What changed in this filing

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Item 1. Financial Statements

2024-11-14 compared with 2024-08-14 · 264 added, 277 removed, 1013 unchanged (35% of the section changed)

4 unchanged sentences

(Dollars in thousands, except share and per share amounts)

June 30, 2024

September 30, 2024

December 31, 2023

20 unchanged sentences

$ 101,195 $ 92,151

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

2 unchanged sentences

Loan payable, current portion

Prepaid Advance liability, at fair value

Lease liability operating, short-term

1 unchanged sentence

Contract liabilities

Liability for ATD Holdback Shares

Liability for ATD Holdback Shares, at fair value

Other current liabilities

20 unchanged sentences

Stockholders' equity

Preferred stock, $ 0.0001 par value, 2,000,000 authorized, 505,000 shares designated as Series A and 240,861 shares designated as Series B as of June 30, 2024 and December 31, 2023, respectively.

No preferred stock was issued or outstanding as of June 30, 2024 or December 31, 2023, respectively.

Preferred stock, $ 0.0001 par value, 2,000,000 authorized, 505,000 shares designated as Series A and 240,861 shares designated as Series B as of September 30, 2024 and December 31, 2023, respectively.

No preferred stock was issued or outstanding as of September 30, 2024 or December 31, 2023, respectively.

Common stock, $ 0.0001 par value;

300,000,000 shares;

86,371,359 shares as of June 30, 2024 and 69,273,334 as of December 31, 2023;

86,216,706 shares as of June 30, 2024 and 69,176,826 as of December 31, 2023.

Treasury stock, 154,653 and 96,508 shares as of June 30, 2024 and December 31, 2023, respectively.

300,000,000 authorized shares;

91,114,540 and 69,273,334 shares issued as of September 30, 2024 and December 31, 2023, respectively;

90,955,020 and 69,176,826 shares outstanding as of September 30, 2024 and December 31, 2023, respectively.

Treasury stock, 159,520 and 96,508 shares as of September 30, 2024 and December 31, 2023, respectively.

( 711 ) ( 522 )

12 unchanged sentences

(Dollars in thousands, except share and per share amounts)

Three Months Ended June 30,

Six Months Ended June 30,

$ 12,427 $ 8,563 $ 22,205 $ 14,748

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of revenue, excluding depreciation and amortization

5,776 4,131 11,061 6,999

Operating expenses:

General and administrative expenses

7,370 5,873 15,032 13,078

Selling and marketing expenses

2,021 2,053 4,435 3,943

Research and development expenses

4,991 4,783 9,992 9,740

Depreciation and amortization

2,344 2,003 4,676 3,954

Total operating expenses

16,726 14,712 34,135 30,715

Loss from operations

( 10,075 ) ( 10,280 ) ( 22,991 ) ( 22,966 )

Other income (expense):

(Loss) gain on extinguishment of debt

- - ( 4,693 ) 527

Interest expense, net

( 544 ) ( 908 ) ( 1,598 ) ( 1,668 )

Gain on remeasurement of ATD Holdback Shares

79 75 128 312

Loss on offering costs - Prepaid Advance

Gain on the sale of Global Public Safety

Other (expense) income

Total other income (expense)

280 ( 833 ) ( 5,418 ) ( 829 )

$ ( 9,795 ) $ ( 11,113 ) $ ( 28,409 ) $ ( 23,795 )

Loss per common share

$ ( 0.12 ) $ ( 0.18 ) $ ( 0.35 ) $ ( 0.41 )

Weighted average shares outstanding

Basic and diluted

84,932,611 61,816,279 81,929,347 58,353,534

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS ’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY

(Dollars in thousands, except share amounts)

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Total Stockholders' Equity

Balance as of March 31, 2024

84,660,589 $ 8 154,653 $ ( 702 ) $ 270,864 $ ( 217,297 ) $ 52,873

Balance as of July 1, 2024

Stock-based compensation

- - - - 1,115 - 1,115

Issuance upon exercise of stock options

3,500 - - - 3 - 3

Issuance upon vesting of restricted stock units

152,617 - - - - - -

Shares withheld upon vesting of restricted stock units

Issuance upon exercise of 2023 Warrants

1,400,000 1 - - 1,959 - 1,960

- - - - - ( 9,795 ) ( 9,795 )

Balance as of June 30, 2024

86,216,706 $ 9 154,653 $ ( 702 ) $ 273,941 $ ( 227,092 ) $ 46,156

Balance as of March 31, 2023

61,030,637 $ 6 91,491 $ ( 506 ) $ 218,157 $ ( 165,680 ) 51,977

Shares issued under the Prepaid Advance

Balance as of September 30, 2024

Balance as of July 1, 2023

Stock-based compensation

- - - - 1,044 - 1,044

Issuance upon exercise of stock options

18,000 - - - 16 - 16

Issuance upon vesting of restricted stock units

130,721 - - - - - -

Issuance of common stock upon exercise of pre-funded warrants

772,853 - - - 1 - 1

- - - - - ( 11,113 ) ( 11,113 )

Balance as of June 30, 2023

61,952,211 $ 6 91,491 $ ( 506 ) $ 219,218 $ ( 176,793 ) $ 41,925

Shares withheld upon vesting of restricted stock units

Issuance upon exercise of Series A warrants

Issuance upon exercise of 2023 Registered Direct Offering Warrants

Balance as of September 30, 2023

Balance as of January 1, 2024

69,176,826 $ 7 96,508 $ ( 522 ) $ 232,568 $ ( 198,683 ) $ 33,370

Stock-based compensation

- - - - 2,282 - 2,282

Issuance upon exercise of stock options

3,500 - - - 3 - 3

Issuance upon vesting of restricted stock units

612,390 - - - - - -

Shares withheld upon vesting of restricted stock units

( 58,145 ) - 58,145 ( 180 ) - - ( 180 )

Shares issued as part of the ATD Acquisition

2,832,135 - - - 8,893 - 8,893

Retirement of the 2023 Promissory Notes

750,000 - - - 1,875 - 1,875

2024 Public Offering

11,500,000 1 - - 26,361 - 26,362

Issuance upon exercise of 2023 Warrants

1,400,000 1 - - 1,959 - 1,960

- - - - - ( 28,409 ) ( 28,409 )

Balance as of June 30, 2024

86,216,706 $ 9 154,653 $ ( 702 ) $ 273,941 $ ( 227,092 ) $ 46,156

Shares issued under the Prepaid Advance

Balance as of September 30, 2024

Balance as of January 1, 2023

54,405,080 $ 5 41,522 $ ( 417 ) $ 202,747 $ ( 152,998 ) $ 49,337

Stock-based compensation

- - - - 2,156 - 2,156

Issuance upon exercise of stock options

36,333 - - - 31 - 31

Issuance upon vesting of restricted stock units

687,914 - - - - - -

Fair value allocated to warrants with 2023 Promissory Notes

- - - - 5,125 - 5,125

Shares withheld upon vesting of restricted stock units

( 49,969 ) - 49,969 ( 89 ) - - ( 89 )

Issuance of common stock and warrants

6,100,000 1 - - 9,158 - 9,159

Issuance upon exercise of Series A warrants

Issuance of common stock upon exercise of pre-funded warrants

772,853 - - - 1 - 1

- - - - - ( 23,795 ) ( 23,795 )

Balance as of June 30, 2023

61,952,211 $ 6 91,491 $ ( 506 ) $ 219,218 $ ( 176,793 ) $ 41,925

Net proceeds from 2023 Registered Direct Offering

Issuance upon exercise of 2023 Registered Direct Offering Warrants

Balance as of September 30, 2023

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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(Dollars in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flows from Operating Activities:

$ ( 28,409 ) $ ( 23,795 )

Adjustments to reconcile net loss to net cash used in operating activities:

8 unchanged sentences

Gain on remeasurement of ATD Holdback Shares

Loss on the sale of property and equipment

Gain on the sale of property and equipment

Gain on the sale of Global Public Safety

Loss (gain) on extinguishment of debt

4,693 ( 527 )

Loss on the remeasurement of Prepaid Advance

Changes in operating assets and liabilities:

Accounts receivable

( 1,191 ) ( 2,508 )

302 ( 1,064 )

