CREX 10-K & 10-Q changes, risk factors and insider trading

As of December 31, 2025, the Company has an accumulated deficit of $65,130 and negative working capital of $5,728. For the year ended December 31, 2025, the Company generated a net loss of $8,276 and used net cash in operations of $7,750. These conditions and events, together with the outstanding debt obligations of the Company, raise substantial doubt about the Company's ability to continue as a going concern under the technical framework within ASU 205-40.

Adequate funds for our operations may not be available, requiring us to raise additional financing or else curtail our activities significantly.

On November 6, 2025, the Company refinanced its credit facilities pursuant to the Amended Credit Agreement (as described in Note 11, Debt, below), which include a $36,000 term loan and a $22,500 revolving credit facility, and sold 30,000 shares of Preferred Stock for $30,000 (each as further described in this Report). The net proceeds from these activities were used in part to pay the purchase price payable under the Share Purchase Agreement to acquire CDM. Additionally, we have a $4,000 Promissory Note outstanding.

If we are unable to maintain our debt service obligations, or we require additional funds for other purposes, we would be required to raise additional funding through public or private financings, including debt or equity financings. Generally, the Amended Credit Agreement prohibits the Company and its subsidiaries from granting any security interests in any of their assets, or from issuing additional debt without the approval of the lenders under the Amended Credit Agreement. The terms of the documents executed in connection with the Offering also provide certain limitations on our ability to effectuate any debt or equity financing, as described in the foregoing risk factor.

Any equity financing will dilute the percentages of ownership interest of then-current holders of our capital stock and may dilute our book value per share. Any additional equity financings may also be dilutive to shareholders and may be completed at a discount to the then-current market price of our securities. Any new debt financing, if available, may involve restrictive covenants on our operations or pertaining to future financing arrangements. Nevertheless, we may not successfully complete any future equity or debt financing even if desired. Adequate funds for our operations, whether from financial markets, collaborative or other arrangements, may not be available when needed or on terms attractive to us. If adequate funds are not available, our plans to operate our business may be adversely affected and we could be required to curtail our activities significantly and/or cease operating.

We may not realize the growth opportunities that are anticipated from our acquisition of CDM.

The benefits we expect to achieve as a result of the acquisition of CDM will depend, in part, on our ability to realize anticipated growth opportunities. Our success in realizing these growth opportunities, and the timing of this realization, depends largely on the successful integration of the business and operations of CDM with our business and operations. Even if we are able to integrate our business with CDM successfully, this integration may not result in the realization of the full benefits of the growth opportunities we currently expect from this integration within the anticipated time frame or at all. While we anticipate that certain expenses will be incurred, such expenses are difficult to estimate accurately, and may exceed current estimates, and cost saving projections may not be realized fully or at all. Accordingly, the benefits from the acquisition may be offset by costs incurred or delays in integrating the companies, which could cause our revenue assumptions to be inaccurate.

The CDM acquisition may fail to achieve beneficial synergies.

We acquired CDM with the expectation that the acquisition will result in beneficial synergies, such as cost reductions and improving the stability of the combined company’s revenues. Achieving these anticipated synergies and benefits will depend largely on our success in integrating CDM with our business. Potential risks from an unsuccessful integration include:

Even if the two companies are able to effectively integrate operations, there can be no assurance that the anticipated synergies will be achieved. The failure to achieve such synergies could adversely affect the business, results of operations and financial condition of the combined company.

The assumption of unknown liabilities in the CDM acquisition may harm our financial condition and results of operations.

Because we acquired all of the issued and outstanding shares of DDC Group International, Inc. (“DDC”), the parent company of CDM, CDM remains subject to all of its liabilities, including contingent and unknown liabilities. Although the share purchase agreement includes representations and warranties and indemnity covenants from the seller of the DDC shares that may offer us some contractual remedies for breaches or certain other undisclosed or unknown liabilities, there are limitations and conditions to our ability to recoup any liabilities, and there may be other unknown obligations for which we have no contractual remedy. In such a case, our business could be materially and adversely affected. We may learn additional information about CDM that adversely affects us, such as the existence of unknown liabilities, or issues that could affect our ability to comply with applicable laws. If these liabilities are greater than expected, or if there are material obligations for which we do not have adequate recourse against the seller, our business may be materially and adversely affected. If we become responsible for substantial uninsured liabilities, such liabilities may have a material adverse effect on our financial condition and results of operations.

