What changed in this filing

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Item 9A. Controls and Procedures

2023-03-29 compared with 2022-03-31 · 120 added, 150 removed, 384 unchanged (41% of the section changed)

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David Desharnais

President (January 2022)

President and Chief Operating Officer (January 2022)

Chief Financial Officer

Rodney Hillman

Chief Operations Officer

Lead Director

Director (Left July 2021)

Richard Nathan, Ph.

Robert Berman has served as our Chief Executive Officer and a member of our Board of Directors since March 2016.

In July 2020 Mr.

Berman was appointed to be the Company’s Executive Chairman upon the recommendation of the Company’s Governance Committee.

Berman, Chief Executive Officer and Director

Robert Berman has served as our Chief Executive Officer and a member of our Board of Directors since March 2016 and was appointed Executive Chairman of the Board of Directors in connection with the retirement of Mr.

James McCarthy from the Board on July 23, 2020.

Since January 2000, Mr.

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Prior to Cinium, Mr.

Berman was Chief Executive Officer of Empire Resorts, Inc., a NASDAQ-listed gaming company, from 2002-2005. We believe Mr.

Berman is qualified to serve on our Board of Directors due to his extensive executive leadership and management experience, his experience in private equity and with public companies, and his understanding of financial markets and mergers and acquisitions.

Berman was Chief Executive Officer of Empire Resorts, Inc., a NASDAQ-listed gaming company, from 2002-2005.

Director Qualifications

Berman has extensive experience in the private equity and public company markets.

We believe his strong understanding of the financial markets and the M&A process, and his previous senior executive roles with public companies make him a qualified member of our Board of Directors and to serve as our Chief Executive Officer and Executive Chairman.

Richard Nathan, PhD, Director

Richard Nathan, Ph.D., has served on our Board of Directors since March 2016.

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Prior to that, Dr.

Nathan was the Chief Executive Officer of AOC Key Solutions.

Nathan was the Chief Executive Officer of AOC Key Solutions, where he worked for over 17 years.

Nathan has over 45 years of corporate management, program management and business and proposal development experience and experience managing service and technical contracts for federal departments and agencies and state governments.

Nathan holds a BS in Chemistry from the Massachusetts Institute of Technology and a PhD in Chemistry from the Polytechnic Institute of Brooklyn.

We believe Dr.

Nathan is qualified to serve on our board of directors due to his technical background and executive leadership experience.

Director Qualifications

Nathan has a strong technical background and extensive experience in the government contracting area.

We believe this expertise, when combined with his entrepreneurial background having built strong operating companies, makes him a qualified member of our Board of Directors and the committees on which he participates.

Glenn Goord, Director

Glenn Goord has served on our Board of Directors since March 2016.

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Goord holds a BA in Psychology from Fairleigh Dickinson University.

We believe Mr.

Goord is qualified to serve on our board of directors due to his experience with government operations and procurement.

Director Qualifications

Goord has a strong background in government operations and procurement.

His insights into how government operates is a key skill for board decision making on Rekor strategy in certain industry segments.

We believe his management and operational experience makes him a qualified member of our Board of Directors and the committees on which he participates.

de Bary, Lead Director

de Bary has served on our Board of Directors since January 2017 and as Lead Director since November 2017.

de Bary has previously served as a partner in a Wall Street law firm and a managing director for several broker dealers, where he provided investment banking and financial advisory services to governmental units and private businesses.

He has served as a director, general counsel or CFO for several public companies and currently serves as chair of the Board of Ethics of the Town of Greenwich, Connecticut.

As an attorney, financial advisor and investment banker, Mr.

de Bary has had extensive experience with financial markets, governmental operations and private businesses.

From 1996 to 2015, he was a managing director at Marquette de Bary Co., Inc., a New York based broker-dealer, where he served as a financial advisor for state and local government agencies, public and private corporations and non-profit organizations, as well as general counsel.

He previously served as a director of Empire Resorts, Inc.

