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Item 8. Financial Statements and Supplementary Data

2026-03-31 compared with 2025-03-31 · 283 added, 264 removed, 1046 unchanged (34% of the section changed)

1 unchanged sentence

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm (Marcum LLP, PCAOB ID 688 )

Reports of Independent Registered Public Accounting Firms (CBIZ CPAs P.C., PCAOB ID 199, and Marcum LLP, PCAOB ID 688 )

Consolidated Balance Sheets as of December 31, 2025 and 2024

7 unchanged sentences

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Rekor Systems, Inc.

(the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheet of Rekor Systems, Inc.

(the “Company”) as of December 31, 2025, the related consolidated statements of operations, stockholders’ equity and cash flows for the year ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”).

In our opinion, based on our audit, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As more fully described in Note 1, the Company has incurred significant losses and will need to raise additional funds to meet its obligations and sustain its operations.

As more fully described in Note 1, the Company has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations.

These conditions raise substantial doubt about the Company's ability to continue as a going concern.

3 unchanged sentences

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Critical Audit Matter – Auditing the Fair Value of Intangible Assets Acquired in a Business Combination

As described in Note 2 to the consolidated financial statements, the Company completed the acquisition of all of the outstanding membership interests of All Traffic Data Service, LLC (“ATD”) on January 2, 2024 for total consideration of $20.6 million.

The Company accounted for this transaction as a business combination under the acquisition method of accounting whereby the fair value of the consideration transferred was allocated to the assets acquired, including a customer relationship intangible asset of $11.9 million and trade names of $0.2 million, and liabilities assumed based upon their acquisition date fair values.

Management estimated the fair value of the customer relationship intangible asset using a multi-period excess earnings method whereby residual forecasted cash flows expected to be derived from the intangible asset over the economic life of the asset, adjusted for expected attrition, are discounted to present value.

We identified the valuation of the customer relationship intangible asset at the ATD acquisition date as a critical audit matter because of the significant assumptions management used in estimating the fair values, including forecasted cash flows and the selection of a discount rate for the customer relationship intangible asset.

Auditing management’s assumptions involved a high degree of auditor judgment and an increased audit effort, including the use of valuation specialists, due to the impact these assumptions could have on the accounting estimates.

Our audit procedures related to the valuation of the customer relationship intangible asset included the following, among others:

We reviewed the interest purchase agreement to understand and evaluate the terms of the acquisition and accounting for the acquisition.

We tested the reasonableness of management’s forecasted cash flows used in the valuation of the customer relationship intangible asset.

This testing included analyzing ATD’s historical revenue growth rates, margins, customer attrition rate, and capital expenditures and comparing them to the forecasted amounts.

Additionally, we considered the post-acquisition performance trajectory of the Company’s most recent prior business combination in order to establish a benchmark.

We utilized our valuation specialists to perform the following procedures, among others:

Evaluate the appropriateness of the valuation method used by management to estimate the fair values of the customer relationship intangible asset and test the mathematical accuracy of the model.

Assess the reasonableness of certain key inputs used to develop the fair value measurements including the discount rate and the inputs to the cost of capital assumption

Test the fair value measurement for the customer relationship intangible asset by performing an independent calculation of the value

We determined that there are no critical audit matters.

/s/ CBIZ CPAs P.C.

CBIZ CPAs P.C.

We have served as the Company’s auditor since 2019 (such date takes into account the acquisition of the attest business of Marcum LLP by CBIZ CPAs P.C.

effective November 1, 2024).

Morristown, New Jersey

March 31, 2026

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of

Rekor Systems, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Rekor Systems, Inc.

(the “Company”) as of December 31, 2024, the related consolidated statements of operations, stockholders equity, and cash flows for the year ended December 31, 2024 and the related notes (collectively referred to as the “financial statements”).

In our opinion, based on our audit, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As more fully described in Note 1, the Company has incurred significant losses and will need to raise additional funds to meet its obligations and sustain its operations.

These conditions raise substantial doubt about the Company's ability to continue as a going concern.

Management's plans in regard to these matters are also described in Note 1.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

Accordingly, we express no such opinion.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Marcum LLP

We have served as the Company’s auditor since 2019

Morristown, NJ

We have served as the Company’s auditor from 2019 to 2025.

Morristown, New Jersey

March 31, 2025

15 unchanged sentences

Property and equipment, net

11,048 13,188

Right-of-use operating lease assets, net

11 unchanged sentences

Notes payable, current portion

Series A Prime Revenue Sharing Notes, net of debt discount of $ 131 and $ 0 , respectively

Series A Prime Revenue Sharing Notes - related party, net of debt discount of $ 66 and $ 0 , respectively

Loans payable, current portion

7 unchanged sentences

Long-term liabilities

Notes payable, long-term

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

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

Series A Prime Revenue Sharing Notes, net of debt discount of $ 0 and $ 263 , respectively

44 unchanged sentences

14,596 18,766

Impairment of intangible assets

Asset impairment charges

Depreciation and amortization

4 unchanged sentences

Other income (expense):

(Loss) gain on extinguishment of debt

( 4,693 ) 527

Loss on extinguishment of debt

Interest expense, net

( 2,297 ) ( 2,645 )

Gain on remeasurement of ATD Holdback Shares

(Loss) gain on remeasurement of ATD Holdback Shares

Loss on offering costs - Prepaid Advance

33 unchanged sentences

1,044,280 - - - - - -

Fair value allocated to warrants with 2023 Promissory Notes

- - - - 5,125 - 5,125

Shares withheld upon vesting of restricted stock units

( 63,012 ) - 63,012 ( 189 ) - - ( 189 )