Other current assets

1 unchanged sentence

Contract liabilities

( 111 ) 1,074

Lease liability

( 540 ) ( 718 )

Net cash used in operating activities - continuing operations

( 17,926 ) ( 19,200 )

Net cash used in operating activities - discontinued operations

Net cash used in operating activities

( 17,926 ) ( 19,649 )

Cash Flows from Investing Activities:

Capital expenditures

( 512 ) ( 490 )

Proceeds from the Roker SAFE

Proceeds from the sale of property and equipment

Proceeds from the sale of Global Public Safety

Cash paid for ATD acquisition, net

Net cash used in investing activities

( 9,707 ) ( 476 )

Net cash (used in) provided by investing activities

Cash Flows from Financing Activities:

4 unchanged sentences

Net proceeds 2023 Registered Direct Offering

Net proceeds from the exercise of the warrants associated with 2023 Registered Direct Offering

Net proceeds from the exercise of the pre-funded warrants

2 unchanged sentences

Net proceeds from exercise of warrants

Net proceeds from the Prepaid Advance

Net proceeds from exercise of warrants associated with series A preferred stock

Repayments of loans payable

( 37 ) ( 54 )

Payments for financing leases

( 441 ) ( 277 )

Repurchases of common stock

( 180 ) ( 89 )

Repayment of STS Notes

Repayment of 2023 Promissory Notes

Net cash provided by financing activities

15,337 20,441

Net (decrease) increase in cash, cash equivalents and restricted cash - continuing operations

( 12,296 ) 765

Net decrease in cash, cash equivalents and restricted cash - discontinued operations

Net (decrease) increase in cash, cash equivalents and restricted cash

( 12,296 ) 316

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

$ 3,417 $ 2,784

Reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents at end of period

$ 3,089 $ 2,438

Restricted cash at end of period

Cash, cash equivalents and restricted cash at end of period

$ 3,417 $ 2,784

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

9 unchanged sentences

("STS") and All Traffic Data Services, LLC ("ATD") (collectively, the “Company”).

On January 2, 2024 , the Company completed the acquisition of ATD by acquiring 100 % of the issued and outstanding capital stock of ATD, which is now a wholly-owned subsidiary of the Company.

The Company serves the roadway intelligence sector, developing products and services to be used in advancing public safety, urban mobility, and transportation management.

The Company's vision is to improve the lives of citizens and the world around them by enabling safer, smarter, and greener roadways and communities.

The Company works towards this vision by collecting, connecting, and organizing mobility data, and making it accessible and useful to its customers for real-time insights and decisioning for situational awareness, rapid response, risk mitigation, and predictive analytics for resource and infrastructure planning and reporting.

On January 2, 2024 , the Company completed the acquisition of ATD by acquiring 100 % of the issued and outstanding capital stock of ATD, which is now a wholly-owned subsidiary of the Company.

The Company works towards this vision by collecting, connecting, and organizing mobility data, and making it accessible and useful to its customers.

The Company's products and services provide data for resource and infrastructure planning and reporting, as well as real-time insights, predictive analytics and decisioning for situational awareness, rapid response and risk mitigation.

These unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

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GAAP for annual financial statements.

In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the Company’s unaudited condensed consolidated financial statements as of and for the periods ended June 30, 2024 .

The financial data and other information disclosed in these notes are unaudited.

The results for the three and six months ended June 30, 2024 , are not necessarily indicative of the results to be expected for the year ending December 31, 2024 .

The results for the three and nine months ended September 30, 2024 , are not necessarily indicative of the results to be expected for the year ending December 31, 2024 .

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10 -K for the year ended December 31, 2023 .

1 unchanged sentence

Dollar amounts, except per share data, in the notes to these unaudited condensed consolidated financial statements are rounded to the nearest $1,000.

Correction of Previously Issued (Unaudited) Interim Financial Statements

While undergoing a review of its unaudited condensed consolidated interim financial statements, the Company determined it had incorrectly classified the ATD Holdback Shares issued in connection with the acquisition of ATD as equity classified instead of liability classified.

This impacted previously reported amounts for goodwill, current liabilities and additional paid in capital, among other line items in the unaudited condensed consolidated interim financial statements as of and for the three months ended March 31, 2024.

In accordance with Staff Accounting Bulletin (“SAB”) No.

99, “Materiality,” and SAB No.

108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated the adjustment detailed above, and determined the related impact did not materially misstate its unaudited condensed consolidated financial statements as of and for the three month period ended March 31, 2024.

Although the Company concluded that the misstatement was not material to its unaudited condensed consolidated financial statements as of and for the three month period ended March 31, 2024, the Company has determined it is appropriate to adjust its unaudited condensed consolidated financial statements as of March 31, 2024 on a prospective basis to provide appropriate context to stakeholders within comparative financial statements.

The impact on the statement of operations will be displayed on the Company’s unaudited condensed consolidated financial statements for the three and six month periods ended June 30, 2024.

The following tables set forth the effects of the error corrections on affected items within the Company’s previously reported interim unaudited condensed consolidated balance sheet and statement of shareholders' equity as of the periods indicated had the adjustments been made in the corresponding quarter (dollars in thousands):

March 31, 2024

Changes in Condensed Consolidated Balance Sheet

As reported Adjusted As corrected

Long-term assets

$ 24,161 $ ( 452 ) $ 23,709

107,150 ( 452 ) 106,698

Current liabilities

Liability for ATD Holdback Shares

- 1,634 1,634

Total liabilities

52,191 1,634 53,825

Stockholders' equity

Additional paid-in capital

272,950 ( 2,086 ) 270,864

Total stockholders’ equity

$ 54,959 $ ( 2,086 ) $ 52,873

Changes in Condensed Consolidated Statement of Shareholders' Equity

Shares of common stock outstanding

85,324,918 ( 664,329 ) 84,660,589

The following tables set forth the effects of the error corrections on affected items within the Company’s previously reported interim condensed statements of operations for the periods indicated had the adjustments been made in the corresponding quarters (dollars in thousands, except share amounts):

Three Months Ended March 31, 2024

Changes in Condensed Consolidated Statements of Operations

As reported Adjusted As corrected

Loss per common share

$ ( 0.23 ) $ ( 0.01 ) $ ( 0.24 )

Weighted average shares outstanding basic and diluted

79,558,346 ( 664,329 ) 78,894,017

Use of Estimates

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The Company attributes losses to non-capital expenditures related to the scaling of existing products and services, development of new products and services and marketing efforts associated with these products and services.

As of and for the six months ended June 30, 2024 , the Company had a working capital deficit of $ 3,375,000 and a net loss of $ 28,409,000 .

Our cash decreased by $ 12,296,000 for the six months ended June 30, 2024 primarily due to the cash paid to acquire ATD and redeem the 2023 Promissory Notes and the net loss of $ 28,409,000 , partially offset by external financing activity.

As of and for the nine months ended September 30, 2024 , the Company had a working capital deficit of $ 7,389,000 and a net loss of $ 41,055,000 .

Based on the Company's current business plan assumptions and the expected cash burn rate, the Company believes that the existing cash is insufficient to fund its current level of operations for the next twelve months following the issuance of these unaudited condensed consolidated financial statements.

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The Company will perform a qualitative assessment, to determine its fair value which includes an evaluation of relevant events and circumstances, including macroeconomic, industry and market conditions, the Company's overall financial performance, and trends in the value of the Company's common stock.

As of June 30, 2024 , the Company did not identify any events that would cause it to assess goodwill for impairment.

As of September 30, 2024 , the Company did not identify any events that would cause it to assess goodwill for impairment.

Business Combination

7 unchanged sentences

The Company allocates any excess purchase price over the fair value of the net tangible and intangible assets acquired to goodwill.

Fair Value Option ( “ FVO ” ) Election

Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Derivative and Hedging , (“ASC 815” ), a financial instrument containing embedded features and/or options may be required to be bifurcated from the financial instrument host and recognized as separate derivative asset or liability, with the bifurcated derivative asset or liability initially measured at estimated fair value as of the transaction issue date and then subsequently remeasured at estimated fair value as of each reporting period balance sheet date.

The Company's Prepaid Advance is accounted under the fair value option election.