We have incurred and will continue to incur significant transaction and integration costs in connection with our acquisition of CDM.

We have incurred significant costs associated with completing the CDM acquisition, and expect to incur additional significant costs integrating the operations of the two companies. The substantial majority of these costs will be non-recurring expenses and will consist of transaction costs (e.g., legal, accounting), facilities and systems consolidation costs and employment-related costs. Additional unanticipated costs may be incurred in the integration of our businesses. Although we expect that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, may offset incremental transaction and acquisition costs over time, this net benefit may not be fully achieved in the near or long term.

Any litigation to determine the validity of infringement claims, including claims arising through our contractual indemnification of our business partners, regardless of their merit or resolution, would likely be costly and time consuming and divert the efforts and attention of our management and technical personnel. If any such litigation resulted in an adverse ruling, we could be required to:

Our Canadian operations through CDM subject us to a complex and evolving framework of Canadian federal and provincial regulatory requirements, including data privacy, accessibility, French-language, and artificial intelligence laws, non-compliance with which could increase our costs, expose us to penalties, and adversely affect our business.

We conduct substantial operations across Canada through CDM, including digital signage managed services and retail media advertising network operations in Ontario, Quebec, and other Canadian provinces, exposing us to Canadian regulatory requirements that differ materially from, and in certain respects are more stringent than, the equivalent U.S. frameworks governing our legacy operations. At the federal level, CDM is subject to PIPEDA, including its accountability principle, which provides that CDM remains responsible for personal information transferred to related entities and third-party processors — including our U.S. operations.

CDM’s operations in Quebec also expose us to the Charter of the French Language (Bill 96), imposing French-language obligations on commercial signage, digital interfaces, and certain consumer-facing communications. CDM’s Ontario operations are subject to Accessibility for Ontarians with Disabilities Act (AODA) accessibility standards for public-facing digital signage. Non-compliance with any of the foregoing could result in regulatory penalties, injunctions, and reputational harm.

The combined impact of cross-border regulatory complexity could materially and adversely affect our business, financial condition, and results of operations.

Fluctuations in the exchange rate between the U.S. dollar and the Canadian dollar could adversely affect our financial results.

A significant portion of our revenues, expenses, and assets are now denominated in Canadian dollars through CDM's operations. Our consolidated financial statements are reported in U.S. dollars, and CDM's results are translated at prevailing exchange rates each period. A strengthening U.S. dollar could reduce the reported U.S. dollar value of CDM's revenues and assets, independent of CDM's underlying Canadian-dollar performance. We do not currently maintain a program to hedge our CAD/USD exposure, and there can be no assurance we will implement one. Currency fluctuations could therefore have a material adverse effect on our reported financial condition and results of operations.

Because we will not declare cash dividends on our common stock in the foreseeable future, stockholders must rely on appreciation of the value of our common stock for any return on their investment.

We have issued shares of convertible preferred stock with terms that could dilute the voting power or reduce the value of our common stock.

On October 15, 2025, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with North Run Strategic Opportunities Fund I, LP (the “Lead Investor”) and NR-SOF I (Co-Invest I), LP (together with the Lead Investor, the “Buyers”), each an affiliate of North Run Capital, pursuant to which the Company agreed to sell to the Buyers in a private placement, for an aggregate gross purchase price of $30.0 million, an aggregate of 30,000 shares of a newly established series of preferred stock designated as Series A Convertible Preferred Stock (the “Preferred Shares”), which have a stated value of $1,000 per share (the “Stated Value”) (the “Offering”). The Offering was completed on November 6, 2025.

The Preferred Stock accrue dividends on the Stated Value for a period of five years from and after the issuance date (the “Guaranteed Term”) at a rate of 5.25% per year. Each Preferred Share is convertible at the option of the holder into shares of the Company’s common stock at a rate (the “Conversion Rate”) calculated by dividing (i) a liquidation preference equal to the Stated Value plus the amount of accrued and unpaid dividends, by (ii) a conversion price of $3.00 (subject to customary adjustments). Conversion of the Preferred Shares are currently subject to ownership limitations that prevent converting the Preferred Shares if the holder, together with its affiliates, would be more than a 19.99% beneficial owner of our common stock following such conversion (the “Beneficial Ownership Limitation”) or if the aggregate number of common shares issued upon conversion of Preferred Shares would exceed 2,102,734 (the “Exchange Cap”). The holders of Preferred Shares may elect to eliminate the Exchange Cap limitation and may elect, upon 61 days’ written notice, to increase the maximum Beneficial Ownership limitation to 49.99%.

