Rekor Systems, Inc. 10-K

ITEM 1. BUSINESS Overview Rekor is at the forefront of the effort to modernize public safety, urban mobility, and transportation management through cutting-edge artificial intelligence (“AI”)-powered solutions tailored to the unique needs of each market we serve. By collaborating closely with our public and private sector customers, we deliver mission-critical services and solutions that enable them to achieve their objectives effectively, while simultaneously working toward creating a new digital infrastructure operating system for roadways. Our vision is to create safer, smarter, and more sustainable roadways and communities, improving the lives of citizens and the world around them. We achieve this by collecting, connecting, and organizing the world’s mobility data, making it useful, accessible, and actionable for real-time insights and decision-making. This provides our customers with significantly enhanced situational awareness, rapid response capabilities, risk mitigation strategies, and predictive analytics. To realize this vision, we’ve developed a suite of interconnected AI-driven hardware and purpose-built software platforms. Powered by vast and diverse multi-modal datasets and proprietary AI technologies, we have designed these solutions with the objective of delivering unparalleled roadway intelligence. They enable clients to more effectively monitor, manage, and optimize the movement of vehicles, traffic, and activities in and around roadways and communities with precision. Through real-time insights and predictive analytics, our platforms drive rapid decision-making, proactive risk mitigation, and streamlined operations across public safety, urban mobility, and transportation systems and agencies, ensuring smarter and safer outcomes for all. As of March 18, 2025, we had 323 employees, of which 319 were full-time and four considered part-time. Our operations are conducted primarily by our wholly-owned subsidiaries, Rekor Recognition Systems, Inc. (“Rekor Recognition”), Waycare Technologies, Ltd. (“Waycare”), Southern Traffic Services, Inc. (“STS”), and All Traffic Data Systems (“ATD”). A New Operating System for Roadways We believe the United States of America stands at a critical turning point in the evolution of its transportation and roadway infrastructure. For over 70 years, the nation has relied on legacy technologies and outdated analog and manual methodologies, resulting in inefficiencies, rising costs, and preventable safety hazards. While private-sector innovations like sensor technology, Internet of Things (“IoT”), AI, cloud computing, autonomous vehicles, and smart drones are advancing rapidly, fundamental challenges such as poor roadway quality, traffic congestion, and driver safety continue to escalate. In February of 2023, the U.S. Department of Transportation declared a national roadway safety emergency, calling for urgent action to address the alarming rise in injuries and fatalities. The American Society of Civil Engineers (“ASCE”) provides a report card for America’s infrastructure every four years. In 2021 ASCE graded overall U.S. infrastructure a C-minus. Roads, which had been rated C+ in 1988, were rated D, “poor or at-risk,” with over 40% of roadways considered in poor or mediocre condition. ASCE’s most recent report card, released March 25, 2025, showed a slight improvement for overall infrastructure to C, crediting better awareness and increased investment by government for slowing the investment gap. The 2025 grade for roads improved modestly to D+, with 39% of roads in poor or mediocre condition and an annual funding gap estimated at $684 billion. The report noted that deficiencies jeopardize public safety, contributing to an estimate of over 40,000 roadway deaths in 2023, but also impose significant economic costs, including an estimated average $1,400 per driver cost related to deteriorated and congested roads. Among the top policy objectives that the ASCE’s 2025 report called for was the continuing need to support the development of innovative technologies and ensure that reliable data is collected and released frequently regarding the condition, capacity, operations, maintenance, safety, and resilience of infrastructure systems. Recognizing the urgent need for modernization, the federal government has recently taken significant steps to invest in the transform the nation's infrastructure. The Infrastructure Investment and Jobs Act (“IIJA”) and Inflation Reduction Act (“IRA”) provided historic levels funding for transportation infrastructure system modernization. Additionally, the Creating Helpful Incentives to Produce Semiconductors (“CHIPS”) and Science Act provided support for AI-driven innovation and semiconductor production, critical components for modernizing infrastructure through technology. These legislative efforts are consistent with the foundation set by President Trump’s 2019 "American AI Initiative" and his most recent 2025 Executive Order 14179, which prioritized public-private collaboration and the adoption of AI technologies across sectors like transportation. These federal actions have provided a strategy and funding mechanisms for states to tackle the long-standing challenges of updating outdated, legacy systems for roadway intelligence gathering. Since 2018, Rekor has worked to deserve a place at the forefront of this wave of transformation and modernization of roadways, actively designing, building, and deploying its AI solutions through public-private collaborations with departments of transportation (“DOTs”), public safety agencies, and private sector partners. Rekor is committed to leading the laying the foundation of a groundbreaking new digital infrastructure operating system for roadways—and has already delivered proven value across multiple domains: ● Enhanced Roadway Safety: Real-time AI monitoring systems detect hazards and reduce roadway fatalities. ● Optimized Traffic Flow: Intelligent analytics alleviate congestion, improve commute times, and boost productivity. ● Cost Savings & Efficiency: AI automation streamlines operations, maximizing resource allocation for agencies. ● Improved Data Accuracy & Insights: Precise, real-time traffic data drives smarter decision-making and better resource planning. ● Border & Freight Management: AI-driven vehicle identification enhances security while minimizing bottlenecks. ● Uninsured Driver Reduction: Automated enforcement ensures insurance compliance, improving public safety. By combining advanced AI-driven insights with a forward-thinking infrastructure strategy, Rekor is reshaping how transportation systems operate. Its solutions empower agencies to prevent accidents, reduce inefficiencies, and optimize resources, driving smarter, safer, and more efficient roadways across the nation. 