What changed in this filing

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Item 1. Financial Statements

2025-05-14 compared with 2024-11-14 · 326 added, 529 removed, 748 unchanged (53% of the section changed)

4 unchanged sentences

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

September 30, 2024

March 31, 2025

December 31, 2024

25 unchanged sentences

Loan payable, current portion

Prepaid Advance liability, at fair value

Lease liability operating, short-term

6 unchanged sentences

Long-term Liabilities

Notes payable, long-term

2023 Promissory Notes, net of debt discount of $ 0 and $ 1,012 , respectively

2023 Promissory Notes - related party, net of debt discount of $ 0 and $ 2,149 , respectively

Series A Prime Revenue Sharing Notes, net of debt discount of $ 231 and $ 263 , respectively

13 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 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.

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 March 31, 2025 and December 31, 2024, respectively.

No preferred stock was issued or outstanding as of March 31, 2025 or December 31, 2024, respectively.

Common stock, $ 0.0001 par value;

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.

111,135,956 and 104,700,593 shares issued as of March 31, 2025 and December 31, 2024, respectively;

110,912,209 and 104,541,073 shares outstanding as of March 31, 2025 and December 31, 2024, respectively.

Treasury stock, 223,747 and 159,520 shares as of March 31, 2025 and December 31, 2024, respectively.

( 804 ) ( 711 )

12 unchanged sentences

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Cost of revenue, excluding depreciation and amortization

7 unchanged sentences

Other income (expense):

(Loss) gain on extinguishment of debt

Loss on extinguishment of debt

Interest expense, net

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)

Total other expense

Loss per common share

12 unchanged sentences

Total Stockholders' Equity

Balance as of July 1, 2024

Stock-based compensation

Issuance upon vesting of restricted stock units

Shares withheld upon vesting of restricted stock units

Issuance upon exercise of 2023 Warrants

Shares issued under the Prepaid Advance

Balance as of September 30, 2024

Balance as of July 1, 2023

Balance as of January 1, 2025

Stock-based compensation

Issuance upon exercise of stock options

Issuance upon vesting of restricted stock units

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

ATD Holdback Shares

Issuance of common stock pursuant to the 2025 Sales Agreement

Balance as of March 31, 2025

Balance as of January 1, 2024

Stock-based compensation

Issuance upon exercise of stock options

Issuance upon vesting of restricted stock units

3 unchanged sentences

2024 Public Offering

Issuance upon exercise of 2023 Warrants

Shares issued under the Prepaid Advance

Balance as of September 30, 2024

Balance as of January 1, 2023

Stock-based compensation

Issuance upon exercise of stock options

Issuance upon vesting of restricted stock units

Fair value allocated to warrants with 2023 Promissory Notes

Shares withheld upon vesting of restricted stock units

Issuance upon exercise of Series A warrants

Issuance of common stock upon exercise of pre-funded warrants

Net proceeds from 2023 Registered Direct Offering

Issuance upon exercise of 2023 Registered Direct Offering Warrants

Balance as of September 30, 2023

Balance as of March 31, 2024

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

3 unchanged sentences

(Dollars in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash Flows from Operating Activities:

1 unchanged sentence

Bad debt expense

Amortization of right-of-use financing lease asset

Amortization of right-of-use lease asset

Non-cash operating lease expense

2 unchanged sentences

Amortization of intangible assets

Impairment of SAFE Agreement

Loss due to the remeasurement of the STS Earnout and Contingent Consideration

Gain on remeasurement of ATD Holdback Shares

Gain on the sale of property and equipment

Gain on the sale of Global Public Safety

Loss (gain) on extinguishment of debt

Loss on the remeasurement of Prepaid Advance

Loss due to the remeasurement of the STS Earnout and Contingent Consideration, net

Loss on extinguishment of debt

Loss due to the remeasurement of ATD Holdback Shares

Loss on financing lease abandonment

Loss on sale of property and equipment

Changes in operating assets and liabilities:

4 unchanged sentences

Lease liability

Net cash used in operating activities - continuing operations

Net cash used in operating activities - discontinued operations

Net cash used in operating activities

1 unchanged sentence

Capital expenditures

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) provided by investing activities

Net cash used in investing activities

Cash Flows from Financing Activities:

Proceeds from 2025 Sales Agreement, net

Proceeds from the public offering

Net proceeds 2022 Promissory Notes - related party, exchanged for 2023 Promissory Notes - related party

Net proceeds 2023 Promissory Notes

Net proceeds 2023 Promissory Notes - related party

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

Repayment of 2023 Promissory Notes

Proceeds from notes receivable

Net proceeds from exercise of options

Net proceeds from exercise of warrants

Net proceeds from the Prepaid Advance

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

Payments related to financing leases

Repayments of loans payable

Payments for financing leases

Repurchases of common stock

Repayment of STS Notes

Repayment of 2023 Promissory Notes

Repurchases of common stock upon vesting of restricted stock units

Net cash provided by financing activities

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

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

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

Net decrease in cash, cash equivalents and restricted cash and cash equivalents

Cash, cash equivalents and restricted cash at beginning of period

2 unchanged sentences

Cash and cash equivalents at end of period

Restricted cash at end of period

Restricted cash and cash equivalents at end of period

Cash, cash equivalents and restricted cash at end of period

10 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 stands at the forefront of the roadway intelligence sector, working to revolutionize public safety, urban mobility, and transportation management on a global scale.

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.

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.

The Company works towards this vision by collecting, connecting, and organizing the world’s 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.

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.

2 unchanged sentences

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 September 30, 2024 .

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

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 .

The results for the three months ended March 31, 2025 , are not necessarily indicative of the results to be expected for the year ending December 31, 2025 .

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, 2024 .

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Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and reported revenues and expenses.

On an ongoing basis, the Company evaluates its estimates, including those related to the collectability of accounts receivable, the fair value of intangible assets, the fair value of debt and equity instruments, income taxes and determination of standalone selling prices in contracts with customers that contain multiple performance obligations.

On an ongoing basis, the Company evaluates its estimates, including those related to the collectability of accounts receivable, the fair value of intangible and long lived assets, the fair value of goodwill, the fair value of debt and equity instruments, income taxes and determination of standalone selling prices in contracts with customers that contain multiple performance obligations.

The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not apparent from other sources.

6 unchanged sentences

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 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 .

As of and for the three months ended March 31, 2025 , the Company had working capital of $ 3,073,000 and a net loss of $ 10,874,000 , respectively.

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.

4 unchanged sentences

If additional financing is not available, the Company also has contingency plans to continue to reduce or defer expenses and cash outlays in the look-forward period.

Significant Accounting Policies

Segment Information

The Company operates as one operating and reportable segment.

Rekor has a variety of platforms that collect, connect and organize mobility data, making it accessible and useful to its customers for real-time insights and decisioning.

The Company’s chief operating decision maker (“CODM”) is the interim president and chief executive officer.

The Company does not report balance sheet information by segment since it is not reviewed by the CODM.

The CODM uses net income in assessing segment performance.

The significant expense regularly reviewed by the CODM is cost of revenues, excluding depreciation and amortization and the Company’s operating expenses.

The presentation of these items to the CODM is consistent with the Company’s presentation of these items on the condensed consolidated statement of operations.

The excess purchase consideration over the fair value of acquired assets and liabilities is recorded as goodwill.

2 unchanged sentences

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

Business Combination

Management conducts a valuation analysis on the tangible and intangible assets acquired and liabilities assumed at the acquisition date thereof.

During the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill.

In addition, uncertain tax positions and tax-related valuation allowances are initially established in connection with a business combination as of the acquisition date.

Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the Company’s consolidated statements of operations.

Amounts paid for acquisitions are allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition.

The Company allocates a portion of the purchase price to the fair value of identifiable intangible assets.

The fair value of identifiable intangible assets is based on a detailed valuation that uses information and assumptions provided by management.

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)).

As of March 31, 2025 , the Company did not identify any events that would cause it to assess goodwill for impairment.

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 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 carrying amounts reported in the consolidated balance sheets for accounts receivable, notes receivable and accounts payable approximate fair value as of March 31, 2025 and December 31, 2024 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 March 31, 2025 and December 31, 2024 , 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” ).

15 unchanged sentences

The Company does not have any Level 1 or Level 2 assets or 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:

The Company considers its contingent consideration and ATD Holdback Shares 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 March 31, 2025 .

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

STS Contingent Consideration

Balance as of January 1, 2025

Loss due to change in fair value

Balance as of September 30, 2024

Change in fair value

Balance as of March 31, 2025

ATD Holdback Shares

Acquisition of ATD January 2, 2024

Balance as of January 1, 2025

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

September 30, 2024

Closing stock price

$ 3.14 $ 1.18

Discount for marketability

$ ( 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 %

Settlement of ATD Holdback Shares

Balance as of March 31, 2025

Revenue Recognition

9 unchanged sentences

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Recurring revenue

1 unchanged sentence

Product and service revenue

5,035 4,292 15,994 9,064

Total revenue

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The Company invoices and receives fees from its customers monthly.

Revenue is recognized ratably over the term of the contract.

Customer support revenue is associated with perpetual licenses and long-term subscription arrangements and consists primarily of technical support and product updates.

6 unchanged sentences

Product and service revenue

Product and service revenue is defined as the Company’s implementation revenue, perpetual license sales, hardware sales, engineering services and contactless compliance revenue.

Implementation revenue is recognized when the Company provides installation, construction and other implementation services to its customers.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Urban Mobility

1 unchanged sentence

Transportation Management

651 711 2,038 2,277

Public Safety

3,038 3,995 10,102 10,848

Total revenue

3 unchanged sentences

These activities can include the use of software applications that are part of the Rekor Discover® platform, the primary application being Rekor’s count, class & speed application.

This application fully automates the aggregation of Federal Highway Administration (“FHWA”) 13 -bin vehicle classification, speed, and volume data.

The application fully automates the aggregation of Federal Highway Administration (“FHWA”) 13 -bin vehicle classification, speed, and volume data.

Revenues associated with the deployment of other traffic sensors, traffic studies, or construction associated with traffic data collection are also part of data aggregation revenue, which is generated through both recurring pay-for-data contracts and hardware sales with a recurring software maintenance component.

4 unchanged sentences

Public Safety

P ublic Safety revenue consists of licensing of the Rekor Scout™ platform, licensing of Rekor CarCheck™ API, licensing of Rekor’s vehicle recognition software, as well as systems deployed for security, contactless compliance and public safety.

Public safety revenue consists of licensing of the Rekor Scout® platform, licensing of Rekor CarCheck™ API, licensing of Rekor’s vehicle recognition software, as well as systems deployed for security, contactless compliance and public safety.

Revenue is generated through recurring and perpetual license sales as well as one -time hardware sales.

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

As of March 31, 2025 , the unsatisfied portion of the remaining performance obligation was approximately $ 14,485,000 .

The Company expects to recognize approximately 89 % 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 $ 1,910,000 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.

Unbilled accounts receivables of $ 1,545,000 and $ 1,623,000 were included in accounts receivable, net, in the unaudited condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024 , respectively.

Contract liabilities

When the Company advance bills clients prior to providing services, generally such amounts will be earned and recognized in revenue within the next six months to five years, depending on the length of the period during which services are to be provided.

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 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):

This revenue and the corresponding decrease in liabilities are 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 three months ended March 31, 2025 were not materially impacted by any other factors.

During the three months ended March 31, 2025 , $ 1,168,000 of the contract liabilities balance as of December 31, 2024 was recognized as revenue.

The services due for contract liabilities described above are shown below as of March 31, 2025 (dollars in thousands):

2025, remaining

Cash and Cash Equivalents, and Restricted Cash and Cash Equivalents

Cash and Cash Equivalents, and Restricted Cash

The Company considers all highly-liquid debt instruments to be cash equivalents.

1 unchanged sentence

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 September 30, 2024 and December 31, 2023 were $ 365,000 and $ 328,000 , respectively, and correspond to equal amounts of related liabilities.

Restricted cash for these client jurisdictions as of March 31, 2025 and December 31, 2024 were $ 458,000 and $ 316,000 , respectively, and correspond to equal amounts of related liabilities.

Concentrations of Credit Risk

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 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.

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

The United States deposits are federally insured up to $250,000 per insured bank, for each account ownership category.

As of March 31, 2025 and December 31, 2024 , the Company had deposits from operations totaling $ 4,309,000 and $ 5,329,000 , respectively, in multiple U.S.

financial institutions and one Israeli financial institution.

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 .

Customer A accounted for 11 % of the unaudited condensed consolidated revenue for the three months ended March 31, 2025 .

No other single customer accounted for more than 10% of the Company’s unaudited condensed consolidated revenues for the three months ended March 31, 2025 and 2024 , respectively.

As of March 31, 2025 , Customer B accounted for 11 % of the Company's unaudited condensed consolidated accounts receivable balance.

As of December 31, 2024 , Customer A accounted for 12 % of the Company's consolidated accounts receivable balance.

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.

As of March 31, 2025 and December 31, 2024 , amounts owed to related parties of $ 78,000 and $ 104,000 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):

September 30, 2024

March 31, 2025

December 31, 2024

3 unchanged sentences

STS Contingent Consideration, at fair value

Other current liabilities

$ 4,900 $ 5,129

New Accounting Pronouncements Effective in Future Periods

In November 2023, FASB issued ASU 2023 - 07 - Segment Reporting (Topic 280 ):

Improvements to Reportable Segment Disclosures, which requires public entities with a single reportable segment to provide all the disclosures required by this standard and all existing segment disclosures in Topic 280 on an interim and annual basis, including new requirements to disclose significant segment expenses that are regularly provided to the chief operating decision maker ("CODM") and included within the reported measure(s) of a segment's profit or loss, the amount and composition of any other segment items, the title and position of the CODM, and how the CODM uses the reported measure(s) of a segment's profit or loss to assess performance and decide how to allocate resources.

The guidance is effective for our annual period beginning January 1, 2025, and interim periods thereafter, applied retrospectively with early adoption permitted.

The Company is currently evaluating the impact of adoption of this standard on its financial statements and disclosures.

In December 2023, the FASB issued ASU 2023 - 09 - Income Taxes (Topic 740 ):

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The guidance is effective for the Company's annual periods beginning January 1, 2025 on a prospective basis, with a retrospective option, and early adoption is permitted.

The Company is currently evaluating the impact of adoption of this standard on its financial statements and disclosures.

The Company is currently evaluating the impact of adoption of this standard on its consolidated financial statements and disclosures.

In November 2024, the FASB issued ASU 2024 - 03 - Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220 - 40 ):

Disaggregation of Income Statement Expenses, which is intended to provide more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation and amortization) included in certain expense captions presented on the consolidated statement of operations.

The guidance in this ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

The amendments may be applied either ( 1 ) prospectively to financial statements issued for periods after the effective date of this ASU or ( 2 ) retrospectively to all prior periods presented in the consolidated financial statements.

