I posted earlier today on how Creative Realities, Inc. has filed an S-1 IPO registration with the US Securities and Exchange Commission.
I always try to stress my understanding of the financial market is very limited, and here’s a a good example. A guy from an equity firm kindly called me to clarify that the S-1 filing for CREX done last week is required quarterly paperwork, and not some indication of the company looking for yet another way to generate cash and keep the lights on.
Admittedly, it seemed a little weird that a company already listed on an exchange could IPO, but I sense weird things happen every second when it comes to raising money. Exhibit A: Derivatives.
So never mind … I’m keeping the post up because the detail remains interesting.
Filed last Thursday, the S-1 says:
This prospectus relates to the resale of 32,128,832 shares of common stock of Creative Realities, Inc. held by or issuable to the selling shareholders listed on page 36 of this prospectus, which figure includes 20,460,642 common shares issuable upon the conversion of outstanding shares of preferred stock, 1,501,454 outstanding shares issued on account of converted promissory notes and accrued interest thereon, 150,000 outstanding shares issued in exchange for a warrant, and an aggregate of 10,016,736 shares issuable upon the exercise of certain warrants currently held by the selling shareholders.
We will receive no proceeds from the sale of common stock by the selling shareholders, but will receive proceeds from this offering in the event that any warrants are exercised for cash. If all of the warrants were exercised, we would receive proceeds in an amount up to approximately $4,457,901.
Our common stock is listed on the OTC Markets (OTC Pink) under the symbol “CREX.” On July 2, 2015, the last sale price for our common stock as reported on the OTC Pink was $0.22 per share.
The date of the proposed sale is described as being “As soon as practicable after the effective date of the registration statement.”
Creative Realities is largely now a New York version of Wireless Ronin, which burned through $100 million as a signage software solutions company based in Minneapolis. Since the merger with CRI, the red ink is still running fast, based on recent SEC filings.
Financials aside, the document has a couple of interesting notes on risk to investors.
Our continued growth could be adversely affected by the loss of several key customers.
Our largest customers account for a majority of our total revenue on a pro forma, consolidated basis. We had two customers that accounted for 27% and 41% of accounts receivable as of March 31, 2015 and December 31, 2014, respectively. In addition, we had three customers that accounted for 58% and 64% of our revenue for the three months ended March 31, 2015 and 2014, respectively.
Decisions by one or more of these key customers and/or partners to not renew, terminate or substantially reduce their use of our products, technology, services, and platform could substantially slow our revenue growth and lead to a decline in revenue. Our business plan assumes continued growth in revenue, and it is unlikely that we will become profitable without a continued increase in revenue.
Note: I’ve had end-user clients who won’t even look at companies that rely too heavily on whale accounts.
Most of our contracts are terminable by our customers with limited notice and without penalty payments, and early terminations could have a material effect on our business, operating results and financial condition.
Most of our contracts are terminable by our customers following limited notice and without early termination payments or liquidated damages due from them. In addition, each stage of a project often represents a separate contractual commitment, at the end of which the customers may elect to delay or not to proceed to the next stage of the project. We cannot assure you that one or more of our customers will not terminate a material contract or materially reduce the scope of a large project. The delay, cancellation or significant reduction in the scope of a large project or a number of projects could have a material adverse effect on our business, operating results and financial condition.
Dave Haynes is the founder and editor of Sixteen:Nine, an online publication that has followed the digital signage industry for some 14 years. Dave does strategic advisory consulting work for many end-users and vendors, and also writes for many of them. He’s based near Halifax, Nova Scotia, on Canada’s east coast.