4 Table of Contents Roadway Intelligence Rekor is a leader in roadway intelligence, committed to revolutionizing transportation systems by collecting, connecting, and organizing the world’s mobility data. Roadway intelligence involves the ability to harness vast amounts and varieties data from roadways, vehicles, transportation systems, and hundreds of external elements like weather, special events, work zones, and more, transforming it into actionable insights. These unique insights empower stakeholders to enhance public safety, optimize traffic flows, and improve operational efficiencies. Through our Rekor One® roadway intelligence engine, we aggregate these datasets from diverse sources and securely deliver these insights to government agencies and private-sector clients, driving smarter, more effective decision-making across transportation management, urban mobility, and public safety ecosystems, as well as multiple commercial market segments. Inspired by the Open System Interconnection (“OSI”) model, Rekor integrates fragmented transportation systems into a cohesive, unified network. Collaborating with government agencies, infrastructure operators, transit providers, and technology partners, we consolidate hardware, software, and data into a connected platform that delivers smarter, safer, and more efficient roadways. Our mission extends beyond connectivity—we are building a dynamic, AI-driven network to modernize traffic management, public safety, and emergency services. By applying a digital layer to existing physical infrastructure and roadways, Rekor is creating a new generation digital operating system for roadways, delivering real-time intelligence that powers economic growth, operational excellence, and improved quality of life for communities. As we look to the future, Rekor remains committed to supporting public and private agencies in developing the digital infrastructure of tomorrow. Our innovative solutions are designed to redefine roadway intelligence and play a transformative role in shaping modern transportation, ensuring safety, efficiency, and resilience for generations to come. 5 Table of Contents Roadway Intelligence Powered by Rekor The Rekor One® roadway intelligence engine is a single source of truth for transforming transportation and mobility data into actionable insights. Powered by advanced AI and fueled by diverse data sources, Rekor delivers real-time and predictive solutions that enhance mobility, safety, and operational efficiency across public and private sectors. Our platforms aggregate and analyze trillions of data points from IoT devices, roadway sensors, cameras, and an expansive partner network, enabling customers to make proactive, informed decisions and optimize resources, and enabling us to deliver tailored solutions for government and commercial customers in public safety, urban mobility, and transportation management. Rekor’s solutions support a variety of use cases, including: ● Traffic Analysis o Comprehensive traffic reports, including Federal Highway Administration (“FHWA”)-mandated vehicle classification, count and speed analytics. o Analytics on bicycles, pedestrians, and other micro-mobility modes. o Identification of patterns and hot spots for emissions and traffic impacts. ● Traffic Operations & Management o Data-driven traffic operations for improved efficiency. o Real-time incident detection and response for proactive problem-solving. o Proactive traffic calming around events to minimize congestion and enhance safety. o Intelligent analytics to alleviate congestion, shorten commute times, and boost productivity. ● High-Definition Video Monitoring o Traffic monitoring to assist law enforcement. o Support for intelligence-based policing to improve crime prevention. o Contactless compliance and enforcement solutions for safety and legal adherence. ● Enhanced Roadway Safety o Real-time AI monitoring systems to detect hazards and reduce roadway fatalities. o Predictive analytics to anticipate and address potential safety risks. ● Optimized Resource Allocation o AI automation to streamline operations and maximize resource allocation. o Improved data accuracy to support better decision-making and strategic planning. ● Border & Freight Management o AI-based vehicle identification to enhance national security and minimize bottlenecks at borders and ports. o Weigh-in-Motion (“WIM”) systems for real-time commercial trucking analytics ● Insurance Compliance & Public Safety o Automated enforcement systems to reduce uninsured drivers and improve overall public safety. 6 Table of Contents By combining advanced technology, domain expertise, and implementation capacity, Rekor offers truly end-to-end roadway intelligence solutions for public agencies and private sector clients. Rekor One®, together with our Rekor Partner Network, enables us to generate unique and deep insights that enable proactive and data-driven decision-making, enabling governments and businesses to unlock the full potential of their infrastructure, and foster safer, smarter, and more efficient roadways and communities, and improving the lives of people. 7 Table of Contents The Road Ahead The United States is now making historic investments to modernize and digitize its aging infrastructure, leveraging cutting-edge technologies like artificial intelligence, edge computing, and the internet of things. Rekor is at the forefront of this transformation, delivering state-of-the-art AI-driven roadway intelligence solutions to enhance public safety, urban mobility, and transportation management. By collecting, connecting, and organizing global mobility data, Rekor provides real-time and predictive insights for roadways, enabling smarter, safer, and more efficient mobility. Our mission is to be a foundational partner in creating the new digital infrastructure operating system for roadways, empowering communities and businesses with actionable intelligence to drive progress. With a focus on innovation, security, and operational excellence, Rekor is shaping the future of transportation, delivering intelligent and connected solutions that pave the way for a brighter, more efficient, and sustainable future for all. 8 Table of Contents Platforms, Products, and Solutions Rekor's revenue streams are driven by our innovative software and data services, along with complementary hardware and peripheral products. The Rekor One® platform is the central hub of an integrated operating system, supporting the assimilation, analysis, and distribution of data from various sources. Our sales strategy involves offering subscriptions for our software solutions, utilizing the Software-as-a-Service (“SaaS”) model. These subscriptions can be provided with or without hardware sales, and our platform is designed to enable customers to enhance their existing sensor network by integrating our proprietary sensors into the network over time. While we may continue to offer long-term licenses for certain strategic partnerships, we anticipate that the bulk of our revenue in the future will come from our newer SaaS model. 9 Table of Contents Rekor One ® Intelligence Platform Rekor One ® , is the bedrock of our innovative AI-powered roadway intelligence platforms, serving multiple missions with modular and rapid development capabilities. Our proprietary technology and machine learning models power all our solutions, including Rekor Command ® for transportation management, Rekor Discover ® for urban mobility, Rekor Scout® for public safety, plus various commercial use cases. The security of Rekor One ® , and all our market facing solutions is a top priority. We use industry-leading security technologies and standards, including end-to-end encryption and proprietary data filters, to ensure that all captured and connected data is protected from unauthorized access or use. We adhere to strict privacy protocols and provide customers with 24/7 access to their data until it is purged. Our platform is hosted on AWS GovCloud for secure data handling and stored in secure databases with limited access only to authorized system administrators. Moreover, Rekor One ® incorporates a privacy filter that uses a proprietary algorithm to strip personally identifiable information (“PII”) from data, ensuring that data privacy is safeguarded. Rekor Command ® for Transportation Management Commuters today face staggering congestion, widespread safety concerns, and rising fatalities that are made far worse by outdated, siloed transportation and traffic management systems that are often overwhelmed by large amounts of unusable data. Rekor enables municipalities to transform their approach to transportation management by sourcing, managing, and transforming massive amounts of