NYNY) from 1996 to 2010, where he served as chairman of its audit committee as well as, at various times throughout his tenure as a director, a member of the governance and compensation committees and various special committees.

de Bary has also served as Chairman of the Board of Ethics of the Town of Greenwich, Connecticut since 2008.

de Bary is a member of the American Bar Association, the New York State Bar Association and the Association of the Bar of the City of New York.

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from Columbia University.

We believe Mr.

de Bary is qualified to serve on our board of directors due to his legal and investment experience and his experience as a member of several boards of directors, including those of public companies.

Director Qualifications

de Bary has a diverse background that includes experience as a lawyer, investment banker, corporate officer and member of several boards of directors, including those of public companies.

We believe these experiences, combined with his skills and knowledge related to public market decision-making and audit committee roles and responsibilities, makes him qualified member of our Board of Directors and the committees on which he participates.

Hanlon, Director

David Hanlon has served on our Board of Directors since November 2018.

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in Accounting from the Wharton School at the University of Pennsylvania and graduated from the Advanced Management Program at the Harvard Business School.

We believe Mr.

Hanlon is qualified to serve on our board of directors due to his leadership and executive management experience and experience serving on public company boards of directors.

Croxton  is the Managing Director of Rice, Voelker, LLC and has more than 30 years of experience in investment and commercial banking.

Director Qualifications

Hanlon has extensive leadership and executive management experience and experience serving on public company boards of directors.

We believe his skills and experience make him a qualified member of our Board of Directors and the committees on which he participates.

Croxton, Director

Croxton is Managing Director of Rice, Voelker, LLC and has more than 30 years’

experience in investment and commercial banking.

During his career, Mr.

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in Finance from Louisiana State University, and a Master of International Management from the American Graduate School of International Management (now Thunderbird School of Global Management), and holds FINRA Series 7, 24, 63, and 79 licenses.

We believe Mr.

Croxton is qualified to serve on our board of directors due to his in-depth knowledge of the capital markets, as well as an extensive background in financing and advisory of public corporations.

Harada served on our Board of Directors from August 2017 to July 2021.

Harada has over 20 years of experience leading government and management consulting organizations.

From November 2015 to January 2017, she served as the Federal Chief Sustainability Officer.

Prior to that role, Ms.

Harada was the Acting Chief of Staff of the U.S.

General Services Administration (“GSA”) from March 2015 through November 2015.

Director Qualifications

Croxton has in-depth knowledge of the capital markets, as well as extensive background in financing and advisory of public corporations.

We believe his skills and experiences make him a qualified member of our Board of Directors and the committees on which he participates.

Executive Officers

Berman, Chief Executive Officer, Executive Chairman of the Board  - The biography for Robert A.

Berman, Chief Executive Officer and Executive Chairman of the Board 

The biography for Robert A.

Berman is set forth above in the section entitled “Directors.”

David Desharnais, President - 

On January 3, 2022, we publicly announced the appointment of David Desharnais, as our President. 

David Desharnais, President

On January 3, 2022, we publicly announced the appointment of David Desharnais as our President.

Desharnais has over two decades of experience leading growth strategies for technology driven businesses from start-ups to multinational corporations and across multiple industries.

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Foster School of Business.

Eyal Hen, Chief Financial Officer - Mr.

Hen has more than 17 years of experience as a global finance and business management executive in corporate environments, most recently with VAYA Pharma Inc.

Eyal Hen, Chief Financial Officer

Hen has served as our Chief Financial Officer since May of 2019.

He has more than 18 years’

experience as a global finance and business management executive in corporate environments, most recently with VAYA Pharma Inc.

and Ormat Technologies, Inc.

His expertise working as a finance executive in the public markets, where he oversaw financial reporting, compliance initiatives, investor communications, and financing, will be instrumental as the Company continues its growth.

His expertise working as a finance executive in the public markets, where he oversaw financial reporting, compliance initiatives, investor communications, and financing, is instrumental as the Company continues its growth.

