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Significant Accounting Policies (Policies)
 12 Months Ended
Dec. 31, 2023
Accounting Policies [Abstract]  
Basis of Accounting, Policy [Policy Text Block]

1. Basis of Presentation

 

The accompanying Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-K and Article 8 of Regulation S-X and include all of the information and disclosures required by generally accepted accounting principles in the United States of America (“GAAP”) for annual financial reporting.

 

The Consolidated Financial Statements include the accounts of Creative Realities, Inc. and our wholly owned subsidiaries Allure Global Solutions, Inc., Creative Realities Canada, Inc., and Reflect Systems, Inc. All intercompany balances and transactions have been eliminated in consolidation, as applicable.

 
New Accounting Pronouncements, Policy [Policy Text Block]

2. Recently Issued and Adopted Accounting Pronouncements

 

In June 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Financial Instruments—Credit Losses, which requires entities to estimate expected lifetime credit losses on financial assets and provide expanded disclosures. This ASU replaced the incurred loss methodology with one that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. We adopted ASU No. 2016-13 on January 1, 2023. The adoption of this guidance did not have a material impact on the Company's Consolidated Financial Statements, as the Company's primary financial assets are its trade accounts receivable, which are short-term financings under industry standard credit and trade terms.

 

In August 2020, the FASB issued Accounting Standards Update No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. This guidance will be effective for us in the first quarter of 2024 on a full or modified retrospective basis. We do not expect the adoption of this guidance to have a material impact on our Consolidated Financial Statements.

 
Revenue from Contract with Customer [Policy Text Block]

3. Revenue Recognition

 

We recognize revenue in accordance with Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers, applying the five-step model.

 

If an arrangement involves multiple performance obligations, the obligations are analyzed to determine the separate units of accounting, whether the obligations 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 customer and variable services being performed, the range of possible revenue amounts and the magnitude of the variable consideration to the overall arrangement. The Company receives variable consideration in very few instances.

 

Revenue is recognized when a customer obtains control of promised goods or services under the terms of a contract and is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. The Company has very few contracts with material extended payment terms as payment is typically due at or shortly after the time of the sale, typically ranging between thirty and ninety days. In those instances where the Company has material extended payment terms (most commonly in multi-year arrangements where the Company acts as an agent to a transaction on behalf of its customers), the Company evaluates and applies constraints to arrive at the revenue recognized in the period in which a contract is entered. 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 customers. A contract liability is recognized as deferred revenue when the Company invoices customers in advance of performing the related services under the terms of a contract. Deferred revenue is recognized as revenue when 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.

 
Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]

4. Allowance for Credit Losses

 

The allowance for credit losses is the Company's best estimate of the amount of expected lifetime credit losses in the Company's accounts receivable. The Company regularly reviews the adequacy of its allowance for credit losses. The Company estimates losses over the contractual life using assumptions to capture the risk of loss, even if remote, based principally on how long a receivable has been outstanding. Account balances are charged off against the allowance for credit losses after all reasonable means of collection have been exhausted and the potential for recovery is considered remote. Other factors considered include historical write-off experience, current economic conditions, customer credit, and past transaction history with the customer. The allowance for credit losses is included in accounts receivable, net in the accompanying Consolidated Balance Sheets.

 

The Company had the following activity for its allowance for credit losses from December 31, 2021 to December 31, 2023:

 

Balance as of December 31, 2021

 $620 

Amounts accrued

  398 

Write-offs charged against the allowance

  (34)

Balance as of December 31, 2022

 $984 

Amounts accrued

  153 

Write-offs charged against the allowance

  (436)

Balance as of December 31, 2023

 $701 

 
Inventory, Policy [Policy Text Block]

5. Inventories

 

Inventories are stated at the lower of cost or net realizable value, determined by the first-in, first-out (FIFO) method, and consist of the following:

 

  

December 31,

  

December 31,

 
  

2023

  

2022

 

Raw materials

 $2,063  $1,671 

Work-in-process

  504   596 

Total inventories

 $2,567  $2,267 

 

The reserve for obsolete inventory at December 31, 2023 and 2022 was $160 and $1,777, respectively. The Company disposed of $1,707 related to Safe Space Solutions during the year ended December 31, 2023, all of which was fully reserved at December 31, 2022. The Company is no longer actively promoting the sale of our Safe Space Solutions or purchasing inventory to support such solutions.

