Item 5. Market for Registrant’s Common Equity
ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is listed on the Nasdaq Capital Market under the symbol “REKR”.
Holders
As of March 25, 2026, there wer e 47 registered holders of record of our common stock, excluding stockholders for whom shares are held in “nominee” or “street name.” The actual number of common stockholders is greater than the number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities .
Dividend Policy
We have never declared or paid any cash dividends on our common stock. We currently do not anticipate paying any cash dividends for the foreseeable future. Instead, we anticipate that all of our earnings will be used to provide working capital, to support our operations, and to finance the growth and development of our business, including potentially the acquisition of, or investment in, businesses, technologies or products that complement our existing business. Any future determination relating to dividend policy will be made at the discretion of our Board of Directors and will depend on a number of factors, including, but not limited to, our future earnings, capital requirements, financial condition, future prospects, applicable Delaware law, which provides that dividends are only payable out of surplus or current net profits and other factors our Board of Directors might deem relevant.
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Recent Sales of Unregistered Securities
2023 Promissory Notes with Warrants
As previously disclosed under Item 3.02 in the Company’s Current Report on Form 8-K filed with the SEC on January 18, 2023, the Company entered into a 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 up to an aggregate of 7,500,000 shares of common stock of the Company. In connection with the initial closing on January 18, 2023, the Company issued $12,500,000 in aggregate principal amount of notes and warrants to purchase 6,250,000 shares of Common Stock, resulting in proceeds to the Company of $12,500,000 before reimbursement of expenses.
New Registered Direct Warrants
On July 25, 2023, we entered into a letter agreement with an institutional investor in connection with the Registered Direct Warrants. Pursuant to the letter agreement, we agreed to issue to the institutional investor 2,850,000 unregistered warrants (the "2023 Private Warrants") to purchase shares of our common stock in exchange for the imposition of volume and trading restrictions on the 6,872,853 shares of common stock issued to the institutional investor in connection with exercise of the 2023 Private Warrants. The 2023 Private Warrants terminate on January 25, 2029, and are exercisable after issuance only for cash. The 2023 Private Warrants have an exercise price of $3.25 per share. The shares of common stock underlying the 2023 Private Warrants have been registered for resale on Form S-3.
ATD Acquisition
As previously disclosed under Item 3.02 in the Company’s Current Report on Form 8-K filed with the SEC on January 3, 2024, as part of the purchase price for the ATD acquisition the Company issued 2,832,135 shares of the Company’s common stock as part of the consideration. Additionally, 664,329 shares were to be issued and delivered to the Seller on the twelve-month anniversary of the Closing Date. The ATD Holdback Shares were deemed to be liability based and are measured at fair value each reporting period. The shares issued and issuable in connection with the ATD Acquisition have been registered on a resale registration statement on Form S-3, declared effective by the SEC on June 17, 2024.
2023 Promissory Notes Redemption
On March 4, 2024, the Company completed the redemption of all the 2023 Promissory Notes. The 2023 Promissory Notes 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 paid in cash. On July 19, 2024, the Company filed a registration statement on Form S-3 to register these shares, which was declared effective by the SEC on July 30, 2024.
Warrant Exercise Agreements
On June 20, 2024, the Company entered into various Warrant Exercise Agreements with certain holders of the 2023 Warrants (each an “Exercising Holder” and collectively, the “Exercising Holders”), pursuant to which the Company reduced the strike price of the 2023 Warrants from $2.00 per warrant to $1.40 per warrant to induce their exercise. In June 2024, all but one of the Exercising Holders subsequently exercised 1,400,000 warrants for common stock in exchange for $1,960,000. In July 2024, the remaining Exercising Holder exercised 2,275,000 warrants for common stock in exchange for $3,185,000.
In consideration for the Company’s agreement to reduce the exercise price, the Exercising Holders agreed to a concomitant reduction in the number of shares into which the 2023 Warrants are exercisable, from 5,250,000 to 3,675,000. This modification resulted in a decrease in the overall fair value of the equity classified warrants and since no incremental value was given to the Exercising Holders, nothing was recorded in the consolidated financial statements related to the modification. The shares issued in connection with the Warrant Exercise Agreement have been registered on a resale registration statement on Form S-3 filed with the SEC on July 19, 2024, and declared effective by the SEC on July 30, 2024.