Hen holds a BA in Economics and Accounting from Ben Gurion University (Israel) and an MBA from the University of Phoenix.

Rodney Hillman, Chief Operating Officer  - Mr.

Hillman joined the Company in May 2012 and served as its Strategy & Finance Analyst since October 2012 and as its Director of Operations from May 2012 to September 2012. Prior to joining the Company, Mr.

Hillman served in various executive level capacities during his career.

He spent 10 years as Chief Operating Officer, Chief Financial Officer, and Director of Game Trading Technologies, Inc.

(“GMTD”), a publicly-traded company in the consumer electronics industry that he co-founded. Prior to his tenure at GMTD, Mr.

Hillman was Vice President of Product Development at InterAct Accessories, Inc.

and held various management positions at both Baltimore Gas & Electric and Constellation Energy Group. Mr.

Hillman has an M.S.

degree in Finance from Loyola College in Baltimore, Maryland, an M.B.A.

degree from the University of Baltimore, and a B.S.

degree in Electrical and Computer Engineering from The Johns Hopkins University.

Independence of Directors

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Committees of the Board

Our Board has four standing committees:

Audit, Compensation, Nomination and Governance.

Our Board has four standing committees:

Audit, Compensation, Governance and Nominations.

Each of the committees is solely comprised of and chaired by independent directors, each of whom the Board has affirmatively determined is independent pursuant to the Stock Market Rules.

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The committee Charters are reviewed annually by the Governance Committee.

If appropriate, and in consultation with the chairs of the other committees, the Governance Committee proposes revisions to the charters.

The responsibilities of each standing committee are described in more detail below.

From time to time, the Board of Directors may also appoint special committees for specific purposes.

The Board has also chartered an Executive Committee to serve in the event that our Chief Executive Officer is unable to discharge duties for a limited period of time.

The charters for the three standing committees are available on the Company's website at www.rekor.ai by following the link to “Investors”

If appropriate, and in consultation with the chairs of the other committees, the Corporate Governance Committee proposes revisions to the charters.

The responsibilities of each committee are described in more detail below.

The charters for the four committees are available on the Company’s website at 

www.rekor.ai  by following the link to “Investors”

and then to “Corporate Governance.”

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within the meaning of Nasdaq Rule 5605(b)(1).

The Audit Committee assists our Board in overseeing the financial reporting process and maintaining the integrity of our financial statements, and our financial reporting processes and systems of internal audit controls, and our compliance with legal and regulatory requirements.

The Audit Committee is responsible for reviewing the qualifications, independence and performance of our independent registered public accounting firm and review our internal controls, financial management practices and investment functions and compliance with financial legal and regulatory requirements.

The Audit Committee assists our Board in overseeing the financial reporting process and maintaining the integrity of our financial statements, and of our financial reporting processes and systems of internal audit controls, and our compliance with legal and regulatory requirements.

The Audit Committee is responsible for reviewing the qualifications, independence and performance of our independent registered public accounting firm and reviews our internal controls, financial management practices and investment functions and compliance with financial legal and regulatory requirements.

The Audit Committee is also responsible for performing risk and risk management assessments as well as preparing any report of the Audit Committee that may be required by the proxy rules of the SEC to be included in the Corporation’s annual proxy statement.

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Croxton, and Mr.

Hanlon. 

Compensation Committee

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within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and “outside directors”

within the meaning of Section 162(m) of the Code.

within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

They are also “independent”

directors within the meaning of NASDAQ Rule 5605(b)(1).

The Compensation Committee is responsible for overseeing the establishment and maintenance of our overall compensation and incentive programs to discharge the Board’s responsibilities relating to compensation of our executive officers and directors, including establishing criteria for evaluating performance and setting appropriate levels of compensation, and producing an annual report on executive compensation for inclusion in the Corporation’s proxy statement in accordance with the rules and regulations of the SEC.