data, including connected vehicle, event, construction, weather, telematics, existing customer infrastructure, and much more, into actionable insights through AI-enabled technology. Authorities can now shift from being siloed and reactive to an interoperable and proactive approach, saving lives, improving traffic flow, and reducing pollution in their cities. Rekor Command ® acts as a seamless command center for traffic operations and traffic management centers so they can have a holistic view of their roadways in real-time, and take appropriate action to help improve safety, sustainability, and efficiency for citizens across their communities. It’s been built to identify more incidents faster, to enable proactive traffic management through crash-risk prediction, and to do this in a collaborative way connecting agencies and stakeholders, including notifying citizens and the public. As a comprehensive cross-agency platform, Rekor Command ® offers dedicated applications for traffic management centers, freeway service patrol, first responders and maintenance crews, aligning them all to better address traffic challenges while arming them with the vital information needed to identify, manage, and recover from incidents and irregularities on their roadways. Rekor Command ® – Roadway Monitoring Core Application & Events Management Application The Roadway Monitoring Core application and Events Management application are fundamental applications that sit within the Rekor Command® platform providing cross-agency incident detection and management functionality that allows customers to effectively implement incident detection and management within their existing workflows while accessing real-time information needed to rapidly identify, manage, and recover from incidents. Traffic management agencies are able to access a live map view of their roadways and are alerted to irregular events and potential incidents that have been identified through AI assisted analysis of multiple sources of data. Once confirmed by the agency, multiple responders are notified to rapidly approach and clear the roadways, enabling traffic to continue and roadway safety to improve. Rekor Command ® – Community Connect Application The Community Connect application within the Rekor Command ® platform allows agencies to integrate with systems that can notify public in real-time of events or incidents that are impacting the roadway. This application is a channel for agencies to interact directly with the public, keeping citizens up to date and aware of potentially dangerous events and incidents to help prevent additional incidents from occurring. Rekor Command ® – Advanced Analytics Application The Advanced Analytics application within the Rekor Command ® platform provides agencies with reporting capabilities to archive incident and event information, as well as analytics to help users better understand trends, patterns, and planning. This helps DOTs to understand historic patterns and arms them with the insights needed to make more proactive decisions around resource allocation and planning. Rekor Command ® – Road Conditions Application The Road Conditions application within the Rekor Command ® platform provides several layers of critical information about real-time conditions happening on an agency’s roadways, including real-time weather information with high geospatial specificity, regular and irregular congestion, heightened crash risk, transit impact, and current roadway status. These additional insights and data feeds help further the real-time view agencies have of their roadways and provide additional layers of information that drive decision-making. Rekor Command ® – Asset View Application The Asset View application within the Rekor Command ® platform allows agencies to integrate with their existing assets on the roadway and showcase these assets in real-time within the Command platform. Agency assets become an additional layer of data to drive decision making and resource allocation. Assets that are typically integrated include freeway service patrol vehicles, highway police vehicles, city police vehicles, fire department vehicles, construction vehicles, EMS, maintenance vehicles, street sweep vehicles, and snowplows. 10 Table of Contents Rekor Discover ® for Urban Mobility Traditional approaches to capturing roadway and infrastructure analytics for planning and engineering generally employ expensive, manual processes that use antiquated technology to capture a fraction of the available information for a fraction of the time. Cities, states, and municipalities know that having a clear and accurate picture of what’s happening in and around the roadway is critical as they plan and invest in the infrastructure needed for smart cities, smart transit, self-driving vehicles, and multi-modal movement across their geographies. The Rekor Discover ® platform ingests data from Rekor’s innovative hardware and fully automates comprehensive analytics and actionable insights about the movement of objects across the roadway. Whether its passenger vehicles, or multi-axle commercial trucks, Rekor Discover ® pulls ground truth insights, both in real-time and historically, allowing agencies to better organize and execute their next-generation roadway planning and city building initiatives in a smart and safe forward-looking way. Customers access their dashboard on web-based cloud instances and review on-demand traffic reports and analytics that breakdown vehicle volumes and patterns, FHWA 13-bin vehicle classification, count, electric vehicle volumes and hot spots, geospatial greenhouse gas emissions from vehicles, smog scores, average and spot speeds, along with a variety of other insights. In addition to agencies, many businesses need to understand the vehicle flow, patterns, types, and other important analytics regarding vehicles in their geographies. Whether it is an engineering firm collecting roadway data for their customers, or a real estate developer planning development in a specific area, the capture of accurate, holistic roadway data is valuable for their unique use cases. Rekor Discover ® – Count, Class and Speed Application The Count, Class and Speed (“CCS”) application within the Rekor Discover ® platform delivers per vehicle record (“PVR”) data and analytics that fully automate FHWA reporting requirements for 13-bin classification. Agencies can leverage Rekor’s portable or fixed AI-based systems to capture this data in a fully automated way and then access this rich data in real-time through the CCS application's cloud-based dashboards. In addition to FHWA-13 vehicle category classification, the application also provides vehicle counting, traffic data, and speed reporting, all accessible by different agencies determined time frames. Agencies can generate reports and extract data through a REST API or also by exporting data in multiple Traffic Monitoring Guide (“TMG”) standard formats (PRN, .CSV, and .PDF) for integration with the tools they may already be using. With this technology agencies can make better-informed planning decisions with ground truth information. Rekor Discover ® – Vehicle Insite Application Rekor Discover’s Vehicle Insite application analyzes real-time video to provide actionable, on-property vehicle intelligence such as vehicle characteristics, Electric Vehicle (“EV”) statistics and other metrics. Utilizing state-of-the-art AI and high-definition camera systems, Vehicle Insite delivers real-time traffic data to deepen the customer’s understanding of the vehicles visiting their properties, enabling enriched experiences and targeted marketing initiatives. Our Visit Metrics feature assists in the analysis of traffic flow patterns to prepare and plan for volume fluctuations, enabling a smooth and efficient experience. Our Vehicle Characteristics feature provides vehicle demographics to leverage in the creation of targeted marketing campaigns that engage and attract the ideal customer segments. Our Vehicle Characteristics feature provides vehicle demographics to leverage in the creation of targeted marketing campaigns that engage and attract the ideal customer segments. The Vehicle Insite application helps users better plan for EV charge station deployment, understand the movement of EVs and their adoption, and gather insights on where emissions and greenhouse gases are emitted from the roadway. The application provides cloud-based dashboards and reports the count of EVs, provides heatmaps for EVs as well as a breakdown of EV models, greenhouse gas emissions and smog, and other useful metrics. Agencies can leverage Rekor’s AI-based systems to capture this data in a fully automated way and then access this rich data in real-time through the sustainability planning application. 