December 2025 Underwriting Agreement Warrants
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 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. The shares the Company's common stock and warrants comprising the units were immediately separable and were issued separately. The offering closed on December 16, 2025.
Each warrant has an exercise price of $2.40 per share, is immediately exercisable, and expires on December 16, 2032 (seven years from the date of issuance). The warrants are subject to a 9.99% beneficial ownership limitation and contain standard adjustment provisions for stock dividends, splits and similar events. The warrants may be exercised on a cashless basis if, at the time of exercise, there is no effective registration statement registering the shares of common stock underlying the warrants.
The shares the Company's common stock included in the units that were offered and sold pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-280913), as supplemented by a prospectus supplement dated December 15, 2025. The warrants were issued in a private placement to a single institutional investor in reliance on Section 4(a)(2) of the Securities Act of 1933, as amended, as a transaction not involving a public offering. The Company did not register the warrants under the Securities Act, and the warrants may not be offered or sold absent registration or an applicable exemption from registration. The shares the Company's common stock issuable upon exercise of the warrants have been registered for resale pursuant to a registration statement on Form S-3.
In connection with the offering, the Company also entered into a Side Letter Agreement with Anson Advisors Inc. (the “Side Letter”), which includes, among other things, a restriction prohibiting the Company from effecting or entering into any Variable Rate Transaction (as defined in the Side Letter) while any December 2025 warrants remain outstanding. The Side Letter also provides the investor with participation rights in future firm-commitment underwritten offerings, subject to customary exceptions.
The gross proceeds to the Company 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.
ITEM 6. [RESERVED]
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ITEM 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included in this Annual Report and the historical financial statements of Rekor Systems, Inc., and the related notes thereto.
Overview
Rekor is working to revolutionize public safety, urban mobility, and transportation management using AI-powered solutions designed to meet the distinct demands of each market we serve. We work hand-in-hand with our customers to deliver mission-critical traffic and engineering services that assist them in achieving their goals. Our vision is to improve the lives of citizens and the world around them by enabling safer, smarter, and greener roadways and communities. We work towards this by collecting, connecting, and organizing the world’s mobility data, and making it accessible and useful to our customers for real-time insights and decisioning for situational awareness, rapid response, risk mitigation, and predictive analytics for resource and infrastructure planning and reporting.
General
The information provided in this discussion and analysis of Rekor’s financial condition, and results of operations covers the years ended December 31, 2025 and 2024. In 2024, we completed the acquisition of 100% of the issued and outstanding limited liability company interests of All Traffic Data Services, LLC (“ATD”).
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Acquisitions and Dispositions
In 2024, we completed the acquisition of All Traffic Data Services, LLC (“ATD”) for an aggregate purchase price of $20,576,000. See Note 2 to our consolidated financial statements for additional information related to our acquisition of ATD.
Opportunities, Trends and Uncertainties
We look to identify the various trends, market cycles, uncertainties and other factors that may provide us with opportunities and present challenges that impact our operations and financial condition from time to time. Although there are many that we may not or cannot foresee, we believe that our results of operations and financial condition for the foreseeable future will be primarily affected by the following:
●
Growing Smart City Market – According to a United Nations report, about two-thirds of the world population will live in urban areas by 2050. The world’s cities are getting larger, with longer commutes and the resulting impact on the environment and the quality of life. This trend requires forward-thinking officials to manage assets and resources more efficiently. We believe that advancements in “big data” connected devices and artificial intelligence can provide Intelligent Transportation System (“ITS”) solutions that can be used to reduce congestion, keep travelers safe, improve transportation, protect the environment, respond to climate change, and enhance the quality of life. We believe our data-driven, artificial intelligence-aided solutions provide useful tools that can effectively tackle the challenges cities and communities are facing today and will face over the coming decades.