The Compensation Committee is responsible for overseeing the establishment and maintenance of our overall compensation and incentive programs to discharge the Board’s responsibilities relating to compensation of our executive officers and directors, including establishing criteria for evaluating performance and setting appropriate levels of compensation, and to produce an annual report on executive compensation for inclusion in the Corporation’s proxy statement in accordance with the rules and regulations of the SEC.

The Compensation Committee advises and makes recommendations to our Board on all matters concerning director compensation.

Goord serves as Chair of the Compensation Committee and is joined by Mr.

Nathan. 

Governance Committee

Our Board has a Governance Committee that (1) reviews and recommends improvements to our governance guidelines and corporate policies;

(2) assists management in the preparation of any required proxy statement disclosure regarding director independence and the operations of the Governance Committee;

(3) reviews standards to be applied in making determinations as to the existence of material relationships between the Corporation and its directors and reviews and either disapproves or grants approval or ratification of those transactions between the Corporation and the Corporation’s related persons;

(4) monitors compliance with our Code of Conduct and manages the whistleblower process;

(5) reviews the performance of the Board of Directors and its various committees and makes recommendations intended to improve that performance, (6) evaluates and makes recommendations concerning changes in the charters of the various Committees of the Board of Directors;

and (7) such other matters as may be required to ensure compliance with applicable federal and state laws or the requirements of any exchange on which the Company maintains a listing for its securities.

(2) monitors compliance with our Code of Conduct;

(3) evaluates and makes recommendations concerning changes in the charters of the various Committees of the Board of Directors, and (4) such other matters as may be required to ensure compliance with applicable federal and state laws or the requirements of any exchange on which the Company maintains a listing for its securities.

The committee is required to be comprised of entirely “independent”

directors within the meaning of NASDAQ Rule 5605(b)(1).

Nathan currently serves as the Chair of the Governance Committee and is joined on the committee by Mr.

Goord and Mr.

de Bary. 

Nathan currently serves as the Chair of the Governance Committee and is joined on the committee by Mr.

Goord and Mr.

Nominations Committee

The purpose of the Nominations Committee is to ensure proper performance of people and practices by (1) recommending new members of the Board;

Our Nominations Committee that ensures proper performance of people and practices of the Company by (1) recommending new members of the Board;

(2) training new members of the Board;

(3) reviewing the performance of the Board and its various committees and making recommendations intended to improve that performance, (4) evaluating and making recommendations to the Governance Committee as to changes in the charters of the various committees of the Board, (5) evaluating the performance of the Chief Executive Officer, (6) overseeing the development and implementation of succession planning our senior management positions;

and (7) identifying and recommending candidates for membership of the Board committees.

Hanlon currently serves as the Chair of the Nominations Committee and is joined on the committee by Mr.

Goord and Mr.

Nathan. 

Hanlon currently serves as the Chair of the Nominations Committee and is joined on the committee by Mr.

Goord and Mr.

Compensation of Rekor Directors

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($) (1)(2)(3)

Christine Harada (4)

Richard Nathan, Ph.

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Amount represents the fair value of the issuances of 45,832 restricted stock units issued on January 20, 2022.

Shares will vest 14 months after the date of grant for all directors who have remained independent directors as of the end of the calendar year in which the grant was made. 

Shares will vest on March 15, 2023, for all directors who have remained independent directors as of the end of the calendar year in which the grant was made. 

Beginning in 2021, the number of RSU’s that will be granted to the independent directors as a group each January will be determined by taking one third of one percent of the preceding November’s average daily market capitalization as reported by NASDAQ, divided by the closing share price on the day preceding the grant.

The number of shares granted to each independent director will be determined by dividing the total number of units so determined by the number of independent directors as of the date of the grant.

Harada left her position in our Board of Directors in July 2021.