11 Table of Contents Rekor Scout ® for Public Safety Rekor is helping to transform the typically siloed, reactive, single-purpose world of legacy law enforcement and security technology with real-time, AI-driven solutions that act as connectors between agencies and force multipliers in a chronically under-resourced space. The Rekor Scout® platform fully automates previously manual processes with collaborative solutions that keep all stakeholders apprised of developing situations and accelerate reaction times to incidents and offenders. The platform provides accurate license plate and vehicle recognition on nearly any IP, traffic, or security camera. It provides integrated AI support for both existing cameras and any proprietary Rekor AI systems in the network and displays results on a web-based dashboard that can be accessed from anywhere by any authorized user. The platform can connect authorized law enforcement agencies to National Crime Information Center (“NCIC”) lists, allowing them to establish customized hotlists with alerts, apply customized data retention policies and share data with other agencies. Vehicles listed on “blacklists” (stolen, terrorists, amber alerts, etc.) generate an alarm in the dispatching room so that they can be intercepted by a patrol. Millions of cars per week are automatically checked in this way. Through this platform agencies can access real-time alerting, forensic research tools, and investigative tools that accelerate public safety and security missions. Agencies and customers can access plate data by state or province from over 50 countries together with the vehicles’ make, model, color, body type, and direction of travel. Users can also access subtle and unique vehicle characteristics including rust, the presence of a roof rack, mismatched paint, or the like, which can be used for investigative policing and forensics. When combined with high performance reads, parallel processing capability and best-in-class hardware such as those built and deployed by Rekor, Rekor Scout® acts as a force multiplier capturing license plate data and vehicle characteristics across multiple lanes at high vehicle speeds with a high degree of accuracy. Rekor Scout® can also be accessed through a smartphone app designed specifically for law enforcement. This app enables advanced data capture by public safety officers in the palm of the hand, providing access to extremely accurate license plate recognition in areas not covered by stationary or mobile sensors, even where there is no network connectivity. The mobile application retrieves vehicle license plate number and state of registration and automatically organizes information by sessions, capturing date, location, and timestamp. Verified reads then sync with the Rekor Scout® platform, and users can receive in-app alerts using plate matches from custom and connected hotlists. With on-device encrypted lists and data, the mobile application is compliant with the Federal Bureau of Investigation’s Criminal Justice Information System (“CJIS”). Through our eCommerce platform, we also offer commercial versions of Rekor Scout® which are sold as a subscription service. Rekor Scout® for commercial users includes specialized offerings that bring value to a variety of industries including parking, retail, logistics and security. Additional Products Supporting Additional and Commercial Use-Cases Rekor AutoNotice ™ Application for Contactless Compliance Rekor’s AutoNotice is a cloud-based financial management application that delivers a turnkey information and citation management solution for cities, states, and municipalities for both primary and secondary offenses. Our plate-based application provides a safe, equitable, and unbiased enforcement method that requires no human involvement. The application issues notices and/or sends information to registered vehicle owners when a non-compliant vehicle is detected by a Rekor AI system. Non-compliant vehicles are any vehicles actively detected to be violating the law or otherwise requiring a compliance notice. Non-compliance may include uninsured vehicles, vehicles with expired registration, and vehicles with outdated emissions/inspection statuses. We have an active deployment of our AutoNotice application for contactless compliance scanning millions of plates and delivering thousands of notices/tickets, including a program for the State of Oklahoma that facilitates enrolling uninsured motorists into a diversion program. In addition to the application, there is an application programming interface for third-party payment gateways for credit card transactions to accommodate both phone and web payments. The interface can also automatically record payments in the system and provide functionality to research, manage unapplied payments, and reconcile receipts. A full call-center is also provided with our AutoNotice application to help facilitate payment or information distribution to non-compliant citizens remotely. Rekor CarCheck ® Application Program Interface (“API”) Rekor CarCheck ® allows our powerful AI based vehicle and license plate recognition technology to be conveniently accessed for a wide range of commercial applications. This API supports nearly any programming language, analyzes still images of vehicles from different countries and responds in seconds with accurate license plate data, vehicle make, model, body type, color and orientation. 12 Table of Contents Rekor Hardware Products Rekor’s portfolio of innovative hardware products are purpose-built to optimize the value of our software as well as bring the advantages of edge AI processing to capture real-time roadway data. Data capture, aggregation and AI/ML analysis is done on device, at the point of capture on the roadway, so that it can be efficiently delivered to the point of use without processing delays. This reduces costs and enables our systems to work with significantly reduced bandwidth requirements, allowing us to deploy in almost any area, at scale, gathering insights from the roadway in real-time where it matters. Rekor Edge Max ™ Rekor Edge Max™ is a fixed traffic data collection system that captures and transforms high-resolution roadway data into holistic traffic insights. Engineered for high-speed primary roadways and highways up to 120 mph, 3-4 lanes (up to 6 lanes with dual cameras), and 300 ft max range, Edge Max seamlessly captures and processes vehicle data on-device and from advanced distances. The system features a durable enclosure, onboard modem, easy mounting, optional solar power, and can be configured with two cameras to increase capture range. The system captures and analyzes vehicles using the embedded Edge Processing Unit ("EPU") and AI-powered video processing. The Edge Max can be integrated