●
AI for Infrastructure – We believe that the application of AI to the analysis of conditions on roadways and other transportation infrastructure can significantly affect the safety and efficiency of travel in the future. As vehicles move towards full automation, there is a need for real-time data and actionable insights around traffic flow, identification of anomalous and unsafe movements – e.g. wrong way vehicles, stopped vehicles, or/and pedestrians on the roadway. Marketers and drive-thru retailers with loyalty programs can also benefit from rapid, lower cost identification of existing and potential customers in streamlining and accelerating local vehicular flow as well as data about the vehicles on the roadway.
●
Connected Vehicle Data – Today’s new vehicles are equipped with dozens of sensors, collecting information about internal systems, external hazards, and driving behaviors. This data is a resource that transportation and other agencies are beginning to find valuable uses for. Notably, the data from these vehicles represent a virtual network that is independent of the infrastructure which is maintained and operated by the public agencies. Connected vehicle sensors can provide important information related to hazardous conditions, speed variations, intersection performance, and more. This data can help agencies and municipalities gain more visibility about conditions on their roads, supplementing data from existing infrastructure and allowing transportation information from rural areas that are not served by ITS infrastructure to be integrated into the overall analysis.
●
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 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. 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.
●
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. Based on published benchmarks, our software currently outperforms competitors. However, large users of existing technology, such as toll road operators, have long-term contracts with service providers that have made considerable investments in their existing technologies and may not consider the improvements in accuracy or reductions in cost sufficient to justify abandoning their current systems in the near future. In addition, existing providers may be able to reduce the cost of their current offerings or elect to reduce prices and accept reduced profitability while working to develop their own systems or secure advanced systems from others who are also working to develop them. As a result, our success in establishing a major position in these markets will depend on being able to effectively communicate our presence, develop strong customer relationships, and maintain leadership in providing the capabilities that customers want. As with any large market, this will require considerable effort and resources.
●
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. To the extent that legislative implementation is required, a deliberative and necessarily time-consuming process is involved. However, as states expand auto-enforcement, the market for these products and services should broaden in the public safety market.
●
Graphic Processing Unit ( “ GPU ” ) Improvements – We expect our business to benefit from more powerful and affordable GPU hardware that has recently been developed. These GPUs are more efficient for image processing because their highly parallel structure makes them more efficient than general-purpose central processing units (“CPUs”) for algorithms that process large blocks of data, such as those produced by video streams. GPUs also provide superior memory bandwidth and efficiencies as compared to their CPU counterparts. The most recent versions of our software have been designed to use the increased GPU speeds to accelerate image recognition. 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.
●
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. Over the last several decades, sensors have evolved and unlocked new capabilities with each advancement. Further, cellular networks have been optimized for downloading data rather than uploading data. As a result, while download speeds have improved significantly due to large investments in cellular infrastructure, this has resulted in relatively small improvements to cellular upload speeds. With roadside deployments experiencing explosive growth in count and density, scalability, latency and bandwidth have become aspects of competition in the market. 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. 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.
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●
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. If we are able to maintain a sustained presence in the market, the continued development of strategic partnerships and other economies of scale will reduce the level of costs necessary to support sales of our products and services. However, the speed at which these markets grow to the degree to which our products and services are adopted is uncertain.
●
Infrastructure Investment and Jobs Act ( “ IIJA ” ) and the Bipartisan Infrastructure Law ( “ BIL ” ) - The IIJA, signed into law on November 15, 2021, provides for significant national investments in the transportation systems in the United States, including over $150 billion in new spending on roadway infrastructure, including intelligent transportation systems. We believe that there will continue to be bi-partisan support for these programs and that our comprehensive offering of solutions positions the Company well to emerge as a technology leader in the expanded market for roadway intelligence that will benefit from this legislation. We have identified opportunities to access federal funding streams, and we are working to implement a program that capitalizes on this unprecedented U.S. federal investment in public safety, homeland security, and transportation infrastructure and ensures that our customers are positioned to capture as much of this extraordinary government spending as possible. Beyond the many recurring federal grant programs that could support customer purchases, and the $350 billion in American Rescue Plan Act allocations that public agencies are receiving now, we are particularly excited about the prospect of benefitting from the following new grant sources that are contained in the IIJA: $200 million annually for a “Safe Streets and Roads for All” program that would make competitive grants for state projects that significantly reduce or eliminate transportation-related fatalities. $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.