Issuance upon exercise of Series A warrants

Shares issued as part of the ATD Acquisition

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

Issuance of common stock upon exercise of pre-funded warrants

Retirement of the 2023 Promissory Notes

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

Net proceeds from 2023 Registered Direct Offering

2024 Public Offering

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

Issuance upon exercise of 2023 Registered Direct Offering Warrants

Issuance of warrants

3,675,000 1 - - 5,144 - 5,145

Prepaid Advance Agreement

15,427,749 1 - - 14,999 - 15,000

- - - - - ( 61,410 ) ( 61,410 )

Balance as of December 31, 2024

8 unchanged sentences

( 154,609 ) - 154,609 ( 189 ) - - ( 189 )

Shares issued as part of the ATD Acquisition

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

Retirement of the 2023 Promissory Notes

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

2024 Public Offering

ATD Holdback Shares

664,329 - - - 1,156 - 1,156

Issuance of warrants

At Market Issuance Sales Agreement

18,888,832 2 - - 22,348 - 22,350

Prepaid Advance Agreement

2025 Underwriting Agreement

8,571,428 1 - - 13,890 - 13,891

16 unchanged sentences

Share-based compensation

Impairment of intangible assets

Asset impairment charges

Amortization of debt discount

1 unchanged sentence

Adjustment to inventory to net realizable value

Impairment of SAFE Agreement

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

Gain on remeasurement of ATD Holdback Shares

Gain on the sale of property and equipment

(Gain) loss due to the remeasurement of the STS Earnout and Contingent Consideration, net

( 1,900 ) 100

Loss (gain) on remeasurement of ATD Holdback Shares

Gain on sale of property and equipment

Gain on the sale of Global Public Safety

Loss (gain) on extinguishment of debt

4,693 ( 527 )

Loss on extinguishment of debt

Loss on settlement of Prepaid Advance

2 unchanged sentences

( 1,670 ) 220

1,159 ( 687 )

Other current assets

( 1,308 ) 144

1,830 ( 495 )

Other current assets and deposits

Accounts payable, accrued expenses and other current liabilities

4 unchanged sentences

( 443 ) ( 876 )

Net cash used in operating activities - continuing operations

( 32,469 ) ( 32,178 )

Net cash used in operating activities - discontinued operations

Net cash used in operating activities

4 unchanged sentences

Proceeds from the sale of property and equipment

Proceeds from the Roker SAFE

Proceeds from notes receivable

Proceeds from the sale of Global Public Safety

Cash paid for ATD acquisition, net

Net cash (used in) provided by investing activities

Net cash used in investing activities

( 2,172 ) ( 9,030 )

Cash Flows from Financing Activities:

Proceeds from public offering

Proceeds from 2025 Sales Agreement, net

Proceeds from 2025 Underwriting Agreement, net

Repayment of STS Notes

( 1,000 ) ( 1,000 )

Proceeds from the public offering

Net proceeds from the Prepaid Advance Agreement

Net proceeds from exercise of options

Net proceeds from exercise of warrants

Net proceeds from the Prepaid Advance

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

Proceeds from notes receivable

Payments related to financing leases

( 969 ) ( 994 )

Net proceeds from exercise of options

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

Net proceeds from Series A Prime Revenue Sharing Notes

Net proceeds from Series A Prime Revenue Sharing Notes - related party

Net proceeds from 2023 Promissory Notes

Net proceeds from 2023 Promissory Notes - related party

Net proceeds from 2023 Registered Direct Offering

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

Net proceeds from the exercise of the pre-funded warrants

Repayments of loans payable

( 78 ) ( 75 )

Repayment of STS Notes

Repurchases of common stock

3 unchanged sentences

34,078 31,115

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

( 10,384 ) 13,694

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

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

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

11,534 ( 10,384 )

6 unchanged sentences

Restricted cash and cash equivalents at end of the year

Cash, cash equivalents and restricted cash and cash equivalents at end of the year

Cash, cash equivalents and restricted cash at end of the year

$ 16,863 $ 5,329

9 unchanged sentences

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

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

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

1 unchanged sentence

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

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

Basis of Consolidation

17 unchanged sentences

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

On February 10, 2025, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with Northland Securities, Inc., 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, having an aggregate offering price of up to $ 25,000,000 .

See Note 16 to our consolidated financial statements for additional information related to the Sales Agreement.

The Company received net proceeds of approximately $ 13,891,000 from the December 2025 Underwriting Agreement (see Note 13 ).

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.

3 unchanged sentences

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

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

The Company’s chief operating decision maker (“CODM”) is the 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 CODM uses net loss 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.

8 unchanged sentences

dollars are presented at their original amounts.

dollar transactions and other items in the financial statements, the following exchange rates are used:

dollar transactions and other items in the consolidated financial statements, the following exchange rates are used:

(i) for transactions – exchange rates at transaction dates or average exchange rates;

1 unchanged sentence

Currency transaction gains and losses are presented in other expense, net on the consolidated statements of operations.

The currency transaction gain (loss) for the year ended December 31, 2024 and 2023 was ($ 10,000 ) and $ 55,000 , respectively.

The currency transaction losses for the years ended December 31, 2025 and 2024 were $ 499,000 and $ 10,000 , respectively.

Concentration of Risk

3 unchanged sentences

financial institutions and one Israeli financial institution.

For the year ended December 31, 2024 , no single customer accounted for more than 10% of the Company's total revenues .

For the year ended December 31, 2023 , Customer A accounted for 18 % of the Company's total revenues.

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

A s of December 31, 2023 , Customer A and Customer B accounted for 22 % and 13%, respectively, of the Company's consolidated accounts receivable balance.

Customer A accounted for 10 % of the consolidated revenue for the year ended December 31, 2025 .

