% cash interest per annum January 1, 2021 through the maturity date. (2) 8.0% cash interest per annum, comprised of 6.0% cash, 2.0% PIK through March 31, 2020. 10.0% PIK interest per annum through September 30, 2020. In an event of default, the interest rate increases by 6.0% to 16.0%. Debt is convertible to preferred stock at the earlier of an event of default or October 1, 2020. While the stated maturity date of the Special Loan is June 30, 2021, the mandatory conversion feature into preferred stock as of October 1, 2020 results in the classification of this debt instrument as a current liability on the consolidated balance sheet. (3) 1,0% cash interest per annum. Payments are deferred for six months from the date of the Promissory Note and the Company can apply for forgiveness of the Promissory Note after 60 days. Forgiveness of the Promissory Note will be determined in accordance with the provisions of the CARES Act and applicable regulations. Any principal and interest amounts outstanding after the determination of amounts forgiven will be repaid on a monthly basis. SBA Paycheck Protection Program Loan On April 27, 2020, the Company entered into a Promissory Note with Old National Bank (the "Promissory Note"), which provided for an unsecured loan of $1,552 pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act and applicable regulations (the "CARES Act"). The Promissory Note has a term of two years with a 1% per annum interest rate. While the Promissory Note currently has a two-year term, the amended law permits the Company to request a five-year maturity from Old National Bank. Payments are deferred for six months from the date of the Promissory Note and the Company can apply for forgiveness of the Promissory Note after 60 days. Forgiveness of the Promissory Note will be determined in accordance with the provisions of the CARES Act and applicable regulations. Any principal and interest amount outstanding after the determination of amounts forgiven will be repaid on a monthly basis. The Company is in process of finalizing their calculation of amounts forgivable in accordance with guidance issued by the Small Business Administration and anticipates applying for forgiveness during the fourth quarter of 2020. No assurance is provided that we will be able to obtain forgiveness of the Promissory Note in whole or in part. Loan and Security Agreement On August 17, 2016, the Company entered into a Loan and Security Agreement with Slipstream ("Loan and Security Agreement"). Since the initial entry into the Loan and Security Agreement in 2016, the Company has entered into several financing arrangements with varying interest rates, maturity dates, and number of associated detachable warrants, each entered within the structure of the Loan and Security Agreement. The debt instruments outstanding under the Loan and Security Agreement as of March 31, 2020 include the Term Loan, Secured Revolving Promissory Note, Secured Disbursed Escrow Promissory Note, and the Special Loan. The Loan and Security Agreement contains certain customary restrictions including, but not limited to, restrictions on mergers and consolidations with other entities, cancellation of any debt or incurring new debt (subject to certain exceptions), and other customary restrictions. Obligations under the loan and security agreement are secured by a grant of collateral security in all of the tangible assets of Creative Realities, Inc. and each of its wholly owned subsidiaries. Eighth Amendment; Modification of Interest Rates under Loan and Security Agreement On April 1, 2020, the Company entered into an Eighth Amendment to Loan and Security Agreement (the "Eighth Amendment") with its subsidiaries and Slipstream to amend the terms of the payments and interest accruing on the Company's Term Loan, Secured Revolving Promissory Note, and Special Loan. The Eighth Amendment increased the interest rates of these loans from 8% to 10%, effective April 1, 2020. Until January 1, 2021, rather than cash payments of accrued interest under the term and revolving loans, interest will be paid by the issuance of and treated as additional principal thereunder. Commencing January 2, 2021, such interest will be payable in cash. Interest on the special loan will no longer be paid in cash, but by the issuance of and treated as additional principal thereunder. Upon entry into the Eighth Amendment, the Company completed an analysis of the changes in the Loan and Security Agreement within ASC 470 Debt Seventh Amendment; Entry into Secured Convertible Special Loan Promissory Note On December 30, 2019, we entered into the Special Loan as part of the Seventh Amendment under which we obtained $2,000, with interest thereon at 8% per annum payable 6% in cash and 2% via the issuance of SLPIK interest, provided however that upon occurrence of an event of default the interest rate shall automatically be increased by 6% per annum payable in cash. The entry into the Seventh Amendment adjusted the interest rate on the Company's Term Loan and Revolving Loan to 8% per annum, provided, however, at all times when the aggregate outstanding principal amount of the Term Loan and the Revolving Loan exceeds $4,100 then the Loan Rate shall be 10%, of which eight percent 8% shall be payable in cash and 2% shall be paid by the issuance of and treated as additional PIK. Upon the earlier to occur of an Event of Default or October 1, 2020, if any of the principal amount of the Special Loan is then outstanding, the principal and accrued but unpaid interest of the Special Loan and the outstanding SLPIK shall be automatically converted into shares of a new series of Senior Convertible Preferred Stock of CRI ("New Preferred") having an Appraised Value equal to three times the then outstanding principal amount and accrued but unpaid interest of the Special Loan and the outstanding SLPIK and having the following terms and conditions, as reasonably determined by CRI and the Lender, the New Preferred shall: ● be the most senior equity security of CRI, including with respect to the payment of dividends and other distributions; ● be on substantially the same terms and conditions as CRI's Series A-1 6% Convertible Preferred Stock as set forth in its Certificate of Designation immediately before the same was cancelled pursuant to a Certificate of Cancellation dated as of March 13, 2019; ● not be subject to a right of redemption upon the part of a holder thereof; ● accrue and pay quarterly dividends at the rate of twelve percent (12%) per annum which shall be payable in cash; ● have a Stated Value that is an amount mutually agreed by CRI and the Lender at the time of issuance; ● Conversion Price shall be an amount equal to 80% of the average for the 30-day period ending two days prior to the required conversion date of the daily average of the range of CRI's common stock (calculated pursuant to information on The Wall Street Journal Online Edition), subject to appropriate adjustments; and ● neither section 6(e) of the Series A-1 Certificate of Designation nor any similar provision shall apply to the New Preferred. In entering the Seventh Amendment and Special Loan, pursuant to ASC 825-10-25-1, Fair Value Option Sixth Amendment; Extension of Maturity Dates On November 6, 2019, Slipstream extended the maturity date of our term loan and revolver loan to June 30, 2021 through the Sixth Amendment to the Loan and Security Agreement, aligning the maturity date of our Term Loan and Secured Revolving Promissory Note with the Secured Disbursed Escrow Promissory Note. Amended and Restated Seller Note from acquisition of Allure The Amended and Restated Seller Note represents a note payable due from Allure to Seller, under a pre-existing Seller Note which was amended and restated to a reduced amount of $900 through the Stock Purchase Agreement. At the closing date, the estimated net working capital deficit of Allure was $801 in excess of the target net working capital as defined in the Stock Purchase Agreement. As of the acquisition date, Allure also had accounts payable to Seller for outsourced services of $2,204. We agreed with the Seller to settle the estimated net working capital deficit through a reduction in the accounts payable to Seller as of the acquisition date and to further amend the Seller Note to include the remaining $1,403 accounts payable due from Allure to Seller, resulting in a Seller Note of $2,303. That debt is represented by our issuance to the Seller of a promissory note accruing interest at 3.5% per annum. The promissory note requires us to make quarterly payments of interest only through February 19, 2020, on which date the promissory note matured and all remaining amounts owing thereunder became due. The promissory note is convertible into shares of Creative Realities common stock, at the seller's option on or after the 180th day after issuance, at an initial conversion price of $8.40 per share, subject to customary equitable adjustments. Conversion of all amounts owing under the promissory note will be mandatory if the 30-day volume-weighted average price of our common stock exceeds 200% of the common stock trading price at the closing of the acquisition. We granted the seller customary registration rights for the shares of our common stock issuable upon conversion of the promissory note. On February 20, 2020, the Company and