What changed in this filing

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Item 1. Financial Statements

2025-08-12 compared with 2025-05-14 · 201 added, 140 removed, 934 unchanged (27% of the section changed)

4 unchanged sentences

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

March 31, 2025

June 30, 2025

December 31, 2024

3 unchanged sentences

Restricted cash

Accounts receivable, net

Accounts receivable, net of reserve allowance of $ 571 and $ 486 , respectively

Note receivable, current portion

4 unchanged sentences

Property and equipment, net

10,418 11,048

Right-of-use operating lease assets, net

35 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 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.

Preferred stock, $ 0.0001 par value, 2,000,000 authorized, 505,000 shares designated as Series A and 240,861 shares designated as Series B as of June 30, 2025 and December 31, 2024, respectively.

No preferred stock was issued or outstanding as of June 30, 2025 or December 31, 2024, respectively.

Common stock, $ 0.0001 par value;

300,000,000 authorized shares;

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.

122,538,090 and 104,700,593 shares issued as of June 30, 2025 and December 31, 2024, respectively;

122,237,802 and 104,541,073 shares outstanding as of June 30, 2025 and December 31, 2024, respectively.

Treasury stock, 300,288 and 159,520 shares as of June 30, 2025 and December 31, 2024, respectively.

( 873 ) ( 711 )

12 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Cost of revenue, excluding depreciation and amortization

9 unchanged sentences

Interest expense, net

(Loss) gain on remeasurement of ATD Holdback Shares

Other (expense) income

Total other expense

Total other (expense) income, net

Loss per common share

12 unchanged sentences

Total Stockholders' Equity

Balance as of April 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 of common stock pursuant to the 2025 Sales Agreement

Balance as of June 30, 2025

Balance as of April 1, 2024

Stock-based compensation

Issuance upon exercise of stock options

Issuance upon vesting of restricted stock units

Issuance upon exercise of 2023 Warrants

Balance as of June 30, 2024

Balance as of January 1, 2025

Stock-based compensation

Issuance upon exercise of stock options

Issuance upon vesting of restricted stock units

2 unchanged sentences

Issuance of common stock pursuant to the 2025 Sales Agreement

Balance as of March 31, 2025

Balance as of June 30, 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

Balance as of March 31, 2024

Issuance upon exercise of 2023 Warrants

Balance as of June 30, 2024

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

3 unchanged sentences

(Dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flows from Operating Activities:

7 unchanged sentences

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 (gain) on remeasurement of ATD Holdback Shares

Loss on sale of property and equipment

Changes in operating assets and liabilities:

Loss on financing lease abandonment

Loss on extinguishment of debt

Changes in operating assets and liabilities, net of acquisition:

Accounts receivable

11 unchanged sentences

Proceeds from 2025 Sales Agreement, net

Repayment of STS Notes

Proceeds from the public offering

1 unchanged sentence

Proceeds from notes receivable

Net proceeds from exercise of options

Net proceeds from exercise of warrants

Payments related to financing leases

Repayments of loans payable

Repurchases of common stock upon vesting of restricted stock units

Repurchases of common stock

Net cash provided by financing activities

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

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

2 unchanged sentences

Cash and cash equivalents at end of period

Restricted cash and cash equivalents at end of period

Restricted cash at end of period

Cash, cash equivalents and restricted cash at end of period

17 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 March 31, 2025 and 2024.

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

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 .

The results for the three and six months ended June 30, 2025 , are not necessarily indicative of the results to be expected for the year ending December 31, 2025 .

The year-end condensed balance sheet data was derived from audited financial statements but does not include all disclosures required by U.S.

14 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 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.

These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.

As of and for the six months ended June 30, 2025 , the Company had working capital of $ 6,159,000 and a net loss of $ 19,532,000 , 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.

These factors raise substantial doubt regarding the Company’s ability to continue as a going concern for the next twelve months following the issuance of these unaudited condensed consolidated financial statements.