N o other single customer accounted for more than 10% of the Company's total revenues f or the years ended December 31, 2025 and 2024 .

As of December 31, 2025 and December 31, 2024 , Customer A accounted for 15 % and 12 % of the Company's consolidated accounts receivable balance.

N o other single customer accounted for more than 10% of the Company's total accounts receivable balance as of December 31, 2025 and 2024 .

Cash and Cash Equivalents

3 unchanged sentences

Restricted cash for these client jurisdictions as of December 31, 2025 and 2024 were $ 297,000 and $ 316,000 , respectively, and correspond to equal amounts of related liabilities.

Accounts Receivable and Allowance for Credit Losses

Accounts Receivable and Credit Losses

Accounts receivable are customer obligations due under normal trade terms.

4 unchanged sentences

Unbilled accounts receivables of $ 1,993,000 and $ 1,623,000 were included in accounts receivable, net, in the consolidated balance sheets as of December 31, 2025 and December 31, 2024 , respectively.

The Company maintains an allowance for credit losses at an amount estimated to be sufficient to cover the risk of collecting less than full payment of the receivables.

Write-offs of accounts receivable during the years ended December 31, 2025 and 2024 were $ 132,000 and $ 686,000 , respectively.

The Company maintains an allowance for credit losses at an amount estimated to be sufficient to cover the risk of collecting less than full payment of financial assets measured at amortized cost, including receivables.

The Company estimates expected credit losses based on historical experience, current conditions, and reasonable and supportable forecasts.

The Company considers factors such as customer-specific risk characteristics, aging, historical write-off trends, and other relevant economic and environmental conditions in developing the estimate.

The Company estimates losses on receivables based on expected losses, including our historical experience of actual losses.

2 unchanged sentences

After all reasonable attempts to collect an account receivable have failed, the amount of the receivable is written off against the allowance.

As of December 31, 2025 and 2024, the Company's allowance for credit losses was $ 519,000 and $ 486,000 , respectively.

Notes Receivable

In connection with the sale of its former TeamGlobal subsidiaries in June 2020, the Company received a $1,700,000, five -and-a-half year promissory note due December 2025, that carries an interest rate of 4 % and is collateralized by a first priority security interest in the shares of TeamGlobal.

Monthly principal payments on the promissory note began in 2021.

In connection with the sale of its former TeamGlobal subsidiaries in June 2020, the Company received a $1,700,000, five -and-a-half year promissory note originally due December 2025, which was amended in 2022 to extend the maturity date to May 2026 and revise the related payment schedule, that carries an interest rate of 4 % and is collateralized by a first priority security interest in the shares of TeamGlobal.

Monthly principal payments on the promissory note began in 2021 and continue pursuant to the amended payment terms.

Based on the general market conditions, the security interest held by the Company and the credit quality of the buyer at the time of the sale, the Company determined that the fixed interest rate approximated the current market rate.

The Company also evaluates notes receivable for expected credit losses in accordance with ASC 326.

The remaining balance due from TeamGlobal as of December 31, 2025 and 2024 , was $ 198,000 and $ 482,000 , respectively and is presented as part of notes receivable, current portion and note receivable, long-term on the consolidated balance sheets.

30 unchanged sentences

If the fair market value is less than the carrying amount, the Company recognizes an impairment loss equal to the excess of the carrying amount over the asset's fair market value.

As of December 31, 2024 and 2023 , the Company did not recognize an impairment loss on its property and equipment.

As of December 31, 2025, the Company recognized an impairment loss on its property and equipment of $ 1,046,000 .

See Note 6 for additional information .

As of December 31, 2024 , the Company did not recognize an impairment loss on its property and equipment.

Deposits consist of cash payments made by the Company related to security deposits for leased assets and deposits on property and equipment which the Company has not yet received.

Research and Development Costs

Research and development costs to develop software to be sold, leased or marketed are expensed as incurred up to the point of technological feasibility for the related software product.

There were no capitalized internally developed software costs not yet placed in service as of December 31, 2024 and 2023 , respectively.

Intangible Assets

6 unchanged sentences

If impairment is determined to exist, the charge is calculated based on estimated fair value.

In 2024, the Company recognized an impairment loss on its intangible assets of $ 10,214,000 .

As of December 31, 2025, the Company did not recognize any impairment on its intangible assets.

As of December 31, 2024, the Company recognized an impairment loss on its intangible assets of $ 10,214,000 .

See Note 8 for additional information .

18 unchanged sentences

Lease expense for lease payments is recognized on a straight-line basis over the terms of the leases.

As of December 31, 2025, the Company recognized a loss on its operating lease ROU assets of $ 2,708,000 .

See Note 7 for additional information.

Business Combination

10 unchanged sentences

The Company will assess goodwill for impairment annually on October 1st of each year, or more often if events or changes in circumstances indicate that it might be impaired, by comparing its carrying value to the reporting unit's fair value.

In conjunction with the impairment of intangible assets goodwill was also assessed for impairment as of December 31, 2024.

The Company decided to bypass the qualitative assessment and proceed directly to the quantitative assessment of the goodwill impairment analysis.

As part of the quantitative assessment of goodwill, the Company evaluated its carrying value compared to its market value based on the share price and outstanding shares of the reporting date.

During the year ended December 31, 2024 and 2023, the Company did not recognize any impairment to goodwill.

During the years ended December 31, 2025 and 2024, the Company did not recognize any impairment to goodwill.

Revenue Recognition

27 unchanged sentences

These SaaS solutions are considered to have a single performance obligation where the customer simultaneously receives and consumes the benefit, and as such, we recognize revenue for these arrangements ratably over the term of the contractual agreement.

The Company also currently receives recurring revenues under contracts entered into using a subscription model for data collection services and bundled hardware and software over a period.

