What changed in this filing

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Item 1. Legal Proceedings

2022-08-11 compared with 2022-05-16 · 28 added, 34 removed, 31 unchanged (67% of the section changed)

17 unchanged sentences

fee advance motion.

On April 27, 2021, the Firestorm Principals filed a notice of motion for partial summary judgment, seeking summary judgment on several of the Company’s claims and the Firestorm Principals’

counterclaims, which the Company, along with counterclaim-defendants Firestorm Franchising, LLC and Firestorm Solutions, LLC, opposed.

On March 14, 2022, the Court issued an opinion and order which denied summary judgment to the Firestorm Principals on the Company's main fraudulent omission claim, the conversion and trespass to chattels claims as to Defendants Loughlin and Rhulen and the breach of fiduciary duty claim as to Defendant Loughlin.

In April 2021, the Firestorm Principals filed a notice of motion for partial summary judgment, seeking summary judgment on several of the Company’s claims and the Firestorm Principals’

counterclaims, which the Company, along with counterclaim-defendants Firestorm Franchising, LLC and Firestorm Solutions, LLC, filed its opposition to the partial summary judgment motion on June 21, 2021. The Firestorm Principals filed their reply in support of their partial summary judgment motion on July 9, 2021. On March 14, 2022, the Court issued an opinion and order which denied summary judgment to the Firestorm Principals on the Company's main fraudulent omission claim, the conversion and trespass to chattels claims as to Defendants Loughlin and Rhulen and the breach of fiduciary duty claim as to Defendant Loughlin.

The Court also denied summary judgment to the Firestorm Principals on their breach of warrants, anticipatory breach of warrants, and anticipatory breach of promissory notes counterclaims and the breach of contract counterclaim asserted by Defendant Satterfield.

The Court granted summary judgment to the Firestorm Principals on our CFAA claims, based on recent case law clarifying that such claims do not apply to employees who have authorized access to an employer’s computer and misuse that access, and granted summary judgment on our CFAA, conversion, and trespass to chattels claims against one defendant because Rekor represented it was prepared to dismiss those claims.

The Court also granted summary judgment on one breach of contract counterclaim asserted by a company related to the Firestorm Principals, holding that the $25,500 amount at issue could not be set off by or recouped from our damages in the case.

In 2020, the Firestorm Principals filed various suits in New York, Delaware and Virginia against our directors and officers, alleging breach of fiduciary duty and libel.

The defendants in the suits moved to dismiss these complaints.

At this stage of these litigations, suits against two of the directors have been dismissed.

On September 28, 2021, the Court issued an order denying the motion to dismiss one of the actions in Delaware. On October 21, 2021, the Delaware Action defendants filed a motion for reconsideration of the Court’s dismissal order;

that reconsideration motion was denied on February 28, 2022. On March 16, 2022, the court in the Virginia Action dismissed the breach of fiduciary duty claim without prejudice (so it can be refiled in Delaware Chancery Court) and denied the motion with respect to the defamation claim on jurisdictional grounds.

The defamation claim will now be challenged on substantive grounds.

The Court granted summary judgment to the Firestorm Principals on our CFAA claims, based on recent case law clarifying that such claims do not apply to employees who have authorized access to an employer’s computer and misuse that access, and granted summary judgment to one defendant on our conversion, and trespass to chattels claims because Rekor represented it was prepared to dismiss those claims.

The Court also granted summary judgment on one breach of contract counterclaim asserted by a company related to the Firestorm Principals, holding that the $25,500 amount at issue could not be set off by or recouped from our damages in this case.

In April 2022, The Company filed a notice of motion seeking partial summary judgement on several of the of the Company’s claims and the Firestorm Principals’

counterclaims, which the Firestorm Principals opposed.

On July 29 th , 2022, the Court issued an opinion and order, which granted the motion in part and denied it in part.

The order dismissed the Firestorm Principal’s counterclaim against the Company for libel.

The order also dismissed the Company’s claim for breach of fiduciary duty against one  defendant on the ground that he was not employed by the Company, but by a subsidiary of the Company that is not a party to the case.

The court also denied summary judgement to the Company as to the breach of fiduciary duty claim against the other defendants and as to the trespass to chattels and conversion claims as to all defendants, on the ground that issues of fact remain contested.

On the same ground, the court also denied summary judgement to the Company as to a breach of contract claim  by one defendant relating to an alleged change in employment status.

In 2020, the Firestorm Principals filed various suits in New York, Delaware and Virginia against directors and officers of the Company, alleging breach of fiduciary duty and libel.

The defendants in the suits moved to dismiss the amended complaint.

At this stage of these litigations, the suits against two of the directors have been dismissed and one has been permitted to proceed.

On September 28, 2021, the Delaware court issued an order denying the defendant’s motion to dismiss.