The Company is currently evaluating the impact that the adoption of ASU 2024 - 03 will have on its consolidated financial statements and disclosures.

The Company does not believe that any recently issued, but not yet effective, accounting standards, other than the standards discussed above, could have a material effect on the accompanying unaudited condensed consolidated financial statements.

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Under the terms of the ATD Purchase Agreement, the Company acquired all of the issued and outstanding limited liability company interests of ATD (the “ATD Acquisition”).

The acquisition met the criteria to be accounted for as a business in accordance with ASC 805, Business Combinations (“ASC 805” ).

The acquisition met the criteria to be accounted for as a business combination in accordance with ASC 805, Business Combinations (“ASC 805” ).

This method requires, among other things, that assets acquired, and liabilities assumed be recognized at their fair values as of the acquisition date and that the difference between the fair value of the consideration paid for the acquired entity and the fair value of the net assets acquired be recorded as goodwill, which is not amortized but is tested at least annually for impairment.

The aggregate purchase price for the interests of ATD was approximately $ 20,576,000 , subject to a customary working capital adjustments.

The aggregate purchase price for the interests of ATD was approximately $ 20,576,000 .

The purchase price comprised approximately $ 10,048,000 in cash, which included closing adjustments and 3,496,464 unregistered shares of the Company’s common stock (the “Stock Consideration”), based on a volume weighted average trading price of the Company’s common stock over a thirty consecutive trading day period prior to the date of the ATD Purchase Agreement, which was $ 2.86 .

2,832,135 of the Stock Consideration was issued at closing, while the other 664,329 shares of the Stock Consideration will be issued and delivered to the Seller on the twelve -month anniversary of the Closing Date (the "ATD Holdback Shares"), subject to cutback for working capital adjustments and/or indemnification claims favoring the Company, if any.

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

See NOTE 9 – STOCKHOLDERS ’ EQUITY for additional information.

As the total number of ATD Holdback Shares to be issued to the Seller is not fixed, the ATD Holdback Shares were deemed to be liability classified and are measured at fair value each reporting period.

The ATD Holdback Shares will be issued to the Seller on the twelve -month anniversary of the Closing Date, subject to cutback from indemnification claims favoring the Company, if any.

2,832,135 of the Stock Consideration was issued at closing, while the other 664,329 shares of the Stock Consideration were issued and delivered to the Seller on January 2, 2025.

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

As the total number of ATD Holdback Shares to be issued to the Seller was not fixed, the ATD Holdback Shares were deemed to be liability classified and were measured at fair value each reporting period.

As a result of the transaction, ATD became a wholly-owned subsidiary of the Company and ATD’s key employees have agreed to continue employment with the Company or one of its affiliates.

The Company incurred $ 548,000 in legal and professional fees related to the acquisition which were expensed as incurred and recognized in general and administrative expenses in the unaudited condensed consolidated statement of operations.

The Company incurred $ 548,000 in legal and professional fees related to the acquisition which were expensed as incurred and recognized in general and administrative expenses in the consolidated statement of operations, during the year ended December 31, 2024.

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 and the nine months ended September 30, 2024.

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

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

Consideration

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Recognized amounts of identifiable assets acquired and liabilities assumed

Estimated Fair Value

Cash and cash equivalents

11 unchanged sentences

Purchase price consideration

Operations of Combined Entities

The following unaudited pro forma combined financial information gives effect to the acquisition of ATD and the Series A Prime Revenue Sharing Notes interest expense, as if they were consummated as of January 1, 2023.

A portion of the proceeds from the Series A Prime Revenue Sharing Notes was used to fund the acquisition of ATD and therefore the Company has included the impact of the issuance of the debt in its pro forma financial information.

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 September 30,

Nine Months Ended September 30,

(Dollars in thousands, except per share data)

(Dollars in thousands except for per share data)

Total revenue

$ 10,546 $ 11,015 $ 32,751 $ 30,195

$ ( 12,646 ) $ ( 11,597 ) $ ( 41,055 ) $ ( 36,440 )

Basic and diluted

$ ( 0.14 ) $ ( 0.17 ) $ ( 0.49 ) $ ( 0.56 )

Basic and diluted number of shares

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 3 - LEASES

The Company has operating leases for office facilities in various locations throughout the United States and Israel.

Additionally, the Company has financing leases for vehicles it uses for its operations throughout the United States.

The Company’s leases have remaining terms of one to eight years.

Certain of the Company’s leases include options to extend the term of the lease or to terminate the lease prior to the end of the initial term.

When it is reasonably certain that the Company will exercise the option, the Company will include the impact of the option in the lease term for purposes of determining total future lease payments.

During the first quarter of 2025, the Company entered into a lease amendment that modified the timing of contractual lease payments related to its lease in Columbia Maryland.

Based on the Company's evaluation, the amendment qualified as a lease modification under ASC 842.

As a result of the modification, the Company recognized a decrease of $ 1,344,000 in both its operating lease liability and the corresponding operating lease right-of-use asset.

Lease cost recognized in our consolidated statements of operations is summarized as follows (dollars in thousands):

Three Months Ended March 31,

Operating lease cost

Finance lease cost

Amortization of right-of-use assets

Interest on lease liabilities

Finance lease cost

Total lease cost

Other information about lease amounts recognized in our consolidated financial statements is as follows:

March 31, 2025

December 31, 2024

Weighted-average remaining lease term (years)

Operating leases

Financing leases

Weighted-average discount rate

Operating leases

Financing leases

Maturities of operating and financing lease liabilities for continuing operations at March 31, 2025 were as follows (dollars in thousands):

Operating Leases

Financing Leases

2025, remaining

Total lease payments

Less imputed interest

Maturities of lease liabilities

NOTE 4 – SUPPLEMENTAL NON CASH DISCLOSURES OF CASH FLOW INFORMATION

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,

Supplemental disclosures of cash flow information for the three months ended March 31, 2025 and 2024 were as follows (dollars in thousands):

Three Months Ended March 31,

Cash paid for interest

$ 1,950 $ 1,099

Cash paid for taxes

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 accounts payable and accrued expenses related to purchases of inventory

Decrease in deposits related to property and equipment received

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

Contract modification resulting in a measurement of an operating lease

Non-cash financing activities:

2022 Promissory Notes exchanged for 2023 Promissory Notes - related party

Warrants issued in connection with the 2023 Promissory Notes

Warrants issued in connection with the 2023 Promissory Notes - related party

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

Fair market value of ATD Holdback Shares at the acquisition date

Settlement of ATD Holdback Shares with common stock

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

Fair 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 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 and nine months ended September 30, 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.

As part of the Company's 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 September 30, 2024 and December 31, 2023 (dollars in thousands):

September 30, 2024

The following provides a breakdown of identifiable intangible assets, net as of March 31, 2025 and December 31, 2024 (dollars in thousands):

March 31, 2025

December 31, 2024

Customer relationships

$ 15,761 $ 3,861

Marketing related

Technology based

24,107 24,107

Internally capitalized software

42,331 30,231

accumulated amortization

( 16,501 ) ( 12,992 )

Identifiable intangible assets, net

$ 25,830 $ 17,239

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

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.

Amortization expense for the three months ended March 31, 2025 and 2024 was $ 300,000 and $ 1,172,000 , 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 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):

As of March 31, 2025 , 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):

2025, remaining

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On September 30, 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

On January 18, 2023, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain accredited investors, pursuant to which the Company agreed to issue and sell to the investors in a private placement transaction (i) up to $ 15,000,000 in aggregate principal amount of senior secured promissory notes (the “2023 Promissory Notes”), and (ii) warrants to purchase, for an exercise price of $ 2.00 per share, up to an aggregate of 7,500,000 shares of common stock of the Company, par value $ 0.0001 per share.