The unaudited condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

3 unchanged sentences

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 operates as a single operating and reportable segment.

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

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.

The CODM uses net income to assess segment performance.

The significant expenses regularly reviewed by the CODM are 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 unaudited condensed consolidated statement of operations.

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

Goodwill is subject to impairment testing on an annual basis.

1 unchanged sentence

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

As of June 30, 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 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 carrying amounts reported in the consolidated balance sheets for accounts receivable, notes receivable and accounts payable approximate fair value as of June 30, 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 June 30, 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” ).

16 unchanged sentences

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 .

There were no changes in levels during the period ended June 30, 2025 .

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

2 unchanged sentences

Change in fair value

Balance as of March 31, 2025

Balance as of June 30, 2025

ATD Holdback Shares

Balance as of January 1, 2025

Gain due to change in fair value

Loss due to change in fair value

Settlement of ATD Holdback Shares

Balance as of March 31, 2025

Balance as of June 30, 2025

Revenue Recognition

9 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Recurring revenue

1 unchanged sentence

Product and service revenue

6,448 6,143 10,540 10,959

Total revenue

48 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Urban Mobility

1 unchanged sentence

Transportation Management

408 723 831 1,387

Public Safety

3,529 3,565 6,775 7,064

Total revenue

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

As of June 30, 2025 , the unsatisfied portion of the remaining performance obligation was approximately $ 13,231,000 .

The Company expects to recognize approximately 88 % 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 $ 1,545,000 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.

Unbilled accounts receivables of $ 1,931,000 and $ 1,623,000 were included in accounts receivable, net, in the unaudited condensed consolidated balance sheets as of June 30, 2025 and December 31, 2024 , respectively.

Contract liabilities

1 unchanged sentence

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):

During the six months ended June 30, 2025 , $ 2,160,000 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 June 30, 2025 (dollars in thousands):

2025, remaining

3 unchanged sentences

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

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.

Restricted cash for these client jurisdictions as of June 30, 2025 and December 31, 2024 were $ 340,000 and $ 316,000 , respectively, and correspond to equal amounts of related liabilities.

Concentrations of Credit Risk

1 unchanged sentence

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.

As of June 30, 2025 and December 31, 2024 , the Company had deposits totaling $ 5,170,000 and $ 5,329,000 , respectively, in multiple U.S.

financial institutions and one Israeli financial institution.

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 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.

No single customer accounted for more than 10% of the Company’s unaudited condensed consolidated revenues for the three and six months ended June 30, 2025 and 2024 , respectively.

As of June 30, 2025 , no single customer accounted for more than 10% of the Company's unaudited condensed consolidated accounts receivable balance.

As of December 31, 2024 , a single customer accounted for 12 % of the Company's consolidated accounts receivable balance.

Accounts Payable and Other Current Liabilities

As of June 30, 2025 and December 31, 2024 , amounts owed to board members of $ 68,000 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):

March 31, 2025

June 30, 2025

December 31, 2024

65 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Operating lease cost

$ 701 $ 688 1,411 1,360

Finance lease cost

Amortization of right-of-use assets

301 198 606 384

Interest on lease liabilities

Finance lease cost

342 230 695 451

Total lease cost

$ 1,043 $ 918 $ 2,106 $ 1,811

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

March 31, 2025

June 30, 2025

December 31, 2024

5 unchanged sentences

Financing leases

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

Maturities of operating and financing lease liabilities for continuing operations at June 30, 2025 were as follows (dollars in thousands):

Operating Leases

4 unchanged sentences

Maturities of lease liabilities

$ 13,098 $ 1,902

NOTE 4 – SUPPLEMENTAL NON CASH DISCLOSURES OF CASH FLOW INFORMATION

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,

Supplemental disclosures of cash flow information for the six months ended June 30, 2025 and 2024 were as follows (dollars in thousands):

Six Months Ended June 30,

Cash paid for interest

2 unchanged sentences

Decrease in deposits related to property and equipment received

Decrease in deposits related to inventory received

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

Abandonment of financing lease

Contract modification resulting in a measurement of an operating lease

6 unchanged sentences

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

NOTE 5 – INTANGIBLE ASSETS AND GOODWILL

ATD Acquisition

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.