Allure filed a demand for arbitration against Seller for (1) breach of contract, (2) indemnification, and (3) fraudulent misrepresentation under the Allure Purchase Agreement. This demand included a claim for the right to offset the amounts owing under the Amended and Restated Seller Note due February 20, 2020. We have not paid, nor do we intend to pay, the Amended and Restated Seller Note, which is now past its maturity date, without resolution of our demand for arbitration. On February 27, 2020, Seller sent the Company a notice of breach for failure to pay the Amended and Restated Seller Note on the maturity date of February 20, 2020 and demanding immediate payment. The Company continues to accrue interest on the Amended and Restated Seller Note and have included $43 in accrued expenses in the Condensed Consolidated Financial Statements as of June 30, 2020. See Note 9 Commitments and Contingencies |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 9: COMMITMENTS AND CONTINGENCIES Litigation On August 2, 2019, the Company filed suit in Jefferson Circuit Court, Kentucky, against a supplier of Allure for breach of contract, breach of warranty, and negligence with respect to equipment installations performed by such supplier for an Allure customer. This case remains in the early stages of litigation, in part due to delays resulting from the COVID-19 pandemic, and, as a result, the outcome of each case is unclear, so the Company is unable to reasonably estimate the possible recovery, or range of recovery, if any. On October 10, 2019, the Allure customer that is the basis of our claim above sent a demand to the Company for payment of $3,200 as settlement for an alleged breach of contract related to hardware failures of equipment installations performed by Allure between November 2017 and August 2018. The suits filed by and against Allure have been adjoined in the Jefferson Circuit Court, Kentucky in January 2020. This suit remains in the early stages of litigation and, as a result, the outcome of the suit and the allocation of liability, if any, remain unclear, so the Company is unable to reasonably estimate the possible liability, recovery, or range of magnitude for either the liability or recover, if any, at the time of this filing. The Company has notified its insurance company on notice of potential claims and continues to evaluate both the claim made by the customer and potential avenues for recovery against third parties should the customer prevail. On February 20, 2020, the Company and Allure filed a demand for arbitration against Seller for breach of contract, indemnification, and fraudulent misrepresentation under the Allure Purchase Agreement. This demand included a claim for the right to offset the amounts owing under the Amended and Restated Seller Note due February 20, 2020. We have not paid the Amended and Restated Seller Note which is now past its maturity date. On February 27, 2020, Seller sent the Company a notice of breach for failure to pay the Amended and Restated Seller Note on the maturity date of February 20, 2020 and demanding immediate payment. Except as noted above, the Company is not party to any other material legal proceedings, other than ordinary routine litigation incidental to the business, as of August 14, 2020, and there were no other such proceedings pending during the period covered by this Report. Employee-related Expenses We implemented cost-control measures in light of the effect of the COVID-19 pandemic on our business, including employment compensation reductions designed to achieve preliminary cost savings. On March 19, 2020, the Company's Board of Directors approved a six-month reduction of the salaries of our Chief Executive Officer and Chief Financial Officer by twenty percent (20%), thereby reducing the salaries payable to such officers in 2020 to $297,000 and $224,100, respectively. On March 20, 2020, we completed a reduction-in-force and accrued one-time termination benefits related to severance to the affected employees of $135, the total of which was paid during the three months ended June 30, 2020 with $0 remaining in accrued expenses on the Condensed Consolidated Balance Sheet as of June 30, 2020. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2020 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 10: RELATED PARTY TRANSACTIONS In addition to the financing transactions with Slipstream, a related party, discussed in Note 8 Loans Payable On August 14, 2018, we entered into a payment agreement with 33 Degrees Convenience Connect, Inc., a related party that is approximately 17.5% owned by a member of our senior management ("33 Degrees") outlining terms for repayment of $2,567 of aged accounts receivable as of that date. The payment agreement stipulated a simple interest rate of 12% on aged accounts receivable to be paid on the tenth day of each month through the maturity date of December 31, 2019. As of December 31, 2019, 33 Degrees paid the note in full. Following repayment of the note, 33 Degrees has continued to purchase additional hardware and services from the Company under normal payment terms. For the three and six months ended June 30, 2020, the Company had sales to 33 Degrees of $291, or 8.0%, and $791, or 10.7%, respectively, of consolidated revenue. For the three and six months ended June 30, 2019, the Company had sales to 33 Degrees of $275, or 3.0%, and $470, or 2.5%, respectively, of consolidated revenue. Accounts receivable due from 33 Degrees was $28, or 0.8%, and $1, or 0.0% of consolidated accounts receivable at June 30, 2020 and December 31, 2019, respectively. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 11: INCOME TAXES Our deferred tax assets are primarily related to net federal and state operating loss carryforwards (NOLs). We have substantial NOLs that are limited in usage by IRC 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. We have performed a preliminary analysis of the annual NOL carryforwards and limitations that are available to be used against taxable income. Based on the history of losses of the Company, there continues to be a full valuation allowance against the net deferred tax assets of the Company with a definite life. For the three and six-months ended June 30, 2020, we reported tax (expense)/benefit of ($4) and $151, respectively. As of June 30, 2020, the net deferred tax assets totaled $0 after valuation allowance, as compared to $175 at December 31, 2019. The reduction is primarily the result of the impairment to goodwill, which resulted in adjusting the deferred tax impact associated with indefinite lived goodwill from a deferred tax liability to a deferred tax asset. As the indefinite-lived intangibles can no longer provide a source of income, a full valuation allowance was placed against the deferred tax assets. |
Warrants
Warrants | 6 Months Ended |
Jun. 30, 2020 | |
Warrants [Abstract] | |
WARRANTS | NOTE 12: WARRANTS A summary of outstanding equity warrants is included below: Warrants (Equity) Amount Weighted Average Exercise Price Weighted Average Remaining Contractual Life Balance January 1, 2020 4,733,028 $ 4.83 3.41 Warrants issued (27,600 ) 4.38 - Warrants expired (89,238 ) 9.49 - Balance June 30, 2020 4,616,190 $ 4.74 2.97 |
Stock-Based Compensation
Stock-Based Compensation | 6 Months Ended |
Jun. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
STOCK-BASED COMPENSATION | NOTE 13: STOCK-BASED COMPENSATION A summary of outstanding options is included below: Time Vesting Options Weighted Average Weighted Weighted Remaining Average Average Range of Exercise Number Contractual Exercise Options Exercise Prices between Outstanding Life Price Exercisable Price $0.01 - $5.39 1,605,000 9.92 $ 2.52 - $ - $5.40 - $7.50 184,830 5.85 $ 6.72 159,830 $ 6.60 $7.51 - $160.50 103,979 4.95 11.74 94,396 $ 12.05 1,893,809 9.25 $ 3.44 254,226 Performance Vesting Options Weighted Average Weighted Weighted Remaining Average Average Range of Exercise Number Contractual Exercise Options Exercise Prices between Outstanding Life Price Exercisable Price $0.01 - $5.39 800,000 9.93 $ 2.53 - $ - $5.40 - $7.50 - - $ - - $ - 800,000 9.93 $ 2.53 - Time Vesting Options Performance Vesting Options Weighted Weighted Average Average Options Exercise Options Exercise Date/Activity Outstanding Price Outstanding Price Balance, December 31, 2019 313,809 $ 8.06 - $ - Granted 1,580,000 2.53 800,000 2.53 Exercised - - - - Forfeited or expired (51 ) 367.50 - - Balance, June 30, 2020 1,893,809 3.44 800,000 $ 2.53 The weighted average remaining contractual life for options exercisable is 5.2 years as of June 30, 2020. Valuation Information for Stock-Based Compensation For purposes of determining estimated fair value under FASB ASC 718-10, Stock Compensation On June 1, 2020 the Board of Directors of the Company granted 10-year options to purchase an aggregate of 2,380,000 shares of its common stock to employees of the Company subject to shareholder approval of an increase in the reserve of shares authorized for issuance under the Company's 2014 Stock Incentive Plan (the "Plan"). On July 10, 2020, the Company held a special meeting of the Company's shareholders at which the shareholders approved the amendment to the Plan, which increased the reserve of shares authorized for issuance thereunder to 6,000,000 shares. Of the 2,380,000 options awarded, 1,580,000 vest