In connection with the initial closing on January 18, 2023, the Company issued $ 12,500,000 in aggregate principal amount of 2023 Promissory Notes and warrants to purchase 6,250,000 shares of Common Stock.

On March 4, 2024, the Company elected to prepay the outstanding 2023 Promissory Notes.

The 2023 Promissory Notes were redeemed at the redemption price of 115 % of the $ 12,500,000 aggregate principal amount of the 2023 Promissory Notes, or approximately $ 14,375,000 , plus accrued and unpaid interest to the redemption date of approximately $ 263,000 (the “Redemption Payment”).

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 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, 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.

As of March 31, 2025 , 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.

Series A Prime Revenue Sharing Notes

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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 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%.

Thereafter, the Series A Prime Revenue Sharing Notes may be prepaid by the Company at par value.

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 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.

The amount related to the interest reserve was $ 500,000 as of March 31, 2025 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 March 31, 2025.

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

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

For the three months ended March 31, 2025 and 2024, the Company recognized $ 497,000 and $ 496,000 in interest expense, 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 September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Contractual interest expense

$ 558 $ 402 $ 1,915 $ 1,134

Amortization of debt issuance costs

37 515 492 1,475

Total interest expense

595 917 2,407 2,609

interest income

Total interest expense, net

$ 496 $ 906 $ 2,094 $ 2,576

Schedule of Principal Amounts Due of Debt

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

The principal amounts due for long-term notes payable are shown below as of March 31, 2025 (dollars in thousands):

2025, 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 September 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 March 31, 2025 .

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 September 30, 2024 .

Federal, state or foreign income tax audits were in process as of March 31, 2025 .

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

For the three months ended March 31, 2025 and 2024, 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 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.

As of March 31, 2025 and December 31, 2024 , our evaluation revealed no uncertain tax positions that would have a material impact on the unaudited condensed consolidated financial statements.

For the three months ended March 31, 2025 and 2024 , the Company did not record any expense or benefit related to income tax.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

21 unchanged sentences

Rekor seeks to recover damages from HCW and Armistice.

HCW and Armistice have now moved to dismiss the amended counterclaims.

Those motions are pending.

Discovery is ongoing in the matter.

The Company believes HCW's claims are without merit.

9 unchanged sentences

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.

In advance of the March 3, 2025 hearing, the parties agreed to bifurcate the matter into two separate hearings.

The first hearing from March 3- 5, 2025 was set to address liability and the second from April 24- 25, 2025 was set to address damages.

The parties were able to settle the claim filed by one employee in advance of the March 3, 2025 hearing.

The hearing did proceed for the claim filed by another employee.

The Court did not make a finding on liability at the hearing.

The Court has requested that the parties prepare and submit post-hearing briefs on or before April 19, 2025.

The Company does not know when the Court will make its findings after the receipt of the briefs.

The parties were next set to appear before the Court on April 24- 25, 2025 to address damages.

On April 22, 2025, the Court notified the parties that the April 24- 25, 2025 damages hearing was cancelled.

The Court indicated that it was going to review the briefs submitted on the liability phase and evidence in the matter and would reschedule a damages hearing, if necessary.

We do not know when the Court will make a finding on the liability phase.

The Company believes these claims are without merit.

4 unchanged sentences

The number of authorized shares of the Company’s preferred stock was not affected by this amendment and remained unchanged at 2,000,000 shares.

At Market Issuance Sales Agreement

On February 10, 2025, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with Northland Securities, Inc.

(the “Agent”), pursuant to which the Company may, from time to time, offer and sell shares of the Company’s common stock, par value $ 0.0001 per share (“Common Stock”), having an aggregate offering price of up to $ 25,000,000 .

The Agent is entitled to receive from the Company a commission in an amount equal to (i) 3.0 % of the gross sales price per share sold through it as agent in agency transactions and (ii) 6.0 % of the purchase price per share sold to the Agent, as principal in principal transactions.

The Company incurred issuance costs of approximately $ 237,000 related to legal, accounting, and other fees in connection with the Sales Agreement.

These costs were charged against the gross proceeds of the Sales Agreement and presented as a reduction to additional paid-in capital on the accompanying consolidated balance sheets.

As of March 31, 2025 the Company issued 5,148,600 shares of its common stock at a weighted average selling price of $ 1.58 per share in accordance with the Sales Agreement.

Net cash provided from the Sales Agreement was $ 7,659,000 after paying $ 237,000 related to the issuance cost, as well as 3.0 % or $ 244,000 related to cash commissions provided to the Agent.

ATD Acquisition

In connection with the acquisition as described in NOTE 2 – ACQUISITION , the Company issued 2,832,135 shares of the Company’s common stock as part of the consideration.

Additionally, 664,329 shares will be issued and delivered to the Seller on the twelve -month anniversary of the Closing Date, subject to cutback for working capital adjustments and/or indemnification claims favoring the Company, if any.

The ATD Holdback Shares were deemed to be liability based and are measured at fair value each reporting period.

The shares issued and issuable in connection with the ATD Acquisition have been registered on a resale registration statement on Form S- 3, declared effective by the SEC on June 17, 2024.

In connection with the acquisition of ATD on January 2, 2024, the Company issued 2,832,135 shares of the Company’s common stock as part of the consideration.

On January 2, 2025, the one year anniversary of closing of the ATD Acquisition, the Company issued and delivered to ATD’s former owners 664,329 holdback shares of the Company’s common stock in full satisfaction of the purchase price for the ATD Acquisition.

The shares issued in connection with the ATD Acquisition have been registered on a resale registration statement on Form S- 3, declared effective by the SEC on June 17, 2024.

2024 Public Offering

6 unchanged sentences

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

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.

After giving effect to the purchase price discount of 6 % provided for in the Prepaid Advance, net proceeds to the Company were $ 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 initial 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 option for additional advances.

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 consolidated statements of operations for the year ended December 31, 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.

As of December 31, 2024, the Company has terminated and fully satisfied the outstanding balance of $ 15,000,000 under the Prepaid Advance.

During the year ended December 31, 2024, the Company recorded $ 900,000 in charges related to the settlement of the Prepaid Advance liability.

Redemption of 2023 Promissory Notes

4 unchanged sentences

The shares of common stock issued in connection with the Redemption payment have been registered on a resale registration statement on Form S- 3, declared effective by the SEC on July 30, 2024.

2023 Registered Direct Offering

On March 23, 2023, the Company entered into a securities purchase agreement with a single institutional investor that provided for the sale and issuance by the Company in a registered direct offering of an aggregate of:

(i) 6,100,000 shares of the Company’s common stock, (ii) pre-funded warrants exercisable for up to an aggregate of 772,853 shares of common stock, and (iii) warrants to purchase up to 6,872,853 shares of common stock (the "Registered Direct Warrants").

The offering price per share of common stock and associated warrant was $ 1.455 and the offering price per pre-funded warrant and associated warrant was $ 1.454 .

Each pre-funded warrant was exercisable for one share of common stock at an exercise price of $ 0.001 per share and expired when exercised in full.

The Registered Direct Warrants were exercisable immediately upon issuance, had an expiration date five years following the issuance date and had an exercise price of $ 1.60 per share.

The Company received gross proceeds from the 2023 Registered Direct Offering of approximately $ 10,000,000 .

The Offering closed on March 27, 2023.

The Company entered into an engagement letter with H.C.

Wainwright & Co., LLC to serve as exclusive placement agent, on a reasonable best-efforts basis, in connection with the offering.