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.

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

NOTE 5 – INTANGIBLE ASSETS

Intangible Assets Subject to Amortization

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

The following provides a breakdown of identifiable intangible assets, net as of June 30, 2025 and December 31, 2024 (dollars in thousands):

June 30, 2025

December 31, 2024

Customer relationships

$ 15,300 $ 15,300

Marketing related

Internally capitalized software

16,447 16,447

accumulated amortization

( 2,597 ) ( 1,997 )

Identifiable intangible assets, net

$ 13,850 $ 14,450

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

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.

Amortization expense for the three months ended June 30, 2025 and 2024 was $ 300,000 and $ 1,171,000 , respectively, and for the six months ended June 30, 2025 and 2024 was $ 600,000 and $ 2,343,000 , 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 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):

As of June 30, 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

1 unchanged sentence

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

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

On September 30, 2024, the Company paid the first payment in the principal amount of $ 1,000,000 .

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.

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

On September 30, 2024 and June 27, 2025, the Company paid the first and second payment in the principal amount of $ 1,000,000 and $ 1,000,000 , respectively.

As of June 30, 2025 , the aggregate balance of these notes payable was fully satisfied.

Series A Prime Revenue Sharing Notes

4 unchanged sentences

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

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

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

The Company entered into a base Indenture for the Series A Prime Revenue Sharing Notes as of December 15, 2023 with Argent Institutional Trust Company, as trustee.

4 unchanged sentences

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 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 amount related to the interest reserve was $ 500,000 as of June 30, 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 June 30, 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.

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

Interest expense related to the Series A Prime Revenue Sharing Notes was $ 497,000 and $ 497,000 for three months ended June 30, 2025 and 2024 respectively, and $ 994,000 and $ 993,000 for the six months ended June 30, 2025 and 2024 , respectively.

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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Contractual interest expense

$ 561 $ 559 $ 1,126 $ 1,357

Amortization of debt issuance costs

Total interest expense

611 615 1,225 1,812

interest income

Total interest expense, net

$ 586 $ 544 $ 1,176 $ 1,598

Schedule of Principal Amounts Due of Debt

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

The principal amounts due for long-term notes payable are shown below as of June 30, 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 March 31, 2025 .

The Company maintains a full valuation allowance against its net deferred taxes, outside of the deferred tax liability related to the indefinite lived intangibles, through June 30, 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 March 31, 2025 .

Federal, state or foreign income tax audits were in process as of June 30, 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 months ended March 31, 2025 and 2024, the Company did not record any interest or penalties related to unrecognized tax benefits.

For the six months ended June 30, 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 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.

As of June 30, 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 and six months ended June 30, 2025 and 2024 , the Company did not record any expense or benefit related to income tax.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

40 unchanged sentences

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.

At the Court's request, the parties submitted post-hearing briefs in April 2025.

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

15 unchanged sentences

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.

As of June 30, 2025 the Company issued 14,914,600 shares of its common stock at a weighted average selling price of $ 1.24 per share in accordance with the Sales Agreement.

Net cash provided from the Sales Agreement was $ 17,699,000 after paying $ 245,000 in issuance costs, as well as 3.0 % or $ 555,000 related to cash commissions provided to the Agent.

ATD Acquisition

23 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.

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 :

There was no activity related to the Company warrants during the period ended June 30, 2025 .

The table below shows the Company's outstanding warrants as of June 30, 2025 :

2023 Promissory Notes (1)

1 unchanged sentence

2023 Private Warrants (3)

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

Outstanding warrants as of June 30, 2025

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

Weighted average strike price of outstanding warrants as of June 30, 2025

$ 2.00 $ 1.82 $ 3.25 $ 2.80

Intrinsic value of outstanding warrants as of June 30, 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.