Alternatively, FASB ASC Topic 825, Financial Instruments , (“ASC 825” ) provides for the “fair value option” (“FVO”) election.

In this regard, ASC 825 - 10 - 15 - 4 provides for the FVO election (to the extent not otherwise prohibited by ASC 825 - 10 - 15 - 5 ) to be afforded to financial instruments, wherein the financial instrument is initially measured at estimated fair value as of the transaction issue date and then subsequently remeasured at estimated fair valu e as of each reporting period balance sheet date, with changes in the estimated fair value recognized as other income (expense) in the statement of operations.

The estimated fair value adjustment of the Prepaid Advance, is presented within other income (expense) in the accompanying unaudited condensed consolidated statement of operations (as provided for by ASC 825 - 10 - 50 - 30 (b)).

Fair Value of Financial Instruments

The carrying amounts reported in the consolidated balance sheets for accounts receivable, notes receivable and accounts payable approximate fair value as of June 30, 2024 and December 31, 2023 because of the relatively short-term maturity of these financial instruments.

The carrying amount reported for long-term debt and long-term receivables approximates fair value as of June 30, 2024 and December 31, 2023 , given management’s evaluation of the instrument’s current rate compared to market rates of interest and other factors.

The carrying amounts reported in the consolidated balance sheets for accounts receivable, notes receivable and accounts payable approximate fair value as of September 30, 2024 and December 31, 2023 because of the relatively short-term maturity of these financial instruments.

The carrying amount reported for long-term debt and long-term receivables approximates fair value as of September 30, 2024 and December 31, 2023 , given management’s evaluation of the instrument’s current rate compared to market rates of interest and other factors.

The determination of fair value is based upon the fair value framework established by ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820” ).

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The Company does not have any Level 1 or Level 2 assets or liabilities.

The Company considers its contingent consideration and ATD Holdback Shares to be Level 3 investments as the fair value measurement is based on significant inputs that are unobservable in the market and thus represents a Level 3 fair value measurement.

There were no changes in levels during the period ended June 30, 2024 .

The following is a rollforward of the company’s contingent consideration and ATD Holdback Share liabilities:

The Company considers its contingent consideration, ATD Holdback Shares and the Prepaid Advance to be Level 3 securities as the fair value measurement is based on significant inputs that are unobservable in the market and thus represents a Level 3 fair value measurement.

There were no changes in levels during the period ended September 30, 2024 .

The following is a rollforward of the company’s contingent consideration, ATD Holdback Shares and the Prepaid Advance liabilities:

STS Contingent Consideration

Balance as of January 1, 2024

Loss (gain) due to change in fair value

Balance as of June 30, 2024

Loss due to change in fair value

Balance as of September 30, 2024

ATD Holdback Shares

Acquisition of ATD January 2, 2024

Loss (gain) due to change in fair value

Balance as of June 30, 2024

The following are the inputs in company’s ATD Holdback Share as of January 2, 2024 and June 30, 2024:

Gain due to change in fair value

Balance as of September 30, 2024

Prepaid Advance

Execution of Prepaid Advance August 14, 2024

Issuance of common stock to settle Prepaid Advance

Loss due to change in fair value

Balance as of September 30, 2024

The estimated fair value of the Prepaid Advance, was computed using a Monte Carlo simulation of the Company’s common shares, using the assumptions below.

The following are the inputs in Company’s ATD Holdback Shares and Prepaid Advance:

ATD Holdback Shares

January 2, 2024

June 30, 2024

September 30, 2024

Closing stock price

2 unchanged sentences

$ ( 0.68 ) $ ( 0.13 )

Prepaid Advance

August 14, 2024

September 30, 2024

Closing stock price

$ 1.39 $ 1.18

Risk-free rate

Indicated yield

14.2 % 12.5 %

Revenue Recognition

9 unchanged sentences

The following table presents a summary of revenue (dollars in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Recurring revenue

52 unchanged sentences

The following table presents a summary of revenue by customer type (dollars in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Urban Mobility

24 unchanged sentences

Where performance obligations for the remaining term of a contract with a customer are not yet satisfied or have only been partially satisfied as of a particular date, the unsatisfied portion is to be recognized as revenue in the future.

As of June 30, 2024 , the unsatisfied portion of the remaining performance obligation was approximately $ 21,023,000 .

As of September 30, 2024 , the unsatisfied portion of the remaining performance obligation was approximately $ 23,613,000 .

The Company expects to recognize approximately $ 15,898,000 of this amount as revenue over the succeeding twelve months, and the remainder is expected to be recognized within the next five years thereafter.

3 unchanged sentences

When billing occurs after services have been provided, such unbilled amounts will generally be billed and collected within 60 to 120 days, but typically no longer than over the next twelve months.

Unbilled accounts receivables of $ 1,530,000 and $ 946,000 were included in accounts receivable, net, in the unaudited condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023 , respectively.

Unbilled accounts receivables of $ 1,910,000 and $ 946,000 were included in accounts receivable, net, in the unaudited condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023 , respectively.

Contract liabilities

1 unchanged sentence

This revenue and the corresponding decrease in liabilities is recognized on a contract-by-contract basis at the end of each reporting period and reflected on the unaudited condensed consolidated balance sheet for such period.

Changes in the contract balances during the six months ended June 30, 2024 were not materially impacted by any other factors.

During the six months ended June 30, 2024 , $ 2,565,000 of the contract liabilities balance as of December 31, 2023 was recognized as revenue.

The services due for contract liabilities described above are shown below as of June 30, 2024 (dollars in thousands):

Changes in the contract balances during the nine months ended September 30, 2024 were not materially impacted by any other factors.

During the nine months ended September 30, 2024 , $ 3,163,000 of the contract liabilities balance as of December 31, 2023 was recognized as revenue.

The services due for contract liabilities described above are shown below as of September 30, 2024 (dollars in thousands):

2024, remaining

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The Company’s restricted cash balances are primarily made up of cash collected on behalf of certain client jurisdictions.

Restricted cash and cash equivalents for these client jurisdictions as of June 30, 2024 and December 31, 2023 were $ 328,000 and $ 328,000 , respectively, and correspond to equal amounts of related liabilities.

Restricted cash and cash equivalents for these client jurisdictions as of September 30, 2024 and December 31, 2023 were $ 365,000 and $ 328,000 , respectively, and correspond to equal amounts of related liabilities.

Concentrations of Credit Risk

The Company deposits its temporary cash investments with highly rated quality financial institutions that are located in the United States and Israel.

The Company deposits its temporary cash investments with highly rated financial institutions that are located in the United States and Israel.

The United States deposits are federally insured up to $250,000 per account.

As of June 30, 2024 and December 31, 2023 , the Company had deposits from operations totaling $ 3,417,000 and $ 15,713,000 , respectively, in multiple U.S.

As of September 30, 2024 and December 31, 2023 , the Company had deposits from operations totaling $ 10,967,000 and $ 15,713,000 , respectively, in multiple U.S.

financial institutions and one Israeli financial institution.

No single customer accounted for more than 10% of the Company’s unaudited condensed consolidated revenues for the three and six months ended June 30, 2024 and 2023 , respectively, except that Customer A accounted for 12 % of the unaudited condensed consolidated revenue for the six months ended June 30, 2023.

As of June 30, 2024 , no single customer accounted for more than 10% of the Company's unaudited condensed consolidated accounts receivable balance.

Customer A accounted for 12 % of the unaudited condensed consolidated revenue for the three months ended September 30, 2024 and 13 % and 12 % of the unaudited condensed consolidated revenue for the three and nine months ended September 30, 2023, respectively.

Additionally, Customer C accounted for 10 % of the unaudited condensed consolidated revenue for the three months ended September 30, 2023 .

No other single customer accounted for more than 10% of the Company’s unaudited condensed consolidated revenues for the three and nine months ended September 30, 2024 and 2023 , respectively.

As of September 30, 2024 , no single customer accounted for more than 10% of the Company's unaudited condensed consolidated accounts receivable balance.

As of December 31, 2023 , Customer A and Customer B accounted for 22 % and 13 %, respectively, of the unaudited condensed consolidated accounts receivable balance.

No other single customer accounted for more than 10% of the Company’s unaudited condensed consolidated accounts receivable balance as of December 31, 2023 .

