What changed in this filing

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Item 1. Financial Statements

2025-11-13 compared with 2025-08-12 · 240 added, 233 removed, 902 unchanged (34% of the section changed)

4 unchanged sentences

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

June 30, 2025

September 30, 2025

December 31, 2024

3 unchanged sentences

Restricted cash

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

Accounts receivable, net of allowance for credit losses of $ 600 and $ 486 , respectively

Note receivable, current portion

4 unchanged sentences

Property and equipment, net

10,192 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 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.

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, 2025 and December 31, 2024, respectively.

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

Common stock, $ 0.0001 par value;

300,000,000 authorized shares;

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.

126,990,085 and 104,700,593 shares issued as of September 30, 2025 and December 31, 2024, respectively;

126,689,228 and 104,541,073 shares outstanding as of September 30, 2025 and December 31, 2024, respectively.

Treasury stock, 300,857 and 159,520 shares as of September 30, 2025 and December 31, 2024, respectively.

( 873 ) ( 711 )

12 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Cost of revenue, excluding depreciation and amortization

9 unchanged sentences

Interest expense, net

(Loss) gain on remeasurement of ATD Holdback Shares

Gain (loss) on remeasurement of ATD Holdback Shares

Loss on offering costs - Prepaid Advance

Gain on the sale of Global Public Safety

Other (expense) income

14 unchanged sentences

Total Stockholders' Equity

Balance as of April 1, 2025

Balance as of July 1, 2025

Stock-based compensation

2 unchanged sentences

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

Issuance of common stock pursuant to the 2025 Sales Agreement, net

Balance as of September 30, 2025

Balance as of July 1, 2024

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 2023 Warrants

Balance as of June 30, 2024

Shares issued under the Prepaid Advance

Balance as of September 30, 2024

Balance as of January 1, 2025

4 unchanged sentences

ATD Holdback Shares

Issuance of common stock pursuant to the 2025 Sales Agreement

Balance as of June 30, 2025

Issuance of common stock pursuant to the 2025 Sales Agreement, net

Balance as of September 30, 2025

Balance as of January 1, 2024

7 unchanged sentences

Issuance upon exercise of 2023 Warrants

Balance as of June 30, 2024

Shares issued under the Prepaid Advance

Balance as of September 30, 2024

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

3 unchanged sentences

(Dollars in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

Cash Flows from Operating Activities:

1 unchanged sentence

Bad debt expense

Amortization of right-of-use lease asset

Amortization of right-of-use financing lease asset

Non-cash operating lease expense

4 unchanged sentences

Loss (gain) on remeasurement of ATD Holdback Shares

Loss on sale of property and equipment

Gain on sale of property and equipment

Loss on financing lease abandonment

Gain on the sale of Global Public Safety

Loss on extinguishment of debt

Changes in operating assets and liabilities, net of acquisition:

Loss on the remeasurement of Prepaid Advance

Changes in operating assets and liabilities:

Accounts receivable

7 unchanged sentences

Proceeds from the sale of property and equipment

Proceeds from the sale of Global Public Safety

Cash paid for ATD acquisition, net

2 unchanged sentences

Proceeds from 2025 Sales Agreement, net

Repayment of STS Notes

Proceeds from the public offering

Repayment of 2023 Promissory Notes

Proceeds from public offering

Net proceeds from the Prepaid Advance

Proceeds from notes receivable

4 unchanged sentences

Repurchases of common stock

Repayment of STS Notes

Repayment of 2023 Promissory Notes

Net cash provided by financing activities

4 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

9 unchanged sentences

(collectively, “Waycare”), Southern Traffic Services, Inc.

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

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.

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

The Company provides roadway intelligence products and services, working to address critical needs in public safety, urban mobility, and transportation management.

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

4 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 June 30, 2025 and 2024.

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

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 results for the three and nine months ended September 30, 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 full year ended December 31, 2024 .

6 unchanged sentences

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 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.

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

As of and for the nine months ended September 30, 2025 , the Company had working capital of $ 6,959,000 and a net loss of $ 23,681,000 , 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.

2 unchanged sentences

The Company is actively monitoring its operations, cash on hand and working capital.

The Company is currently in the process of reviewing and exploring external financing options in order to sustain its operations.

The Company continuously reviews and explores external financing options in order to sustain its operations.

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.

11 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 June 30, 2025 , the Company did not identify any events that would cause it to assess goodwill for impairment.