The Company paid the placement agent an aggregate cash fee equal to 7.5% of the gross proceeds of the offering.

The Company also paid the placement agent $ 75,000 for non-accountable expenses and $ 16,000 for clearing fees.

Additionally, the Company issued designees of the placement agent, as compensation, warrants to purchase up to 481,100 shares of common stock, equal to 7.0% of the aggregate number of shares of common stock and pre-funded warrants placed in the offering.

The warrants issued to the placement agent have a term of five years and an exercise price of $ 1.8188 per share of common stock.

During the year ended December 31, 2023, 772,853 of the pre-funded warrants were exercised for 772,853 shares of the Company's common stock.

2023 Letter Agreement

On July 25, 2023, the Company entered into a letter agreement (the “2023 Letter Agreement”) with the purchaser of the 2023 Registered Direct Offering, pursuant to which the investor and the Company agreed that the investor would exercise all its Registered Direct Warrants for shares of common stock at $ 1.60 per share of common stock.

In consideration for the imposition of volume and trading restrictions on the 6,872,853 shares of common stock issued to the institutional investor in connection with exercise of the Registered Direct Warrants, the 2023 Letter Agreement provided for the issuance of unregistered warrants to purchase up to an aggregate of 2,850,000 shares of common stock (the “2023 Private Warrants”).

The shares of common stock underlying the 2023 Private Warrants have been registered for resale on a registration statement declared effective by the SEC on September 29, 2023.

The 2023 Private Warrants will expire on January 25, 2029 and have an exercise price of $ 3.25 .

The 2023 Private Warrants were valued using the Black-Scholes pricing model at a total of $ 6,757,000 based on a five year term, volatility of 115 %, a risk-free of 4.15 %, and stock price of $ 2.85 .

The fair value of the 2023 Private Warrants were treated as an equity financing cost and recorded as part of the Company’s additional paid-in capital.

This resulted in a net zero impact within the Company’s additional paid-in capital.

2023 Warrants

In connection with the initial closing of the 2023 Promissory Notes on January 18, 2023, the Company issued warrants to purchase 6,250,000 shares of common stock.

The warrants issued in connection with the initial closing have an exercise price of $ 2.00 per share, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions, are immediately exercisable, have a term of five years from the date of issuance and are exercisable on a cash or cashless basis at the election of the holder.

The 2023 Warrants were valued at $ 5,125,000 , based on the relative fair value basis, compared to the total proceeds received.

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 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 .

In consideration for the Company’s agreement to reduce the exercise price, the Exercising Holders agreed to a concomitant reduction in the number of shares into which the 2023 Warrants are exercisable, from 5,250,000 to 3,675,000 .

This modification resulted in a decrease in the overall fair value of the equity classified warrants and since no incremental value was given to the Exercising Holders, nothing was recorded in the consolidated financial statements related to the modification.

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 September 30, 2024 is as follows:

There was no activity related to the Company warrants during the period ended March 31, 2025 .

The table below shows the Company's outstanding warrants as of March 31, 2025 :

2023 Promissory Notes (1)

1 unchanged sentence

2023 Private Warrants (3)

Active warrants as of January 1, 2024

6,250,000 481,100 2,850,000 9,581,100

Exercised warrants

( 3,675,000 ) - - ( 3,675,000 )

Cancelled warrants

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

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 September 30, 2024

$ 1.58 $ 1.82 $ 3.25 $ 2.32

Intrinsic value of outstanding warrants as of September 30, 2024

$ - $ - $ - $ -

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

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

On January 18, 2023, in connection with the 2023 Promissory Notes, the Company issued warrants to the investors to purchase 6,250,000 shares of its common stock, exercisable over a period of five years, at an exercise price of $ 2.00 per share.

Outstanding warrants as of March 31, 2025

Weighted average strike price of outstanding warrants as of March 31, 2025

Intrinsic value of outstanding warrants as of March 31, 2025

On January 18, 2023, in connection with the 2023 Promissory Notes, the Company issued the investors warrants to purchase 6,250,000 shares of its common stock, exercisable over a period of five years, at an exercise price of $ 2.00 per share.

These warrants were exercisable commencing January 18, 2023 and expire on January 18, 2028.

As part of the Warrant Exercise Agreements, explained in detail above, the Exercising Holders reduced the number of warrants held by 1,575,000 .

On March 23, 2023, in connection with the 2023 Registered Direct Offering the Company issued warrants to the placement agent to purchase up to 481,100 shares of common stock.

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

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:

For the three months ended March 31, 2025 and 2024 there was no stock compensation expense related to stock options.

There was no activity related to the Company's stock options under the Company's 2017 Plan during the period ended March 31, 2025 .

The table below shows the Company's outstanding and exercisable stock options as of March 31, 2025 :

Number of Shares Subject to Option

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Aggregate Intrinsic Value

Outstanding balance as of January 1, 2024

688,841 $ 1.20 3.70 $ 1,478,000

( 3,500 ) 0.80

( 3,880 ) 3.81

Outstanding balance as of September 30, 2024

681,461 $ 1.19 2.94 $ 136,000

Exercisable as of September 30, 2024

Outstanding and exercisable balance as of March 31, 2025

486,866 $ 1.13 3.48 $ 38,000

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

As of March 31, 2025 , 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 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:

Stock compensation expense related to Restricted Stock Units ("RSUs") for the three months ended March 31, 2025 and 2024 was $ 1,370,000 and $ 1,167,000 , 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 three months ended March 31, 2025 is as follows:

Number of Shares

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( 783,367 ) 0.93 0.76

Outstanding balance as of September 30, 2024

Outstanding balance as of March 31, 2025

4,416,925 $ 1.09 0.96

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

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.

As of March 31, 2025 , there was $ 2,764,000 of unrecognized stock compensation expense related to unvested RSUs granted under the 2017 Plan that will be recognized over an average remaining period of 0.96 years.

NOTE 11 – LOSS PER SHARE

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

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands, except per share data)

Three Months Ended March 31,

(Dollars in thousands, except per share data)

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Net loss attributable to shareholders

$ ( 12,646 ) $ ( 10,566 ) $ ( 41,055 ) $ ( 34,361 )

Weighted average common shares outstanding - basic and diluted

89,285,197 66,671,622 84,397,568 61,125,035

Basic and diluted loss per share

$ ( 0.14 ) $ ( 0.16 ) $ ( 0.49 ) $ ( 0.56 )

Common stock equivalents excluded due to the anti-dilutive effect

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

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 nine months ended September 30, 2023 , the following 12,001,681 potentially dilutive securities were excluded from diluted loss per share:

Potentially dilutive securities excluded due to the anti-dilutive effect

As the Company had a net loss for the three months ended March 31, 2025 , the following 9,234,891 potentially dilutive securities were excluded from diluted loss per share:

4,331,100 for outstanding warrants, 486,866 related to outstanding options, and 4,416,925 related to outstanding RSUs.

As the Company had a net loss for the three months ended March 31, 2024 , the following 11,946,345 potentially dilutive securities were excluded from diluted loss per share:

9,581,100 for outstanding warrants, 688,841 related to outstanding options and 1,676,404 related to outstanding RSUs.

NOTE 12 – SUBSEQUENT EVENTS

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.

At Market Issuance Sales Agreement

From March 31, 2025 to May 13, 2025 the Company issued 5,716,600 shares of its common stock in exchange for net cash of $ 4,995,000 under the Sales Agreement.

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

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The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this report and the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual Report”) and any updates contained herein as well as those set forth in our reports and other filings made with the SEC.