Accounts Payable, Accrued and Other Current Liabilities

As of June 30, 2024 and December 31, 2023 , amounts owed to related parties of $ 189,000 and $ 253,000 were presented as part of accounts payable and accrued expenses on the unaudited condensed consolidated balance sheets.

Other Current Liabilities

As of September 30, 2024 and December 31, 2023 , amounts owed to related parties of $ 189,000 and $ 253,000 were presented as part of accounts payable and accrued expenses on the unaudited condensed consolidated balance sheets.

A summary of other current liabilities is as follows (in thousands):

June 30, 2024

September 30, 2024

December 31, 2023

2 unchanged sentences

Right of offset to restricted cash

STS Contingent Consideration

STS Contingent Consideration, at fair value

$ 5,467 $ 5,610

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In accordance with the acquisition method of accounting for a business combination, the purchase price has been allocated to the assets acquired and liabilities assumed based on their fair values as of the Closing Date.

Since the acquisition of ATD occurred on January 2, 2024, the results of operations for ATD from the date of acquisition have been included in the Company’s unaudited condensed consolidated statement of operations for the three months ended June 30, 2024.

The table below shows the breakdown related to the preliminary purchase price allocation for the acquisition (dollars in thousands):

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This unaudited pro forma financial information is presented for information purposes only and is not intended to present actual results that would have been attained had the acquisition and the issuance of the Series A Prime Revenue Sharing Notes been completed as of January 1, 2023 ( the beginning of the earliest period presented) or to project potential operating results as of any future date or for any future periods.

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands, except per share data)

7 unchanged sentences

89,285,197 70,168,085 84,397,568 64,621,498

NOTE 3 - INVESTMENTS

In February 2017, the Company contributed substantially all the assets and certain liabilities related to its vehicle services business to Global Public Safety (the “GPS Closing”).

After the GPS Closing, the Company continued to own 19.9 % of the units of Global Public Safety.

This equity investment did not have a readily determinable fair value and the Company reported this investment at cost, less impairment.

Prior to the sale of Global Public Safety the readily determinable fair value was $ 0 .

On July 1, 2024, the Company sold its remaining 19.9 % ownership of Global Public Safety to LB&B Associates Inc.

for $ 1,500,000 , which was paid in two cash installments of $ 750,000 at closing and $ 750,000 on August 1, 2024.

As a result of the sale, the Company recognized a gain of $ 1,500,000 during the third quarter of 2024 which is presented within other income (expense) in the accompanying unaudited condensed consolidated statement of operations.

NOTE 4 – SUPPLEMENTAL NON CASH DISCLOSURES OF CASH FLOW INFORMATION

Supplemental disclosures of cash flow information for the six months ended June 30, 2024 and 2023 were as follows (dollars in thousands):

Six Months Ended June 30,

Supplemental disclosures of cash flow information for the nine months ended September 30, 2024 and 2023 were as follows (dollars in thousands):

Nine Months Ended September 30,

Cash paid for interest

1 unchanged sentence

Cash paid for taxes

Decrease in accounts payable and accrued expenses related to purchases of property and equipment

Increase (decrease) in accounts payable and accrued expenses related to purchases of property and equipment

Increase (decrease) in accounts payable and accrued expenses related to purchases of inventory

Increase in inventory related to the transfer of property and equipment

( 394 ) ( 517 )

Decrease in deposits related to property and equipment received

Decrease in property and equipment that was uninstalled and moved to inventory

Non-cash financing activities:

3 unchanged sentences

Fair market value of shares issued in connection with the acquisition of ATD

Fair market value of ATD Holdback Shares

Fair market value of ATD Holdback Shares at the acquisition date

2023 Promissory Note redemption premium settled in shares of the Company’s common stock

Conversion of Prepaid Advance to common stock

New Leases under ASC-842:

Right-of-use assets obtained in exchange for new operating lease liabilities

Right-of-use assets obtained in exchange for new finance lease liabilities

Right-of-use assets obtained in exchange for new operating lease liabilities

NOTE 5 – INTANGIBLE ASSETS AND GOODWILL

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The purchase price for the ATD acquisition has been allocated to the assets acquired and liabilities assumed based on fair values as of the acquisition date.

Since the acquisition occurred on January 2, 2024, the results of operations for ATD from the date of acquisition have been included in the Company’s unaudited condensed consolidated statement of operations for the three months ended March 31, 2024.

As part of the Company's preliminary purchase price allocation for the acquisition, the Company recognized $ 3,720,000 in goodwill, $ 11,900,000 in customer relationships, assigned a 15 -year useful life, and $ 200,000 of marketing related intangible assets related to the ATD tradename, assigned a five -year useful life.

Intangible Assets Subject to Amortization

The following provides a breakdown of identifiable intangible assets, net as of June 30, 2024 and December 31, 2023 (dollars in thousands):

June 30, 2024

The following provides a breakdown of identifiable intangible assets, net as of September 30, 2024 and December 31, 2023 (dollars in thousands):

September 30, 2024

December 31, 2023

11 unchanged sentences

These intangible assets are amortized on a straight-line basis over their estimated useful life.

Amortization expense for the three months ended June 30, 2024 and 2023 was $ 1,171,000 and $ 1,032,000 , respectively, and for the six months ended June 30, 2024 and 2023 was $ 2,343,000 and $ 2,073,000 , respectively and is presented as part of depreciation and amortization in the unaudited condensed consolidated statements of operations.

Amortization expense for the three months ended September 30, 2024 and 2023 was $ 1,166,000 and $ 1,018,000 , respectively, and for the nine months ended September 30, 2024 and 2023 was $ 3,509,000 and $ 3,091,000 , respectively and is presented as part of depreciation and amortization in the unaudited condensed consolidated statements of operations.

During the current period there have been no events that would cause the Company to evaluate its intangible assets for impairment.

As of June 30, 2024 , the estimated impact from annual amortization from intangible assets for each of the next five fiscal years and thereafter is as follows (dollars in thousands):

As of September 30, 2024 , the estimated impact from annual amortization from intangible assets for each of the next five fiscal years and thereafter is as follows (dollars in thousands):

2024, remaining

1 unchanged sentence

On June 17, 2022, pursuant to the terms of the Company’s acquisition of STS, the Company issued an aggregate of $ 2,000,000 of notes payable in the form of two unsecured, subordinated promissory notes, each in the principal amount of $ 1,000,000 and bearing an interest rate of 3.0 % per annum, payable quarterly.

The notes currently mature on September 30, 2024 and June 17, 2025, respectively.

In June 2024, the Company and noteholders amended the $ 1,000,000 , June 2024 maturity payment of the subordinated promissory notes to September 30, 2024.

As of June 30, 2024, the aggregate balance of these notes payable was $ 2,000,000 which was included in notes payable current portion in the unaudited condensed consolidated balance sheets.

Notes in the principal amount of $ 1,000,000 matured on September 30, 2024, and $ 1,000,000 in principal amount of the notes will mature on June 17, 2025.

On September 3, 2024, the Company paid the first payment in the principal amount of $ 1,000,000 .

As of September 30, 2024 , the aggregate balance of these notes payable was $ 1,000,000 which was included in notes payable current portion in the unaudited condensed consolidated balance sheets.

2023 Promissory Notes

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The noteholders elected to accept $ 1,875,000 of the Redemption Payment in the form of 750,000 unregistered shares of the Company’s common stock, par value $ 0.0001 per share, having a value of $ 2.50 per share, with the remainder of the Redemption Payment to be paid in cash.

Subsequent to this transaction these shares have been registered on a Form S- 3.

Subsequent to this transaction these shares were registered on a Form S- 3.

See NOTE 9 – STOCKHOLDERS ’ EQUITY for additional information.

As a result of the Redemption Payment, the Company recognized a loss on extinguishment of debt of $ 4,693,000 , which included $ 1,875,000 related to the early termination payment and $ 2,818,000 related to unamortized issuance costs.

The 2023 Promissory Notes were a senior secured obligation of the Company and ranked senior to all indebtedness of the Company, subject to certain exceptions, had a maturity date of July 18, 2025 ( the “Maturity Date”), and bore an interest rate of 12 % per annum.