As of September 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 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 carrying amounts reported in the consolidated balance sheets for accounts receivable, notes receivable and accounts payable approximate fair value as of September 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 September 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 June 30, 2025 .

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

Balance as of September 30, 2025

ATD Holdback Shares

2 unchanged sentences

Settlement of ATD Holdback Shares

Balance as of June 30, 2025

Balance as of September 30, 2025

Revenue Recognition

9 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Recurring revenue

48 unchanged sentences

Revenue is recognized monthly based on the number of diversion citations collected by the relevant jurisdiction.

The Company also generates revenue through its engineering services.

The Company also generates revenue through its engineering services, which include short-term data collections services.

These services are provided at the request of its customers and the revenue related to these services is recognized over time as the service is completed.

1 unchanged sentence

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Urban Mobility

24 unchanged sentences

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

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

As of September 30, 2025 , the unsatisfied portion of the remaining performance obligation was approximately $ 13,157,000 .

The Company expects to recognize approximately 86 % 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 $ 1,931,000 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.

Unbilled accounts receivables of $ 2,545,000 and $ 1,623,000 were included in accounts receivable, net, in the unaudited condensed consolidated balance sheets as of September 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.

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):

During the nine months ended September 30, 2025 , $ 2,572,000 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 September 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 June 30, 2025 and December 31, 2024 were $ 340,000 and $ 316,000 , respectively, and correspond to equal amounts of related liabilities.

Restricted cash for these client jurisdictions as of September 30, 2025 and December 31, 2024 were $ 253,000 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 June 30, 2025 and December 31, 2024 , the Company had deposits totaling $ 5,170,000 and $ 5,329,000 , respectively, in multiple U.S.

As of September 30, 2025 and December 31, 2024 , the Company had deposits totaling $ 3,411,000 and $ 5,329,000 , respectively, in multiple U.S.

financial institutions and one Israeli financial institution.

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

Customer B accounted for 20 % of the unaudited condensed consolidated revenue for the three months ended September 30, 2025.

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

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, 2025 and 2024 , respectively.

As of September 30, 2025 , Customer B accounted for 28 % 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.

As of September 30, 2025 and December 31, 2024 , amounts owed to board members of $ 71,000 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):

June 30, 2025

September 30, 2025

December 31, 2024

24 unchanged sentences

The Seller is a portfolio company of Seaport Capital, a private equity firm.

ATD is engaged in the business of advanced traffic data collection.

ATD is engaged in the business of traffic data collection.

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”).

38 unchanged sentences

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 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:

June 30, 2025

September 30, 2025

December 31, 2024

5 unchanged sentences

Financing leases

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

Maturities of operating and financing lease liabilities for continuing operations on September 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 six months ended June 30, 2025 and 2024 were as follows (dollars in thousands):

Six Months Ended June 30,

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

Nine Months Ended September 30,

Cash paid for interest

Cash paid for taxes

Decrease in accounts payable and accrued expenses related to purchases of inventory

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

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

Increase in inventory related to the transfer of property and equipment

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

Decrease in deposits related to Inventory

Abandonment of financing lease

2 unchanged sentences

Settlement of ATD Holdback Shares with common stock

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

Fair market 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:

3 unchanged sentences

Intangible Assets Subject to Amortization

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

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

September 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 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.

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

Amortization expense for the three months ended September 30, 2025 and 2024 was $ 300,000 and $ 1,166,000 , respectively, and for the nine months ended September 30, 2025 and 2024 was $ 900,000 and $ 3,509,000 , respectively, and is presented as part of depreciation and amortization in the unaudited condensed consolidated statements of operations.

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

As of June 30, 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 September 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 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.

These notes matured and were fully paid on September 30, 2024, and June 17, 2025, respectively.

As of September 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 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.

Interest is based on revenue received from an initial pool of “prime” accounts which are related to contracts from transportation agencies in five states, each of which has been highly 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 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 amount related to the interest reserve was $ 500,000 as of September 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 September 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 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 related to the Series A Prime Revenue Sharing Notes was $ 497,000 and $ 497,000 for three months ended September 30, 2025 and 2024 respectively, and $ 1,491,000 and $ 1,490,000 for the nine months ended September 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 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 June 30, 2025 (dollars in thousands):

The principal amounts due for loans and notes payable are shown below as of September 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 June 30, 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 September 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 June 30, 2025 .

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

For the nine months ended September 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 2024 tax years remain subject to examination by the Internal Revenue Service.

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.