over 3 years and have an exercise price of $2.53, the market value of the Company's common stock on the grant date. The fair value of the options on the grant date was $1.87 and was determined using the Black-Scholes model. These values were calculated using the following weighted average assumptions: Risk-free interest rate 0.66 % Expected term 6.25 years Expected price volatility 89.18 % Dividend yield 0 % The remaining 800,000 options awarded vest in equal installments over a three-year period subject to satisfying the Company revenue target and earnings before interest, taxes, depreciation and amortization ("EBITDA") target for the applicable year. In each of calendar years 2020, 2021 and 2022, one-third of the total shares may vest (if the revenue and EBITDA targets are met), and the shares that are subject to vesting each year are allocated equally to each of the revenue and EBITDA targets for such year. These performance options include a catch-up provision, where any options that did not vest during a prior year due to the Company's failure to meet a prior revenue or EBITDA target may vest in a subsequent vesting year if the revenue or EBITDA target, as applicable, is met in the future year. The revenue and EBITDA targets for the following three years are as follows: Calendar Year Revenue Target EBITDA Target 2020 $32 million $2.2 million 2021 $35 million $3.1 million 2022 $38 million $3.5 million The exercise price of the foregoing options is $2.53 per share, the closing price of the Company's common stock on the date of issuance. The options were issued from the Company's 2014 Stock Incentive Plan. The fair value of the options on the grant date was $1.87 and was determined using the Black-Scholes model. These values were calculated using the same weighted average assumptions as the time vesting options issued. Performance against the identified revenue and EBITDA targets will be assessed quarterly by the Company in order to determine whether any compensation expense should be recorded. As of June 30, 2020, the Company had recorded no compensation expense in the Consolidated Statement of Operations with respect to these awards. Stock Compensation Expense Information ASC 718-10, Stock Compensation In October 2014, the Company's shareholders approved the 2014 Stock Incentive Plan, under which 7,390,355 shares were reserved for purchase by the Company's employees. In August 2018, a special meeting of shareholders was held in which the shareholders voted to amend the Company's 2014 Stock Incentive Plan to increase the reserve of shares authorized for issuance thereunder, from 7,390,355 shares to 18,000,000 shares. Following a 1-for-30 reverse stock split, the shares authorized for issuance under the Company's 2014 Stock Incentive Plan was reduced to 600,000. On July 10, 2020, the Company's shareholders approved an amendment to the Company's 2014 Stock Incentive Plan to increase the reserve of authorized for issuance thereunder to 6,000,000. Compensation expense recognized for the issuance of stock options for the three and six months ended June 30, 2020 of $19 and $119, respectively, was included in general and administrative expense in the Condensed Consolidated Financial Statements. Compensation expense recognized for the issuance of stock options for the three and six months ended June 30, 2019 of $41 and $83, respectively, was included in general and administrative expense in the Condensed Consolidated Financial Statements. Amounts recorded include stock compensation expense for awards granted to directors of the Company in exchange for services at fair value. At June 30, 2020, there was approximately $3,014 and $1,499 of total unrecognized compensation expense related to unvested share-based awards with time vesting and performance vesting criteria, respectively. Generally, expense related to the time vesting options will be recognized over the next three years and will be adjusted for any future forfeitures as they occur. Compensation expense related to performance vesting options will be recognized if it becomes probable that the Company will achieve the identified performance metrics |
Significant Customers_vendors
Significant Customers/vendors | 6 Months Ended |
Jun. 30, 2020 | |
Segment Reporting [Abstract] | |
SIGNIFICANT CUSTOMERS/VENDORS | NOTE 14: SIGNIFICANT CUSTOMERS/VENDORS Significant Customers We had one (1) and one (1) customers that in the aggregate accounted for 16% and 18.5% of accounts receivable as of June 30, 2020 and December 31, 2019, respectively. We had two (2) customers that accounted for 27% and 51% of revenue for the three months ended June 30, 2020 and 2019, respectively. We had two (2) customers that accounted for 22% and 41% of revenue for the six months ended June 30, 2020 and 2019, respectively. Significant Vendors We had one (1) vendor that accounted for 22% and 50% of outstanding accounts payable at June 30, 2020 and December 31, 2019, respectively. |
Leases
Leases | 6 Months Ended |
Jun. 30, 2020 | |
Leases [Abstract] | |
LEASES | NOTE 15: LEASES We have entered into various non-cancelable operating lease agreements for certain of our offices and office equipment. Our leases have original lease periods expiring between 2020 and 2023. Many leases 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 components of lease costs, lease term and discount rate are as follows: (in thousands) Six Months Ended Six Months Ended Finance lease cost Amortization of right-of-use assets $ 12 $ 16 Interest 1 3 Operating lease cost 343 393 Total lease cost $ 356 $ 412 Weighted Average Remaining Lease Term Operating leases 3.0 years 3.8 years Finance leases 1.0 years 1.4 years Weighted Average Discount Rate Operating leases 10.0 % 10.0 % Finance leases 14.0 % 13.5 % The following is a schedule, by years, of maturities of lease liabilities as of June 30, 2020: (in thousands) Operating Finance The remainder of 2020 $ 342 $ 9 2021 630 4 2022 377 1 2023 375 - Thereafter - - Total undiscounted cash flows 1,724 14 Less imputed interest (237 ) $ (1 ) Present value of lease liabilities $ 1,487 $ 13 Supplemental cash flow information related to leases are as follows: (in thousands) Six Months Ended Six Months Ended Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 171 $ 383 Operating cash flows from finance leases 2 1 Financing cash flows from finance leases 12 15 |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | 1. Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the applicable instructions to Form 10-Q and Regulation S-X and include all of the information and disclosures required by generally accepted accounting principles in the United States of America ("GAAP") for interim financial reporting. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements of the Company and related footnotes for the year ended December 31, 2019, included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 13, 2020. The results of operations for the interim periods are not necessarily indicative of results of operations for a full year. Management believes the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, including normal recurring items, considered necessary for a fair statement of results for the interim periods presented. |
Revenue Recognition | 2. Revenue Recognition We recognize revenue in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers If an arrangement involves multiple performance obligations, the items are analyzed to determine the separate units of accounting, whether the items have value on a standalone basis and whether there is objective and reliable evidence of their standalone selling price. The total contract transaction price is allocated to the identified performance obligations based upon the relative standalone selling prices of the performance obligations. The standalone selling price is based on an observable price for services sold to other comparable customers, when available, or an estimated selling price using a cost plus margin approach. The Company estimates the amount of total contract consideration it expects to receive for variable arrangements by determining the most likely amount it expects to earn from the arrangement based on the expected quantities of services it expects to provide and the contractual pricing based on those quantities. The Company only includes some or a portion of variable consideration in the transaction price when it is probable that a significant reversal in the amount of cumulative revenue recognized 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 client 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. 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 does not have any material extended payment terms as payment is due at or shortly after the time of the sale, typically ranging between thirty and ninety days. 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. The Company recognizes contract assets or unbilled receivables related to revenue recognized for services completed but not yet invoiced to the clients. Unbilled receivables are recorded as accounts receivable when the Company has an unconditional right to contract consideration. A contract liability is recognized as deferred revenue when the Company invoices clients in advance of performing the related services under the terms of a contract. Deferred revenue is recognized as revenue when the Company has satisfied the related performance obligation. The Company uses the practical expedient for recording an immediate expense for incremental costs of obtaining contracts, including certain design/engineering services, commissions, incentives and payroll taxes, as these incremental and recoverable costs have terms that do not exceed one year. |