Holders of Preferred Shares are entitled to vote on an as-converted basis with holders of the Company’s common stock (after taking into the account the applicable conversion limitations). Based on the Conversion Rate and without regard to the conversion limitations, the Preferred Shares held by the Buyers were initially convertible into common stock representing 48.7% of our issued and outstanding common stock after giving effect to such conversion.

The Preferred Shares rank senior to the Company’s common stock as to distributions and payments upon the liquidation, dissolution and winding up of the Company, and holders of Preferred Shares will participate with the holders of the common stock on an as-converted basis to the extent any dividends are declared on common stock. Holders of Preferred Shares are also entitled to redemption rights under certain circumstances. The redemption rights and liquidation preferences assigned to holders of the Preferred Shares could affect the residual value of the common stock.

Our preferred shareholders possess significant voting power, which will limit your influence on our management and affairs, and may discourage parties from initiating potential merger, takeover or other change-of-control transactions.

Based on the Conversion Rate and without regarding the conversion limitations, the Preferred Shares were initially convertible into common stock representing 48.7% of our issued and outstanding common stock after giving effect to such conversion. For as long as North Run and its affiliates hold a significant amount of Preferred Shares and/or our common stock, they will be able to strongly influence or effectively exercise control over us. This concentrated control may limit or preclude other shareholders’ ability to influence corporate matters for the foreseeable future, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring shareholder approval.

In addition to the significant voting control of North Run and its affiliates, for so long as the North Run and its affiliates beneficially own at least 20% of the common stock underlying the Preferred Shares, the Company may not take any of various actions without North Run’s consent, including creating, authorizing, or issuing capital stock that ranks senior to or pari passu with the Preferred Shares, or increasing the authorized number of Preferred Shares; incurring debt that would result in the ratio of debt to EBITDA of the Company for preceding twelve calendar months exceeding 2.5:1; purchasing or redeeming, or paying or declaring any dividend on shares of capital stock other than redemptions of or dividends on the Preferred Shares; completing an acquisition with consideration above $5.0 million; entering into, renewing, extending or being a party to certain related party transactions; or amending, altering or repealing any provision of the Company’s articles of incorporation or bylaws in a manner that adversely affects the rights, powers and preferences of the Preferred Shares.

North Run has continuing director designation rights based on its and its affiliates’ beneficial ownership of common stock on an as-converted basis. The director designation right initially applies to two Board designees, but will be limited to one Board designee at such time as North Run and its affiliates cease to beneficially own at least 15% of the Company’s outstanding shares of common stock on an as-converted basis, and the designation right will cease to exist if such beneficial ownership threshold fall below 5%.

North Run’s concentrated ownership may also prevent or discourage unsolicited acquisition proposals or offers for our capital stock that shareholders may believe are in their best interest. North Run’s interests may not align with the interests of our other shareholders. North Run and its affiliates may also determine to sell substantial amounts of our securities in one or more transactions, including to one or several private parties in negotiated transactions. In that case, those buyers may subsequently be able to exert significant control over us.

Geopolitical conflicts, including the current conflicts involving Iran, Israel and the United States, as well as terrorism and other global security threats, could adversely affect our business, financial condition and results of operations.

On February 24, 2022, Russian military forces invaded Ukraine, and the length, impact, and outcome of the ongoing war in Ukraine is unpredictable. On October 7, 2023, Hamas terrorists infiltrated Israel’s border with the Gaza Strip and conducted a series of attacks on civilian and military targets, triggering an Israeli campaign against Hamas. Although there is currently a cease fire in the Israel-Hamas conflict, no assurance can be given that the cease fire will continue. On February 28, 2026, United States and Israeli forces conducted a series of attacks in Iran, and Iran responded by launching retaliatory attacks on Israel and United States military bases in the Middle East. The intensity and duration of the United States/Israel war against Iran is difficult to predict. The Russia-Ukraine, Israel-Hamas and United States/Israel-Iran wars and other geopolitical and macroeconomic events, a severe or prolonged economic downturn, interest rate fluctuations, rising inflation, recession, or other global financial or geopolitical crises, could result in a variety of risks to our business, or our ability to access the capital markets at a time when we would like, or need, to raise capital, including, but not limited to disruptions to our business operations, or a reduction or restriction on our operations and services.