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

NOTE 8 – COMMITMENTS AND CONTINGENCIES

20 unchanged sentences

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

Rekor seeks to recover damages from HCW and Armistice.

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.

The Company intends to vigorously defend itself in this lawsuit.

In Q3 2025, Rekor resolved its claims with Armistice and came to a settlement agreement.

The proceeds from the settlement are presented as part of other expense (income) in the condensed consolidated statement of operations.

Rekor now seeks to recover damages from HCW and HCW moved to dismiss the amended counterclaims.

The Court granted HCW’s motion to dismiss Rekor’s counterclaims.

Rekor has filed a notice of appeal of that ruling.

The Company believes HCW's claims are without merit and intends to vigorously defend itself in this lawsuit.

Occupational Safety and Health Administration ( “ OSHA ” ) Claim

6 unchanged sentences

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

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

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.

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.

The Company intends to vigorously defend itself in this lawsuit.

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

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

On September 30, 2025, the OALJ issued an Order in Rekor’s favor, dismissing all aspects of Claimant’s Complaint.

Claimant subsequently submitted a request for appellate review to the Appellate Review Board (“ARB”).

The ARB must accept Claimant’s request for appeal in order to conduct a review of the Order.

The ARB has not yet decided if it will accept Claimant’s request for appeal.

Generally, the decision to conduct a review must be made within thirty ( 30 ) days of the submission of the request.

This deadline is likely delayed/stayed by the government shutdown.

The Company believes these claims are without merit and intends to vigorously defend itself in this administrative proceeding.

NOTE 9 – STOCKHOLDERS ’ EQUITY

4 unchanged sentences

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 “Agent”), pursuant to which the Company could, 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 was 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 $ 245,000 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 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.

On August 12, 2025, the Company elected to voluntarily terminate its Sales Agreement.

As of September 30, 2025 the Company issued 18,888,832 shares of its common stock at a weighted average selling price of $ 1.23 per share in accordance with the Sales Agreement.

Net cash provided from the Sales Agreement was $ 22,350,000 after paying $ 245,000 in issuance costs, as well as 3.0 % or $ 699,000 related to cash commissions provided to the Agent.

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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 Company issued and sold 10,000,000 shares of its common stock, at an offering price of $ 2.50 per share (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”).

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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 June 30, 2025 .

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

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

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

2023 Promissory Notes (1)

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2023 Private Warrants (3)

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

$ - $ - $ - $ -

Outstanding warrants as of September 30, 2025

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

Intrinsic value of outstanding warrants as of September 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.

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

For the three and six months ended June 30, 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

Weighted Average Exercise Price

For the three and nine months ended September 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 September 30, 2025 is as follows:

Number of Shares Subject to Option Weighted Average Exercise Price

Weighted Average Remaining Contractual Term (Years)

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( 15,333 ) 0.68

Outstanding and exercisable balance as of June 30, 2025

Outstanding and exercisable balance as of September 30, 2025

471,533 $ 1.14 3.00 $ 255,000

As of June 30, 2025 , there was $ 0 of unrecognized stock compensation expense related to unvested stock options granted under the 2017 Plan.

As of September 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 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:

Stock compensation expense related to Restricted Stock Units ("RSUs") for the three months ended September 30, 2025 and 2024 was $ 577,000 and $ 1,148,000 , respectively and for the nine months ended September 30, 2025 and 2024 was $ 2,670,000 and $ 3,430,000 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, 2025 is as follows:

Number of Shares

Weighted Average Unit Price

Weighted Average Remaining Contractual Term (Years)

Weighted Average Unit Price Weighted Average Remaining Contractual Term (Years)

Outstanding balance as of January 1, 2025

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( 1,202,878 ) 1.00 0.45

Outstanding balance as of June 30, 2025

Outstanding balance as of September 30, 2025

2,000,350 $ 1.12 0.65

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

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.

As of September 30, 2025 , there was $ 1,126,000 of unrecognized stock compensation expense related to unvested RSUs granted under the 2017 Plan that will be recognized over an average remaining period of 1.12 years.

NOTE 11 – LOSS PER SHARE

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands, except per share data)

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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

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:

As the Company had a net loss for the three and nine months ended September 30, 2025 , the following 6,802,983 potentially dilutive securities were excluded from diluted loss per share:

4,331,100 for outstanding warrants, 471,533 related to outstanding options, and 2,000,350 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:

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.