Inventories | 3. Inventories Inventories are stated at the lower of cost or market (net realizable value), determined by the first-in, first-out (FIFO) method, and consist of the following: June 30, December 31, 2020 2019 Raw materials, net of reserve of $101 and $134, respectively $ 1,996 $ 200 Inventory on consignment with distributors 360 - Work-in-process 275 179 Total inventories $ 2,631 $ 379 |
Impairment of Long-Lived Assets | 4. Impairment of Long-Lived Assets We review the carrying value of all long-lived assets, including property and equipment, for impairment in accordance with ASC 360, Accounting for the Impairment or Disposal of Long-Lived Assets If the impairment tests indicate that the carrying value of the asset is greater than the expected undiscounted cash flows to be generated by such asset, an impairment loss would be recognized. The impairment loss is determined as the amount by which the carrying value of such asset exceeds its fair value. We generally measure fair value by considering sale prices for similar assets or by discounting estimated future cash flows from such assets using an appropriate discount rate. Assets to be disposed of are carried at the lower of their carrying value or fair value less costs to sell. Considerable management judgment is necessary to estimate the fair value of assets, and accordingly, actual results could vary significantly from such estimates. |
Basic and Diluted Income/(Loss) per Common Share | 5. Basic and Diluted Income/(Loss) per Common Share Basic and diluted income/(loss) per common share for all periods presented is computed using the weighted average number of common shares outstanding. Basic weighted average shares outstanding includes only outstanding common shares. Diluted weighted average shares outstanding includes outstanding common shares and potential dilutive common shares outstanding in accordance with the treasury stock method. Shares reserved for outstanding stock options, including stock options with performance restricted vesting, and warrants totaling approximately 7,309,998 and 5,320,162 at June 30, 2020 and 2019, respectively were excluded from the computation of income/(loss) per share as all options and warrants were anti-dilutive due to the net loss in each period. In calculating diluted earnings per share for the three and six months ended June 30, 2020, in accordance with ASC 260 Earnings per share |
Income Taxes | 6. Income Taxes Deferred income taxes are recognized in the financial statements for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates. Temporary differences arise from net operating losses, differences in basis of intangibles, stock-based compensation, reserves for uncollectible accounts receivable and inventory, differences in depreciation methods, and accrued expenses. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company accounts for uncertain tax positions utilizing an established recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We had no uncertain tax positions as of June 30, 2020 and December 31, 2019. |
Goodwill | 7. Goodwill We follow the provisions of ASC 350, Goodwill and Other Intangible Assets. Pursuant to ASC 350, goodwill acquired in a purchase business combination is not amortized, but instead tested for impairment at least annually. The Company uses a measurement date of September 30 (see Note 7 Intangible Assets and Goodwill |
Use of Estimates | 8. 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 allowance for doubtful accounts, valuation allowances related to deferred taxes, the fair value of acquired assets and liabilities, the fair value of liabilities reliant upon the appraised fair value of the Company, valuation of stock-based compensation awards and other assumptions and estimates used to evaluate the recoverability of long-lived assets, goodwill and other intangible assets and the related amortization methods and periods. Actual results could differ from those estimates. |
Leases | 9. Leases We account for leases in accordance with ASU No. 2016-02, Leases We determine if an arrangement is a lease at inception. Right of use ("ROU") assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term. For this purpose, we consider only payments that are fixed and determinable at the time of commencement. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Our incremental borrowing rate is a hypothetical rate based on our understanding of what our credit rating would be. The ROU asset also includes any lease payments made prior to commencement and is recorded net of any lease incentives received. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise such options. Operating leases are included in operating lease right-of-use assets, current maturities of operating leases, and long-term obligations under operating leases on our condensed consolidated balance sheets. Finance leases are included in property and equipment, net, current maturities of financing leases, and long-term obligations under financing leases on our condensed consolidated balance sheets. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Schedule of inventories | June 30, December 31, 2020 2019 Raw materials, net of reserve of $101 and $134, respectively $ 1,996 $ 200 Inventory on consignment with distributors 360 - Work-in-process 275 179 Total inventories $ 2,631 $ 379 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Revenue Recognition and Deferred Revenue [Abstract] | |
Schedule of revenue by major source | (in thousands) Three Months Three Months Six Months Six Months Hardware $ 1,601 $ 1,654 $ 2,968 $ 3,295 Services: Installation Services 463 1,791 1,332 4,163 Software Development Services 37 4,259 179 8,235 Managed Services 1,555 1,610 2,881 3,105 Total Services 2,055 7,660 4,392 15,503 Total Hardware and Services $ 3,656 $ 9,314 $ 7,360 $ 18,798 |
Supplemental Cash Flow Statem_2
Supplemental Cash Flow Statement Information (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Supplemental Cash Flow Statement Information [Abstract] | |
Schedule of supplemental cash flow information | Six Months Ended June 30, 2020 2019 Supplemental Cash Flow Information Non-cash Investing and Financing Activities Right of offset settlement of Amended and Restated Seller Note $ - $ 498 Cash paid during the period for: Interest $ - $ 181 Income taxes, net $ 2 $ - |
Intangible Assets, Including _2
Intangible Assets, Including Goodwill (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of intangible assets | June 30, December 31, 2020 2019 Gross Gross Carrying Accumulated Carrying Accumulated Amount Amortization Amount Amortization Technology platform $ 4,635 3,273 $ 4,635 3,147 Customer relationships 5,330 2,775 5,330 2,679 Trademarks and trade names 1,020 847 1,020 752 10,985 6,895 10,985 6,578 Accumulated amortization 6,895 6,578 Net book value of amortizable intangible assets $ 4,090 $ 4,407 |
Schedule of goodwill | Total Balance as of December 31, 2019 $ 18,171 Adjustments due to impairment loss (10,646 ) Balance as of June 30, 2020 $ 7,525 |
Loans Payable (Tables)
Loans Payable (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
Schedule of outstanding debt with detachable warrants | Debt Type Issuance Principal Maturity Warrants Interest Rate Information A 6/30/2018 $ 264 6/30/2021 - 0.0% interest B 1/16/2018 1,032 6/30/2021 61,729 10.0% interest (1) C 8/17/2016 3,096 6/30/2021 588,236 10.0% interest (1) D 11/19/2018 1,637 2/15/2020 - 3.5% interest E 12/30/2019 2,773 6/30/2021 - 10.0% interest (2) F 4/27/2020 1,552 4/27/2022 - 1.0% interest (3) Total debt, gross 10,354 649,965 Debt discount (338 ) Total debt, net $ 10,016 Less current maturities (8,464 ) Long term debt 1,552 A – Secured Disbursed Escrow Promissory Note with related party B – Secured Revolving Promissory Note with related party C – Term Loan with related party D – Amended and Restated Seller Note from acquisition of Allure E – Secured Convertible Special Loan Promissory Note, at fair value F – Paycheck Protection Program Loan from Small Business Administration (1) 8.0% cash interest per annum through March 31, 2020. 10.0% paid-in-kind interest ("PIK") interest per annum from April 1, 2020 through December 31, 2020. 8.0% cash interest per annum January 1, 2021 through the maturity date. (2) 8.0% cash interest per annum, comprised of 6.0% cash, 2.0% PIK through March 31, 2020. 10.0% PIK interest per annum through September 30, 2020. In an event of default, the interest rate increases by 6.0% to 16.0%. Debt is convertible to preferred stock at the earlier of an event of default or October 1, 2020. While the stated maturity date of the Special Loan is June 30, 2021, the mandatory conversion feature into preferred stock as of October 1, 2020 results in the classification of this debt instrument as a current liability on the consolidated balance sheet. (3) 1,0% cash interest per annum. Payments are deferred for six months from the date of the Promissory Note and the Company can apply for forgiveness of the Promissory Note after 60 days. Forgiveness of the Promissory Note will be determined in accordance with the provisions of the CARES Act and applicable regulations. Any principal and interest amounts outstanding after the determination of amounts forgiven will be repaid on a monthly basis. |