The 2023 Promissory Notes, which were a senior secured obligation of the Company and ranked senior to all indebtedness of the Company, subject to certain exceptions, had a maturity date of July 18, 2025 ( the “Maturity Date”), and bore an interest rate of 12 % per annum.

No 2023 Promissory Notes remain outstanding.

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Debt issuance costs paid in connection with the Series A Prime Revenue Sharing Notes were $ 670,000 and are being amortized as interest expense using a straight-line method over the term of the Series A Prime Revenue Sharing Notes.

The Company has a material relationship with Arctis Global, LLC, which invested $ 5,000,000 in connection with the $ 15,000,000 initial closing of the Series A Prime Revenue Sharing Notes.

The Company has a related party relationship with Arctis Global, LLC, which invested $ 5,000,000 in connection with the $ 15,000,000 initial closing of the Series A Prime Revenue Sharing Notes.

Interest will be paid based on revenue received from an initial pool of “prime” accounts which are related to contracts from customers in five states, each of which has been rated for their respective unsecured general obligation debt by nationally recognized credit rating agencies.

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If the sinking fund requirement takes effect, the Company is required to maintain a cash balance sufficient to amortize the principal amount due on all series of Prime Revenue Sharing Notes outstanding under the Indenture in equal monthly installments by the respective due dates of each such series.

The amount related to the interest reserve was $ 500,000 as of June 30, 2024 and is held by a third party and is presented as part of deposits on the consolidated balance sheets.

The Company is not in default of any requirements as they relate to the Series A Prime Revenue Sharing Notes and the sinking fund requirement has not been triggered as of June 30, 2024.

The amount related to the interest reserve was $ 500,000 as of September 30, 2024 and is held by a third party and is presented as part of deposits on the consolidated balance sheets.

The Company is not in default of any requirements as they relate to the Series A Prime Revenue Sharing Notes and the sinking fund requirement has not been triggered as of September 30, 2024.

The Company may prepay the Series A Prime Revenue Sharing Notes at any time after December 15, 2024 until December 15, 2026 by paying a premium ranging from 103 % to 106%.

1 unchanged sentence

Repayment of the Series A Prime Revenue Sharing Notes at par, plus any unpaid accrued interest, may also be accelerated by the noteholder upon a change in control or event of default.

For the three and six months ended June 30, 2024, the Company recognized $ 497,000 and $ 993,000 in interest expense, respectively, related to the Series A Prime Revenue Sharing Notes.

For the three and nine months ended September 30, 2024 , the Company recogni zed $ 497,000 and $ 1,490,000 in interest ex pense, respectively, related to the Series A Prime Revenue Sharing Notes.

Interest Expense

The following table presents the interest expense net of interest income related to the contractual interest and the amortization of debt issuance costs for the Company’s debt arrangements (dollars in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Contractual interest expense

8 unchanged sentences

Schedule of Principal Amounts Due of Debt

The principal amounts due for long-term notes payable are shown below as of June 30, 2024 (dollars in thousands):

The principal amounts due for long-term notes payable are shown below as of September 30, 2024 (dollars in thousands):

2024, remaining

2 unchanged sentences

NOTE 7 – INCOME TAXES

The Company maintains a full valuation allowance against its net deferred taxes, outside of the deferred tax liability related to the indefinite lived intangibles, through June 30, 2024 .

The Company maintains a full valuation allowance against its net deferred taxes, outside of the deferred tax liability related to the indefinite lived intangibles, through September 30, 2024 .

The Company files income tax returns in Israel, the United States and in various states.

Federal, state or foreign income tax audits were in process as of June 30, 2024 .

Federal, state or foreign income tax audits were in process as of September 30, 2024 .

The Company evaluated the recoverability of the net deferred income tax assets and the level of the valuation allowance required with respect to such net deferred income tax assets.

2 unchanged sentences

If it is determined in future periods that portions of the Company’s net deferred income tax assets satisfy the realization standard, the valuation allowance will be reduced accordingly.

For the three and six months ended June 30, 2024 and 2023, the Company did not record any interest or penalties related to unrecognized tax benefits.

For the three and nine months ended September 30, 2024 and 2023, the Company did not record any interest or penalties related to unrecognized tax benefits.

It is the Company’s policy to record interest and penalties related to unrecognized tax benefits as part of income tax expense.

The 2019 through 2023 tax years remain subject to examination by the Internal Revenue Service.

As of June 30, 2024 and December 31, 2023 , our evaluation revealed no uncertain tax positions that would have a material impact on the unaudited condensed consolidated financial statements.

For the three and six months ended June 30, 2024 and 2023, the Company did not record any expense or benefit related to income tax.

As of September 30, 2024 and December 31, 2023 , our evaluation revealed no uncertain tax positions that would have a material impact on the unaudited condensed consolidated financial statements.

For the three and nine months ended September 30, 2024 and 2023 , the Company did not record any expense or benefit related to income tax.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

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With respect to such lawsuits, claims and proceedings the Company accrues reserves when a loss is probable, and the amount of such loss can be reasonably estimated.

H.C Wainwright & Co., LLC

Wainwright & Co., LLC

In March 2023, the Company entered into an engagement letter with H.C.

Wainwright & Co., LLC, ("HCW"), related to a capital raise (see Note 8 – 2023 Registered Direct Offering).

Wainwright & Co., LLC, ("HCW"), related to a capital raise (see NOTE 9 – STOCKHOLDERS ’ EQUITY ).

That letter agreement contained provisions for both a “tail” fee due to HCW for any subsequent transactions the Company may enter into during the specified tail period with investors introduced to the Company by HCW during the term of the letter, as well as a right of first refusal ("ROFR") to act as the Company's exclusive underwriter or placement agent on any subsequent financing transactions utilizing an underwriter or placement agent occurring within twelve months from the consummation of a transaction pursuant to the engagement letter.

In July 2023, the Company entered into an agreement with one of its warrant holders in connection with the exercise of warrants, which the Company refers to as the July Warrant Exercise Transaction.

Subsequent to the July Warrant Exercise Transaction, the Company received a letter from HCW claiming entitlement to certain “tail” fees and warrant consideration stemming from the Warrant Exercise Transaction.

The Company believed then, and believes now, that this claim is without merit.

As a result of this claim and for other reasons articulated to HCW, the Company terminated its engagement letter with HCW, including for cause, which, the Company believes, eliminated both the “tail” provision and the ROFR provision with respect to the 2023 Registered Direct Offering.

On or about October 23, 2023, HCW filed a complaint in New York State Supreme Court asserting a claim for breach of contract against the Company relating to the July Warrant Exercise Transaction.

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In this lawsuit, HCW advances the same breach of contract theory and seeks to recover the same damages as sought in the prior now-dismissed lawsuit.

In addition, HCW seeks to recover an additional $ 2,156,000 in damages plus the value of warrants to purchase an aggregate of up to 805,000 shares of common stock at an exercise price of $ 3.125 per share in connection with Rekor’s February 2024 offering.

HCW alleges that Rekor breached its engagement letter with HCW by failing to give HCW notice of this offering and failing to provide HCW with the opportunity to exercise the ROFR with respect to this transaction.

On May 3, 2024, Rekor answered HCW’s complaint and filed counterclaims against HCW and Armistice Capital LLC ("Armistice") relating to Rekor’s March 2023 Registered Direct Offering, Armistice’s trading activity in Rekor common stock, and Rekor’s 2024 Public Offering.

Rekor’s counterclaims include causes of action for fraud, breach of fiduciary duty, and tortious interference.

After HCW and Armistice moved to dismiss Rekor’s counterclaims, Rekor filed amended counterclaims on October 1, 2024.

Rekor seeks to recover damages from HCW and Armistice.

9 unchanged sentences

On January 4, 2024, the Office of Administrative Law Judges (“OALJ”) processed the appeals and issued its Notice of Docketing and Order of Consolidation.

On February 28, 2024, the OALJ issued an Order setting forth a revised schedule governing the case with the start of the hearing scheduled for December 2, 2024.

On February 28, 2024, the OALJ issued an Order setting forth a revised schedule governing the case with the start of the hearing scheduled for March 3, 2025.

The Company believes these claims are without merit.