Of the original 6,250,000 warrants, 3,675,000 have been exercised and 1,575,000 were cancelled.

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

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.

15 unchanged sentences

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

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 :

For the three and six months ended June 30, 2025 and 2024 there was no stock compensation expense related to stock options.

A summary of stock option activity under the Company’s 2017 Plan during the period ended June 30, 2025 is as follows:

Number of Shares Subject to Option

2 unchanged sentences

Aggregate Intrinsic Value

Outstanding and exercisable balance as of March 31, 2025

Outstanding balance as of January 1, 2025

486,866 $ 1.13 3.76 $ 264,000

As of March 31, 2025 , there was $ 0 of unrecognized stock compensation expense related to unvested stock options granted under the 2017 Plan.

( 5,333 ) 0.68

Outstanding and exercisable balance as of June 30, 2025

481,533 $ 1.13 3.26 $ 120,000

As of June 30, 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 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:

Stock compensation expense related to Restricted Stock Units ("RSUs") for the three months ended June 30, 2025 and 2024 was $ 723,000 and $ 1,115,000 , respectively and for the six months ended June 30, 2025 and 2024 was $ 2,093,000 and $ 2,282,000 respectively, and is presented based on the awardees' operating department, as general administrative, selling and marketing and research and development expenses in the unaudited condensed consolidated statements of operations.

A summary of RSU activity under the Company’s 2017 Plan for the six months ended June 30, 2025 is as follows:

Number of Shares

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( 1,029,167 ) 0.97 0.58

Outstanding balance as of March 31, 2025

Outstanding balance as of June 30, 2025

2,602,424 $ 1.15 0.91

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

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.

As of June 30, 2025 , there was $ 1,852,000 of unrecognized stock compensation expense related to unvested RSUs granted under the 2017 Plan that will be recognized over an average remaining period of 0.91 years.

NOTE 11 – LOSS PER SHARE

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands, except per share data)

Basic and diluted loss per share

Net loss attributable to shareholders

$ ( 8,658 ) $ ( 9,795 ) $ ( 19,532 ) $ ( 28,409 )

Weighted average common shares outstanding - basic and diluted

117,435,953 84,932,611 112,459,949 81,929,347

Basic and diluted loss per share

$ ( 0.07 ) $ ( 0.12 ) $ ( 0.17 ) $ ( 0.35 )

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:

7,415,057 9,627,895 7,415,057 9,627,895

As the Company had a net loss for the three and six months ended June 30, 2025 , the following 7,415,057 potentially dilutive securities were excluded from diluted loss per share:

4,331,100 for outstanding warrants, 481,533 related to outstanding options, and 2,602,424 related to outstanding RSUs.

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

6,606,100 for outstanding warrants, 681,461 related to outstanding options, 664,329 related to the ATD Holdback Shares and 1,676,005 related to outstanding RSUs.

NOTE 12 – SUBSEQUENT EVENTS

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.

From June 30, 2025 to August 11, 2025 the Company issued 3,974,232 shares of its common stock in exchange for net cash of $4,653,000 under the Sales Agreement.

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

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Our historical operating results in dollars are presented below.

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

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Interest expense, net

(Loss) gain on remeasurement of ATD Holdback Shares

Other (expense) income

Total other expense

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

Total other (expense) income, net

Comparison of the Three and Six Months Ended June 30, 2025 and the Three and Six Months Ended June 30, 2024

Total Revenue

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

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.

The decrease in revenue for the three and six months ended June 30, 2025, compared to the six months ended June 30, 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

Cost of revenue, excluding depreciation and amortization

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.

For the three months ended June 30, 2025, cost of revenue, excluding depreciation and amortization increased compared to the corresponding prior period primarily due to the mix of software and hardware revenue which resulted in an increase in personnel and other direct costs.