We cannot predict the occurrence, scope, duration or consequences of geopolitical conflicts, terrorism, cyber incidents or other global crises, or the governmental responses thereto. Any such developments could materially adversely affect our business, financial condition and results of operations.

North Run Securities Purchase Agreement

On October 15, 2025, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with North Run Strategic Opportunities Fund I, LP (the “Lead Investor”) and NR-SOF I (Co-Invest I), LP (together with the Lead Investor, the “Buyers”), each an affiliate of North Run Capital, LP (“North Run”), pursuant to which we agreed to sell in a private placement (the “Offering”), for an aggregate gross purchase price of $30,000, an aggregate of 30,000 shares of a newly established series of preferred stock, par value $0.01 per share, to be designated as Series A Convertible Preferred Stock (the “Preferred Shares”). On November 5, 2025, in anticipation of the closing of the Offering, we filed the Certificate of Designations with the Secretary of State of the State of Minnesota, which established the designations, preferences, powers and rights of the Preferred Shares. The closing of the purchase and sale of the Preferred Shares occurred on November 6, 2025. We used net proceeds from the Offering to pay a portion of the purchase price for our acquisition of the business of Cineplex Digital Media Inc. and its affiliates (the “CDM Acquisition”). See Note 9, Series A Redeemable Convertible Preferred Stock, for a description of the terms of the Securities Purchase Agreement.

CDM Acquisition

On October 15, 2025, the Company entered into a Share Purchase Agreement (the “Share Purchase Agreement”) with its wholly owned subsidiary, 1001372953 Ontario Inc., an Ontario corporation and Cineplex Entertainment Limited Partnership, a Manitoba limited partnership (“Cineplex”), to acquire DDC Group International, Inc., an Ontario corporation and wholly owned subsidiary of Cineplex (“DDC”). DDC is the parent company of its wholly owned subsidiary, Cineplex Digital Media Inc., an Ontario corporation (“CDMI”), and CDMI’s wholly owned subsidiary, Cineplex Digital Media US Inc., a Delaware corporation (“CDMUS”). In this Report, DDC, CDMI and CDMUS are collectively referred to as “CDM”, and such acquisition is referred to as the “CDM Acquisition”.

On November 7, 2025, the parties consummated the transactions contemplated by the Share Purchase Agreement. Upon the terms and conditions of the Share Purchase Agreement, at the closing of the CDM Acquisition, the Company (indirectly through 1001372953 Ontario Inc.) acquired ownership of all of the issued and outstanding capital shares of DDC for a total purchase price of approximately CAD $70,000, subject to customary purchase price adjustments. The final purchase price after adjustments was approximately CAD $60,263 (or approximately USD $42,761). See Note 5, Business Combinations, for a description of the terms of the Share Purchase Agreement.

Amended and Restated Credit Agreement

On November 6, 2025 (the “Refinancing Date”), the Company and certain of its subsidiaries entered into the Amended and Restated Credit Agreement (the “Amended Credit Agreement”), with FMB acting as agent (“Agent”), and a new syndicate of lenders (“Lenders”) which included FMB and two additional creditors, Northwest Bank (“NWB”) and Axos Bank (“Axos”; together with NWB, the “New Lenders”). In the ordinary course of its business, Agent has performed and may continue to perform commercial banking and financial services for the Company for which it has received and will continue to receive customary fees and expenses. The Amended Credit Agreement provides the Company, CDMI and CDMUS (collectively, “Borrowers”) with two debt facilities, including a three-year term loan of $36,000 (the “Term Loan”) and a three-year revolving debt arrangement of up to $22,500 (the “New Revolving Credit Facility”). The Term Loan and New Revolving Credit Facility in the Amended Credit Agreement both have maturity dates of November 6, 2028 (the “Maturity Date”), and are secured by all the assets of the Borrowers.