14 unchanged sentences

The net proceeds to the Company for the exercise of the Underwriters’ Option, after deducting the underwriting discounts and commissions and offering expenses payable by the Company of $ 2,388,000 was approximately $ 26,362,000 in aggregate for the 2024 Public Offering including the exercise of the Underwriters’ Option.

Prepaid Advance

On August 14, 2024, the Company entered into a Prepaid Advance Agreement (the “Prepaid Advance”) with YA II PN, Ltd., a Cayman Islands exempt limited company (the “Investor”), an affiliate of Yorkville Advisors Global, LP.

In accordance with the terms of the Prepaid Advance, the Investor advanced to the Company $ 15,000,000 .

After giving effect to the purchase price discount of 6 % provided for in the Prepaid Advance, net proceeds to the Company was $ 14,100,000 .

Pursuant to the terms of the Prepaid Advance, within one year the Company could have received an additional $ 20,000,000 on the same terms as the Prepaid Advance, subject to satisfaction of certain conditions.

On October 22, 2024, the Company and the Investor entered into Amendment No.1 to the Prepaid Advance Agreement (the “Amendment”) to eliminate the Optional Additional Advance from the PPA, see NOTE 12 – SUBSEQUENT EVENTS for additional information.

The Investor, at its sole discretion, may elect to purchase the Company’s common stock, $ 0.0001 par value per share, in exchange for any amount up to the total principal and interest of the Prepaid Advance, provided that none of the following limitations exist:

(i) the conversion may not cause the aggregate number of common shares beneficially owned by the Investor and its affiliates to exceed 4.99% of the then-outstanding voting power or number of common shares, (ii) the issuance of common stock may not exceed a certain cap (unless the Company has obtained stockholder consent or obtains a written legal opinion that stockholder approval is not required), and (iii) the amount of the advances converted may not exceed $ 2,625,000 in any month.

However, the Investor may convert principal Advances in excess of $ 2,625,000 each month upon an Event of Default, if the Purchase Price exceeds $ 2.50 per share, or upon the Company’s consent.

If and when requested by the Investor, amounts outstanding under the Prepaid Advance will be correspondingly reduced upon the issuance by the Company of its common stock, par value $ 0.0001 per share, to the Investor at a price per share equal to the lower of:

(a) $ 2.50 (the “Fixed Price”) or (b) 93 % of the lowest daily volume weighted average price (as reported during regular trading hours by Bloomberg) (“VWAP”) of the shares during the five trading days immediately prior to each purchase notice, subject a floor price of $ 0.28 per share (the “Floor Price”).

There is no interest related to the Prepaid Advance, however, interest will accrue at 18 % upon events of default.

The Prepaid Advance matures on August 28, 2025.

The Company incurred issuance costs and original issuance discounts totaling approximately $ 888,000 associated with the issuance of the Prepaid Advance, which were expensed as incurred as a component of other income (expense) in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2024.

Due to the various embedded derivatives that would otherwise require separate valuation and bifurcation as derivative liabilities, the Company elected to account for the Prepaid Advance under the fair value option as prescribed by ASC 825.

As of September 30, 2024, $ 2,500,000 of the Prepaid Advance had been converted into 2,207,876 shares of common stock.

During the three and nine months ended September 30, 2024, the Company recorded a change in fair value of the Prepaid Advance liability of $ 21,000 .

See NOTE 1 - GENERAL, BASIS OF PRESENTATION, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES for further discussion of the key inputs to determine the fair value of the Prepaid Advance.

As of September 30, 2024, the Prepaid Advance had a fair market value of $ 11,621,000 .

Subsequent to the period end, additional shares were issued, see NOTE 12 – SUBSEQUENT EVENTS for additional information.

Redemption of 2023 Promissory Notes

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On June 20, 2024, the Company entered into various Warrant Exercise Agreements (the “Agreements”) with certain holders of the 2023 Warrants (each an “Exercising Holder” and collectively, the “Exercising Holders”), pursuant to which the Company reduced the strike price of the 2023 Warrants from $ 2.00 per warrant to $ 1.40 per warrant to induce their exercise.

In June 2024, all but one of the Exercising Holders subsequently exercised 1,400,000 warrants for common stock in exchange for $ 1,960,000 .

In June 2024, all but one of the Exercising Holders exercised 1,400,000 warrants for common stock in exchange for $ 1,960,000 .

In July 2024, the remaining Exercising Holder exercised 2,275,000 warrants for common stock in exchange for $ 3,185,000 .

2 unchanged sentences

The shares issued in connection with the Warrant Exercise Agreements have been registered on a resale registration statement on Form S- 3, declared effective by the SEC on July 30, 2024.

A summary of the warrant activity for the Company for the period ended June 30, 2024 is as follows:

A summary of the warrant activity for the Company for the period ended September 30, 2024 is as follows:

2023 Promissory Notes (1)

7 unchanged sentences

( 1,575,000 ) - - ( 1,575,000 )

Outstanding warrants as of June 30, 2024

Outstanding warrants as of September 30, 2024

1,000,000 481,100 2,850,000 4,331,100

Weighted average strike price of outstanding warrants as of June 30, 2024

Weighted average strike price of outstanding warrants as of September 30, 2024

$ 1.58 $ 1.82 $ 3.25 $ 2.32

Intrinsic value of outstanding warrants as of June 30, 2024

Intrinsic value of outstanding warrants as of September 30, 2024

$ - $ - $ - $ -

Shares of common stock issued for warrant exercises during the six months ended June 30, 2024

Shares of common stock issued for warrant exercises during the nine months ended September 30, 2024

3,675,000 - - 3,675,000

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The vesting period is generally three years with a contractual term of ten years.

For the three and six months ended June 30, 2024 and 2023 there was no stock compensation expense related to stock options.

A summary of stock option activity under the Company’s 2017 Plan for the period ended June 30, 2024 is as follows:

For the three and nine months ended September 30, 2024 and 2023 there was no stock compensation expense related to stock options.

A summary of stock option activity under the Company’s 2017 Plan for the period ended September 30, 2024 is as follows:

Number of Shares Subject to Option

6 unchanged sentences

( 3,880 ) 3.81

Outstanding balance as of June 30, 2024

Outstanding balance as of September 30, 2024

681,461 $ 1.19 2.94 $ 136,000

Exercisable as of June 30, 2024

Exercisable as of September 30, 2024

681,461 $ 1.19 2.94 $ 136,000

As of June 30, 2024 , there was $ 0 of unrecognized stock compensation expense related to unvested stock options granted under the 2017 Plan.

As of September 30, 2024 , there was $ 0 of unrecognized stock compensation expense related to unvested stock options granted under the 2017 Plan.

Restricted Stock Units

Stock compensation expense related to Restricted Stock Units ("RSUs") for the three months ended June 30, 2024 and 2023 was $ 1,115,000 and $ 1,044,000 , respectively, and for the six months ended June 30, 2024 and 2023 was $ 2,282,000 and $ 2,156,000 , respectively, and is presented, based on the awardees operating department, as general administrative, selling and marketing and research and development expenses in the unaudited condensed consolidated statements of operations.

A summary of RSU activity under the Company’s 2017 Plan for the six months ended June 30, 2024 is as follows:

Stock compensation expense related to Restricted Stock Units ("RSUs") for the three months ended September 30, 2024 and 2023 wa s $ 1,148,000 and $ 1,081,000 , respectively, and for the nine months ended September 30, 2024 and 2023 was $ 3,430,000 and $ 3,237,000 , respectively, and is presented, based on the awardees operating department, as general administrative, selling and marketing and research and development expenses in the unaudited condensed consolidated statements of operations.

A summary of RSU activity under the Company’s 2017 Plan for the nine months ended September 30, 2024 is as follows:

Number of Shares

6 unchanged sentences

( 138,723 ) 2.84 1.54

Outstanding balance as of June 30, 2024

Outstanding balance as of September 30, 2024

2,380,289 $ 2.15 1.81

All RSUs granted vest upon the satisfaction of a service-based vesting condition.

As of June 30, 2024 , there was $ 3,209,000 of unrecognized stock compensation expense related to unvested RSUs granted under the 2017 Plan that will be recognized over an average remaining period of 1.40 years.