●
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. If Rekor is unable to successfully implement and execute its plans, there could be a material and adverse effect on the Company’s business, results of operations, and financial condition.
●
Inability to Achieve Profitability - Rekor continues to grow its business, its operating expenses and capital expenditures have increased, and it has not yet achieved the level of sustaining profitability. As a result, if the Company is unable to generate additional revenue or achieve planned efficiencies in operations, or if its revenue declines significantly, Rekor may not be able to achieve profitability in the future, which would materially and adversely affect the Company’s business.
●
Inability to Retain Qualified Personnel – Rekor’s success depends on the continued efforts and abilities of the senior management team and key engineering and marketing specialists. Although Rekor has employment agreements with these employees, they may not choose to remain employed by Rekor. Should one or more key personnel leave the Company or join a competitor, the Company’s business, operating results, and financial condition can be adversely affected.
●
Inability to Compete Effectively - Competition and technological advancements by others may erode the Company’s business and result in inability to capture new business and revenue. Each business line faces significant competitive pressures within the markets in which they operate. While Rekor continues to work to develop and strengthen its competitive advantages, many factors such as market and technology changes may erode or prevent this. If the Company is unable to successfully maintain its competitive advantage, the Company’s business, operating results, and financial condition can be adversely affected.
●
Cyber Security Risks - Rekor relies on information technology in all aspects of its business. A significant disruption or failure in the information technology systems could result in services interruptions, safety failures, security violations, regulatory compliance failures, an inability to protect information and assets against intruders, and other operational difficulties. This could result in the loss of assets and critical information and expose the Company to remediation costs and reputational damage. Although Rekor takes reasonable steps intended to mitigate these risks, a significant disruption or cyber intrusion could lead to misappropriation of assets or data corruption and could adversely affect the Company’s results of operations, financial condition, and liquidity.
●
Intellectual Property Claims - Third parties that have been issued patents or have filed for patent applications similar to those used by the Company’s operating subsidiaries may result in intellectual property claims against the Company. Rekor cannot determine with certainty whether existing third-party patents or the issuance of any future third party patents would require any of its operating subsidiaries to alter their respective technologies, obtain licenses or cease certain activities. Should the Company be unable to defend against such claims, the Company’s business, operating results, and financial condition can be adversely affected.
●
Strategic Consolidation of Engineering Operations - Subsequent to year end, we announced a strategic consolidation of our global engineering operations, including transitioning engineering activities from Israel to our United States-based teams and consolidating key product development and technology functions in the United States. This initiative is intended to improve operational efficiency, enhance coordination across product development, delivery and customer-facing teams, and better align our cost structure with current revenue levels. We expect to incur one-time costs in connection with the transition, including employee-related separation costs and other exit-related costs, and the timing and amount of realized savings and incurred costs may differ from our current expectations. This initiative could impact the timing of certain longer-range product development initiatives and may not achieve the anticipated savings.
●
Video Verification - In 2024, we developed and applied for a patent on a procedure to identify the time, place and device on which a video was recorded and provide the means to verify whether it had been altered. Although initially developed to support public safety clients, we believe there may be significant demand for such a product in the insurance and news media markets, as well as others. Pending the approval of our patent applications relating to the product, we have developed an application that can be installed on certain cameras and a companion website. This product is sufficiently different in its potential end user market and functionality that we believe it should be pursued as a separate venture. Consequently, the intellectual property for this technology has been transferred to Rekor Labs, LLC. ("Rekor Labs") and we have established a separate board of managers to concentrate on the commercialization of the product.