into a network and features an onboard modem, easy mounting, optional solar power, and can even be configured with multiple cameras to increase capture range. Rekor Edge Pro ™ Rekor Edge Pro™ is a complete vehicle recognition solution that can be used on a standalone basis or integrated into a network. Engineered for roadway speeds up to 70 mph, 1-2 lanes, and 75 ft max range, the system can be deployed in neighborhoods, campuses, business districts, and can also be used for parking and access control. It captures and processes data on-device within a durable enclosure. The unit is simple to install and features optional solar power that expands the number of locations where Rekor Edge Pro™ can meet the customer’s needs. Rekor Edge Flex ™ Rekor Edge Flex™ is a non-intrusive, portable data collection system that captures and transforms high-speed roadway data into holistic traffic insights. Powered by a range of modular batteries, the Edge Flex is designed for temporary studies lasting 1 to 7 days. Edge Flex captures up to 12 lanes of traffic and employs AI-powered video processing to analyze it on site using the embedded EPU. Vehicle category classification, vehicle counts, and speed reports are made available in web-based dashboards or exported in multiple file formats that meet TMG standards. 13 Table of Contents Rekor Traffic Services With the addition of ATD in 2024, Rekor offers thousands of personnel-years of unparalleled traffic data collection and traffic engineering expertise and services to our customers using both traditional and AI-based approaches. Traffic services include, but are not limited to the following: Our global presence features an installation base spanning the United States and several international countries, allowing us to deploy our highly experienced field staff anywhere to ensure our commercial and government clients receive tailored solutions irrespective of their geographical location. Traditional Traffic Studies Rekor's traditional traffic studies serve as the cornerstone for both permanent and temporary traffic analytics projects, delivering vital data and insights for those involved in the planning and management of roadway infrastructure and commercial initiatives. Our team of experts provides accurate vehicle volume counts all year round, every hour of the day, supporting trend analysis, real-time adjustments, and the advancement of traffic management systems. We emphasize tailoring our approach to meet specific goals, ensuring that each project is conducted efficiently, effectively, and in a cost-conscious manner. Innovative AI-driven Traffic Studies For agencies seeking to enhance their traffic management services, Rekor presents the cutting-edge AI-driven Rekor Edge Series. These solutions, available in both portable and permanent formats, mark a significant departure from traditional methods. They can be deployed quickly at roadside locations, eliminating the need for manual data collection in potentially dangerous or traffic-heavy areas. Transitioning to Rekor’s AI-driven systems not only increases the accuracy and efficiency of traffic data collection but also prioritizes the safety of road workers by minimizing their need to work in risky conditions or disrupt traffic flow. This innovative approach is swiftly gaining favor among commercial and public entities for its ability to ensure safety, minimize road disruptions, and deliver scalable and speedy solutions. These AI-powered systems are redefining the standards of efficiency and precision, allowing clients to adeptly meet contemporary traffic management challenges. Extensive Traffic Engineering Services Rekor is dedicated to offering comprehensive traffic engineering services, leveraging both historical and newly gathered data. Our advanced analytical methods convert raw data into actionable insights, supporting a wide range of studies, including: ● Origin-Destination Studies: Map vehicle routes to support urban development planning. ● Travel Time Studies: Provide insights into travel efficiency and congestion patterns. ● Occupancy Studies: Analyze parking and vehicle occupancy to understand utilization trends. ● Traffic Impact & Operations Analysis: Forecast the implications of new developments and refine traffic control strategies. ● Access Management Studies: Formulate approaches to manage vehicular access points effectively. ● Traffic Signal Warrant Analysis: Evaluate the necessity for traffic signal installations. ● Traffic Signal System Timing Analysis and Design: Optimize traffic signal timings for smoother traffic flow. ● Intersection Improvements: Upgrade intersections to bolster safety and improve traffic movement. ● Turning Movement Counts: Document the volume and direction of vehicles, pedestrians, or cyclists at specific road locations to enhance road design, traffic signal management, and overall traffic efficiency. Our extensive technology portfolio, combined with our ability to deploy skilled teams anywhere in the world for traffic engineering and traffic services, positions us as a leading force in shaping the future of traffic management and infrastructure development. 14 Table of Contents Competitive Strengths Our patented technology has driven our global expansion and been prominently featured by renowned outlets. We have earned trust and business over established incumbents as well as new entrants in highly competitive bidding processes, owing to our award-winning proprietary technology and exceptional customer service. We work to provide a unique breadth, depth, and sophistication that our integrated platform delivers to multiple missions and agencies. We seek to maintain our first-mover advantage by continuing to invest in our key differentiators and solution set. In the transportation management, public safety, urban mobility, and commercial markets, we possess and continue to cultivate a variety of competitive strengths that set us apart: ● Solution-driven Approach : Our customers are often overwhelmed with an immense amount of data from a wide range of sources. We bridge the gap between data and actionable solutions by converting data into information, knowledge, and insights through our proprietary technology and platform, enabling customers to make informed decisions. ● Single Source Provider : Unlike other organizations that provide only disconnected products, we deliver an integrated platform of solutions to meet the needs of transportation management, public safety, and commercial markets. As we are infrastructure and data agnostic, we can serve as a single source provider to customers for any of their requirements. ● One Device Multiple Missions : Our advanced IOT devices are powerful performer that support multiple value-added AI-based data collection and analytic services on the same unit simultaneously, thereby providing extreme value, extensibility, and ability for customers to future-proof their investments well into the future as needed. ● Cross-Agency Functionality : Our platform supports multiple missions with the same, unified operating system. By integrating our platform directly into agency workflows, we empower our customers to address the growing concerns around safety, equity, and sustainability effectively. ● Industry-leading Privacy and Security : We use advanced security technologies and standards to safeguard all captured and connected data from unauthorized access or use. Our platform also employs proprietary algorithms to strip PII from data, protecting the privacy of our customers and their data. ● Enhanced Accuracy and Capture for Vehicle Recognition : Our AI software achieves superior accuracy rates under broader parameters of vehicle speed, camera viewing angles, and lighting conditions, capturing vehicle traits, rust, damage, and other unique signatures that can be used to aid investigations ● Technology leading Vehicle Classification, Count, and Speed: Our AI software also achieves superior accuracy and performance rates across all 13 classes and deep classification of vehicles for DOT studies in line with the latest FHWA guidelines. ● Intelligence-Based Policing : Our comprehensive data capture allows us to detect patterns and analytics around vehicles of interest for law enforcement, significantly enhancing the value of our products and services. ● Functionality with any IP Cameras : Our AI software supports images and vehicle recognition captured by almost any digital camera, providing a flexible, infrastructure-agnostic solution that is easily scalable across geographies. ● Edge Processing : Our hardware delivers low-latency alerting via defined edge processing at the edge of the network, enabling real-time data processing and scale without the need for expensive infrastructure such as fiber. ● SOC II Compliance: Each of our three platforms are SOC II Compliant. 