On October 21, 2021, the defendants filed a motion for reconsideration of the Delaware court’s dismissal order;

which was denied on February 28, 2022. On March 16, 2022, the court in the Virginia action dismissed the breach of fiduciary duty claim without prejudice (so it can be refiled in Delaware Chancery Court) and denied the motion with respect to the defamation claim on jurisdictional grounds.

The defamation claim in Virginia will now be challenged on substantive grounds.

In July 2022, the Firestorm Principals obtained new counsel. 

On July 21, 2022, the Firestorm Principals’

new counsel requested an adjournment of the October 17, 2022 trial date and related pre-trial deadlines, which the Company did not oppose. 

On July 22, 2022, the Court granted the request and rescheduled trial to begin on February 13, 2023.

At this stage of these litigations, we are unable to render an opinion regarding the likelihood of a favorable outcome.

1 unchanged sentence

remaining counterclaims and suits against Rekor directors and officers are without merit.

On January 31, 2020, our wholly-owned subsidiary, OpenALPR, filed a complaint in the US District Court for the Western District of Pennsylvania against a former customer, Plate Capture Solutions, Inc.

(“PCS”) for breach of software license agreements pursuant to which software was licensed to PCS.

On June 14, 2020, PCS filed its operative answer to the Complaint.

On June 21, 2020, PCS filed a motion to join us and another entity, OpenALPR Technology, Inc., as parties to the litigation and made claims against them and counterclaims against OpenALPR for defamation, fraud and intentional interference with existing and future business relationships.

On July 13, 2020, OpenALPR filed an opposition to the motion for joinder.

On November 23, 2020, the court denied PCS’s Motion for Joinder with prejudice.

On August 30, 2021, OpenALPR and PCS filed a joint stipulation of dismissal with prejudice, and the court ordered dismissal of the case with prejudice on August 31, 2021.

We consider this matter closed.

On September 18, 2020, Fordham Financial Management, Inc.

(“Fordham”) commenced a lawsuit against us in the Supreme Court for the State of New York, New York County.

Fordham alleges that we breached an underwriting agreement with Fordham.

On September 18, 2020, Fordham Financial Management, Inc.

(“Fordham”) commenced a lawsuit against the Company in the Supreme Court for the State of New York, New York County.

Fordham alleges that the Company breached an underwriting agreement with Fordham.

Fordham has brought claims for breach of contract, a declaratory judgment, and attorneys’

fees and expenses, and seeks damages.

The Complaint was served to us on September 25, 2020.

We issued a motion to dismiss counterclaims on June 23, 2021.

The Court granted Fordham’s motion to dismiss our counterclaims on October 23, 2021. On November 29, 2021, the Company filed a notice of appeal with the Appellate Division and a motion to reargue that decision and order, arguing that the court misunderstood the nature and purpose of the prospectus supplement, which was actually prepared by plaintiff after it set the prices for the 2018 offering. On March 3, 2022, the court denied the motion to reargue. In doing so, however, the court clarified that the dismissal was without prejudice, which would permit the Company to refashion the counterclaims.

Meanwhile, the Company’s deadline to perfect its concurrent appeal in the appellate division is May 30, 2022.

The Complaint was served on the Company on September 25, 2020. The Company issued a motion to dismiss counterclaims on June 23, 2021. The Court granted Fordham’s motion to dismiss Rekor’s counterclaims on October 23, 2021. On November 29, 2021, the Company filed a notice of appeal with the Appellate Division and a motion to reargue that decision and order, arguing that the court misunderstood the nature and purpose of the prospectus supplement, which was actually prepared by the plaintiff after it set the prices for the 2018 offering. On March 3, 2022, the court denied the motion to reargue. In doing so, however, the court clarified that the dismissal was without prejudice, which would permit the Company to refashion the counterclaims in the future, although the Company’s has filed an appeal in the appellate division.

The Company has cross-moved for summary judgment seeking the dismissal of plaintiff’s complaint on the basis that plaintiff opted against exercising its right of first refusal when it declined the opportunity to manage the 2019 ATM Program. 

Both plaintiff’s motion and Rekor’s cross-motion are now returnable on August 18, 2022.

At this stage of the Fordham litigation, we are unable to render an opinion regarding the likelihood of a favorable outcome.

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To that end we intend to vigorously litigate this action.

In June 2021, a putative shareholder class action lawsuit (captioned Miller v.

Rekor Systems, Inc.

et al.) was filed in the United States District Court for the District of Maryland, naming as defendants Rekor Systems, Inc.

and certain of its officers.

It alleges violations of Sections 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934 related to our automatic license plate recognition technology and uninsured vehicle enforcement diversion related business and sought damages on behalf of shareowners who acquired our stock between April 12, 2019 and May 25, 2021.

The court appointed a lead plaintiff.

In November 2021, the plaintiff filed an order of dismissal, seeking to voluntarily dismiss without prejudice.

This matter was voluntarily dismissed without prejudice. 

In addition, from time to time, we may be named as a party to various other lawsuits, claims and other legal and regulatory proceedings that arise in the ordinary course of business.

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Legal Proceedings