For the year ended December 31, 2021 our non-employee directors are compensated for their services as follows:

For the year ended December 31, 2022 our non-employee directors are compensated for their services as follows:

Board Meeting Fee

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Directors who are officers or employees of Rekor or its subsidiaries do not receive any compensation for service on our Board, but employee directors will be reimbursed for expenses incurred in attending meetings of our Board or any committees thereof. 

Code of Ethics

Code of Conduct

We have adopted a Code of Conduct, which serves as our Code of Ethics, which applies to all of our employees, including our Chief Executive Officer and our Chief Financial Officer.

Our Code of Conduct is available on our website at www.rekor.ai.

If we amend or grant a waiver of one or more of the provisions of our Code of Conduct, we intend to satisfy the requirements under Item 5.05 of Item 8-K regarding the disclosure of amendments to or waivers from provisions of our Code of Conduct that apply to our Principal Executive and Principal Financial Officer by posting the required information on our website at the above address.

Our Code of Conduct is available on our website at 

www.rekor.ai.

Our website is not part of this Annual Report on Form 10-K.

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Chief Financial Officer

Rodney Hillman

Chief Operating Officer

David Desharnais

President Chief Operating Officer

In 2021, we increased Mr.

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Additionally, in 2021, we increased Mr.

Hen's base salary from $405,000 to $445,000 per year effective December 20, 2021.

In 2020, we increased Mr.

Hen’s base salary from $335,000 to $375,000 per year effective February 3, 2020.

Hen's base salary from $405,000 to $445,000 per year effective December 20, 2021. 

Amount represents the fair value of the issuance of 40,000 restricted stock units to Mr.

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Amount represents the fair value of the issuance of 10,000 restricted stock units to Mr.

Hen on February 21, 2020.

In 2021, we increased Mr.

Hillman’s base salary from $305,000 to $355,000 per year effective April 1, 2021.

In 2020, we increased Mr.

Hillman’s base salary from $285,000 to $305,000 per year effective February 3, 2020. 

Hen on March 17, 2021.

Desharnais has served as the Company's President since January 17, 2022 and Chief Operating Officer since September 30, 2022. 

Amount represents a bonus that was guaranteed to Mr.

Desharnais as part of his employment agreement date December 10, 2021. 

Amount represents the fair value of the issuance of 375,000 restricted stock units to Mr.

Hillman on February 21, 2020.

Desharnais on January 17, 2022.

Narrative Disclosure to Summary Compensation Table

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Chief Financial Officer

Rodney Hillman

Chief Operating Officer

David Desharnais

President Chief Operating Officer

The options and awards vest in equal annual installments over three years.

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Steven Croxton

Rodney Hillman

David Desharnais

All directors and named executive officers as a group (11 persons)

5% or Greater Shareholders

Avon Road Partners, L.P.

Goldman Sachs Group Inc

Arctis Global, LLC

Goldman Sachs Group Inc

BlackRock, Inc.

* Less than 1%

Unless otherwise indicated, the address of those listed is c/o Rekor Systems, Inc., 6721 Columbia Gateway Drive, Suite 400, Columbia, MD 21046.

Unless otherwise indicated, all shares are owned directly by the beneficial owner.

Based on 44,949,939 shares of our common stock issued and outstanding as of the March 31, 2022.

As the general partner and Manager of Avon Road Partners, L.P.

and Rekor Holdings LLC, respectively, Mr.

Based on 55,020,612 shares of our common stock issued and outstanding as of the March 24, 2023.

Berman may be deemed to be the beneficial owner of 4,265,323 shares of Rekor Systems, Inc.

common stock, or 7.8% of the class of securities.

He may be deemed to share with Avon Road (and not with any third-party) the power to vote or direct the vote of and to dispose or direct the disposition of the 2,165,104 shares of Rekor Systems, Inc.

common stock beneficially owned by Avon Road, or 5.3% of the class of securities.

It also consists of 973,609 shares of our common stock, 26,610 restricted stock units and options to purchase 100,000 shares of our common stock exercisable with 60 days of March 31, 2022.