The Company also currently receives recurring revenues under contracts entered into using a subscription model for data collection services and software over a period.

Payments for these services and subscriptions are received periodically over the term of the agreement and revenue is recognized ratably over the term of the agreement.

9 unchanged sentences

Revenue is recognized ratably over the term of the contract.

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

The Company’s customer support team is ready to provide these maintenance services, as needed, to the customer during the contract term.

The customer benefits evenly throughout the contract period from the guarantee that the customer support resources and personnel will be available to them.

As customer support is not critical to the customers' ability to derive benefit from their right to use the Company’s software, customer support is considered a distinct performance obligation when sold together with a long-term license for software.

Customer support for perpetual and term licenses is renewable, generally on an annual basis, at the option of the customer.

Customer support for subscription licenses is renewable concurrently with such licenses for the same duration of time.

Revenue for customer support is recognized ratably over the contract period based on the start and end dates of the customer support obligation, in line with how the Company believes services are provided.

Product and service revenue

6 unchanged sentences

Accordingly, for perpetual licenses of functional IP, revenue is recognized at the point-in-time when the customer has access to the software, which normally occurs once software activation keys have been made available to the customer.

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

The Company’s customer support team is ready to provide these maintenance services, as needed, to the customer during the contract term.

The customer benefits evenly throughout the contract period from the guarantee that the customer support resources and personnel will be available to them.

Customer support for perpetual and term licenses is renewable, generally on an annual basis, at the option of the customer.

Customer support for subscription licenses is renewable concurrently with such licenses for the same duration of time.

The Company also generates revenue through the sale of hardware through its partner program and internal sales force distribution channels.

65 unchanged sentences

It is the Company’s accounting policy to account for ASC 740 - 10 related penalties and interest as a component of the income tax provision in the consolidated statements of operations and comprehensive loss.

As of December 31, 2024 , and 2023 , the Company’s evaluation revealed no uncertain tax positions that would have a material impact on the financial statements.

As of December 31, 2025 , and 2024 , the Company’s evaluation revealed no uncertain tax positions that would have a material impact on the consolidated financial statements.

Equity-Based Compensation

27 unchanged sentences

Balance as of December 31, 2024

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

Balance as of December 31, 2025

ATD Holdback Shares

2 unchanged sentences

Balance as of December 31, 2024

Loss on remeasurement of ATD Holdback Shares

Issuance of common stock to settle ATD Holdback Shares

Balance as of December 31, 2025

Prepaid Advance

3 unchanged sentences

Balance as of December 31, 2024

Balance as of December 31, 2025

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

1 unchanged sentence

ATD Holdback Shares

January 2, 2024 December 31, 2024

January 2, 2024

December 31, 2024

January 2, 2025

Closing stock price

15 unchanged sentences

Treasury shares are presented as a reduction of equity, at their cost to the Company.

The Company accounts for warrants as either equity-classified or liability-classified instruments on an assessment of the warrant's specific terms and applicable authoritative guidance in ASC 480, Distinguishing Liabilities from Equity ("ASC 480" ), and ASC 815, Derivatives and Hedging ("ASC 815" ).

Management's assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, whether they meet the definition of a liability pursuant to ASC 480, and whether the warrants meets all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company's own common stock and whether the warrant holders could potentially require "net cash settlement" in a circumstance outside of the Company's control, among other conditions for equity classification.

This assessment, which requires the use of professional judgement, is conducted at the time of warrant issuance and as of each subsequent quarterly period-end date while the warrants are outstanding.

Issued or modified warrants that meet all of the criteria for equity classification are recorded as a component of additional paid-in-capital at the time of issuance.

Issued or modified warrants that do not meet all the criteria for equity classification are recorded as a liability at their initial fair value on the date of issuance and subject to remeasurement each balance sheet date with changes in the estimated fair value of the warrants to be recognized as an unrealized gain or loss in the consolidated statements of operations.

Cost associated with issuing the warrants accounted for as liabilities are charged to consolidated statements of operations when warrants are issued.

As of December 31, 2025, all outstanding warrants meet equity classification guidance and are classified as such.

New Accounting Pronouncements Effective in the Current Period

In November 2023, FASB issued Accounting Standards Update (“ASU”) 2023 - 07 - Segment Reporting (Topic 280 ):

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

The guidance is retrospectively applied and effective for our annual period beginning December 31, 2024 and interim periods starting in 2025.

See above in Note 1 to our consolidated financial statements for additional information related to segment reporting.

Recently Issued Accounting Pronouncements

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

2 unchanged sentences

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

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

The Company adopted ASU 2023 - 09 on a prospective basis effective January 1, 2025.

Accordingly, the enhanced income tax disclosures are presented in the income taxes footnote (Note 10 ) beginning in fiscal year 2025, and prior period disclosures have not been recast.

Recently Issued Accounting Pronouncements Not Yet Adopted

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

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Early adoption is permitted.

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

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

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

In March 2025, the FASB issued ASU 2025 - 05 - Financial Instruments - Credit Losses (Topic 326 ):

Measurement of Credit Losses for Accounts Receivable and Contract Assets, which clarifies the measurement of expected credit losses for accounts receivable and contract assets arising from revenue transactions within the scope of Topic 606.

The amendments require entities to measure expected credit losses for these financial assets using a methodology consistent with the current expected credit loss model while clarifying the interaction between the guidance in Topic 326 and Topic 606.

The guidance in this ASU is effective for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years.

Early adoption is permitted.

The amendments should be applied using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal years of adoption.

The Company is currently evaluating the impact that the adoption of ASU 2025 - 05 will have on its consolidated financial statements and disclosures.