Rekor was founded in 2017 and first entered the roadway intelligence business in 2019, with the acquisition of a company pioneering the development of computer vision software for roadway data collection and analysis.

The software analyzes images and provides contemporaneous data about vehicles moving on the roadway, such as direction, speed, color, make, model license plate and other characteristics.

The software uses a form of generative artificial intelligence, or AI, that employs neural networks to filter and identify patterns within the images and is continuously updated through machine learning that expands its capabilities and allows it to adapt to changes in the vehicle pool and other elements of the roadway environment.

Rekor has continued the development of this software and has also developed a proprietary supporting operating system, which we identify as Rekor One TM .

This system addresses privacy concerns and facilitates the analysis and distribution of relevant data to multiple users through edge processing and other techniques.

Using Rekor One TM , we can collect, aggregate and analyze roadway data in combination with data from other sources.

This analysis provides insights that are distributed to a variety of customers through our own proprietary platforms, as well as through those provided by others.

While our primary customers are located in North America, products and services we provide are currently used in over 90 countries around the world.

Our primary customers include national, state and municipal public agencies, as well as large commercial users in North America who employ our products and services for traffic studies, transportation management, public safety, perimeter security and tolling, as well as parking system operations.

Our ultimate vision is to become the premier provider of roadway intelligence and data-driven mobility insights in the world.

Our operations are conducted primarily by our wholly-owned subsidiaries Rekor Recognition Systems, Inc., Waycare Technologies, Ltd.

and Waycare Technology Inc., or Waycare, Southern Traffic Services, Inc., or STS, and All Traffic Data, LLC, or ATD.

We integrated Waycare into our operations as part of a collaborative process of developing Rekor Command TM , a platform used by traffic management centers.

In addition to award winning incident management tools, Waycare brought us a valuable network of established third party data sources such as weather forecasts, transit schedules, event information and other data that provide insights through predictive analytics to our traffic management customers.

The acquisition of STS in 2022 allowed us to join forces with one of the leading data suppliers to state level Departments of Transportation, or DOTs, in the United States.

Throughout its history, STS has pioneered an increasingly popular “pay for data” model of conducting traffic studies for DOTs.

Using our Rekor Discover TM platform, STS has been able to dramatically improve the quality, scope, efficiency and reliability of the data it supplies to DOTs.

As more fully described under “ Traffic Data Collection ”, STS currently has contracts with several states, with a strong footprint in the Southeastern United States.

We are currently engaged in discussions, including conducting proof of concept demonstrations, with additional states and municipalities to provide similar services.

On January 2, 2024, we acquired ATD, which collaborates closely with numerous traffic engineering firms, metropolitan planning organizations, municipalities, and state DOTs, in locations where Rekor previously lacked a sales presence.

ATD is actively involved in data collection across a wide-ranging geographic area, encompassing states like California, Colorado, Arizona, Nebraska, Nevada, Oregon, and Washington.

This addition expands the coverage of our urban mobility operations across the country’s western region and further strengthens our position in the Southeast, providing ready access to experienced urban mobility personnel and operational facilities to support the expansion of our Internet of Things, or IoT, network.

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.

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 there is a significant need for the innovative products and services we have developed.

The current condition of national transportation infrastructure systems is a matter of concern, particularly in the United States.

According to a 2021 infrastructure report from the American Society of Civil Engineers, or ASCE, U.S.

infrastructure has been graded a C minus, indicating that there is significant and urgent need for improvement.

Over 43% of the 4.3 million miles of U.S.

roadways were rated in poor condition, which impacts the safety of drivers and passengers.

The issue of congestion is also a serious concern, and was estimated to cost U.S.

citizens $120 billion per year in economic and productivity losses.

Transportation-related greenhouse gas emissions – motorists’ emissions, particularly when trapped in traffic – account for a significant proportion of the country’s total emissions and are a leading contributor to declining sustainability, which has far-reaching environmental impacts.

Addressing the road infrastructure issue is imperative for both economic and ecological reasons.

Further, more than 43,000 people lose their lives each year while using the nation’s transportation network of streets, roads and highways, which represents a failure in public safety and policy.

On February 2, 2023, the U.S.

Department of Transportation declared a national crisis and state of emergency for roadway safety and launched an urgent roadway safety call-to-action demanding stakeholders to commit to specific actions to reverse the spike in serious injuries and deaths on our roadways.

To address urgent transportation issues and ensure the competitiveness of the U.S.

economy, an unprecedented amount of funding has been made available from the federal government through the 2021 Infrastructure Investment and Jobs Act, or IIJA, 2022 Inflation Reduction Act, and the 2022 CHIPS and Science Act to create digitally-enabled transportation infrastructure that will provide public goods and new economic value.

This represents a once-in-a-generation level of investment and bipartisan support for creating and scaling transportation digital infrastructure for the 21st century.

Rather than completely rebuilding existing infrastructure, we expect the focus to be on using the power of funding and policymaking to leverage off previous investments by promoting new technology layers and facilitating access to digital infrastructure systems throughout the country.

We expect the deployment of sophisticated roadway intelligence systems to be a significant part of both planning for and implementing the infrastructure improvements necessary to meet these challenges.

Our commitment to delivering mission-critical solutions for roadway intelligence is driven by our vision of creating smarter, safer and more sustainable streets for all communities.

To achieve this vision, we strive to collect, connect and organize the world’s mobility data, harnessing its full potential to provide the most essential, real-time and predictive actionable mobility insights.

We are working to make mobility data more accessible and useful for all responsible users, empowering our customers to make informed decisions and drive meaningful progress towards a better future.

The ultimate objective is to adopt an augmented approach to existing physical infrastructure that blends the strengths of physical, digital and operational infrastructure with mobility data, including mobile phones, connected vehicles and roadway sensors.

The ultimate goal is to enable and coordinate private and public collaboration through a digital-enabled mobility internet and operating system for the roadways that will advance smarter, safer and greener roadways for all.

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.

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.

Roadway Intelligence

Since the inception of our efforts, we have been dedicated to becoming a leader in roadway intelligence by collecting, connecting and organizing global mobility data.

Today, our comprehensive portfolio offers multiple cutting-edge, AI-driven, edge-based IoT devices for roadside data collection, and an array of curated and integrated data sets from a network of transportation ecosystem data providers, tailored platforms, applications and data streams that provide accurate, real-time and predictive actionable insights about moving objects on roadways.

We specialize in collecting and aggregating mobility-related data from multiple sources into our Rekor One™ roadway intelligence engine, transforming this data into knowledge and actionable insights, and securely distributing those insights to multiple users across our software platforms and applications.

Our proprietary technologies use recent advances in artificial intelligence, machine learning, data analysis, edge processing and communications.

They are designed to be integrated into existing roadway and roadway sensor infrastructure to deliver real-time and predictive analytics that address critical challenges in transportation management, public safety, urban mobility and other key commercial markets.

By applying a multi-layer architectural approach and protocols inspired by the Open System Interconnection, or OSI, model, which was instrumental in creating computer operating systems in the 1970s and the internet in the 1980s, we are collaborating with members of the Rekor Partner Network to integrate various transportation infrastructure systems into a cohesive network of roadway intelligence assets and insights.

This involves consolidating fragmented and disparate systems, as well as adding new layers of connectivity, to create a unified infrastructure.

To achieve this goal, we are working closely with a wide range of stakeholders, including local, state and federal government agencies, law enforcement, transit providers, infrastructure owners/operators, automotive OEMs and technology and communications providers.