The Borrowers used a portion of the proceeds from the Term Loan to finance a portion of the purchase price for the CDM Acquisition (as defined below) and may use additional proceeds of the Term Loan and New Revolving Credit Facility to refinance certain indebtedness of the Borrowers, for working capital and for other general corporate purposes.

See Note 11, Debt, to the Consolidated Financial Statements for a description of the terms of the Amended Credit Agreement.

Sales increased by $6,378 or 12.5%, to $57,232 for the year ended December 31, 2025 compared to $50,854 for the year ended December 31, 2024. The increase was driven by the CDM Acquisition, which contributed $13,613 in total revenue from the November 7, 2025 acquisition date through December 31, 2025, partially offset by a decline in legacy CRI revenue on a standalone basis.

Hardware revenues were $21,232 for the year ended December 31, 2025, an increase of $2,973, or 16.3%, from $18,259 for the year ended December 31, 2024. The increase in hardware revenues was primarily driven by purchases from customers in our QSR and sports and entertainment verticals along with incremental hardware attributable to the CDM Acquisition. Services and other revenues were $36,000, an increase of $3,405, or 10.4%, from $32,595 in the prior year. Legacy CRI experienced a $9,000 decline in service revenues primarily attributable to fewer deployments during the period, a decline in media revenue as the Company exited the media business effective October 1, 2024, and lower SaaS subscription revenues. The decrease was offset by $12,577 of services and other revenues generated by CDM in the post-acquisition period.

Gross profit increased $1,703, or 7%, to $25,714 for the year ended December 31, 2025 from $24,011 for the year ended December 31, 2024. Gross margin decreased to 44.9% from 47.2% The decline in gross margin percentage was primarily driven by the inclusion of CDM, which carries a different revenue and cost mix, as well as changes in product mix within legacy CRI operations, including higher-volume but lower-margin hardware deployments during the year.

General and administrative expenses increased $6,007, or 35.2%, to $23,065 for the year ended December 31, 2025 compared to $17,058 for the year ended December 31, 2024. The increase was primarily attributable to (1) approximately $2,182 in stock-based compensation expense recognized in the current year in connection with equity awards granted in 2025, compared to $13 in the prior year, as all previously outstanding time-vested and performance awards were fully expensed as of December 31, 2024, (2) incremental general and administrative costs associated with CDM from the November 7, 2025 acquisition date of approximately $3,992 (3) Deal and other expenses related to the acquisition of CDM totaling $1,954, and (4) decrease in SG&A (excluding the effects of stock compensation and deal costs) of approximately $1,251 related to cost containment efforts related to legacy CRI. These included a $1,367 reduction in fixed and variable salaries, benefits, and payroll taxes for general and administrative personnel, as well as broad-based savings achieved across multiple spending categories. The Company implemented a number of low-cost restructuring measures and targeted vendor spend reductions, none of which were individually material, but which collectively contributed to a more efficient back-office cost structure. These actions were further supported by the retirement of legacy software platforms and the transition to a unified ERP system, which has enabled modest improvements in workflow efficiency and systems integration.

Loss on Impairment of Software Asset

During the year ended December 31, 2025, the Company recognized a $5,712 asset impairment charge related to a proprietary software platform capitalized as an intangible asset under ASC 350-40. The impairment was recorded after management determined that expected future cash flows associated with the platform were not sufficient to recover its carrying amount, primarily due to uncertainty regarding the renewal of an existing software license agreement. The uncertainty arose in September 2025 when the customer communicated that it was unable to renew their license agreement due to budget constraints, representing a triggering event under ASC 350-40. The impairment loss was measured as the excess of the asset’s carrying amount over its estimated fair value, which was determined using an income approach based on discounted cash flows and Level 3 inputs under ASC 820. The impairment did not impact cash flows or liquidity, but it did result in a significant increase in total operating expenses for the year ended December 31, 2025.

Interest expense, including amortization of debt discount, was $2,479 for the year ended December 31, 2025 compared to $1,775 for the same period in 2024, an increase of $704, or 39.7%. The modest year-over-year increase reflects higher outstanding debt balances following the November 2025 refinancing in connection with the CDM Acquisition, partially offset by lower amortization of debt discount ($27 in 2025 compared to $569 in 2024 as the prior debt discount was fully written off upon extinguishment of the Prior Credit Agreement in May 2024). See Note 11, Debt, to the Consolidated Financial Statements for a discussion of the Company’s debt and related interest expense obligations.