In December 2025, the FASB issued ASU 2025 - 11 - Interim Reporting (Topic 270 ):

Improvements to Interim Reporting Guidance, which is intended to improve the clarity and organization of the interim reporting guidance in Topic 270.

The amendments clarify the scope and presentation requirements for interim financial statements and introduce a general disclosure principle requiring entities to disclose events or transactions occurring since the end of the last annual reporting period that have a material impact on the entity.

The guidance also incorporates certain interim disclosure requirements from other Topics into Topic 270 to improve accessibility of the interim reporting guidance.

The amendments in this ASU are effective for interim reporting periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

The Company is currently evaluating the impact that the adoption of ASU 2025 - 11 will have on its consolidated financial statements and disclosures.

NOTE 2 – BUSINESS ACQUISITION

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Total revenue

$ 46,028 $ 44,709

$ ( 61,410 ) $ ( 46,777 )

Basic and diluted loss per share

$ ( 0.71 ) $ ( 0.70 )

Basic and diluted number of shares

86,717,724 66,664,762

NOTE 3 – INVESTMENTS

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

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

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

In June 2020, the Company announced a joint venture in which the Company would have a 50 % equity interest in Roker Inc.

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As of December 31, 2025 and 2024 the investment in Roker had a carrying value of $ 0 .

In 2021, in exchange for $ 1,250,000 the Company entered into a Simple Agreement for Future Equity with Roker (the “Roker SAFE”).

In 2022, the Company invested an additional $ 755,000 in the Roker SAFE.

The Roker SAFE allows the Company to participate in future equity financings of Roker, through a share-settled redemption of the amount invested (such notional being the “invested amount”).

Alternatively, upon the occurrence of a change of control or an initial public offering (other than a qualified financing), the Company has the option to receive either (i) cash payment equal to the invested amount under the Roker SAFE, or (ii) a number of shares of common stock equal to the invested amount divided by the liquidity price set forth in the Roker SAFE.

The Company’s investment in the Roker SAFE was recorded on the cost method of accounting and included under the Roker SAFE investment on the consolidated balance sheets and is shown as long-term, as it was not readily convertible into cash.

During the year ended December 31, 2023, the Company recognized an impairment of $ 101,000 related to the Roker SAFE that is presented as part of general and administrative expenses in the consolidated statements of operations.

During the year ended December 31, 2023, the Company entered into an agreement to sell substantially all of the assets of Roker, which initiated a triggering event related to the Company's Roker SAFE agreements.

As result of the triggering event the Company received cash proceeds of $ 1,904,000 , of which includes $ 423,000 that was held in escrow as of December 31, 2023 and was presented as part of other current assets, net and deposits on the consolidated balance sheets.

The Company received 50 % of the amount held in escrow on July 25, 2024 and the other 50 % of the amount will be held in escrow until July 25, 2025.

In 2023, the Company entered into an agreement to sell substantially all of the assets of Roker, which initiated a triggering event related to the Company's Roker SAFE agreements.

As result of the triggering event the Company received cash proceeds of $ 1,904,000 , of which the remaining escrow of $ 211,000 was released from escrow in 2025.

NOTE 4 – SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

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Cash paid for taxes

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

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

(Decrease) increase in inventory related to the transfer of property and equipment

( 1,501 ) 935

Decrease in deposits related to inventory received

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

Decrease in inventory related to the transfer of property and equipment

Change in deposits related to inventory

Abandonment of financing lease

Contract modification resulting in a measurement of an operating lease

Non-cash financing activities:

2022 Promissory Notes exchanged for 2023 Promissory Notes - related party

Warrants issued in connection with the 2023 Promissory Notes

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

Settlement of ATD Holdback Shares with common stock

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

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$ 8,632 $ 11,048

In December 2025, the Company determined that the operations of its wholly owned subsidiary, Waycare Technologies LTD, located in Tel Aviv, Israel, were no longer sustainable given the entity's operating cost structure.

The Company initiated a plan to wind down the Tel Aviv operations and consolidate all engineering functions into its U.S.

The closure was announced to employees on February 23, 2026, and Tel Aviv operations ceased on February 24, 2026.

The Command product line and all associated intellectual property, customer relationships, and operations continue in the United States.

The closure does not qualify for discontinued operations reporting under ASC 205 - 20.

As a result of the decision to close the Tel Aviv office, the Company identified a triggering event requiring an impairment assessment of the related long-lived assets, consisting of property and equipment (primarily leasehold improvements, furniture, and equipment) and the operating lease ROU asset associated with the Tel Aviv office lease.

The Company determined that the undiscounted future cash flows expected from the use and eventual disposition of these assets were less than their carrying amounts, and accordingly, the assets were written down to their estimated fair values.

The Company estimated that the fair values of the property and equipment and the ROU asset were approximately $0, based on the expected abandonment of these assets with no material residual or sublease value (a Level 3 fair value measurement).

The Company recognized total impairment charges of $ 3,754,000 during the year ended December 31, 2025, consisting of $ 1,046,000 related to property and equipment and $ 2,708,000 related to the operating lease ROU asset.

These impairment charges are included in asset impairment charges in the consolidated statements of operations.

NOTE 7 – LEASES

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

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

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

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

As noted in Note 6, in December 2025 the Company determined to cease the operations of its wholly owned subsidiary, Waycare Technologies Ltd., located in Tel Aviv, Israel.

As a result of this decision, the Company recognized an impairment charge of $ 2,708,000 related to the operating lease ROU asset associated with the Tel Aviv facility.

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

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There were no changes to goodwill during the year ended December 31, 2025.