 
Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

6. 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. Under ASC 360, impairment losses are recorded whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable.

 

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.

 
Earnings Per Share, Policy [Policy Text Block]

7. Basic and Diluted Income/(Loss) per Common Share

 

Basic and diluted (loss) income 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 6,223,134 and 7,360,271 at December 31, 2023 and 2022, respectively were excluded from the computation of (loss) income per share as the strike price on the options and warrants were higher than the Company's market price and therefore anti-dilutive.

 
Income Tax, Policy [Policy Text Block]

8. 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 a number of matters including, but not limited to, 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  December 31, 2023 and 2022.

 
Goodwill and Intangible Assets, Policy [Policy Text Block]

9. Goodwill and Definite-Lived Intangible Assets

 

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 an annual measurement date of September 30 to assess impairment of goodwill and indefinite-lived intangible assets, or as indicators are identified.

 

Definite-lived intangible assets are amortized straight-line in accordance with their identified useful lives.

 
Use of Estimates, Policy [Policy Text Block]

10. 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: contingent purchase consideration valuation, allowance for credit losses, 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.

 
Property, Plant and Equipment, Policy [Policy Text Block]

11. Property and Equipment

 

Property and equipment are carried at cost, less accumulated depreciation and amortization. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over the estimated service lives, principally using straight-line methods. Leasehold improvements are amortized over the shorter of the life of the improvement or the lease term, using the straight-line method.

 

Property and equipment consist of the following at December 31, 2023 and 2022:

 

  

December 31,

 
  

2023

  

2022

 

Equipment

 $334  $138 

Leasehold improvements

  298   197 

Furniture and fixtures

  205   199 

Other depreciable assets

  135   124 

Total property and equipment

  972   658 

Less: accumulated depreciation and amortization

  (473)  (457)

Net property and equipment

 $499  $201 

 

The estimated useful lives used to compute depreciation and amortization are as follows:

 

Asset class

  

Useful life assigned (in years)

 

Equipment

  3 – 5 

Furniture and fixtures

  3 – 5 

Leasehold improvements

  

Shorter of 5 years or term of lease

 

 

Depreciation expense was $166 and $131 for the years ended December 31, 2023 and 2022, respectively. During the year ended December 31, 2023, the Company disposed of certain fully depreciated fixed assets with an acquisition value of $150, no such disposals occurred during the year ended December 31, 2022.

 
Research and Development Expense, Policy [Policy Text Block]

12. Research and Development and Software Development Costs

 

Research and development expenses consist primarily of development personnel and non-employee contractor costs related to the development of new products and services, enhancement of existing products and services, quality assurance and testing. The Company capitalizes its costs incurred for additional functionality to its internal software. We capitalized approximately $3,366 and $4,444 for the years ended December 31, 2023 and 2022, respectively. These software development costs include both enhancements and upgrades of our customer-based systems including functionality of our internal information systems to aid in our productivity, profitability and customer relationship management. We are amortizing these costs over 3 years once the new projects are completed and placed in service. These costs are included in other intangible assets, net on the Consolidated Balance Sheets.

 
Business Combinations Policy [Policy Text Block]

13. Contingent Consideration

 

The Company has contingent consideration arrangements related to certain acquisitions to potentially pay additional cash amounts in future periods based on the lack of achievement of certain share price performance goals of our common stock. Such contingent consideration arrangements are recorded at fair value and are classified as liabilities on the acquisition date and are remeasured at each reporting period in accordance with ASC 805-30-35-1 using a Monte Carlo simulation model.