Loss on Change in Fair Value of Contingent Consideration

The Company had a contingent consideration arrangement related to its acquisition of Reflect, which was recorded at fair value and remeasured at each reporting period using a Monte Carlo simulation model. During the year ended December 31, 2024, the Company recognized a $1,608 loss on the change in fair value of this contingent consideration. The contingent consideration was settled with a gain in 2025.

Gain on Settlement of Contingent Consideration

During the year ended December 31, 2025, the Company recognized a gain of $4,775 on settlement of contingent consideration, representing the excess of the carrying value of the contingent consideration liability over the fair value of the cash and equity consideration transferred in settlement. See Note 5, Business Combinations, to the Consolidated Financial Statements for further detail.

Other Expense (Income), Net

Other expense, net was $516 for the year ended December 31, 2025 compared to other income, net of $102 for the year ended December 31, 2024, a change of $618. Other expenses consist primarily of $293 in legal expenses incurred in connection with the contingent consideration settlement and a patent infringement claim and $283 in severance-related expenses in connection with the termination of certain employees as part of a cost-reduction initiative.

Net cash used in operating activities was $7,750 for the year ended December 31, 2025 compared to net cash provided by operating activities of $3,381 for the year ended December 31, 2024. Cash used in 2025 was primarily attributable to a net loss of $8,276, adjusted for net non-cash charges of $12,021, offset by a $11,495 net decrease in cash from changes in operating assets and liabilities. Cash provided in 2024 was primarily attributable to a net loss of $3,508, adjusted for net non-cash charges of $7,675, offset by a $786 net decrease in cash from changes in operating assets and liabilities.

Net cash used in investing activities was $40,477 for the year ended December 31, 2025 compared to $2,801 for the year ended December 31, 2024. The increase was primarily attributable to $37,983 in net cash paid for the CDM Acquisition on November 7, 2025 (net of cash acquired). Capitalization of internally developed software costs was $2,188 for the year ended December 31, 2025 compared to $2,790 for the year ended December 31, 2024, with the decrease reflecting the completion of the Company's automotive digital signage platform during the second quarter of 2024. Purchases of property and equipment were $306 for the year ended December 31, 2025 compared to $11 for the year ended December 31, 2024. The Company did not have any material commitments for capital expenditures as of December 31, 2025.

Net cash provided by financing activities was $48,739 for the year ended December 31, 2025 compared to net cash used of $2,453 for the year ended December 31, 2024. Cash provided in 2025 was primarily driven by capital raised in connection with the CDM Acquisition, of which $30,000 represented gross proceeds from the sale of Series A Redeemable Convertible Preferred Stock (net of $2,544 in issuance costs) and $36,000 represented proceeds from the Term Loan under the Amended Credit Agreement. These inflows were partially offset by net repayments under the revolving credit facility of $8,105, a $3,000 cash payment in connection with the settlement of the contingent consideration liability, $2,272 in repayments of finance lease obligations, $850 in deferred financing costs, and $490 in scheduled term loan repayments. Cash used in 2024 was primarily attributable to $15,147 in repayments of term debt, partially offset by $13,044 in net borrowings under the revolving credit facility. See Note 11, Debt, to the Consolidated Financial Statements for further discussion.

Contractual Obligations and Commitments

As of December 31, 2025, we had operating and finance lease obligations of approximately $23,912 payable over the next five years. These obligations relate primarily to corporate office space, warehousing and light-assembly facilities used to stage and deploy digital signage hardware, and leased equipment supporting our operations. Our contractual lease commitments increased materially during 2025 as a result of the CDM Acquisition on November 7, 2025, which added leases for the Waterloo, Ontario corporate office (operating lease) and two finance leases covering facilities and equipment with Cadillac Fairview and Cominar.

The preparation of financial statements and related disclosures are in conformity with U.S. GAAP. These accounting principles require us to make estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expense during the periods presented. We believe that the estimates and judgments upon which we rely are reasonable based upon information available to us at the time that we make these estimates and judgments. To the extent that there are material differences between these estimates and actual results, our financial results will be affected. The accounting policies that reflect our more significant estimates and judgments and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described below.