The following summarizes the change in goodwill from December 31, 2023 to December 31, 2024 ( dollars in thousands):

The following summarizes the change in goodwill from December 31, 2023 to December 31, 2025 ( in thousands):

December 31, 2023

1 unchanged sentence

December 31, 2024

December 31, 2025

$ 20,593 $ 3,720 $ - $ 24,313 $ - $ 24,313

Intangible Assets Subject to Amortization

The following summarizes the change in intangible assets from December 31, 2022 to December 31, 2024 (dollars in thousands):

The following summarizes the changes in intangible assets, net of accumulated amortization and impairment, from December 31, 2023 to December 31, 2025 (dollars in thousands):

December 31, 2023

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13,419 - ( 3,432 ) ( 9,987 ) - - - - -

Internally capitalized software

185 - ( 185 ) - - - - -

Intangible assets subject to amortization

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The impairment charges were recorded in operating expenses in the consolidated statement of operations.

No impairment charges were recognized during 2025.

The estimates of future cash flows used in determining the fair value of intangible assets involve significant management judgment and are based upon assumptions about expected future operating performance, economic conditions, market conditions and cost of capital.

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Marketing related

Technology based

Internally capitalized software

16,200 16,200

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

As of December 31, 2024, the aggregate balance of these notes payable was $ 1,000,000 which was included in notes payable current portion in the consolidated balance sheet.

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

As of December 31, 2025, the aggregate balance of these notes payable was fully satisfied.

Loans Payable

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2023 Promissory Notes

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

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

The 2023 Promissory Notes were a senior secured obligation of the Company and ranked senior to all indebtedness of the Company, had a maturity date of July 18, 2025 and bore an interest rate of 12 % per annum.

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

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

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

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

See Note 13 for additional information.

As a result of the Redemption Payment, no 2023 Promissory Notes remained outstanding and the Company recognized a loss on extinguishment of debt of $ 4,693,000 , which included $ 1,875,000 related to the early termination payment and $ 2,818,000 related to unamortized issuance costs.

In January 2023, the Company issued $ 12,500,000 aggregate principal amount of senior secured promissory notes.

The notes were fully redeemed in March 2024, and no amounts were outstanding as of December 31, 2025 or 2024.

Series A Prime Revenue Sharing Notes

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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 December 31, 2025.

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

provided, however, that the Series A Prime Revenue Sharing Notes may not be redeemed prior to December 15, 2024.

The Company may prepay the Series A Prime Revenue Sharing Notes at any time through December 15, 2026 at a premium ranging from 103 % to 106%;

provided that the Series A Prime Revenue Sharing Notes may not be redeemed prior to December 15, 2024.

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.

As of the year ended December 31, 2024 and 2023 , the Company recognized $ 1,988,000 and $ 83,000 respectively in interest expense related to the Series A Prime Revenue Sharing Notes.

For the years ended December 31, 2025 and 2024 , the Company recognized $ 1,988,000 in interest expense related to the Series A Prime Revenue Sharing Notes.

Interest Expense, net

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interest income

( 365 ) ( 43 )

Total interest expense, net

32 unchanged sentences

( 106 ) ( 92 )

( 8 ) ( 771 )

Total gross deferred tax liabilities

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$ ( 92 ) $ ( 79 )

The difference between the income tax provision computed at the U.S.

Federal statutory rate and the effective tax rate is as follows for the years ended December 31, 2024 and 2023 :

The items accounting for the difference between income taxes computed at the federal statutory rate and our effective tax rate after the adoption of ASU 2023 - 09 were as follows:

Year Ended December 31, 2025

(in thousands)

statutory federal rate

$ ( 6,598 ) 21.00 %

(Decrease) increase in taxes resulting from:

State income tax rate, net of U.S.

Federal benefit

Foreign tax effects – Israel

2,072 ( 6.59 )%

Change in valuation allowance

4,621 ( 14.71 )%

Nontaxable or nondeductible items

Remeasurement of the STS Earnout and Contingent Consideration

( 399 ) 1.27 %

Valuation allowance

318 ( 1.01 )%

1 unchanged sentence

$ 42 ( 0.13 )%

The items accounting for the difference between income taxes computed at the federal statutory rate and our effective tax rate were as follows for years prior to our adoption of ASU 2023 - 09:

Year ended December 31, 2024

statutory federal rate

(Decrease) increase in taxes resulting from:

State income tax rate, net of U.S.

Federal benefit

Valuation allowance

Effective tax rate

The Company files income tax returns in the United States and various state and foreign jurisdictions.

5 unchanged sentences

During the year ended December 31, 2025, the Company’s valuation allowance increased by $ 7,888,000 , which was primarily driven by an increase in the Company’s deferred tax assets.

As of December 31, 2024 , the Company had gross federal and state net operating loss carryforwards of $ 190,624,000 and $ 180,859,000 , respectively.

The gross NOLs generated in the years ended December 31, 2024 and 2023 of $ 30,520,000 and $ 31,599,000 , respectively, will be carried forward indefinitely and are subject to the annual 80 percent limitation.

As of December 31, 2024 , Rekor had net federal and state net operating loss (“NOL”) carryforwards of $ 40,460,000 and $ 8,916,000 , respectively.

The net federal and state NOLs of $ 40,460,000 and $ 8,916,000 , respectively, are scheduled to begin to expire in 2035 and are grandfathered under the Tax Cuts and Jobs Act;

thus, these NOLs are not subject to the 80 percent limitation.

As of December 31, 2023 , Rekor had gross federal and state net operating loss carryforwards of $ 156,392,000 and $ 149,122,000 , respectively.

As of December 31, 2023 , Rekor had net federal and state net operating loss carryforwards of $ 33,063,000 and $,7,298,000 , respectively.

The federal and state net operating loss and credit carryforwards may be subject to significant limitations under Sections 382 and 383 of the Internal Revenue Code ("Code") and similar provisions of state law.

