Item 1.01 Entry into a Material Definitive Agreement.
On February 3, 2022, Creative Realities,
Inc., a Minnesota corporation (the “Company”), entered into a securities purchase agreement (the “Securities
Purchase Agreement”) with a purchaser (the “Purchaser”), pursuant to which the Company agreed to issue and sell to
the Purchaser, in a private placement priced at-the-market under Nasdaq rules, (i) 1,315,000 shares (the “Shares”) of
the Company’s common stock, par value $0.01 per share (the “Common Stock”) and accompanying warrants to purchase
an aggregate of 1,315,000 shares of Common Stock, and (ii) pre-funded warrants to purchase up to an aggregate of 5,851,505 shares of
Common Stock (the “Pre-Funded Warrants”) and accompanying warrants to purchase an aggregate of 5,851,505 shares of
Common Stock (collectively, the “Private Placement”). The accompanying warrants to purchase Common Stock are referred to
herein collectively as the “Common Stock Warrants.” Under the Securities Purchase Agreement, each Share and accompanying
warrants to purchase Common Stock are being sold together at a combined price of $1.535, and each Pre-Funded Warrant and
accompanying warrants to purchase Common Stock are being sold together at a combined price of $1.5349, for gross proceeds of
approximately $11.0 million, before deducting placement agent fees and estimated offering expenses payable by the Company.
The Private Placement closed on February 3, 2022.
The Company intends to use the net proceeds from the Private Placement to fund, in part, payment of the closing cash consideration in
its pending merger transaction (the “Merger”) with Reflect Systems, Inc. (“Reflect”), which is expected to be
completed on or about February 15, 2022.
Each Pre-Funded Warrant to be issued will have an exercise price of
$0.0001 per share, will be exercisable immediately and will be exercisable until the Pre-Funded Warrant is exercised in full. The Common
Stock Warrants will expire five years from the date of issuance, will have an exercise price of $1.41 per share and will be exercisable
immediately.
Under the terms of the Pre-Funded Warrants and the Common Stock Warrants,
the Company may not effect the exercise of any such warrant, and a holder will not be entitled to exercise any portion of any such warrant,
if, upon giving effect to such exercise, the aggregate number of shares of Common Stock beneficially owned by the holder (together with
its affiliates) would exceed 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise,
as such percentage ownership is determined in accordance with the terms of such warrant, which percentage may be increased or decreased
at the holder’s election upon 61 days’ notice to the Company subject to the terms of such warrants, provided that such percentage
may in no event exceed 9.99%.
In addition, the Company may not effect the exercise of any such warrant,
and a holder will not be entitled to exercise any portion of any such warrant, for a number of warrant shares in excess of that number
of warrant shares which, upon giving effect to such exercise, would cause (i) the aggregate number of shares of Common Stock beneficially
owned by the holder (together with its affiliates) to exceed 19.99% of the total number of issued and outstanding shares of Common Stock
of the Company following such exercise, or (ii) the combined voting power of the securities of the Company beneficially owned by the holder
(together with its affiliates) to exceed 19.99% of the combined voting power of all of the securities of the Company then outstanding
following such exercise, in either case as such percentage ownership is determined in accordance with the terms of such warrant, unless
Company shareholder approval is obtained to exceed more than such 19.99% of the total number of issued and outstanding shares of Common
Stock of the Company following such exercise in accordance with the rules of The Nasdaq Stock Market.
In certain circumstances, upon a fundamental transaction of the Company,
the holders of Common Stock Warrants will have the right to require the Company to repurchase such warrants at their fair value using
a Black Scholes option pricing formula; provided that such holder may not require the Company or its successor entity to repurchase
such warrants for the Black Scholes value in connection with a fundamental transaction that is not approved by the Board of Directors,
and therefore not within the Company’s control.
The Securities Purchase Agreement contains customary representations,
warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and the Purchaser,
including for liabilities arising under the Securities Act of 1933, as amended (the “Securities Act”), other obligations of
the parties and termination provisions.
Registration Rights Agreement
On February 3, 2022 (the “Agreement Date”), in connection
with the Private Placement, the Company entered into a registration rights agreement (the “Registration Rights Agreement”)
with the Purchaser, pursuant to which the Company agreed to register for resale the Shares, as well as the shares of Common Stock issuable
upon exercise of the Pre-Funded Warrants and the Common Stock Warrants (the “Warrant Shares”). Under the Registration Rights
Agreement, the Company has agreed to file a registration statement covering the resale by the Purchaser of the Shares and Warrant Shares
(together, the “Registrable Securities”) no later than February 4, 2022. The Company has agreed to use commercially reasonable
efforts to cause such registration statement to become effective and to keep such registration statement effective until the date the
Shares and Warrant Shares covered by such registration statement have been sold or may be resold pursuant to Rule 144 without restriction
(the “Effectiveness Period”). The Company has agreed to be responsible for all fees and expenses incurred in connection with
the registration of the Registrable Securities.