We are working to build a future for our customers where the mobility internet is interactive, generating and distributing real-time transportation intelligence to improve traffic management, public safety, maintenance, emergency services and planning agencies, as well as by connected and autonomous vehicles.

Our primary objective has been and remains to develop a unique and differentiated suite of products and services that will play a central role in facilitating this process, while aligning with key partners in the transportation ecosystem to provide the most comprehensive view of roadways.

We will continue to optimize our investments to uniquely combine physical and digital infrastructure that is foundational to a new operating system for the roadways.

As agencies plan for and build the transportation network of the future, we expect to play a critical and disproportionately valuable role in meeting the essential need for real-time and predictive 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.

Roadway Intelligence Powered by Rekor

Our cutting-edge technology and domain expertise gives us a position of strength in the emerging field of roadway intelligence.

At the core of our roadway intelligence solutions is the Rekor One™ roadway intelligence engine.

It is through this engine, fueled by rich data and purpose-built to be a single source of truth to address diverse use cases, that we deliver a range of solutions that cater to public safety, urban mobility, transportation management and commercial markets.

This engine facilitates the efficient collection, analysis and distribution of vast amounts of data, unlocking real-time and predictive operational insights.

Within Rekor One™, our proprietary algorithms curate data from multiple sources, including edge-based IoT devices, existing roadway sensors and a growing network of transportation data partners, unlocking multiple additional data points.

We use this data to generate multi-dimensional insights in real-time, and AI-driven predictive analytics that leverage patterns of what happened in the past so that we can forecast what will happen in the future.

These insights enable our customers to make better-informed proactive decisions and achieve improved operational efficiency through strategic resource allocation.

Our solutions can support diverse use cases, including real-time incident detection and response, data driven traffic operations and traffic management, proactive traffic calming around events, Federal Highway Administration, or FHWA, mandated vehicle classification, counts, and speed collection and reporting, analytics for bicycle, pedestrians and other micro-mobility modes, patterns and hot spots for greenhouse gas emissions, high-definition video management and traffic surveillance, law enforcement and intelligence-based policing, citation management, contactless compliance and enforcement.

With our advanced technology and domain expertise, we are well-equipped to serve multiple public agencies and private sector segments with comprehensive roadway intelligence.

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

Comprehensive traffic reports, including Federal Highway Administration (“FHWA”)-mandated vehicle classification, count and speed analytics.

Analytics on bicycles, pedestrians, and other micro-mobility modes.

Identification of patterns and hot spots for emissions and traffic impacts.

Traffic Operations & Management

Data-driven traffic operations for improved efficiency.

Real-time incident detection and response for proactive problem-solving.

Proactive traffic calming around events to minimize congestion and enhance safety.

Intelligent analytics to alleviate congestion, shorten commute times, and boost productivity.

High-Definition Video Monitoring

Traffic monitoring to assist law enforcement.

Support for intelligence-based policing to improve crime prevention.

Contactless compliance and enforcement solutions for safety and legal adherence.

Enhanced Roadway Safety

Real-time AI monitoring systems to detect hazards and reduce roadway fatalities.

Predictive analytics to anticipate and address potential safety risks.

Optimized Resource Allocation

AI automation to streamline operations and maximize resource allocation.

Improved data accuracy to support better decision-making and strategic planning.

Border & Freight Management

AI-based vehicle identification to enhance national security and minimize bottlenecks at borders and ports.

Weigh-in-Motion (“WIM”) systems for real-time commercial trucking analytics

Insurance Compliance & Public Safety

Automated enforcement systems to reduce uninsured drivers and improve overall public safety.

Opportunities, Trends and Uncertainties

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AI for Infrastructure – We believe that the application of AI to the analysis of conditions on roadways and other transportation infrastructure can significantly affect the safety and efficiency of travel in the future.

As vehicles increasingly move towards automation, there is a need for real-time data and actionable insights around traffic flow, identification of anomalous and unsafe movements – e.g.

As vehicles move towards full automation, there is a need for real-time data and actionable insights around traffic flow, identification of anomalous and unsafe movements – e.g.

wrong way vehicles, stopped vehicles, or/and pedestrians on the roadway.

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Communities are currently searching for better means of achieving compliance with minor vehicle offenses, such as lapsed registrations, and safety issues such as motorists who fail to stop for school buses.

For example, due to high rates of fatalities and injuries to law enforcement and other emergency response crews on roadsides, several states have considered authorizing automated enforcement of violations where motorists fail to slow down and/or move over for emergency responders and law enforcement vehicles at the side of the road.

For example, due to high rates of fatalities and injuries to law enforcement and other emergency response crews on roadsides, several states are considering authorizing automated enforcement of violations where motorists fail to slow down and/or move over for emergency responders and law enforcement vehicles at the side of the road.

To the extent that legislative implementation is required, a deliberative and necessarily time-consuming process is involved.

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As a result, we have made significant investments in our business development, marketing and eCommerce activities to increase awareness and market adoption of our products and services within key markets.

We anticipate that a sustained presence in the market, the continued development of strategic partnerships and other economies of scale will reduce the level of costs necessary to support sales of our products and services.

If we are able to maintain a sustained presence in the market, the continued development of strategic partnerships and other economies of scale will reduce the level of costs necessary to support sales of our products and services.

However, the speed at which these markets grow to the degree to which our products and services are adopted is uncertain.

Infrastructure Investment and Jobs Act ( “ IIJA ” ) and the Bipartisan Infrastructure Law ( “ BIL ” ) - The IIJA, signed into law on November 15, 2021, provides for significant national investments in the transportation systems in the United States, including over $150 billion in new spending on roadway infrastructure, including intelligent transportation systems.

We believe that our comprehensive offering of solutions positions the Company well to emerge as a technology leader in the expanded market for roadway intelligence that will benefit from this legislation.

We believe that there will continue to be bi-partisan support for these programs and that our comprehensive offering of solutions positions the Company well to emerge as a technology leader in the expanded market for roadway intelligence that will benefit from this legislation.

We have identified opportunities to access federal funding streams, and we are working to implement a program that capitalizes on this unprecedented U.S.

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$150 million for the current administration to establish a grant program to modernize state data collection systems $500 million for the Strengthening Mobility and Revolutionizing Transportation (“SMART”) Grant Program that would support demonstration projects on smart technologies that improve transportation efficiency and safety.

Recent Acquisitions - Over the past two years, Rekor has acquired two subsidiaries as part of its plans to advance its appeal to national and local transportation agencies.

In the first of these acquisitions, we acquired a leader in the development of predictive analytics for traffic management using a combination of internally generated and third party data sources.

This acquisition was designed to assure transportation agencies that we were developing the most advanced data analysis systems to support their missions in safety and efficiency.

In the second acquisition, we acquired one of the leading existing providers of traffic data services in the United States.

Uniquely, this Company had innovated a change in the service model from providing, servicing and maintaining agency resources to a data services model where overlapping entities could benefit from our modular approach to data collection and dissemination.

Each of these acquisitions has led to increased visibility for the Company among national and state level DOTs in the United States.

Recent Acquisition - In the current year, Rekor has acquired one subsidiary as part of its plans to advance its appeal to national and local transportation agencies.

We acquired one of the leading existing providers of traffic data services in the United States.

This acquisition has led to increased visibility for the Company among national and state level DOTs in the United States.

Challenges to Executing on the Corporate Strategy – As an acquirer and integrator of established technology companies in the ITS industry, there is an inherent risk associated with the successful implementation and execution of the strategy.

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Critical Accounting Estimates and Assumptions

Business Combination

The Company has made a preliminary estimate of the allocation of the preliminary purchase price of ATD to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair value.