These Code sections limit the federal net operating loss and credit carryforwards that may be used in any year in the event of an “ownership change”.

As of December 31, 2025, the Company had gross U.S.

Federal and state net operating loss (“NOL”) carryforwards of $ 176,630,000 and $ 168,197,000 , respectively.

The gross U.S.

NOL generated in the years ended December 31, 2025 and 2024 of $ 19,679,000 and $ 26,369,000 respectively, will be carried forward indefinitely and are subject to the annual 80 percent limitation.

As of December 31, 2025, the Company had net U.S.

federal and state NOL carryforwards of $ 37,547,000 and $ 9,959,000 , respectively.

As of December 31, 2025, the Company had gross U.S.

federal NOL carryforwards of approximately $ 3,826,000 that were generated prior to the Tax Cuts and Jobs Act that are scheduled to begin to expire in 2034, and are not subject to the annual 80 percent limitation.

The Company had gross foreign federal and state operating loss carryforwards of $ 53,264,000 and $ 52,056,000 , respectively, which are carried forward indefinitely and are not subject to any limitation.

The net foreign carryforwards are $ 11,185,000 and $ 833,000 , respectively.

The gross foreign NOL generated in the years ended December 31, 2025 and 2024 are $ 5,054,000 and $ 4,151,000 , respectively.

As of December 31, 2024, the Company had U.S.

gross federal and state NOL carryforwards of $ 142,415,000 and $ 133,857,000 , respectively.

As of December 31, 2024, the Company had U.S.

net federal and state NOL carryforwards of $ 30,336,000 and $ 8,164,000 , respectively.

As of December 31, 2024, the Company had foreign gross federal and state NOL carryforwards of $ 48,209,000 and $ 47,002,000 , respectively.

As of December 31, 2024, the Company had foreign net federal and state NOL carryforwards of $ 10,124,000 and $ 752,000 , respectively.

The federal and state NOL and credit carryforwards may be subject to significant limitations under Sections 382 and 383 of the Internal Revenue Code ("Code") and similar provisions of state law.

These Code sections limit the federal NOL and credit carryforwards that may be used in any year in the event of an “ownership change”.

A Section 382 “ownership change” generally occurs if one or more shareholders or groups of shareholders, who own at least 5% of the Company’s stock, increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three -year period.

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

The amount of cash income taxes paid, net of refunds received were as follows:

Amount (in thousands)

Year Ended December 31, 2025

federal taxes

State and local taxes (various)

Foreign taxes – Israel

Total income taxes paid

Recent Tax Legislation

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law in the United States.

This comprehensive tax legislation contains a broad range of tax reforms, including provisions that allow for the immediate expensing of domestic research and development expenses, restore and make permanent 100% bonus depreciation for qualifying assets, and ease limitations on the deductibility of interest expense.

The legislation has multiple effective dates, with certain provisions taking effect in 2025 and others being implemented through various future years.

The Company has accounted for the provisions of the OBBBA in its consolidated financial statements.

The Company will continue to monitor the impact of this legislation in future periods.

NOTE 11 – EMPLOYEE BENEFIT PLAN

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

Wainwright & Co., LLC, ("HCW"), related to a capital ra ise (see Note 13 ).

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

Wainwright & Co., LLC, ("HCW"), related to a capital raise (see NOTE 13 – STOCKHOLDERS ’ EQUITY ).

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

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

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

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

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

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

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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.

The proceeds 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

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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.

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

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

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

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.

On November 24, 2025, the Appellate Review Board ("ARB") served a Notice of Appeal Acceptance and indicated they accepted the matter for review.

They subsequently set a briefing schedule for the parties.

Complainant’s brief was filed on January 22, 2026.

Our brief is due on March 31, 2026.

Complainant then has fourteen ( 14 ) days from the submission of our brief to file a reply.

The Company believes these claims are without merit.

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The Amendment and the creation of additional shares of authorized common stock will not alter current stockholders’ relative rights and limitations.

At Market Issuance Sales Agreement

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

(the "Agent"), pursuant to which the Company 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 prices 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.

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

As of December 31, 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.

ATD Acquisition

4 unchanged sentences

On January 2, 2025, all of the ATD Holdback Shares were issued to the Seller.

2025 Underwriting Agreement

On December 13, 2025, the Company entered into an underwriting agreement with William Blair & Company, L.L.C., as representative of the several underwriters, relating to an underwritten registered direct offering of 8,571,428 units at a public offering price of $ 1.75 per unit (the “2025 Underwriting Agreement”).

Each unit consisted of one share of the Company's common stock and one warrant to purchase one share of the Company's common stock at an exercise price of $ 2.40 per share.

The warrants are immediately exercisable and expire on December 16, 2032.

The offering closed on December 16, 2025.

Gross proceeds from the offering were approximately $ 15.0 million.

After deducting underwriting discounts and commissions and estimated offering expenses, the net proceeds to the Company were approximately $ 13.9 million.

In connection with the offering, the Company entered into a Side Letter Agreement with Anson Advisors Inc.

that, among other things, restricts the Company from entering into Variable Rate Transactions (as defined therein) while any December 2025 warrants remain outstanding.

2024 Public Offering

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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.

2023 Registered Direct Offering

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

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

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

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

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

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

The Offering closed on March 27, 2023.

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

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

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

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

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

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

The pre-funded warrants were exercised for 772,853 shares of the Company's common stock in 2023.

2023 Letter Agreement

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

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

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

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

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

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

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

2023 Warrants

24 unchanged sentences

As of December 31, 2025 and 2024, there are no outstanding shares of the Company's Series A Preferred Stock.

Based on the terms of the Series A Preferred Stock, the Company concluded that the Series A Preferred Stock should be classified as temporary equity in the accompanying consolidated balance sheets.