15 Table of Contents Customer Segments and Markets Our technology and solutions are transforming the transportation infrastructure landscape, empowering customers in 90 countries around the world. With many markets currently relying on outdated physical infrastructure, or in the early stages of technology adoption, we see immense potential for growth. Our diverse customer base includes cities, states, municipalities, law enforcement agencies, commercial customers and more, and our success is evidenced by our multiple pilots, proof of concept, and full-scale deployment agreements throughout the Americas. While we will continue to pursue opportunities to sell perpetual licenses and hardware, our focus has been on providing innovative SaaS and pay-for-data offerings and services with recurring annual revenues. Our eCommerce site allows us to serve individuals and smaller organizations at scale using a self-service recurring revenue model. We expect the market for our solutions and services to be significant. We are dedicated to addressing a wide range of market segments, including intelligent transportation systems, smart mobility, traffic analytics, incident detection and location systems, traffic and parking management, smart cities, vehicle regulatory compliance programs, and more. Since the launch of our Rekor One® roadway intelligence Engine in 2020, our market-specific solutions have gained increased adoption, both in the government and commercial sectors. We are confident in our competitive position and look forward to continued growth and success as we lead the way in intelligent infrastructure. Business Drivers and Growth Strategies Rekor’s products and services have consistently demonstrated their ability to significantly enhance public safety, urban mobility, and transportation management, positioning the company as a leader in addressing critical infrastructure challenges. The transportation and roadway infrastructure market is undergoing transformative change, driven by a convergence of political, economic, societal, and technological forces. Rising safety concerns, rapid urbanization, and the growing need for advanced mobility solutions have prompted governments and businesses to seek innovative, scalable technologies. Recent federal initiatives, including the 2025 Executive Order on "Removing Barriers to American Leadership in Artificial Intelligence," emphasize technology-driven modernization, AI advancement, and infrastructure investment—all of which align with Rekor’s solutions. These developments, combined with increased government attention to the need to digitize transportation infrastructure, create a significant opportunity for Rekor to accelerate its growth and impact. Rekor’s solutions are uniquely aligned with these priorities and address a wide range of challenges: ● Rekor Scout ® : Plays a pivotal role in public safety and law enforcement by providing advanced monitoring and intelligence tools for vehicle recognition and Automatic License Plate Recognition (ALPR) that enable proactive policing, crime prevention, real-time crime alerting, contactless compliance, and investigative policing missions. By leveraging AI and high-definition video capabilities, Scout enhances situational awareness and supports proactive, data-driven decision-making, helping to uphold law and order in communities. ● Rekor Command ® : Focused on enhancing roadway safety and reducing traffic congestion, Command offers unique and powerful solutions for transportation management, including real-time incident detection, proactive traffic calming, and predictive analytics. These capabilities empower agencies to allocate resources strategically, mitigate risks, response quickly to roadway incidences, and improve traffic flow, ensuring safer and more efficient roadways. ● Rekor Discover ® : Critical for analyzing, planning, and maintaining the nation’s 4.2 million miles of roadways, Discover provides data-driven insights to assess existing infrastructure and guide strategic investments. By integrating real-time data from roadway sensors, video, connected vehicles, and external sources like weather and event data, Discover supports the modernization and long-term resilience of transportation networks. The Rekor One® intelligence engine serves as the backbone of these solutions, combining modular design, proprietary edge processing, and AI-driven technologies to aggregate and analyze trillions of data points in real time. This engine enables Rekor’s solutions to deliver precise, predictive insights that empower stakeholders to address critical challenges in public safety, urban mobility, and transportation management. Over the past three years, Rekor has successfully delivered products and services to a diverse range of customers across public and private sectors. These relationships have allowed Rekor to refine its technologies and demonstrate their full potential in real-world applications. By employing a "land and expand" growth strategy, Rekor continues to deepen relationships with existing customers while attracting new ones, fostering collaboration, and expanding its data network to drive greater value for all stakeholders through its business growth flywheel. Rekor’s subscription-based solutions help to ensure scalability and long-term growth, with hardware sales serving as an entry point to drive adoption in key segments. Also, we continuously canvas the market for strategic acquisitions and partnerships to accelerate innovation and expand our capabilities. These combined efforts are designed to strengthen Rekor’s leadership in the roadway intelligence industry and enhance its ability to deliver comprehensive, end-to-end solutions. By aligning its mission with evolving market forces and governmental priorities, Rekor is well-positioned to lead the next generation of transportation and public safety intelligence. With Scout, Command, and Discover working together, Rekor empowers governments and businesses to modernize infrastructure, enhance safety, reduce traffic, and build smarter, more resilient communities. As the U.S. invests in digitizing its transportation systems, Rekor is uniquely equipped to provide the technology and expertise needed to create a brighter future for mobility and public safety 16 Table of Contents Competition Rekor’s strategy is to lead modernization of transportation and roadway infrastructure by delivering innovative, data-driven solutions that redefine roadway intelligence and position the company as a leader in this multi-billion-dollar, competitive market. The competitive landscape includes new and legacy-based companies focused on siloed areas such as Automatic License Plate Recognition ("ALPR"), vehicle recognition technology, data aggregation, insights platforms, and smart city technologies. Additionally, many vendors rely on disconnected, analog, or previous-generation technologies for vehicle classification, counting, and speed analysis. Rekor’s unique approach stands out by offering modular components that are designed to support comprehensive, end-to-end solutions that leverage advanced AI, edge-based computing, and a robust network of ecosystem partners, along with a deep services expertise in infrastructure construction, roadway sensors, and traffic studies. This “concrete to cloud” approach positions Rekor as the ultimate one-stop shop for roadway intelligence. What further sets Rekor apart is its ability to seamlessly integrate with existing ecosystem players and platforms. Unlike competitors that require costly rip-and-replace overhauls, Rekor’s solutions operate alongside and on top of existing physical infrastructure and software systems, ensuring minimal disruption. This approach allows customers to adopt Rekor’s technology in a way that aligns with their current workflows and operational preferences. By leveraging existing customer data sets and integrating into familiar processes, Rekor makes adoption and deployment simple, intuitive, and cost-effective. These strategic advantages have solidified Rekor’s reputation as a flexible, collaborative, and innovative partner, uniquely equipped to meet the complex demands of modernizing transportation systems. Rekor ’ s Competitive Advantages Rekor’s competitive edge lies in its ability to combine deep expertise, advanced technology, and a customer-centric approach to deliver unmatched value. Below are some key factors that differentiate Rekor in the market: ● Comprehensive Solutions - A One-Stop Shop: Rekor works with its customers to develop a seamless, all-in-one solution, combining physical infrastructure expertise with advanced digital technologies. From roadway sensors to cloud-based data analytics, Rekor’s “concrete to cloud” approach simplifies deployment for customers and eliminates the need for multiple vendors, streamlining implementation and operations. ● Deep Expertise in Roadway Sensor Deployment: With thousands of people-years of experience in roadway sensor deployments, Rekor offers unparalleled expertise. This depth of knowledge allows the company to design and implement scalable, efficient solutions tailored to the unique needs of transportation agencies and municipalities. ● Advanced Data Collection & Analysis: Rekor collects detailed vehicle classification, count, and speed data across all 13 FHWA classes, along with deeper insights for connected, hybrid, and electric vehicles, as well as non-motorized roadway users such as bicycles and pedestrians. These capabilities provide customers with a comprehensive understanding of roadway activity, far surpassing most competitors in the market. ● Non-Intrusive, Safety-Focused Technology: Rekor’s ability to collect data without disrupting roadways addresses critical safety concerns for its customers. This non-intrusive approach not only enhances safety but also reduces deployment costs and risks, providing a significant competitive advantage. ● Proven Innovation in AI & Edge Processing: Rekor’s early adoption of AI and machine learning for vehicle recognition and roadway intelligence has given it a significant lead over competitors. The company’s proprietary edge processing and privacy filtering technologies further differentiate Rekor, enabling high-performance, privacy-compliant solutions that meet the evolving needs of the market. ● Integrated Insights & Predictive Analytics: The Rekor One® platform combines data from roadway sensors, connected vehicles, weather, events, and historical trends to deliver real-time, historical, and predictive insights. This comprehensive capability empowers customers to make informed, proactive decisions, optimizing resource allocation and improving safety, traffic management, and urban mobility. ● Seamless Integration with Existing Ecosystems: Rekor’s solutions integrate seamlessly with existing infrastructure, software platforms, and workflows, eliminating the need for costly rip-and-replace implementations. By leveraging existing customer data sets and fitting into familiar workflows, Rekor simplifies adoption and accelerates deployment, allowing customers to quickly realize value from its solutions. ● Collaboration with Ecosystem Players: Rekor works closely with entrenched ecosystem players to integrate its technologies into their platforms, creating collaborative partnerships that enhance functionality and deliver superior results for end users. Sustaining Leadership in a Competitive Market Rekor is not just focused on technological innovation but also on providing unmatched customer value. The company prioritizes: ● Design Innovation: Modular solutions that integrate seamlessly with existing infrastructure. ● Security & Privacy: Proprietary technologies to ensure data protection and compliance with strict privacy standards. ● Product Reliability: High-performance, durable solutions that exceed customer expectations. ● Exceptional Support: Building long-term customer relationships through superior service and support. Rekor’s “land and expand” growth strategy emphasizes scaling within its existing customer base while attracting new customers with its superior offerings. By upgrading infrastructure to collect reliable data, integrating it with third-party sources, and delivering actionable insights tailored to agency-specific needs, Rekor enables its customers to achieve greater efficiency and safety while driving innovation. 17 Table of Contents Addressing Competitive Challenges As a relatively new entrant, Rekor operates in a highly competitive market, with rivals that boast significant technical, marketing, financial and other resource advantages, as well as larger installed device bases. Despite this, Rekor’s comprehensive platform, which spans a wide range of use cases, sets it apart from competitors that operate in narrower segments. By offering a full suite of solutions, Rekor meets the diverse needs of customers across public safety, transportation management, and urban mobility. As all of these agencies work together, Rekor has the added advantage in its go-to-market approach in that it can engage customers in one segment of its portfolio, and pull-through other segments over time. By leveraging unmatched expertise in sensor deployment, groundbreaking technologies, and actionable insights that span from physical infrastructure to cloud-based systems, Rekor remains agile, scalable, and highly responsive to customer needs. This combination ensures continued leadership in the rapidly evolving roadway intelligence market. As governments increasingly focus on technology advancement, AI innovation, and infrastructure modernization, Rekor is uniquely positioned to align with these priorities. Renewed emphasis on law and order, combined with initiatives like the 2025 Executive Order on “Removing Barriers to American Leadership in Artificial Intelligence,” underscore the importance of proven, scalable technologies that can efficiently modernize transportation systems. Rekor’s flexible, integrative solutions align perfectly with this vision, positioning the company to lead the next generation of roadway intelligence, creating smarter, safer, and more efficient transportation infrastructure and urban mobility for communities nationwide. Marketing and Sales We offer products and services in multiple markets, using direct sales, an eCommerce platform and extensive partnerships and alliances. Our direct sales force has been organized into groups aligned to the Intelligent Traffic Systems (“ITS”) chapters