As of September 30, 2024 , there was $ 3,226,000 of unrecognized stock compensation expense related to unvested RSUs granted under the 2017 Plan that will be recognized over an average remaining period of 1.81 years.

NOTE 11 – LOSS PER SHARE

The following table provides information relating to the calculation of loss per common share:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands, except per share data)

9 unchanged sentences

8,057,179 12,001,681 8,057,179 12,001,681

As the Company had a net loss for the three and six months ended June 30, 2024 , the following 9,627,895 potentially dilutive securities were excluded from diluted loss per share:

As the Company had a net loss for the three and nine months ended September 30, 2024 , the following 8,057,179 potentially dilutive securities were excluded from diluted loss per share:

4,331,100 for outstanding warrants, 681,461 related to outstanding options, 664,329 related to the ATD Holdback Shares and 2,380,289 related to outstanding RSUs.

As the Company had a net loss for the three and six months ended June 30, 2023 , the following 16,200,612 potentially dilutive securities were excluded from diluted loss per share:

As the Company had a net loss for the three and nine months ended September 30, 2023 , the following 12,001,681 potentially dilutive securities were excluded from diluted loss per share:

9,595,076 for outstanding warrants, 691,174 related to outstanding options and 1,715,431 related to outstanding RSUs.

NOTE 12 – SUBSEQUENT EVENTS

Global Public Safety

On July 1, 2024, the Company sold its remaining 19.9 % ownership of Global Public Safety, LLC ("GPS") to LB&B Associates Inc for $ 1,500,000 , which was paid in two cash installments of $ 750,000 at closing and $ 750,000 on August 1, 2024.

2023 Warrants

In July 2024, the remaining Exercising Holder exercised 2,275,000 warrants for common stock in exchange for $ 3,185,000 .

Amendment No.

1 to Prepaid Advance Agreement

On October 22, 2024, the Company and the Investor entered into Amendment No.1 to the Prepaid Advance Agreement to eliminate the Optional Additional Advance from the PPA.

All other terms and provisions of the PPA remain unchanged and in full force and effect.

Prepaid Advance Agreement

Subsequent to the period end, $2,750,000 of the Prepaid Advance had been converted into 2,719,604 shares of common stock.

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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our continued ability to successfully access the public markets for debt or equity capital;

political, legal, regulatory, governmental, administrative and economic conditions and developments in the United States (“U.S.”) and other countries in which we operate and, in particular, the impact of recent and future federal, state and local regulatory proceedings and changes, including legislative and regulatory initiatives associated with our products;

political, legal, regulatory, administrative, military and economic conditions and developments in the United States (“U.S.”) and other countries in which we operate and, in particular, the impact of ongoing hostilities in the Middle East and recent and future federal, state and local regulatory proceedings and changes, including legislative and regulatory initiatives associated with our products;

current and future litigation;

205 unchanged sentences

The fair value measurements were primarily based on significant inputs that are not observable in the market, such as discounted cash flow ("DCF") analyses, and thus represent Level 3 fair value measurements.

Prepaid Advance

We have elected to account for the prepaid advance at fair value in accordance with FASB ASC Topic 825, Financial Instruments, (“ASC 825”).

In this regard, ASC 825-10-15-4 provides for the fair value option election (to the extent not otherwise prohibited by ASC 825-10-15-5) to be afforded to financial instruments, wherein the financial instrument is initially measured at estimated fair value as of the transaction issue date and then subsequently remeasured at estimated fair value as of each reporting period balance sheet date, with changes in the estimated fair value recognized as other income (expense) in the statement of operations.

The determination of the fair value of the prepaid advance at inception and each reporting date requires judgement from Management.

The fair value of the Prepaid Advance was calculated using a Monte Carlo simulation using quoted market prices of our outstanding common stock as of September 30, 2024.

Based on observed price movements, we will model advance payoffs under the various scenarios.

We determine the discount rate or yield of the Prepaid Advance and calculate the aggregate present value of all potential payoffs to estimate the fair value of the advance on each valuation date.

Applying the stock price on close of market September 30, 2024, of $1.18 per share, volatility of 90%, a risk-free rate of 4% and an indicated yield of 12.5%, management determined the fair value of the Prepaid Advance to be $11,621,000.

A change to these inputs could impact the fair value of the Prepaid Advance.

During the three and nine months ended September 30, 2024, the Company recorded a change in fair value of the Prepaid Advance liability of $21,000.

A comprehensive discussion of our critical accounting estimates and assumptions is included in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in our Annual Report on Form 10-K for the year ended December 31, 2023.

3 unchanged sentences

Our historical operating results in dollars are presented below.

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands)

11 unchanged sentences

Gain on remeasurement of ATD Holdback Shares

Loss on offering costs - Prepaid Advance

Gain on the sale of Global Public Safety

Other (expense) income

Total other income (expense)

Comparison of the Three and Six Months Ended June 30, 2024 and the Three and Six Months Ended June 30, 2023

Comparison of the Three and Nine Months Ended September 30, 2024 and the Three and Nine Months Ended September 30, 2023

Total Revenue

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands)

The increase in revenue for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, was primarily attributable to our acquisition of ATD in January 2024.

During the three and six months ended June 30, 2024, revenue attributable to ATD was $3,341,000 and $5,705,000, respectively.

The remainder of the increase in revenue for the six months ended June 30, 2024 was related to portable and short-term traffic services.

The increase in revenue for the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023, was primarily attributable to our Urban Mobility revenue stream which consists of revenue derived from roadway data aggregation activities.

During the three and nine months ended September 30, 2024, revenue attributable to ATD was $1,723,000 and $7,428,000, respectively, and is included as part of our Urban Mobility revenue stream.

The remainder of the increase in revenue for the nine months ended September 30, 2024 was related to portable and short-term traffic services.

Cost of Revenue, Excluding Depreciation and Amortization

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands)

Cost of revenue, excluding depreciation and amortization

For the three and six months ended June 30, 2024, cost of revenue, excluding depreciation and amortization increased compared to the corresponding prior periods primarily due to an increase in personnel and other direct costs such as hardware that were incurred to support our increase in revenue.

Additionally, during the three and six months ended June 30, 2024, $970,000 and $1,799,000 of the increase was related to our acquisition of ATD.

For the three and nine months ended September 30, 2024, cost of revenue, excluding depreciation and amortization increased compared to the corresponding prior periods primarily due to an increase in personnel and other direct costs such as hardware that were incurred to support our increase in revenue.

Additionally, during the three and nine months ended September 30, 2024, $809,000 and $2,608,000 of the increase was related to our acquisition of ATD.

Operating Expenses

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands)

6 unchanged sentences

General and Administrative Expenses

For the six months ended June 30, 2024, the increase in general and administrative expenses was primarily due to:

For the nine months ended September 30, 2024, the increase in general and administrative expenses was primarily due to:

a $2,453,000 increase in general and administrative expenses as a result of the acquisition of ATD.

a $206,000 increase in expenses related to our directors, mainly as a result the addition of two new members to our Board of Directors.

These expenses were offset by

a $85,000 decrease in payroll and payroll related expenses related to our operations excluding ATD.

a $350,000 decrease in professional services related to our operations excluding ATD.

For the three months ended June 30, 2024, the increase in general and administrative expenses was primarily due to:

a $545,000 increase in payroll and payroll related expenses related to our operations excluding ATD.

For the three months ended September 30, 2024, the increase in general and administrative expenses was primarily due to:

a $664,000 increase in general and administrative expenses as a result of the acquisition of ATD.

a $630,000 increase in payroll and payroll related expenses related to our operations excluding ATD.

a $106,000 increase in expenses related to our directors, mainly as a result the addition of two new members to our Board of Directors.

a $95,000 increase in professional services related to our operations excluding ATD.

Selling and Marketing Expenses

For the six months ended June 30, 2024, the increase in selling and marketing expenses was primarily due to a $343,000 increase in advertising expense, of which approximately $164,000 was related to our acquisition of ATD.

For the three months ended June 30, 2024, selling and marketing expenses remained fairly consistent period over period due to an increase in expenses related to ATD which were offset by a decrease to payroll and payroll related costs.