Based on the terms of the Series A Preferred Stock, the Company concluded that the Series A Preferred Stock should be classified as temporary equity.

A summary of the warrant activity for the Company for the period ended December 31, 2025 and December 31, 2024 is as follows:

Series A Preferred Stock Warrants (1)

Firestorm Warrants (2)

Secure Education Warrants (3)

2018 Public Offering Warrants (4)

2023 Promissory Notes (5)

2023 Registered Direct Offering (6)

2023 Private Warrants (7)

2023 Promissory Notes (1) 2023 Registered Direct Offering (2)

2023 Private Warrants (3) 2025 Underwriting Agreement (4) Total

Active warrants January 1, 2024

1 unchanged sentence

Issued warrants

- - - - 6,250,000 8,126,806 2,850,000 17,226,806

Exercised warrants

1 unchanged sentence

Expired warrants

( 5,621 ) - ( 15,556 ) ( 3,505 ) - - - ( 24,682 )

Cancelled warrants

13 unchanged sentences

Exercised warrants

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

Expired warrants

- - - - - - - -

Cancelled warrants

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

Outstanding warrants December 31, 2025

5 unchanged sentences

Shares of common stock issued for warrant exercises during the year ended December 31, 2025

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

As part of a Regulation A Offering in fiscal years 2016 and 2017, the Company issued warrants to the holders of Series A Preferred Stock (the “Series A Preferred Stock Warrants”).

The exercise price for these warrants is $ 1.03 .

The expiration date of the Series A Preferred Stock Warrants was November 8, 2023.

As part of the acquisition of Firestorm on January 24, 2017, the Company issued warrants to purchase 315,627 shares of its common stock, exercisable over a period of five years, at an exercise price of $ 2.5744 per share, and warrants to purchase 315,627 shares of its common stock, exercisable over a period of five years, at an exercise price of $ 3.6083 per share (the “Firestorm Warrants”).

The expiration date of the Firestorm Warrants was January 24, 2022.

As part of the settlement of the Firestorm litigation, these warrants were cancelled.

Pursuant to the Company’s acquisition of Secure Education Consultants on January 1, 2018, the Company issued warrants to purchase 33,333 shares of its common stock, exercisable over a period of five years, at an exercise price of $ 5.44 per share, and warrants to purchase 33,333 shares of its common stock, exercisable over a period of five years, at an exercise price of $ 6.53 per share (the “Secure Education Warrants”).

The expiration date of the Secure Education Warrants was January 1, 2023.

On November 1, 2018, in connection with an underwritten public offering of its common stock, the Company issued to the underwriters warrants to purchase 206,250 shares of its common stock (the “2018 Public Offering Warrants”), exercisable over a period of five years, at an exercise price of $ 1.00 per share.

These warrants were exercisable commencing April 27, 2019 and expired on October 29, 2023.

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.

6 unchanged sentences

These warrants were exercisable commencing July 25, 2023 and expire on January 25, 2029.

On December 16, 2025, in connection with the 2025 Underwriting Agreement, the Company issued warrants to purchase 8,571,428 shares of its common stock.

The warrants have an exercise price of $ 2.40 per share, are immediately exercisable and have a term of seven years from the date of issuance.

These warrants expire on December 16, 2032.

NOTE 14 – EQUITY INCENTIVE PLAN

31 unchanged sentences

( 63,832 ) 1.14

( 3,880 ) 3.81

Outstanding and exercisable balance at December 31, 2025

35 unchanged sentences

As the Company had a net loss for the year ended December 31, 2025 , the following 13,979,702 potentially dilutive securities were excluded from diluted loss per share:

4,331,100 for outstanding warrants, 486,866 related to outstanding options, 664,329 related to the ATD Holdback Shares and 5,776,426 related to outstanding RSUs.

As the Company had a net loss for the year ended December 31, 2023 , the following 12,017,399 potentially dilutive securities were excluded from diluted loss per share:

12,902,528 for outstanding warrants, 423,034 related to outstanding options and 654,140 related to outstanding RSUs.

As the Company had a net loss for the year ended December 31, 2024 , the following 11,258,721 potentially dilutive securities were excluded from diluted loss per share:

4,331,100 for outstanding warrants, 486,866 related to outstanding options, 664,329 related to the ATD Holdback Shares and 5,776,426 related to outstanding RSUs.

NOTE 16 – SUBSEQUENT EVENTS

Release of ATD Holdback Shares

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

At Market Issuance Sales Agreement

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

As of March 28, 2025 the Company issued 5,148,600 shares of its common stock in exchange for net cash of $ 7,895,000 under the Sales Agreement.

Departure of Chief Executive Officer

On March 12, 2025, Rekor’s President and CEO, David Desharnais, submitted his resignation, which was accepted by the Company’s Board of Directors.

The Company has begun steps to identify a new CEO.

In the interim Robert A.

Berman, the Company's Board Chairman and previous CEO, will assume the role of interim president and CEO.

The Company evaluated subsequent events through the date the consolidated financial statements were issued.

Strategic Consolidation of Engineering Operations

The Company initiated a plan to wind down the Tel Aviv operations and consolidate all engineering functions into its U.S.

The closure was announced to employees on February 23, 2026, and Tel Aviv operations ceased on February 24, 2026.

The action is intended to improve operational efficiency and align the Company's cost structure with current revenue levels.

In connection with this initiative, the Company expects to incur one -time costs consisting primarily of employee-related separation costs and other exit-related costs.

The Company is continuing to evaluate the scope and financial impact of these actions;

accordingly, a reasonable estimate of the total costs to be incurred cannot yet be determined.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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-K

Item 8. Financial Statements and Supplementary Data