The Company is still evaluating the fair value of intangible assets, and income taxes, in addition to ensuring all other assets and liabilities have been identified and recorded.

The Company has estimated the preliminary fair value of assets acquired and liabilities assumed based on information currently available and will continue to adjust those estimates as additional information pertaining to events or circumstances become available.

The Company will reflect measurement period adjustments, in the period in which the adjustments occur, and the Company will finalize its accounting for the acquisition within one year from the Closing Date.

A change in the fair value of the net assets may change the amount of the purchase price allocable to goodwill.

If the final fair value estimates and tax adjustments related to the net assets acquired decrease from their preliminary estimates, the amount of goodwill will increase.

In addition, the final fair value estimates related to the net assets acquired could impact the amount of amortization expense recorded associated with amounts allocated to tangible and intangible assets.

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, 2024.

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Our historical operating results in dollars are presented below.

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in thousands)

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Other income (expense):

(Loss) gain on extinguishment of debt

Loss on extinguishment of debt

Interest expense, net

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

Total other expense

Comparison of the Three Months Ended March 31, 2025 and the Three Months Ended March 31, 2024

Total Revenue

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in thousands)

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.

The decrease in revenue for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily attributable to adverse weather conditions and a slowdown in project activity, partially driven by ongoing uncertainty within the government sector.

Cost of Revenue, Excluding Depreciation and Amortization

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in thousands)

Cost of revenue, excluding depreciation and amortization

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.

For the three months ended March 31, 2025, cost of revenue, excluding depreciation and amortization decreased compared to the corresponding prior periods primarily due to a decreased in personnel and other direct costs such as hardware.

Operating Expenses

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in thousands)

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General and Administrative Expenses

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 $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.

For the three months ended March 31, 2025 , the decrease in general and administrative expenses was primarily due to a $225,000 decrease in professional services related to our operations and payroll and payroll related costs as a result of cost containment efforts intended to conform to operations.

Selling and Marketing Expenses

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.

For the three months ended March 31, 2025 , the decrease in selling and marketing expenses was primarily due to a $568,000 decreased related to payroll and payroll related costs as a result of cost containment efforts intended to conform to operations.

Research and Development Expense

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.

For the three months ended March 31, 2025 , the decrease in r esearch and development expenses was primarily due to a $918,000 decreased related to payroll and payroll related costs as a result of cost containment efforts intended to conform to operations.

Depreciation and Amortization

The increase in depreciation and amortization during the period is attributable primarily to the intangible assets that were acquired as part of our acquisition of ATD.

The decrease in depreciation and amortization during the period is attributable to an impairment we recognized as of December 31, 2024, following the identification of a triggering event.

Other Income (Expense)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars in thousands)

Other income (expense):

(Loss) gain on extinguishment of debt

Loss on extinguishment of debt

Interest expense, net

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 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.

Total other expense

For the three months ended March 31, 2025, interest expense decreased period over period due to the early redemption of the 2023 Promissory Notes.

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

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 September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Depreciation and amortization

Share-based compensation

Loss (gain) on extinguishment of debt

Loss on offering costs - Prepaid Advance

Gain on the sale of Global Public Safety

Loss on extinguishment of debt

Adjusted EBITDA

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

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands, except percentages)

Three Months Ended March 31,

(Dollars in thousands, except percentages)

2 unchanged sentences

Adjusted Gross Margin

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.

Adjusted Gross Margin For the three months ended March 31, 2025, increased compared to three months ended March 31, 2024.

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 September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Recurring revenue

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Performance Obligations

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.

As of March 31, 2025, we had approximately $14,485,000 of contracts that were closed prior to March 31, 2025 but have a contractual period beyond March 31, 2025.

This represents an increase of $35,000 or 0.2% compared to $14,450,000 of performance obligations as of December 31, 2024.

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

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Lease Obligations

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

As of March 31, 2025, we had material leased building space at the following locations in the U.S.

Columbia, Maryland – The corporate headquarters

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We believe our facilities are in good condition and adequate for their current use.

We expect to improve, replace and increase facilities as considered appropriate to meet the needs of our planned operations.

We expect to improve, replace and increase or decrease facilities as considered appropriate to meet the needs of our planned operations.

Liquidity and Capital Resources

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

Nine Months Ended September 30,

Three Months Ended March 31,

Net cash used in operating activities

Net cash (used in) provided by investing activities

Net cash used in 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 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 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.

Net decrease in cash, cash equivalents and restricted cash

Net cash used in operating activities for the three months ended March 31, 2025 had a increase of $193,000, which was primarily attributable to various fluctuations in our operating assets and liabilities.

The decrease in net cash used in investing activities of $8,793,000 was primarily due to the net cash outflow of $8,969,000 related to the acquisition of ATD.

Net cash provided by financing activities for the three months ended March 31, 2025 decreased by $6,174,000 from the prior three month period ended March 31, 2024.

During the three months ended March 31, 2025, as part of our Sale Agreement, we received net proceeds of $7,659,000.

During the three months ended March 31, 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

For the three months ended March 31, 2025 and 2024, we funded our operations primarily through cash from operating activities, the issuance of debt and the sale of equity.

As of March 31, 2025, we had cash and cash equivalents and restricted cash of $4,309,000 and a working capital of $3,073,000, as compared to cash and cash equivalents and restricted cash of $5,329,000 and working capital of $1,707,000 as of December 31, 2024.

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.

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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 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.

As of and for the three months ended March 31, 2025, we had working capital of $3,073,000 and a net loss of $10,874,000.

Our cash decreased by $1,020,000 for the three months ended March 31, 2025 primarily due to the net loss of $10,874,000, this amount was partially offset by external financing activity.

On February 10, 2025, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with Northland Securities, Inc.

(the “Agent”), pursuant to which the Company may, from time to time, offer and sell shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”), having an aggregate offering price of up to $25,000,000.

The Agent is entitled to receive from the Company a commission in an amount equal to (i) 3.0% of the gross sales price per share sold through it as agent in agency transactions and (ii) 6.0% of the purchase price per share sold to the Agent, as principal in principal transactions.

The Company incurred issuance costs of approximately $237,000 related to legal, accounting, and other fees in connection with the Sales Agreement.

These costs were charged against the gross proceeds of the Sales Agreement and presented as a reduction to additional paid-in capital on the accompanying consolidated balance sheets.

As of March 31, 2025 the Company issued 5,148,600 shares of its common stock at a weighted average selling price of $1.58 per share in accordance with the Sales Agreement.

Net cash provided from the Sales Agreement was $7,659,000 after paying $237,000 related to the issuance cost, as well as 3.0% or $244,000 related to cash commissions provided to the Agent.

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To the extent that events outside of the Company's control have a significant negative impact on economic and/or market conditions, they could affect payments from customers, services and supplies from vendors, its ability to continue to secure and implement new business, raise capital, and otherwise, depending on the severity of such impact, materially adversely affect its operating results.

2024 Public Offering

On February 9, 2024, the “Company issued and sold 10,000,000 shares of its common stock, at an offering price of $2.50 per share of common stock (the “2024 Public Offering Price”) in a registered public offering by the Company (the “ 2024 Public Offering”), pursuant to an underwriting agreement with William Blair & Company, L.L.C., as representative of the several underwriters named therein (collectively, the “Underwriters”).

On February 9, 2024, the Underwriters exercised in-full their option to purchase up to 1,500,000 additional shares of common stock at the 2024 Public Offering Price (the “Underwriters’ Option”).

The purchase closed on February 13, 2024.

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.

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 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.

As of March 31, 2025, we did not have any material commitments for capital expenditures.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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