Warrants (Tables)
Warrants (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Warrants [Abstract] | |
Schedule of outstanding equity warrants | Warrants (Equity) Amount Weighted Average Exercise Price Weighted Average Remaining Contractual Life Balance January 1, 2020 4,733,028 $ 4.83 3.41 Warrants issued (27,600 ) 4.38 - Warrants expired (89,238 ) 9.49 - Balance June 30, 2020 4,616,190 $ 4.74 2.97 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of stock options outstanding | Time Vesting Options Weighted Average Weighted Weighted Remaining Average Average Range of Exercise Number Contractual Exercise Options Exercise Prices between Outstanding Life Price Exercisable Price $0.01 - $5.39 1,605,000 9.92 $ 2.52 - $ - $5.40 - $7.50 184,830 5.85 $ 6.72 159,830 $ 6.60 $7.51 - $160.50 103,979 4.95 11.74 94,396 $ 12.05 1,893,809 9.25 $ 3.44 254,226 Performance Vesting Options Weighted Average Weighted Weighted Remaining Average Average Range of Exercise Number Contractual Exercise Options Exercise Prices between Outstanding Life Price Exercisable Price $0.01 - $5.39 800,000 9.93 $ 2.53 - $ - $5.40 - $7.50 - - $ - - $ - 800,000 9.93 $ 2.53 - |
Schedule of stock option activity | Time Vesting Options Performance Vesting Options Weighted Weighted Average Average Options Exercise Options Exercise Date/Activity Outstanding Price Outstanding Price Balance, December 31, 2019 313,809 $ 8.06 - $ - Granted 1,580,000 2.53 800,000 2.53 Exercised - - - - Forfeited or expired (51 ) 367.50 - - Balance, June 30, 2020 1,893,809 3.44 800,000 $ 2.53 |
Schedule of fair value of the options | Risk-free interest rate 0.66 % Expected term 6.25 years Expected price volatility 89.18 % Dividend yield 0 % |
Schedule of revenue and EBITDA targets | Calendar Year Revenue Target EBITDA Target 2020 $32 million $2.2 million 2021 $35 million $3.1 million 2022 $38 million $3.5 million |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Leases [Abstract] | |
Schedule of components of lease costs, lease term and discount rate | (in thousands) Six Months Ended Six Months Ended Finance lease cost Amortization of right-of-use assets $ 12 $ 16 Interest 1 3 Operating lease cost 343 393 Total lease cost $ 356 $ 412 Weighted Average Remaining Lease Term Operating leases 3.0 years 3.8 years Finance leases 1.0 years 1.4 years Weighted Average Discount Rate Operating leases 10.0 % 10.0 % Finance leases 14.0 % 13.5 % |
Schedule of maturities of lease liabilities | (in thousands) Operating Finance The remainder of 2020 $ 342 $ 9 2021 630 4 2022 377 1 2023 375 - Thereafter - - Total undiscounted cash flows 1,724 14 Less imputed interest (237 ) $ (1 ) Present value of lease liabilities $ 1,487 $ 13 |
Schedule of cash flow information related to leases | (in thousands) Six Months Ended Six Months Ended Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 171 $ 383 Operating cash flows from finance leases 2 1 Financing cash flows from finance leases 12 15 |
Nature of Organization and Op_2
Nature of Organization and Operations (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||
Jun. 19, 2020 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 | |
Nature of Organization and Operations (Textual) | |||||||
Cash and cash equivalents | $ 870 | $ 1,824 | $ 870 | $ 1,824 | $ 2,534 | $ 2,718 | |
Working capital deficit | 9,211 | 9,211 | |||||
Net loss | (2,459) | $ 417 | (15,642) | $ 233 | |||
Current maturities of operating leases | 653 | $ 653 | $ 646 | ||||
Description of conversion of all amounts | The Amended and Restated Seller Note represents a note payable due from Allure to Seller, under a pre-existing Seller Note which was amended and restated to a reduced amount of $900 through the Stock Purchase Agreement. | ||||||
Business acquisition description | Through August 6, 2020, we received gross proceeds under the Agreement of $1,300 from the issuance of 558,183 shares of our common stock, and paid an aggregate of $38 to Roth in commissions, yielding net proceeds of $1,160 after commissions and offering expenses. | ||||||
Description of special loan agreement | (i) our receipt of approximately $1,552 of funding through the Paycheck Protection Program on April 27, 2020, of which a significant portion we believe will ultimately be forgiven, (ii) our operational forecast through 2021, (iii) our access to capital markets through the Agreement with Roth, and (iv) a commitment of continued support from Slipstream, we can continue as a going concern through at least August 15, 2021. However, given our history of net losses, cash used in operating activities and working capital deficit, each of which continued as of and for the six months ended June 30, 2020, we can provide no assurance that our ongoing operational efforts or ability to access the public markets for capital will be successful, particularly in consideration of the business interruptions and uncertainty generated as a result of the COVID-19 pandemic ,which has materially adverse affected our results of operations and cash flows. | ||||||
Dividend rate | 12.00% | ||||||
Conversion price percentage | 80.00% | ||||||
Gross proceeds | $ 1,300 | $ 1,300 | |||||
Shares of our common stock | 558,183 | 558,183 | |||||
Commissions and offering expenses | $ 1,160 | ||||||
Sales Agreement [Member] | |||||||
Nature of Organization and Operations (Textual) | |||||||
Description of special loan agreement | The Company entered into a Sales Agreement (the "Agreement") with Roth Capital Partners, LLC ("Roth") under which the Company may offer and sell, from time to time at its sole discretion, shares of its common stock, par value $0.01 per share (the "Common Stock"), having an aggregate offering price of up to $8,000,000 through Roth as the Company's sales agent. Roth may sell the Common Stock by any method permitted by law deemed to be an "at the market offering" as defined in Rule 415 of the Securities Act of 1933, as amended. Subject to the terms of the Agreement, Roth will use its commercially reasonable efforts to sell the Common Stock from time to time, based upon instructions from the Company (including any price, time or size limits or other customary parameters or conditions the Company may impose). The Company or Roth may suspend the offering of the Common Stock being made through Roth under the Agreement upon proper notice to the other party. The Company will pay Roth a commission of 3.0% of the gross sales proceeds of any Common Stock sold through Roth under the Agreement, and also has provided Roth with customary indemnification rights. The sale of Common Stock under the Agreement is registered on a Form S-3 registration statement (Registration No. 333-238275) and related prospectus supplement filed with the SEC on June 19, 2020, and pursuant to the "baby shelf" rules that apply to such registration statement, we cannot sell more our common stock in a public primary offering (including under the Agreement) with a value exceeding more than one-third of our public float in any 12 calendar month period so long as our public float remains below $75.0 million. | ||||||
Slipstream Communications, LLC [Member] | Seventh Amendment Loan and Security Agreement[Member] | |||||||
Nature of Organization and Operations (Textual) | |||||||
Description of special loan agreement | On April 1, 2020, the Company entered into an Eighth Amendment to Loan and Security Agreement (the “Eighth Amendment”) with its subsidiaries and Slipstream to amend the terms of the payments and interest accruing on the Company’s Term Loan, Secured Revolving Promissory Note, and Special Loan. The Eighth Amendment increased the interest rates of these loans from 8% to 10%, effective April 1, 2020. Until January 1, 2021, rather than cash payments of accrued interest under the term and revolving loans, interest will be paid by the issuance of and treated as additional principal thereunder. Commencing January 2, 2021, such interest will be payable in cash. Interest on the special loan will no longer be paid in cash, but by the issuance of and treated as additional principal thereunder. | ||||||
Slipstream Communications, LLC [Member] | Seventh Amendment of Loan and Security Agreement [Member] | |||||||
Nature of Organization and Operations (Textual) | |||||||
Description of special loan agreement | On December 30, 2019, we entered into the Secured Convertible Special Loan Promissory Note (“Special Loan”) as part of the Seventh Amendment of the Loan and Security Agreement with Slipstream, under which we obtained $2,000, with interest thereon at 8% per annum payable 6% in cash and 2% via the issuance of paid-in-kind (“SLPIK”) interest, provided however that upon occurrence of an event of default the interest rate shall automatically be increased by 6% per annum payable in cash. The entry into the Seventh Amendment adjusted the interest rate on the Company’s Term Loan and Revolving Loan to 8% per annum, provided, however, at all times when the aggregate outstanding principal amount of the Term Loan and the Revolving Loan exceeds $4,100 then the Loan Rate shall be 10%, of which eight percent 8% shall be payable in cash and 2% shall be paid by the issuance of and treated as additional PIK. | ||||||