For the nine months ended September 30, 2024, the increase in selling and marketing expenses was primarily due to a $256,000 increase in advertising expense.

For the three months ended September 30, 2024, selling and marketing expenses remained fairly consistent period over period due to an increase in expenses related to ATD which were offset by a decrease to payroll and payroll related costs.

Research and Development Expense

Research and development expenses during the three and six months ended June 30, 2024 , compared to the three and six months ended June 30, 2023, remained consistent period over period.

Research and development expenses during the three and nine months ended September 30, 2024 , compared to the three and nine months ended September 30, 2023, remained consistent period over period.

Depreciation and Amortization

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Other Income (Expense)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands)

3 unchanged sentences

Gain on remeasurement of ATD Holdback Shares

Loss on issue and offering costs - Prepaid Advance

Gain on the sale of Global Public Safety

Other (expense) income

Total other income (expense)

For the three and six months ended June 30, 2024, interest expense decreased period over period due to the early redemption of the 2023 Promissory Notes.

For the three and nine months ended September 30, 2024, interest expense decreased period over period due to the early redemption of the 2023 Promissory Notes.

(Loss) gain on extinguishment of debt is a result of early redemption of the 2023 Promissory Notes.

As part of the redemption, we recorded a Redemption Payment of $1,875,000 which we settled through the issuance of common stock and accelerated debt issuance costs of $2,818,000.

Other income for the three and six months ended June 30, 2024, increased as a result of the remeasurement of the ATD Holdback Shares.

As part of the redemption, we recorded accelerated debt issuance costs of $2,818,000 and a Redemption Payment of $1,875,000 which we settled through the issuance of common stock.

Other income for the three and nine months ended September 30, 2024, increased as a result of the remeasurement of the ATD Holdback Shares.

Non-GAAP Measures

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The following table sets forth the components of the EBITDA and Adjusted EBITDA for the periods included (dollars in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Depreciation and amortization

1 unchanged sentence

Loss (gain) on extinguishment of debt

Loss on offering costs - Prepaid Advance

Gain on the sale of Global Public Safety

Adjusted EBITDA

6 unchanged sentences

The following table sets forth the components of the Adjusted Gross Profit and Adjusted Gross Margin for the periods included:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands, except percentages)

3 unchanged sentences

Adjusted Gross Margin

Adjusted Gross Margin for the three months ended June 30, 2024 increased compared to the three months ended June 30, 2023, while the Adjusted Gross Margin for the six months ended June 30, 2024 decreased compared to the six months ended June 30, 2023.

Adjusted Gross Margin For the three months ended September 30, 2024 decreased compared to the three months ended September 30, 2023.

The Adjusted Gross Margin for the nine months ended September 30, 2024 decreased compared to the nine months ended September 30, 2023.

The fluctuation in Adjusted Gross Margin is typically correlated to the mix of software sales versus service type work.

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The following table sets forth our recurring revenue for the periods included (dollars in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Recurring revenue

3 unchanged sentences

Performance Obligations

As of June 30, 2024, we had approximately $21,023,000 of contracts that were closed prior to June 30, 2024 but have a contractual period beyond June 30, 2024.

As of September 30, 2024, we had approximately $23,613,000 of contracts that were closed prior to September 30, 2024 but have a contractual period beyond September 30, 2024.

This represents a decrease of $2,777,000 or 11% compared to $26,390,000 of performance obligations as of December 31, 2023.

These contracts generally cover a term of one to five years, in which the Company will recognize revenue ratably over the contract term.

Performance obligations for large contracts gradually decrease as they approach the renewal stage and increase if and when renewed.

We currently expect to recognize approximately $15,898,000 of this amount over the succeeding twelve months, and the remainder is expected to be recognized over the following four years.

2 unchanged sentences

Lease Obligations

As of June 30, 2024, we had material leased building space at the following locations in the U.S.

As of September 30, 2024, we had material leased building space at the following locations in the U.S.

Columbia, Maryland – The corporate headquarters

4 unchanged sentences

The following table sets forth the components of our cash flows for the periods included (dollars in thousands):

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash used in operating activities

Net cash used in investing activities

Net cash (used in) provided by investing activities

Net cash provided by financing activities

Net (decrease) increase in cash, cash equivalents and restricted cash

Net cash used in operating activities for the six months ended June 30, 2024 had a decrease of $1,274,000, which was primarily attributable to the timeliness of collections related to our accounts receivable balance.

Net cash used in operating activities for the nine months ended September 30, 2024 had a decrease of $886,000, which was primarily attributable to increased loss in our operations.

The increase in net cash used in investing activities of $9,207,000 was primarily due to the net cash outflow of $9,222,000 related to the acquisition of ATD.

Net cash provided by financing activities for the six months ended June 30, 2024 decreased by $5,104,000 from the prior six month period ended June 30, 2023.

During the six months ended June 30, 2024, as part of our 2024 Public Offering, we received net proceeds of $26,362,000, these proceeds were partially offset by the repayment of our 2023 Promissory Notes.

During the six months ended June 30, 2023, as part of the 2023 Promissory Notes and the 2023 Registered Direct Offering, we received net proceeds of $11,100,000 and $9,159,000, respectively.

For the three and six months ended June 30, 2024 and 2023, we funded our operations primarily through cash from operating activities, the issuance of debt and the sale of equity.

As of June 30, 2024, we had cash and cash equivalents and restricted cash of $3,417,000 and a working capital deficit of $3,375,000, as compared to cash and cash equivalents and restricted cash of $15,713,000 and working capital of $8,100,000 as of December 31, 2023.

Net cash provided by financing activities for the nine months ended September 30, 2024 increased by $7,000 from the prior nine month period ended September 30, 2023.

During the nine months ended September 30, 2024, as part of our 2024 Public Offering and Prepaid Advance, we received net proceeds of $26,362,000 and $14,100,000, respectively, these proceeds were partially offset by the repayment of our 2023 Promissory Notes.

During the nine months ended September 30, 2023, as part of the 2023 Promissory Notes and the 2023 Registered Direct Offering, we received net proceeds of $11,100,000 and $9,159,000, respectively.

For the three and nine months ended September 30, 2024 and 2023, we funded our operations primarily through cash from operating activities, the issuance of debt and the sale of equity.

As of September 30, 2024, we had cash and cash equivalents and restricted cash of $10,967,000 and a working capital deficit of $7,389,000, as compared to cash and cash equivalents and restricted cash of $15,713,000 and working capital of $8,100,000 as of December 31, 2023.

Management has assessed going concern uncertainty to determine whether there is sufficient cash on hand, together with expected capital raises and working capital, to assure operations for a period of at least one year from the date these consolidated financial statements are issued, which is referred to as the “look-forward period”, as defined in U.S.

3 unchanged sentences

We attribute losses to non-capital expenditures related to the scaling of existing products, development of new products and service offerings and marketing efforts associated with these products and services.

As of and for the six months ended June 30, 2024, we had working capital deficit of $3,375,000 and a net loss of $28,409,000.

Our cash decreased by $12,296,000 for the six months ended June 30, 2024 primarily due to the cash paid to acquire ATD and redeem the 2023 Promissory Notes and the net loss of $28,409,000, partially offset by external financing activity.

As of and for the nine months ended September 30, 2024, we had working capital deficit of $7,389,000 and a net loss of $41,055,000.

Our cash decreased by $4,746,000 for the nine months ended September 30, 2024 primarily due to the cash paid to acquire ATD and redeem the 2023 Promissory Notes and the net loss of $41,055,000, partially offset by external financing activity.

7 unchanged sentences

The net proceeds to the Company for the exercise of the Underwriters’ Option, after deducting the underwriting discounts and commissions and estimated offering expenses payable by the Company, was $2,388,000, or approximately $26,362,000 in aggregate for the 2024 Public Offering including the exercise of the Underwriters’ Option.

As of June 30, 2024, we did not have any material commitments for capital expenditures.

Prepaid Advance

In accordance with the terms of the Prepaid Advance, the Investor advanced to the Company $15,000,000.

After giving effect to the purchase price discount provided for in the Prepaid Advance, net proceeds to the Company was $14,100,000.

As of September 30, 2024, we did not have any material commitments for capital expenditures.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

1 unchanged sentence

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. Financial Statements