NOTE 12 – SUBSEQUENT EVENTS

At Market Issuance 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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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 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.

Rekor serves governmental and commercial customers by providing advanced roadway intelligence products and services.

Our customers include federal, state and local governments and large commercial customers in the North America, as well as commercial customers in many other countries.

Rekor generates and distributes roadway data used in the management, maintenance and planning of transportation infrastructure.

We have been working for many years to develop and deploy proprietary systems that modernize and improve the collection and use of roadway data.

Our systems employ advanced models developed using machine learning and other recent advances in artificial intelligence (“AI”) to enhance public safety, urban mobility, and transportation management.

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.

Our approach leverages its AI capabilities to collect, organize and analyze mobility data and distribute it securely and efficiently, 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.

To assist our customers in realizing this vision, we’ve developed purpose-built software platforms and a complimentary suite of interconnected AI-enabled hardware offerings.

We’ve designed these solutions to exploit a set of diverse multi-modal datasets using our proprietary AI technologies, with the objective of delivering unparalleled roadway intelligence.

They enable clients to more effectively monitor, manage, and optimize the movement of vehicles and activities in and around roadways and communities with precision.

Through real-time insights and predictive analytics, our platforms enable 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.

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A New Operating System for Roadways

We believe the United States of America stands at a critical turning point in the evolution of its transportation and roadway infrastructure.

For over 70 years, the nation has relied on legacy technologies and outdated analog and manual methodologies, resulting in inefficiencies, rising costs, and preventable safety hazards.

While private-sector innovations like sensor technology, Internet of Things (“IoT”), AI, cloud computing, autonomous vehicles, and smart drones are advancing rapidly, fundamental challenges such as poor roadway quality, traffic congestion, and driver safety continue.

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:

We believe the United States of America is undergoing significant transition in the evolution of its transportation and roadway infrastructure.

For over 70 years, the nation has relied on legacy technologies that depend on analog and manual methodologies, resulting in inefficiencies, rising costs, and preventable safety hazards.

While innovations like sensor technology, Internet of Things (“IoT”), AI, cloud computing, and autonomous vehicles are advancing rapidly, fundamental challenges such as poor roadway quality, traffic congestion, and driver safety continue.

A concentrated recent effort by federal, state and local governments to repair and upgrade the nation’s roadways has provided an exciting opportunity to modernize the nation’s transportation infrastructure and address these challenges.

Since 2018, Rekor has positioned itself to participate in this modernization effort by actively designing, building, testing 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 keep a leadership role in laying the foundation of a 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.

Real-time AI monitoring systems detect roadway hazards and reduce incident response times, helping to prevent injuries and fatalities.

Optimized Traffic Flow:

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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.

With these forward-thinking infrastructure strategies, Rekor is playing a leading role in 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

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.

Rekor is a leader in roadway intelligence, committed to supporting the process of revolutionizing transportation systems by collecting, connecting, and organizing the world’s mobility data.

Improving and making effective use of roadway intelligence requires the ability to harness vast amounts and varieties of data from roadways, vehicles, transportation systems, and hundreds of external elements like weather, special events, and work zones, and do the analysis and distribution that transforms them into actionable insights that operators and planners can use productively.

These unique insights permit our customers to enhance public safety, visualize and optimize traffic flows more quickly, and improve other 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.

Inspired by the Open System Interconnection (“OSI”) model, Rekor works to integrate fragmented transportation systems into a cohesive, unified network.

Collaborating with government agencies, infrastructure operators, transit providers, and technology partners, we can 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 dynamic, AI-enabled networks to modernize traffic management, public safety, and emergency services.

By supporting the establishment of a digital overlay on existing physical infrastructure, Rekor is helping to create 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.

Roadway Intelligence Powered by Rekor

The Rekor One® roadway intelligence engine is a single source of truth for transforming transportation and mobility data into actionable insights.

The Rekor One® roadway intelligence engine serves as a central data and analytics platform that integrates multimodal mobility and roadway 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.

Within this suite, Rekor has developed specialized AI-powered platforms that serve as core revenue streams:

Rekor Command®:

A cutting-edge, AI-enabled platform that provides Transportation Management Centers with a rapid and holistic view of roadway activity.

By collecting and analyzing multiple real-time and historical data sources efficiently, Rekor Command delivers our customers with actionable alerts for more incidents, at greater speed, transforming roadway management by enabling faster detection, situational awareness, and proactive response.