Series A Convertible Preferred Stock [Member] | |||||||
Nature of Organization and Operations (Textual) | |||||||
Convertible preferred stock percentage | 6.00% |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Accounting Policies [Abstract] | ||
Raw materials, net of reserve of $136 and $134, respectively | $ 1,996 | $ 200 |
Inventory on consignment with distributors | 360 | |
Work-in-process | 275 | 179 |
Total inventories | $ 2,631 | $ 379 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies (Details Textual) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2019 |
Summary of Significant Accounting Policies (Textual) | |||
Reserve net | $ 101 | $ 134 | |
Stock options and warrants [Member] | |||
Summary of Significant Accounting Policies (Textual) | |||
Outstanding stock options and warrants | 7,309,998 | 5,320,162 |
Revenue Recognition (Details)
Revenue Recognition (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Hardware | $ 1,601 | $ 1,654 | $ 2,968 | $ 3,295 |
Services: | ||||
Total Services | 2,055 | 7,660 | 4,392 | 15,503 |
Total Hardware and Services | 3,656 | 9,314 | 7,360 | 18,798 |
Installation Services [Member] | ||||
Services: | ||||
Total Services | 463 | 1,791 | 1,332 | 4,163 |
Software Development Services [Member] | ||||
Services: | ||||
Total Services | 37 | 4,259 | 179 | 8,235 |
Managed Services [Member] | ||||
Services: | ||||
Total Services | $ 1,555 | $ 1,610 | $ 2,881 | $ 3,105 |
Revenue Recognition (Details Te
Revenue Recognition (Details Textual) | 6 Months Ended |
Jun. 30, 2020 | |
Revenue Recognition (Textual) | |
Installation service performance obligations, description | The aggregate amount of the transaction price allocated to installation service performance obligations that are partially unsatisfied as of March 31, 2020 and 2019 were $0. |
Fair Value Measurement (Details
Fair Value Measurement (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2020 | Jun. 30, 2019 | |
Fair Value Measurement (Textual) | |||
Stock purchase agreement, description | The Purchase Agreement contemplated additional consideration of $2,000 to be paid by us to Christie Digital Systems, USA ("Seller") in the event that acquiree revenue exceeds $13,000, as defined in the underlying agreement, for any of the trailing twelve-month periods measured as of December 31, 2019, March 31, 2020, June 30, 2020, September 30, 2020 and December 31, 2020. The fair value of the earnout liability was determined to be $250 at the time of acquisition. As part of our finalization of opening balance sheet accounting at the close of the measurement period in November 2019, we recorded an adjustment to reflect the earnout liability to $0. | ||
Fair value estimate | $ 0 | $ 0 | |
Loss from special loan | $ 551 | $ 702 | |
Fair value (Level 3) [Member] | |||
Fair Value Measurement (Textual) | |||
Warrant liabilities | $ 0 |
Supplemental Cash Flow Statem_3
Supplemental Cash Flow Statement Information (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Non-cash Investing and Financing Activities | ||
Right of offset settlement of Amended and Restated Seller Note | $ 498 | |
Cash paid during the period for: | ||
Interest | 181 | |
Income taxes, net | $ 2 |
Intangible Assets, Including _3
Intangible Assets, Including Goodwill (Details) - USD ($) $ in Thousands | Jun. 30, 2020 | Dec. 31, 2019 |
Gross Carrying Amount | $ 10,985 | $ 10,985 |
Accumulated Amortization | 6,895 | 6,578 |
Net book value of amortizable intangible assets | 4,090 | 4,407 |
Technology platform [Member] | ||
Gross Carrying Amount | 4,635 | 4,635 |
Accumulated Amortization | 3,273 | 3,147 |
Customer relationships [Member] | ||
Gross Carrying Amount | 5,330 | 5,330 |
Accumulated Amortization | 2,273 | 2,679 |
Trademarks and trade names [Member] | ||
Gross Carrying Amount | 1,020 | 1,020 |
Accumulated Amortization | $ 847 | $ 752 |
Intangible Assets, Including _4
Intangible Assets, Including Goodwill (Details 1) $ in Thousands | 6 Months Ended |
Jun. 30, 2020USD ($) | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Balance as of December 31, 2019 | $ 18,171 |
Adjustments due to impairment loss | (10,646) |
Balance as of June 30, 2020 | $ 7,525 |
Intangible Assets, Including _5
Intangible Assets, Including Goodwill (Details Textual) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2020 | Mar. 31, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Amortization of intangible assets | $ 158 | $ 147 | $ 317 | $ 303 | |
Discount rate | 15.30% | ||||
Non-cash impairment loss | $ 10,646 | ||||
Goodwill impairment [Member] | |||||
Non-cash impairment loss | $ 7,525 |
Loans Payable (Details)
Loans Payable (Details) $ in Thousands | 6 Months Ended | |
Jun. 30, 2020USD ($)shares | ||
Schedule of outstanding debt with detachable warrants | ||
Total debt, gross | $ 10,354 | |
Warrants | shares | 649,965 | |
Debt discount | $ (338) | |
Total debt, net | 10,016 | |
Less current maturities | $ (8,464) | |
6/30/2018 [Member] | ||
Schedule of outstanding debt with detachable warrants | ||
Debt Type | Secured Disbursed Escrow Promissory Note with related party | |
Issuance Date | Jun. 30, 2018 | |
Total debt, gross | $ 264 | |
Maturity Date | Jun. 30, 2021 | |
Warrants | shares | ||
Interest Rate Information | 0.0% interest | |
1/16/2018 [Member] | ||
Schedule of outstanding debt with detachable warrants | ||
Debt Type | Secured Revolving Promissory Note with related party | |
Issuance Date | Jan. 16, 2018 | |
Total debt, gross | $ 1,032 | |
Maturity Date | Jun. 30, 2021 | |
Warrants | shares | 61,729 | |
Interest Rate Information | 10.0% interest | [1] |
8/17/2016 [Member] | ||
Schedule of outstanding debt with detachable warrants | ||
Debt Type | Term Loan with related party | |
Issuance Date | Aug. 17, 2016 | |
Total debt, gross | $ 3,096 | |
Maturity Date | Jun. 30, 2021 | |
Warrants | shares | 588,236 | |
Interest Rate Information | 10.0% interest | [1] |
11/19/2018 [Member] | ||
Schedule of outstanding debt with detachable warrants | ||
Debt Type | Amended and Restated Seller Note from acquisition of Allure | |
Issuance Date | Nov. 19, 2018 | |
Total debt, gross | $ 1,637 | |
Maturity Date | Feb. 15, 2020 | |
Warrants | shares | ||
Interest Rate Information | 3.5% interest | |
12/30/2019 [Member] | ||
Schedule of outstanding debt with detachable warrants | ||
Debt Type | Secured Convertible Special Loan Promissory Note, at fair value | |
Issuance Date | Dec. 30, 2019 | |
Total debt, gross | $ 2,773 | |
Maturity Date | Jun. 30, 2021 | |
Warrants | shares | ||
Interest Rate Information | 10.0% interest | [2] |
4/27/2020 [Member] | ||
Schedule of outstanding debt with detachable warrants | ||
Debt Type | Paycheck Protection Program Loan from Small Business Administration | |
Issuance Date | Apr. 20, 2027 | |
Total debt, gross | $ 1,552 | |
Maturity Date | Apr. 27, 2022 | |
Warrants | shares | ||
Interest Rate Information | 1.0% interest | [3] |
[1] | 8.0% cash interest per annum through March 31, 2020. 10.0% paid-in-kind interest ("PIK") interest per annum from April 1, 2020 through December 31, 2020. 8.0% cash interest per annum January 1, 2021 through the maturity date. | |
[2] | 8.0% cash interest per annum, comprised of 6.0% cash, 2.0% PIK through March 31, 2020. 10.0% PIK interest per annum through September 30, 2020. In an event of default, the interest rate increases by 6.0% to 16.0%. Debt is convertible to preferred stock at the earlier of an event of default or October 1, 2020. While the stated maturity date of the Special Loan is June 30, 2021, the mandatory conversion feature into preferred stock as of October 1, 2020 results in the classification of this debt instrument as a current liability on the consolidated balance sheet. | |
[3] | 1,0% cash interest per annum. Payments are deferred for six months from the date of the Promissory Note and the Company can apply for forgiveness of the Promissory Note after 60 days. Forgiveness of the Promissory Note will be determined in accordance with the provisions of the CARES Act and applicable regulations. Any principal and interest amounts outstanding after the determination of amounts forgiven will be repaid on a monthly basis. |
Loans Payable (Details Textual)
Loans Payable (Details Textual) - USD ($) $ / shares in Units, $ in Thousands | Nov. 06, 2019 | Apr. 27, 2020 | Jun. 30, 2020 | Mar. 31, 2020 | Jun. 30, 2020 | Dec. 30, 2019 | Dec. 31, 2019 |
Loans Payable (Textual) | |||||||
Convertible special loan, description | ● be the most senior equity security of CRI, including with respect to the payment of dividends and other distributions; ● be on substantially the same terms and conditions as CRI's Series A-1 6% Convertible Preferred Stock as set forth in its Certificate of Designation immediately before the same was cancelled pursuant to a Certificate of Cancellation dated as of March 13, 2019; ● not be subject to a right of redemption upon the part of a holder thereof; ● accrue and pay quarterly dividends at the rate of twelve percent (12%) per annum which shall be payable in cash; ● have a Stated Value that is an amount mutually agreed by CRI and the Lender at the time of issuance; ● Conversion Price shall be an amount equal to 80% of the average for the 30-day period ending two days prior to the required conversion date of the daily average of the range of CRI's common stock (calculated pursuant to information on The Wall Street Journal Online Edition), subject to appropriate adjustments; and ● neither section 6(e) of the Series A-1 Certificate of Designation nor any similar provision shall apply to the New Preferred. | ||||||