Based on the Schedule 13D/A Amendment No.

common stock, or 6.5% of the class of securities, consisting of options to purchase 100,000 shares of our common stock exercisable within 60 days of March 24, 2023, warrants to purchase up to 1,000,000 shares of common stock that are exercisable within 60 days of March 24, 2023, 1,000,219 shares of our common stock, and, as the general partner and manager of Avon Road Partners, L.P., he may be deemed to share with Avon Road (and not with any third-party) the power to vote or direct the vote of and to dispose or direct the disposition of the 2,165,104 shares of Rekor Systems, Inc.

common stock beneficially owned by Avon Road based on the Schedule 13D/A Amendment No.

7 filed with the SEC by Avon Road and Mr.

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Consists of options to purchase 48,499 shares of our common stock exercisable within 60 days of March 24, 2023, and 64,502 shares of our common stock.

Hen has served as our Chief Financial Officer and Principal Financial and Accounting Officer since May 15, 2019 and consists of options to purchase 50,000 shares of our common stock exercisable within 60 days of March 31, 2022, and 39,926 shares of our common stock.

Consists of options to purchase 50,000 shares of our common stock exercisable within 60 days of March 24, 2023, and 68,638 shares of our common stock.

Based on the Schedule 13G filed with the Securities and Exchange Commission on January 24, 2022, reporting indirect ownership of 2,276,054 shares of Rekor Systems, Inc.

common stock, representing a beneficial ownership of 5.2% based on 43,977,218 shares issued and outstanding.

Consists of 84,516 shares of our common stock.

Based on the Schedule 13G/A Amendment No.1 filed with the Securities and Exchange Commission on February 14, 2023, reporting beneficial ownership of 6,089,591 shares of Rekor Systems, Inc.

common stock, reporting beneficial ownership of 10.51%.

In addition the shares filed with Schedule 13 G/A Amendment No.1, as part of the Securities Purchase Agreement this beneficial owner received warrants to purchase up to 3,250,000 shares of common stock that are exercisable within 60 days of March 24, 2023.

The address of the reporting person is 07 Calle Del Parque, 7th Floor, San Juan, Puerto Rico, 00912-3242.

Based on the Schedule 13G/A Amendment 1 filed with the Securities and Exchange Commission on February 8, 2023, reporting indirect ownership of 2,767,852 shares of Rekor Systems, Inc.

common stock, representing a beneficial ownership of 5.1%.

The address of the reporting person is 200 West Street, New York, New York 10282.

Based on the Schedule 13G filed with the Securities and Exchange Commission on May 11, 2021, reporting beneficial ownership of 5.7% based on 40,994,510 shares issued and outstanding.

The address of the reporting person is 70 East 77th Street, 8A, New York, New York 10075.

Based on the Schedule 13G filed with the Securities and Exchange Commission on February 4, 2022, reporting beneficial ownership of 2,264,368 shares of Rekor Systems, Inc.

common stock, reporting beneficial ownership of 5.1% based on 43,977,218 shares issued and outstanding.

Based on the Schedule 13G filed with the Securities and Exchange Commission on May 9, 2022, reporting indirect ownership of 2,236,436 shares of Rekor Systems, Inc.

common stock, representing a beneficial ownership of 5.0%.

The address of the reporting person is 55 East 52nd Street New York, NY 10055.

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The Governance Committee has responsibility for reviewing and, if appropriate, for approving any related party transactions that would be required to be disclosed pursuant to applicable SEC rules.

Described below are any transactions since January 1, 2020 through December 31, 2021 and any currently proposed or subsequent transactions to which the Company was a party in which:

Described below are any transactions since January 1, 2021 through December 31, 2022 and any currently proposed or subsequent transactions to which the Company was a party in which:

The amounts involved exceeded or will exceed the lower of either $120,000 or 1% of the average of the Company’s total assets at year-end for the last two completed fiscal years;

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Each of the transactions described below was approved by the Board of Directors after review and recommendation by the Governance Committee, which consists entirely of officers and directors without any personal, business or family interest in the transactions described:

AOC Key Solutions Transaction

On March 16, 2020, the Corporation announced that it had received an offer to purchase its AOC Key Solutions subsidiary, for an aggregate price of $4 million, from PurpleReign, LLC (“PurpleReign”), an entity formed by Mr.