In the event (i) the registration statement is not filed within the
time period specified above, (ii) the Company fails to file with the Securities and Exchange Commission (the “SEC”) a request
for acceleration of the registration statement in accordance with Rule 461within five trading days of the date that the Company is notified
by the SEC that the registration statement will not be reviewed by the SEC staff or is not subject to further comment by the SEC staff,
(iii) the Company fails to file a pre-effective amendment and otherwise respond in writing to comments made by the SEC in respect of the
registration statement within ten days after the receipt of comments by or notice from the SEC that such amendment is required in order
for the registration statement to be declared effective, (iv) the registration statement has not been declared effective (A) by March
31, 2022 (or, in the event of a “full review” by the SEC, the 60th day after the Agreement Date) or (B) within five trading
days following the date the Company is notified by the SEC that the registration statement will not be reviewed or is no longer subject
to further review and comments (provided that such notification is received by the Company on or prior to February 10, 2022), or (v) after
the registration statement is declared effective but prior to the end of the Effectiveness Period, the registration statement ceases for
any reason to remain continuously effective as to all Registrable Securities, or the holders of Registrable Securities are otherwise not
permitted to utilize the prospectus in the registration statement to resell such Registrable Securities, for more than ten consecutive
days or more than an aggregate of 15 days during any 12-month period, then the Company has agreed to make pro rata payments to each holder
as liquidated damages in an amount equal to 2.0% of the aggregate amount invested by each such holder in the Registrable Securities then
held by the holder per 30-day period or pro rata for any portion thereof for each such month during which such event continues. To the
extent a filing prior to the applicable deadline of an amendment to the registration statement under clause (iii) above would require
that the Company file updated audited financial statements by amendment to the registration statement pursuant to the Securities Act in
advance of the applicable filing deadline for such audited financial statements under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), the applicable filing deadline with respect thereto will instead be five trading days after the applicable
Exchange Act deadline. In lieu of a cash payment, the holder may elect, in its discretion, to receive the liquidated damages in the form
of newly issued shares of Common Stock (valued at $1.41 per share), or in Common Warrants to purchase the shares of Common Stock (having
an aggregate exercise price equal to the amount liquated damages otherwise payable in case; provided that the Company shall not be required
to issue any shares of Common Stock or Common Warrants in violation of the listing rules of the Nasdaq Stock Market LLC. If the Company
fails to pay any required liquidated damages in full within seven days after the date payable, the Company will be required to pay interest
thereon to the holder at a rate of 18% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) until
paid in full.
The Company has granted the Purchaser customary indemnification rights
in connection with the registration statement. The Purchaser has also granted the Company customary indemnification rights in connection
with the registration statement. Subject to certain exceptions, the Company has also agreed not to file any other registration statements
until 90 days after all Registrable Securities are registered pursuant to a registration statement that is declared effective by the SEC.
Placement Agency Agreement with A.G.P./Alliance Global Partners
On February 3, 2022, the Company also entered into a Placement Agency
Agreement (the “Placement Agency Agreement”) with A.G.P./Alliance Global Partners (the “Placement Agent”), pursuant
to which the Placement Agent agreed to serve as placement agent for the Private Placement. The Company has agreed to pay the Placement
Agent and/or its respective designees a cash fee equal to 7.0% of the aggregate gross proceeds raised from the sale in the Private Placement
of the Shares, the Pre-Funded Warrants and the Common Stock Warrants, and has agreed to reimburse the Placement Agent for $5,000 of non-accountable
expenses and up to $65,000 in legal expenses and clearing agent fees and expenses. The Placement Agency Agreement contains customary representations,
warranties and agreements by the Company, including indemnification obligations.
The representations, warranties and
covenants contained in the Placement Agency Agreement, Securities Purchase Agreement, the Pre-Funded Warrants, the Common Stock
Warrants and the Registration Rights Agreement were made solely for the benefit of the parties thereto and may be subject to
limitations agreed upon by the contracting parties. The foregoing descriptions of the Placement Agency Agreement, Pre-Funded
Warrants, the Common Stock Warrants, the Securities Purchase Agreement and the Registration Rights Agreement do not purport to be
complete and are qualified in their entirety by reference to the full text of the form of Placement Agency Agreement, Pre-Funded
Warrant, the form of Common Stock Warrant, the form of Securities Purchase Agreement and the form of Registration Rights Agreement,
copies of which are filed as Exhibits 1.1, 4.1, 4.2, 10.1, and 10.2 hereto, respectively, and incorporated by reference herein.