For the six months ended June 30, 2025, compared to the six months ended June 30, 2024, Cost of Revenue, Excluding Depreciation and Amortization remained consistent period over period.

Operating Expenses

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

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General and Administrative Expenses

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.

For the three and six months ended June 30, 2025 , the decrease in general and administrative expenses was primarily due to a $365,000 and $628,000 decrease in payroll and payroll related costs as a result of cost containment efforts intended to conform to operations.

Selling and Marketing Expenses

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.

For the three and six months ended June 30, 2025 , the decrease in selling and marketing expenses was primarily due to a $251,000 and $848,000 decreased related to payroll and payroll related costs as a result of cost containment efforts intended to conform to operations.

Research and Development Expense

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.

For the three and six months ended June 30, 2025 , the decrease in r esearch and development expenses was primarily due to a $1,220,000 and $2,138,000 decreased related to payroll and payroll related costs as a result of cost containment efforts intended to conform to operations.

Depreciation and Amortization

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Other Income (Expense)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

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Interest expense, net

(Loss) gain on remeasurement of ATD Holdback Shares

Other (expense) income

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.

Total other (expense) income, net

For the three months ended June 30, 2025, interest expense remained fairly consistent period over period, however, for the six months ended June 30, 2025 interest expense decrease compared to the corresponding period in 2024 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.

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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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Depreciation and amortization

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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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands, except percentages)

Cost of revenue, excluding depreciation and amortization

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Adjusted Gross Margin

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

Adjusted Gross Margin For the three and six months ended June 30, 2025, decreased compared to the three and six months ended June 30, 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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Recurring revenue

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Performance Obligations

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.

As of June 30, 2025, we had approximately $13,231,000 of contracts that were closed prior to June 30, 2025 but have a contractual period beyond June 30, 2025.

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

As of June 30, 2025, we had material leased building space at the following locations in the U.S.

Columbia, Maryland – The corporate headquarters

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

Three Months Ended March 31,

Six Months Ended June 30,

Net cash used in operating activities

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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.

Net cash used in operating activities for the six months ended June 30, 2025 had a decrease of $2,192,000, which was primarily attributable to a reduction in our net loss.

The decrease in net cash used in investing activities of $9,077,000 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 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.

Net cash provided by financing activities for the six months ended June 30, 2025 increased by $868,000 from the prior six month period ended June 30, 2024.

During the six months ended June 30, 2025, as part of our Sale Agreement, we received net proceeds of $17,699,000.

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

For the three and six months ended June 30, 2025 and 2024, we funded our operations primarily through cash from operating activities, the issuance of debt and the sale of equity.

As of June 30, 2025, we had cash and cash equivalents and restricted cash of $5,170,000 and a working capital of $6,159,000, 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 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.

As of and for the six months ended June 30, 2025, we had working capital of $6,159,000 and a net loss of $19,532,000.

Our cash decreased by $159,000 for the six months ended June 30, 2025 primarily due to the net loss of $19,532,000, 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.

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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.

As of June 30, 2025 the Company issued 14,914,600 shares of its common stock at a weighted average selling price of $1.24 per share in accordance with the Sales Agreement.

Net cash provided from the Sales Agreement was $17,699,000 after paying $245,000 related to the issuance cost, as well as 3.0% or $555,000 related to cash commissions provided to the Agent.

These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.

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.

The unaudited condensed consolidated financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

The Company's ability to generate positive operating results and execute its business strategy will depend on (i) its ability to continue the growth of its customer base, (ii) its ability to continue to improve its quarterly financial metrics such as net loss and cash used from operating activities (iii) the continued performance of its contractors, subcontractors and vendors, (iv) its ability to maintain and build good relationships with investors, lenders and other financial intermediaries, (v) its ability to maintain timely collections from existing customers, and (vi) the ability to scale its business processes.

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.

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

As of June 30, 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