Greg McCarthy, the then Chief Executive Officer of AOC Key Solutions.

As founders of AOC Key Solutions and persons related to a principal in PurpleReign and a key executive of AOC Key Solutions, Mr.

James McCarthy, the then-Chair of our Board of Directors, and Dr.

Richard Nathan, as a member of our Board of Directors, recused themselves from participation in any discussions with management or the Board concerning the potential sale.

In connection with its review of the transaction, the Governance Committee retained the investment banking services of B.

Riley FBR, Inc.

(“BRFBR”) to review the terms of the proposed transaction and advise the Company whether the consideration to be received was fair to the Company’s public stockholders.

On April 2, 2020, the Company divested its AOC Key Solutions subsidiary.

Investment in 2019 Promissory Notes and Exchange for Equity

On March 12, 2019, we financed the acquisition of certain assets through an agreement pursuant to which investors loaned us $20,000,000 in exchange for promissory notes (the “2019 Notes”) and we issued warrants to purchase 2,500,000 shares of our common stock to the investors.

The investors included Avon Road, an affiliate of Robert Berman, Rekor’s Chief Executive Officer and a member of our Board of Directors and Matt Hill, a principal in the company selling the assets, who is now the Company’s Chief Science Officer.

On July 15, 2020, the “Company completed an exchange provided for in connection with the 2019 Notes.

Approximately $15.1 million aggregate principal amount of the 2019 Notes were exchanged for 4,349,497 shares of the Company’s common stock pursuant to the previously disclosed Exchange Agreements dated June 30, 2020.

As part of the exchange, Matt Hill, Chief Science Officer exchanged $1,726,676 into 431,669 common shares.

After this transaction Matt Hill owns 961,669 common shares.

McCarthy –

Berman Stock Purchase Agreement

On August 5, 2020, our former Chairman, Mr.

James McCarthy entered into a privately negotiated Stock Purchase Agreement with Mr.

Berman, our current CEO, President, and Executive Chairman, to sell Mr.

Berman 2,725,836 shares of the Company’s common stock, at a price per share of approximately $2.57.

The transfer of the shares is conditioned upon Mr.

Berman's full payment of the purchase price of $7,000,000 within forty-five days, after which Mr.

McCarthy will cease to be a beneficial owner of the Company’s common stock.

2022 Promissory Notes 

On December 20, 2022, the Company entered into a Promissory Note Agreement (the “2022 Notes”) with (i) Robert A.

Berman, the Company’s Chief Executive Officer and Executive Chairman, and (ii) Arctis Global Master Fund Limited (“Arctis”), an affiliate of Arctis Global, LLC, a 10.3% holder of Common Stock of the Company based on its Schedule 13G filed with the Securities and Exchange Commission on May 20, 2022 (the “2022 Lenders”), pursuant to which the 2022 Lenders loaned $1,000,000 to the Company. The Company has determined that it has a material relationship with the 2022 Lenders.

The 2022 Notes have a maturity date of March 20, 2023, at which time all remaining outstanding principal and accrued but unpaid interest will be due, however, the aggregate unpaid principal amount under 2022 Notes shall be exchangeable for an equal principal amount of secured notes to be issued by the 2022 Lenders pursuant to that certain term sheet dated December 20, 2022 (the “Secured Notes Transaction”) together with any accrued and unpaid interest on this 2022 Notes, in which case the 2022 Notes shall be cancelled with no further force and effect as of the effective date of the Secured Notes Transaction. The 2022 Notes bear an interest rate of 12% per annum.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Audit Committee reviews and pre-approves both audit and all permissible non-audit services provided by our independent registered public accounting firm.