Rekor Discover®:

Leveraging artificial intelligence models developed through years of supervised machine learning analysis of high-resolution video streams, Rekor Discover fully automates the capture of comprehensive traffic and vehicle analytics across a wide variety of use cases.

Strategically deployed, non-intrusive, video-based camera systems with AI-powered edge processing deliver powerful roadway intelligence and operational efficiencies.

Rekor Scout®:

A versatile platform that enables accurate license plate and vehicle recognition on nearly any IP, traffic, or security camera.

With quick deployment and a web-based interface hosted in the cloud or on-premise, Rekor Scout provides scalable security enhancements for government agencies, law enforcement, businesses, and even residential customers.

Rekor’s solutions support a variety of use cases, including:

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Enhanced Roadway Safety

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

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

Predictive analytics to anticipate and address potential safety risks.

Optimized Resource Allocation

AI automation to streamline operations and maximize resource allocation.

AI assistance to allow managers 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.

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

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

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New and Expanded Uses for Vehicle Recognition Systems – We believe that reductions in the cost of vehicle recognition products and services will significantly broaden the market for these systems.

We also expect the availability of faster, higher-accuracy, lower-cost systems to dramatically increase the ability of crowded urban areas to manage traffic congestion and implement smart city programs.

We currently serve many users who could not afford the cost, or adapt to the restrictions of, conventional vehicle recognition systems.

These include smaller municipalities, homeowners’ associations, and organizations finding new applications such as innovative customer loyalty programs.

We have seen and responded to an increase in the number of smaller jurisdictions that are testing vehicle recognition systems or that issued requests for proposals to install a network of vehicle recognition sensors.

As larger agencies implement and grow more familiar with the new systems, we have seen and responded to increased awareness among smaller agencies.

Adaptability of the Market – We have made a considerable investment in our advanced vehicle recognition systems because we believe their increased accuracy, affordability and ability to capture additional vehicle data will allow them to compete effectively with existing providers.

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Expansion of Automated Enforcement of Motor Vehicle Laws – We expect contactless compliance programs to be expanded as the types of vehicle related violations authorized for automated enforcement increase and experience provides localities with a better understanding of the circumstances where it is and is not beneficial.

We believe that future legislation will increasingly allow for automated enforcement of regulations such as motor vehicle insurance and registration requirements.

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 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.

We believe that future legislation will increasingly allow for automated enforcement of weight requirements and regulations such as motor vehicle insurance and registration requirements.

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.

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

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The GPU market is predicted to grow as a result of a surge in the adoption of the Internet of Things (“IoT”) by the industrial and automotive sectors.

As GPU manufacturers increase production volume, we hope to benefit from the reduced cost to manufacture the hardware included in our products or available to others using our services.

If GPU manufacturers are able to increase production volume, we hope to benefit from the reduced cost to manufacture the hardware included in our products or available to others using our services.

Edge Processing – Demand for actionable roadway information continues to grow in parallel with sensor improvements, such as increasingly sophisticated internal software and optical and other hardware adapted to the use of this software.

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Our systems have been designed to address these issues through the use of more effective edge processing, enabled both by incorporating the increasingly effective new GPUs into our systems and continual improvements in the efficiency of our AI algorithms.

Our edge processing systems ingest local HD video streams at the source and convert the raw video data to text data, dramatically reducing the volume of data that needs to be transferred through the network.

Our edge processing systems ingest local HD video streams at the source and convert the raw video data to text data, dramatically reducing the volume of data that needs to be uploaded and transferred through the network.

Edge processing allows us to scale a network dramatically without the bandwidth, cost, latency and dependability limitations that are experienced by other networks where raw video needs to be streamed to the cloud for processing.

Accelerated Business Development and Marketing – Our ability to compete in a large, competitive and rapidly evolving industry will require us to achieve and maintain a visible leadership position.

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.

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

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.

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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 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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Our historical operating results in dollars are presented below.

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands)

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Interest expense, net

(Loss) gain on remeasurement of ATD Holdback Shares

Gain (loss) 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 (expense) income, net

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

Comparison of the Three and Nine Months Ended September 30, 2025 and the Three and Nine Months Ended September 30, 2024

Total Revenue

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands)

The 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.

Revenue increased for the three and nine months ended September 30, 2025, compared to the corresponding periods in 2024, primarily due to higher perpetual license sales in Q3 2025.

Cost of Revenue, Excluding Depreciation and Amortization

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands)

Cost of revenue, excluding depreciation and amortization

For the three 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.