Convertible promissory note, description | The Company entered into a Promissory Note with Old National Bank (the "Promissory Note"), which provided for an unsecured loan of $1,552 pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act and applicable regulations (the "CARES Act"). The Promissory Note has a term of two years with a 1% per annum interest rate. While the Promissory Note currently has a two-year term, the amended law permits the Company to request a five-year maturity from Old National Bank. Payments are deferred for six months from the date of the Promissory Note and the Company can apply for forgiveness of the Promissory Note after 60 days. | (1) 8.0% cash interest per annum through March 31, 2020. 10.0% paid-in-kind interest ("PIK") interest per annum from April 1, 2020 through December 31, 2020. 8.0% cash interest per annum January 1, 2021 through the maturity date. (2) 8.0% cash interest per annum, comprised of 6.0% cash, 2.0% PIK through March 31, 2020. 10.0% PIK interest per annum through September 30, 2020. In an event of default, the interest rate increases by 6.0% to 16.0%. Debt is convertible to preferred stock at the earlier of an event of default or October 1, 2020. While the stated maturity date of the Special Loan is June 30, 2021, the mandatory conversion feature into preferred stock as of October 1, 2020 results in the classification of this debt instrument as a current liability on the consolidated balance sheet. (3) 1,0% cash interest per annum. Payments are deferred for six months from the date of the Promissory Note and the Company can apply for forgiveness of the Promissory Note after 60 days. Forgiveness of the Promissory Note will be determined in accordance with the provisions of the CARES Act and applicable regulations. Any principal and interest amounts outstanding after the determination of amounts forgiven will be repaid on a monthly basis. | |||||
Long term seller note payable | $ 3,757 | ||||||
Description of conversion of all amounts | The Amended and Restated Seller Note represents a note payable due from Allure to Seller, under a pre-existing Seller Note which was amended and restated to a reduced amount of $900 through the Stock Purchase Agreement. | ||||||
Accrued expenses | 43 | $ 43 | |||||
Loss from special loan | 551 | $ 702 | |||||
Slipstream Communications, LLC [Member] | Seventh Amendment Loan and Security Agreement[Member] | |||||||
Loans Payable (Textual) | |||||||
Convertible special loan, description | The "Company entered into an Eighth Amendment to Loan and Security Agreement (the "Eighth Amendment") with its subsidiaries and Slipstream to amend the terms of the payments and interest accruing on the Company's Term Loan, Secured Revolving Promissory Note, and Special Loan. The Eighth Amendment increased the interest rates of the Company's term, revolving and special loans from 8% to 10%, effective April 1, 2020. Until January 1, 2021, rather than cash payments of accrued interest under the term and revolving loans, interest will be paid by the issuance of and treated as additional principal thereunder. Commencing January 2, 2021, such interest will be payable in cash. Interest on the special loan will no longer be paid in cash, but by the issuance of and treated as additional principal thereunder. Upon entry into the Eighth Amendment, the Company completed an analysis of the changes in the Loan and Security Agreement within ASC 470 Debt, concluding that the changes represent a modification to the existing debt that was not a troubled debt restructuring and will account for the modified terms prospectively as yield adjustments, based on the revised terms. | We entered into the Special Loan as part of the Seventh Amendment under which we obtained $2,000, with interest thereon at 8% per annum payable 6% in cash and 2% via the issuance of SLPIK interest, provided however that upon occurrence of an event of default the interest rate shall automatically be increased by 6% per annum payable in cash. The entry into the Seventh Amendment adjusted the interest rate on the Company’s Term Loan and Revolving Loan to 8% per annum, provided, however, at all times when the aggregate outstanding principal amount of the Term Loan and the Revolving Loan exceeds $4,100 then the Loan Rate shall be 10%, of which eight percent 8% shall be payable in cash and 2% shall be paid by the issuance of and treated as additional PIK. | |||||
Slipstream Communications, LLC [Member] | Seventh Amendment Loan and Security Agreement[Member] | |||||||
Loans Payable (Textual) | |||||||
Convertible special loan, description | Slipstream extended the maturity date of our term loan and revolver loan to June 30, 2021 through the Sixth Amendment to the Loan and Security Agreement, aligning the maturity date of our Term Loan and Secured Revolving Promissory Note with the Secured Disbursed Escrow Promissory Note. | ||||||
Allure Global Solutions, Inc. [Member] | |||||||
Loans Payable (Textual) | |||||||
Estimated net working capital deficit | 801 | $ 801 | |||||
Accounts payable to seller for outsourced services | $ 1,403 | $ 1,403 | |||||
Promissory note accruing interest percent | 3.50% | 3.50% | |||||
Initial conversion price | $ 8.40 | $ 8.40 | |||||
Description of conversion of all amounts | Conversion of all amounts owing under the promissory note will be mandatory if the 30-day volume-weighted average price of our common stock exceeds 200% of the common stock trading price at the closing of the acquisition. | ||||||
Allure Global Solutions, Inc. [Member] | Stock Purchase Agreement [Member] | |||||||
Loans Payable (Textual) | |||||||
Accounts payable to seller for outsourced services | $ 2,204 | $ 2,204 | |||||
Long term seller note payable | $ 2,303 | $ 2,303 |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) $ in Thousands | Oct. 10, 2019 | Mar. 20, 2020 | Mar. 19, 2020 | Jun. 30, 2020 |
Commitments and Contingencies (Textual) | ||||
Accrued liability | $ 0 | |||
Severance expense | $ 135 | |||
Termination benefits, description | On March 19, 2020, the Company's Board of Directors approved a six-month reduction of the salaries of our Chief Executive Officer and Chief Financial Officer by twenty percent (20%), thereby reducing the salaries payable to such officers in 2020 to $297,000 and $224,100, respectively. | |||
Allure [Member] | ||||
Commitments and Contingencies (Textual) | ||||
Settlement for an alleged breach of contract | $ 3,200 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | Aug. 14, 2018 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 |
Related Party Transactions (Textual) | ||||||
Related party entity, description | Due from 33 Degrees was $28, or 0.8%, and $1, or 0.0% of consolidated accounts receivable at June 30, 2020 and December 31, 2019, respectively. | Due from 33 Degrees was $28, or 0.8%, and $1, or 0.0% of consolidated accounts receivable at June 30, 2020 and December 31, 2019, respectively. | ||||
Accounts receivable | $ 2,308 | $ 2,308 | $ 4,663 | |||
33 Degrees [Member] | ||||||
Related Party Transactions (Textual) | ||||||
Related party entity owned percentage | 17.50% | |||||
Related party entity, description | The payment agreement stipulated a simple interest rate of 12% on aged accounts receivable to be paid on the tenth day of each month through the maturity date of December 31, 2019. | The Company had sales to 33 Degrees of $291, or 8.0%, and $791, or 10.7%, respectively, of consolidated revenue. | The Company had sales to 33 Degrees of $275, or 3.0%, and $470, or 2.5%, respectively, of consolidated revenue. | The Company had sales to 33 Degrees of $291, or 8.0%, and $791, or 10.7%, respectively, of consolidated revenue. | The Company had sales to 33 Degrees of $275, or 3.0%, and $470, or 2.5%, respectively, of consolidated revenue. | |
Repayment amount of related party transactions | $ 2,567 | |||||
Accounts receivable | $ 28 | $ 28 | $ 1 | |||
Concentration credit risk percentage | 0.80% | 0.00% |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2020 | Mar. 31, 2019 | |
Income Taxes (Textual) | |||
Reported tax benefit | $ 151 | $ (4) | |
Net deferred tax assets | $ 0 | $ 0 | |
Valuation allowance | $ 175 |
Warrants (Details)
Warrants (Details) - Warrants (Equity) [Member] | 6 Months Ended |
Jun. 30, 2020$ / sharesshares | |
Class of Warrant or Right [Line Items] | |
Number of Shares, Warrants, Beginning Balance | shares | 4,733,028 |
Number of Shares, Warrants issued | shares | (27,600) |
Number of Shares, Warrants expired | shares | (89,238) |
Number of Shares, Warrants, Ending Balance | shares | 4,616,190 |
Weighted Average Exercise Price, Beginning Balance | $ / shares | $ 4.83 |
Weighted Average Exercise Price, Warrants issued | $ / shares | 4.38 |
Weighted Average Exercise Price, Warrants expired | $ / shares | 9.49 |
Weighted Average Exercise Price, Ending Balance | $ / shares | $ 4.74 |
Weighted Average Remaining Contractual Life, Beginning Balance | 3 years 4 months 28 days |