Friedman LLP (“Friedman”) has served as our principal auditor since June 2019.

The Audit Committee has considered whether the provision of services, other than services rendered in connection with the audit of our annual financial statements, is compatible with maintaining Friedman’s independence. 

Aggregate fees billed or incurred related to the following years for professional services rendered by Friedman for 2021 and 2020 are set forth below.

Fees for services performed by Marcum LLP ("Marcum") and Friedman LLP ("Friedman"), prior to the acquisition of certain assets of Friedman by Marcum effective September 1, 2022, for the years ended December 31, 2022 and 2021 were:

Year ended December 31,

(Dollars in thousands)

All other fees

Audit Fees for 2021 and 2020 include fees associated with the audits of the annual financial statements and the quarterly reviews of the unaudited interim financial statements included in the Company’s Annual and Quarterly Reports on Form 10-K and 10-Q, respectively.

Audit-related fees for 2021 primarily include costs associated with SEC filings and the supplemental audit and disclosure documents. 

The Company was notified that certain assets of Friedman, the Company’s independent registered public accounting firm, were acquired by Marcum effective September 1, 2022.

On September 13, 2022, the Audit Committee of the Board approved the dismissal of Friedman and the engagement of Marcum to serve as the independent registered public accounting firm of the Company.

As of September 1, 2022, the services previously provided by Friedman are provided by Marcum.

Approximately $219,000 of the total fees for audit services during the year ended December 31, 2022 were for services provided by Marcum.

The Audit Committee reviews and pre-approves both audit and all permissible non-audit services provided by our independent registered public accounting firm.

Audit Fees for 2022 and 2021 include fees associated with the audits of the annual financial statements and the quarterly reviews of the unaudited interim financial statements included in the Company’s Annual and Quarterly Reports on Form 10-K and 10-Q, respectively. 

EXHIBITS, FINANCIAL STATEMENTS SCHEDULES

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Certificate of Amendment to Certificate of Incorporation of Novume Solutions, Inc.

as filed with the Secretary of State of Delaware on April 30, 2019 

Second Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Rekor Systems, Inc., dated March 18, 2020 

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on September 29, 2017

Form of Warrant (January 2023)

Form of Senior Secured Note (January 2023)

Form of Pre-Funded Common Stock Purchase Warrant (March 2023)

Form of Common Stock Purchase Warrant (March 2023)

Form of Placement Agent Common Stock Purchase Warrant (March 2023)

2017 Equity Award Plan of Novume Solutions, Inc. (as amended and restated as of September 14, 2021)

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Employment Agreement with Robert Berman effective May 15, 2019

Employment Agreement with David Deshanais dated as of December 10, 2021

Employment Agreement with David Desharnais dated as of December 10, 2021

Form of Rekor Systems, Inc.

5 unchanged sentences

Share Purchase Agreement, dated August 6, 2021, by and among Rekor Systems Inc., Waycare Technologies Ltd., the sellers named therein, and Shareholder Representative Services LLC, solely in its capacity as representative of the sellers.

Securities Purchase Agreement, dated as of January 18, 2023, by and among the Company and the investors party thereto

Form of Securities Purchase Agreement (March 2023)

Subsidiaries of Rekor Systems, Inc.

Consent of Marcum LLP., Independent Registered Public Accounting Firm

Consent of Friedman LLP., Independent Registered Public Accounting Firm

13 unchanged sentences

Indicates management contract or compensatory plan.

Confidential treatment has been granted with respect to redacted portions of this exhibit.

Redacted portions of this exhibit have been filed separately with the SEC.

FORM 10-K SUMMARY

4 unchanged sentences

Principal Executive Officer

March 31, 2022

March 29, 2023

Chief Financial Officer (Principal Financial and Accounting Officer)

20 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-K

Item 9A. Controls and Procedures