and other targeted market segments, with a primary focus on direct-to-end-user sales through a high-touch consultative process. In addition, we have established partnerships and strategic alliances that allow us to bundle our technology into purpose-built solutions for various national and global market segments. As we continue to increase our roadway intelligence engagement with national, state and municipal DOTs, we remain focused on law enforcement communities – both directly and indirectly through strategic partners and resellers/integrators. Our market-leading solutions can provide significant value to DOTs for traffic management, planning and operations, and to municipal planning organizations for urban mobility. In addition to these agencies, our solutions also enable law enforcement, intelligence-based policing, corporate campus security, and regulatory compliance for public security. Our technology enables us to understand vehicle characteristics and behaviors beyond simple license plate capture, and digital vehicle signatures – extending into traffic analytics, sustainability metrics, and weigh-in-motion studies for motorized as well as non-motorized movements, such as bicycles and pedestrians. In 2025, we will be working to extend our reach into smaller communities as we continue to serve medium-large DOT and law enforcement departments with our direct sales representatives. Given that our primary market is state and local governments in the United States, the majority of our sales efforts involve a request for proposal process and/or grant application process. In 2025, we will continue to capture and submit proposals and apply for grants for our customers, while also seeking opportunities to submit concurrently with strategic partners. Our eCommerce platform allows us to provide products and services to international customers and begin to penetrate markets outside North America without the need for a large international sales force. It offers businesses and individuals around the world a convenient way to purchase our high-value vehicle recognition solutions with just a credit card and a click. The platform allows for self-service sign-up and a range of subscription options while also funneling customers directly to our sales support team if they need more information. Our Edge Pro camera system is the first hardware device for sale directly through the eCommerce platform. With our ALPR software preloaded, customers can activate AI-based vehicle recognition services through a subscription online or by telephone. The device is shipped globally, with optional enhancements for solar power and various pole configurations. Research and Development The highly competitive industries where we compete require that we keep up with the latest technological advancements. As such, our success is reliant upon a consistent and timely release of innovative products, new rich data services, and advanced technologies to the market. To ensure our competitive edge, we must follow cutting-edge technologies and enhance our existing offerings, through rigorous research and development to expand our range of solutions. This involves developing new AI models and algorithms, licensing intellectual property, and acquiring third-party datasets and technology. We are committed to staying abreast of our customers' technological developments, adhering to industry standards, and meeting their increasingly stringent demands for performance, productivity, quality, and predictability. As a result, we plan to continue to make significant investments in research and development and data and analytics as we strive to maintain our position as a leader in our field. Proprietary Technology and Intellectual Property Our innovative hardware devices, accessories, software, and services are protected by a collection of patents, copyrights, trademarks, service marks, trade dress, and other forms of intellectual property rights both in the United States and foreign countries. While we recognize the importance of owning these intellectual property rights and believe they contribute to our success, we know that the know-how of our skilled personnel and their technical competence and marketing abilities are the foundation of our Company's achievements. To ensure our continued success, we prioritize the filing of patent applications to safeguard the innovations that arise from our research, development, and design efforts, and we are currently pursuing multiple patent applications. With our commitment to intellectual property rights and our talented personnel, we are well-positioned to lead the market in delivering cutting-edge solutions and services. 18 Table of Contents Acquisitions On January 2, 2024, we completed the ATD Acquisition. Additional information concerning the ATD Acquisition is provided in this Annual Report on Form 10-K under ITEM 7 “Management’s Discussion and Analysis of Financial Conditions and Results of Operations.” Human Capital Management We look for our employees to represent the best and brightest in our industry and the talent we select to be a part of our team defines our culture and success. Our global workforce is highly educated, technical and specialized, with a substantial majority of employees working in technical roles. As o f March 18, 2025, we had 323 employees, of which 319 were full-time and four considered part-time. Although the competition for top talent in our area is significant, to date, we have been fortunate to have engaged highly qualified employees as needed. We are working to ensure that our growth efforts are not constrained by a lack of qualified personnel. Seasonality We derive revenues substantially from the sale of software, hardware and related services and do not currently anticipate a significant seasonality impact on our revenues. There is a portion of our revenue that requires our technicians and field support teams to work outside. Their ability to work and provide services to our end customers can be impacted by inclement weather in the winter months and storm seasons. Should our penetration of tolling and other markets involving per recognition fees expand, we would also expect to become more subject to seasonal traffic patterns. Insurance and Risk Management We maintain insurance covering professional liability and claims involving bodily injury, property and economic loss. We consider our present limits of coverage, deductibles, and reserves to be adequate. Whenever possible, we endeavor to eliminate or reduce the risk of loss on a project through quality assurance and control, risk management, workplace safety, and other similar methods. Risk management is an integral part of our project management approach for fixed-price contracts and our project execution process. We also evaluate risk through internal risk analyses in which our management reviews higher-risk projects, contracts, or other business decisions that require corporate legal and risk management approval. Regulation We are regulated in some of the fields in which we operate. When working with governmental agencies and entities, we must comply with laws and regulations relating to the formation, administration, and performance of contracts. These laws and regulations contain terms that, among other things, may require certification and disclosure of all costs or pricing data in connection with various contract negotiations. We are subject to the laws and regulations that restrict the use and dissemination of information classified for national security purposes. To help ensure compliance with these laws and regulations, our employees are sometimes required to complete tailored ethics and other compliance training relevant to their position and our operations. 19 Table of Contents