Cost of revenue, excluding depreciation and amortization, decreased for the three and nine month periods ended September 30, 2025, compared to the corresponding prior-year periods, primarily due to a favorable revenue mix of software versus hardware, which resulted in higher margins from increased software license sales.

Operating Expenses

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands)

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General and Administrative Expenses

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.

General and administrative expenses decreased for the three and nine months ended September 30, 2025 , compared to the prior-year periods.

The decrease was primarily driven by reductions in payroll and related expenses of $1,085,000 and $1,766,000, respectively, as a result of cost-containment initiatives implemented to better align with operations.

In addition, bad debt expense decreased by $591,000 and $798,000, respectively, and professional fees decreased by $571,000 and $390,000, respectively.

Selling and Marketing Expenses

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.

For the three and nine months ended September 30, 2025 , the decrease in selling and marketing expenses was primarily due to a $388,000 and $1,091,000 decrease related to payroll and payroll related costs as a result of cost-containment initiatives implemented to better align with operations.

Research and Development Expense

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.

For the three and nine months ended September 30, 2025 , the decrease in r esearch and development expenses was primarily due to a $1,000,000 and $3,138,000 decrease related to payroll and payroll related costs as a result of cost-containment initiatives implemented to better align with operations.

Depreciation and Amortization

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Other Income (Expense)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands)

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Interest expense, net

(Loss) gain on remeasurement of ATD Holdback Shares

Gain (loss) 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 (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.

For the three months ended September 30, 2025, interest expense increased by 15%, however, for the nine months ended September 30, 2025 interest expense decreased 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 in 2024.

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.

Additionally, in 2024 we recorded non-operating items, including a loss on offering costs related to our Prepaid Advance and a gain on the sale of Global Public Safety.

These items were one-time in nature and did not recur in 2025.

Non-GAAP Measures

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Interest, net

Depreciation and amortization

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Loss on extinguishment of debt

(Gain) loss on remeasurement of ATD Holdback Shares

Loss on offering costs - Prepaid Advance

Gain on the sale of Global Public Safety

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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(Dollars in thousands, except percentages)

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Adjusted Gross Margin

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.

Adjusted Gross Margin for the three and nine months ended September 30, 2025 increased compared to the three and nine months ended September 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Recurring revenue

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Performance Obligations

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.

As of September 30, 2025, we had approximately $13,157,000 of contracts that were closed prior to September 30, 2025 but have a contractual period beyond September 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 June 30, 2025, we had material leased building space at the following locations in the U.S.

As of September 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):

Six Months Ended June 30,

Nine Months Ended September 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 six months ended June 30, 2025 had a decrease of $2,192,000, which was primarily attributable to a reduction in our net loss.

Net cash used in operating activities for the nine months ended September 30, 2025 had a decrease of $6,970,000, which was primarily attributable to a reduction in our net loss.

The decrease in net cash used in investing activities of $6,580,000 was primarily due to the net cash outflow of $9,222,000 related to the acquisition of ATD.

Net cash provided by financing activities for the six months ended June 30, 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.

The decrease in net cash used in investing activities was partially offset by an increase in capital expenditures, which are directly tied to revenue generating contracts.

Net cash provided by financing activities for the nine months ended September 30, 2025 decreased by $10,722,000 from the prior nine month period ended September 30, 2024.

During the nine months ended September 30, 2025, as part of our Sales Agreement, we received net proceeds of $22,350,000.

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.

For the three and nine months ended September 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 September 30, 2025, we had cash and cash equivalents and restricted cash of $3,411,000 and a working capital of $6,959,000, 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 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.

As of and for the nine months ended September 30, 2025, we had working capital of $6,959,000 and a net loss of $23,681,000.

Our cash decreased by $1,918,000 for the nine months ended September 30, 2025 primarily due to the net loss of $23,681,000, 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 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.

On August 12, 2025, the Company elected to voluntarily terminate its Sales Agreement.

As of September 30, 2025 the Company issued 18,888,832 shares of its common stock at a weighted average selling price of $1.23 per share in accordance with the Sales Agreement.

Net cash provided from the Sales Agreement was $22,350,000 after paying $245,000 related to the issuance cost, as well as 3.0% or $699,000 related to cash commissions provided to the Agent.

See Note 9 – Stockholders’ Equity for details on shares issued under the Sales Agreement.

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.

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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.

As of June 30, 2025, we did not have any material commitments for capital expenditures.

As of September 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