Weighted Average Remaining Contractual Life, Ending Balance | 2 years 11 months 19 days |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) | 6 Months Ended |
Jun. 30, 2020$ / sharesshares | |
Time Vesting Options | |
Schedule of stock options outstanding and exercisable | |
Number Outstanding | shares | 1,893,809 |
Weighted Average Remaining Contractual Life | 9 years 2 months 30 days |
Weighted Average Exercise Price | $ 3.44 |
Options Exercisable | shares | 254,226 |
Performance Vesting Options [Member] | |
Schedule of stock options outstanding and exercisable | |
Number Outstanding | shares | 800,000 |
Weighted Average Remaining Contractual Life | 9 years 11 months 4 days |
Weighted Average Exercise Price | $ 2.53 |
Range One [Member] | Time Vesting Options | |
Schedule of stock options outstanding and exercisable | |
Range of Exercise Prices Between, Lower Limit | 0.01 |
Range of Exercise Prices between, Upper Limit | $ 5.39 |
Number Outstanding | shares | 1,605,000 |
Weighted Average Remaining Contractual Life | 9 years 11 months 1 day |
Weighted Average Exercise Price | $ 2.52 |
Options Exercisable | shares | |
Weighted Average Exercise Price | |
Range One [Member] | Performance Vesting Options [Member] | |
Schedule of stock options outstanding and exercisable | |
Range of Exercise Prices Between, Lower Limit | 0.01 |
Range of Exercise Prices between, Upper Limit | $ 5.39 |
Number Outstanding | shares | 800,000 |
Weighted Average Remaining Contractual Life | 9 years 11 months 4 days |
Weighted Average Exercise Price | $ 2.53 |
Range Two [Member] | Time Vesting Options | |
Schedule of stock options outstanding and exercisable | |
Range of Exercise Prices Between, Lower Limit | 5.40 |
Range of Exercise Prices between, Upper Limit | $ 7.50 |
Number Outstanding | shares | 184,830 |
Weighted Average Remaining Contractual Life | 5 years 10 months 6 days |
Weighted Average Exercise Price | $ 6.72 |
Options Exercisable | shares | 159,830 |
Weighted Average Exercise Price | $ 6.60 |
Range Two [Member] | Performance Vesting Options [Member] | |
Schedule of stock options outstanding and exercisable | |
Range of Exercise Prices Between, Lower Limit | 5.40 |
Range of Exercise Prices between, Upper Limit | $ 7.50 |
Number Outstanding | shares | |
Weighted Average Remaining Contractual Life | |
Weighted Average Exercise Price | |
Range Three [Member] | Time Vesting Options | |
Schedule of stock options outstanding and exercisable | |
Range of Exercise Prices Between, Lower Limit | 7.51 |
Range of Exercise Prices between, Upper Limit | $ 160.50 |
Number Outstanding | shares | 103,979 |
Weighted Average Remaining Contractual Life | 4 years 11 months 12 days |
Weighted Average Exercise Price | $ 11.74 |
Options Exercisable | shares | 94,396 |
Weighted Average Exercise Price | $ 12.05 |
Stock-Based Compensation (Det_2
Stock-Based Compensation (Details 1) | 6 Months Ended |
Jun. 30, 2020$ / sharesshares | |
Schedule of stock option activity | |
Options Outstanding, Granted | |
Options Outstanding, Ending balance | 313,809 |
Time Vesting Options | |
Schedule of stock option activity | |
Options Outstanding, Granted | |
Options Outstanding, Exercised | |
Options Outstanding, Forfeited or expired | (51) |
Options Outstanding, Ending balance | 313,809 |
Weighted Average Exercise Price, Granted | $ / shares | $ 2.53 |
Weighted Average Exercise Price, Exercised | $ / shares | |
Weighted Average Exercise Price, Forfeited or expired | $ / shares | 367.50 |
Weighted Average Exercise Price, Ending balance | $ / shares | $ 3.44 |
Performance Vesting Options [Member] | |
Schedule of stock option activity | |
Options Outstanding, Granted | 800,000 |
Options Outstanding, Exercised | |
Options Outstanding, Forfeited or expired | |
Options Outstanding, Ending balance | 800,000 |
Weighted Average Exercise Price, Granted | $ / shares | $ 2.53 |
Weighted Average Exercise Price, Exercised | $ / shares | |
Weighted Average Exercise Price, Forfeited or expired | $ / shares | |
Weighted Average Exercise Price, Ending balance | $ / shares | $ 2.53 |
Stock-Based Compensation (Det_3
Stock-Based Compensation (Details 2) | 6 Months Ended |
Jun. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Risk-free interest rate | 66.00% |
Expected term | 6 years 2 months 30 days |
Expected price volatility | 89.18% |
Dividend yield | 0.00% |
Stock-Based Compensation (Det_4
Stock-Based Compensation (Details Textual) - USD ($) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||
Oct. 31, 2014 | Aug. 31, 2014 | Mar. 31, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Stock-Based Compensation (Textual) | |||||
Weighted average remaining contractual life | 5 years 2 months 12 days | ||||
Options outstanding | 313,809 | ||||
Stock option expense recognize period | 10 years | ||||
Unrecognized compensation expense | $ 155 | ||||
Unrecognized compensation expense, description | At June 30, 2020, there was approximately $3,014 and $1,499 of total unrecognized compensation expense related to unvested share-based awards with time vesting and performance vesting criteria, respectively. | ||||
Deemed granted shares | |||||
Recognized compensation expenses | $ 41 | $ 83 | |||
Remaining options awarded vest | 800,000 | ||||
Options vesting period | 3 years | ||||
Exercise price | $ 2.53 | ||||
Fair value of options on grant date | $ 1.87 | ||||
Purchase aggregate | The Board of Directors of the Company granted 10-year options to purchase an aggregate of 2,380,000 shares of its common stock to employees of the Company subject to shareholder approval of an increase in the reserve of shares authorized for issuance under the Company's 2014 Stock Incentive Plan (the "Plan"). On July 10, 2020, the Company held a special meeting of the Company's shareholders at which the shareholders approved the amendment to the Plan, which increased the reserve of shares authorized for issuance thereunder to 6,000,000 shares. | ||||
2006 Equity Incentive Plan [Member] | |||||
Stock-Based Compensation (Textual) | |||||
Shares reserved for company's employees | 1,720,000 | ||||
Options outstanding | 12,186 | ||||
2006 Non-Employee Director Stock Option Plan [Member] | |||||
Stock-Based Compensation (Textual) | |||||
Shares reserved for company's employees | 700,000 | ||||
2014 Stock Incentive Plan [Member] | |||||
Stock-Based Compensation (Textual) | |||||
Shares reserved for company's employees | 7,390,355 | ||||
Options outstanding | 276,674 | ||||
2014 Stock Incentive Plan [Member] | Minimum [Member] | |||||
Stock-Based Compensation (Textual) | |||||
Issuance of shares authorized | 7,390,355 | ||||
2014 Stock Incentive Plan [Member] | Maximum [Member] | |||||
Stock-Based Compensation (Textual) | |||||
Issuance of shares authorized | 18,000,000 |
Significant Customers_vendors (
Significant Customers/vendors (Details) | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2020integer | Jun. 30, 2019integer | Jun. 30, 2020Customersinteger | Jun. 30, 2019integer | Dec. 31, 2019CustomersVendors | |
Accounts Receivable [Member] | |||||
Significant Customers (Textual) | |||||
Percentage from major customers | 16.00% | 18.50% | |||
Number of major customers | 1 | 1 | |||
Revenue [Member] | |||||
Significant Customers (Textual) | |||||
Percentage from major customers | 51.00% | 27.00% | 22.00% | 41.00% | |
Number of major customers | 2 | 2 | 2 | 2 | |
Accounts Payable [Member] | |||||
Significant Customers (Textual) | |||||
Percentage from major customers | 22.00% | 50.00% | |||
Number of major Vendor | 1 | 1 |
Leases (Details)
Leases (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Finance lease cost | ||
Amortization of right-of-use assets | $ 12 | $ 16 |
Interest | 1 | 3 |
Operating lease cost | 343 | 393 |
Total lease cost | $ 356 | $ 412 |
Weighted Average Remaining Lease Term, Operating leases | 3 years | 3 years 9 months 18 days |
Weighted Average Remaining Lease Term, Finance leases | 1 year | 1 year 4 months 24 days |
Weighted Average Discount Rate, Operating leases | 10.00% | 10.00% |
Weighted Average Discount Rate, Finance leases | 14.00% | 13.50% |
Leases (Details 1)
Leases (Details 1) $ in Thousands | Jun. 30, 2020USD ($) |
Operating Leases [Member] | |
Maturities of lease liabilities | |
Operating Leases, The remainder of 2020 | $ 342 |
Operating Leases, 2021 | 630 |
Operating Leases, 2022 | 377 |
Operating Leases, 2023 | 375 |
Operating Leases, Thereafter | |
Operating Leases, Total undiscounted cash flows | 1,724 |
Operating Leases, Less imputed interest | (237) |
Operating Leases, Present value of lease liabilities | 1,487 |
Finance Leases [Member] | |
Maturities of lease liabilities | |
Finance Leases, The remainder of 2020 | 9 |
Finance Leases, 2021 | 4 |
Finance Leases, 2022 | 1 |
Finance Leases, 2023 | |
Finance Leases, Thereafter | |
Finance Leases, Total undiscounted cash flows | 14 |
Finance Leases, Less imputed interest | (1) |
Finance Leases, Present value of lease liabilities | $ 13 |
Leases (Details 2)
Leases (Details 2) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows from operating leases | $ 171 | $ 383 |
Operating cash flows from finance leases | 2 | 1 |
Financing cash flows from finance leases | $ 12 | $ 15 |
Leases (Details Textual)
Leases (Details Textual) | 6 Months Ended |
Jun. 30, 2020 | |
Leases (Textual) | |
Lease expiration period, description | Our leases have original lease periods expiring between 2020 and 2023. |