We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

Management has identified certain critical accounting estimates which are outlined below. In addition, there are other items within our financial statements that require estimation but are not deemed critical, as defined above. Changes in estimates used in these and other items could have a material impact on our financial statements.

Business Combinations

On November 7, 2025, the Company completed the CDM Acquisition and accounted for the transaction as a business combination under ASC 805, Business Combinations. The accounting for a business combination requires the Company to make significant estimates and assumptions to determine the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets. These estimates are based on information available at the acquisition date and are inherently uncertain. The Company engaged a third-party valuation specialist to assist in the determination of fair values.

The key assumptions underlying the preliminary purchase price allocation include discount rates, projected revenue growth rates, customer attrition rates, royalty rates, and the remaining useful lives of identified intangible assets. The valuation of customer relationships utilized the multi-period excess earnings method, developed technology utilized the relief-from-royalty method, and non-compete agreements utilized the with-and-without method. Changes in the assumptions used to determine fair value could result in materially different asset and liability values, which would affect the amount of goodwill recognized and the amortization of intangible assets in future periods.

The purchase price allocation for the CDM Acquisition remains preliminary as of December 31, 2025 and is subject to adjustment during the measurement period, which extends through November 7, 2026. Preliminary fair values may be revised as additional information becomes available, including but not limited to the finalization of the valuation of identified intangible assets, the assessment of deferred tax assets and liabilities, and the resolution of post-closing working capital adjustments. See Note 5, Business Combinations, for additional information.

Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025

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

Sales

Sales increased by $15,089 or 66%, to $37,853 for the six months ended June 30, 2026 compared to the same period in 2025. Hardware revenues during the first half of 2026 were $12,032, an increase of $1,565 as compared to the same period in 2025. Approximately 68% of the increase was due to the inclusion of CDM, with the remaining 32% driven by new customer deployments during the first half of 2026. The number of new deployments was lower than expected due to adverse weather conditions that delayed planned installations in multiple regions. Services and other revenues were $25,821, an increase of $13,524 for the six months ended June 30, 2026, as compared to the same period in 2025, due to the acquisition of CDM. Installation services revenue was $7,742, an increase of $4,908 for the six months ended June 30, 2026, as compared to the same period in 2025, driven by the inclusion of CDM in 2026 along with the continued roll-outs of QSR and lottery customers. Digital marketing advertising and other services revenues also increased as a result of the acquisition of CDM, up $8,979 for the six months ended June 30, 2026 as compared to the same period in 2025. Managed services revenue, which includes the Company’s SaaS subscription services, was $8,368, a decrease of $363, or 4%, as compared to the same period in 2025, due to the expiration of certain customer contracts in 2025.

Gross Profit

Gross profit margin was 37% and 42% for the six months ended June 30, 2026 and 2025, respectively. Hardware gross margin decreased 11 points, due to an unusually higher mix of lower margin QSR deployments during the 2026 period and $486 in costs associated with transitioning away from an outsourced installer of a large CDM customer. Services and other gross margin decreased 7 points in the period compared to the prior year period driven by the expiration of certain customer contracts in 2025.

Sales and Marketing Expenses

Sales and marketing expenses generally include the salaries, taxes, and benefits of our sales and marketing personnel, as well as trade show activities, travel, and other related sales and marketing expenses. Costs increased by $2,518, or 105% for the six months ended June 30, 2026 as compared to the same period in 2025, driven primarily by the inclusion of CDM which contributed $1,874 of expenses for the period.

General and Administrative Expenses

General and administrative expenses increased by $8,803 or 97%, for the six months ended June 30, 2026 as compared to the same period in 2025. The increase was primarily driven by the inclusion of CDM, which represented $8,020 of expense, and additional accounting, compliance, legal and other one-time fees and severance costs in connection with the integration of CDM.

Interest Expense

Interest expense increased by $2,057 or 247%, during the six months ended June 30, 2026 as compared to June 30, 2025 primarily as a result of the Amended Credit Agreement entered into during November 2025. See Note 9, Debt, to the condensed consolidated financial statements for a discussion of the Company’s debt and related interest expense obligations.

Other Expense (Income)

The Company recognized $360 in other expenses for the six months ended June 30, 2026 as compared to $264 for the six months ended June 30, 2025. The increase is a result of the inclusion of CDM in 2026.