Other than as discussed above and elsewhere in this Annual Report on Form 10-K, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition. Subsequent to year end, we announced certain actions intended to further align our cost structure with current revenue levels, as discussed above under "Opportunities, Trends and Uncertainties."
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Components of Operating Results
Revenues
The Company derives its revenues primarily from the sale of its roadway data aggregation, traffic management and licensing offerings. These offerings include a mixture of data collection, implementation, engineering, customer support and maintenance services as well as software and hardware. Revenue is recognized upon transfer of control of promised products and services to the Company’s customers, in an amount that reflects the consideration the Company expects to receive in exchange for those products and services.
Costs of revenues, excluding depreciation and amortization
Direct costs of revenues consist primarily of the portion of technical and non-technical salaries and wages and payroll-related costs incurred in connection with revenue-generating activities. Direct costs of revenues also include production expenses, data subscriptions, sub-consultant services and other expenses that are incurred in connection with our revenue-generating activities. Direct costs of revenues exclude the portion of technical and non-technical salaries and wages related to marketing efforts, vacations, holidays, and other time not spent directly generating fees under existing contracts. Such costs are included in operating expenses. We expense direct costs of revenues when they incur.
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Operating Expenses
Our operating expenses consist of general and administrative expenses, sales and marketing, research and development and depreciation and amortization. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, payroll taxes and stock-based compensation expenses. Operating expenses also include impairment of assets.
General and Administrative
General and administrative expenses consist of personnel costs for our executive, finance, legal, human resources, and administrative departments. Additional expenses include office leases, professional fees, and insurance.
We expect our general and administrative expenses to continue to reflect actions taken to align our cost structure with current revenue levels, while continuing to include the costs associated with operating as a public company, including accounting, compliance, legal, insurance and investor relations. Our general and administrative expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses. However, our general and administrative expenses have decreased as a percentage of our revenue and, to the extent we continue to generate increased revenue and realize efficiencies from these actions, we expect our general and administrative expenses to decrease as a percentage of our revenue over the long term.
Sales and Marketing
Sales and marketing expenses consist of personnel costs, marketing programs, travel and entertainment associated with sales and marketing personnel, expenses for conferences and trade shows. We will require significant investments in our sales and marketing expenses to continue the rate of growth in our revenues, further penetrate existing markets and expand our customer base into new markets.
Research and Development
Research and development expenses consist of personnel costs, software used to develop our products and consulting and professional fees for third-party development resources. Our research and development expenses support our efforts to continue to add capabilities to and improve the value of our existing products and services, as well as develop new products and services.
Depreciation and Amortization
Depreciation and amortization expenses are primarily attributable to our capital investments and consist of fixed asset depreciation, amortization of intangibles considered to have finite lives, and amortization of capitalized internal-use software costs.
Other Income (Expense)
Other income (expense) consists primarily of legal settlements, legal judgements, interest income and expense in connection with our debt arrangements, costs associated with the extinguishment of our debt arrangements, gains on the sale of subsidiaries, gains or losses on the sale of fixed assets, interest income earned on cash and cash equivalents, short-term investments and note receivables.
Income Tax Provision
Income tax provision consists primarily of income taxes in certain domestic jurisdictions in which we conduct business. We have recorded deferred tax assets for which a full valuation allowance has been provided, including net operating loss carryforwards and tax credits. We expect to maintain this full valuation allowance for the foreseeable future as it is more likely than not that those deferred tax assets may not be realized based on our history of losses.
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Results of Operations
Our historical operating results in dollars are presented below. The following selected consolidated financial data should be read in conjunction with the foregoing information contained in this Item 7 and with the consolidated financial statements and the notes thereto in Item 8 of Part II, “Financial Statements and Supplementary Data.” Only historical operating results are presented below. Historical results are not necessarily indicative of future results.
Year ended December 31,
(Dollars in thousands)
2025
2024
Revenue
$
48,450
$
46,028
Cost of revenue, excluding depreciation and amortization
21,379
23,344
Operating expenses:
General and administrative expenses
25,177
30,676
Selling and marketing expenses
6,172
7,858
Research and development expenses
14,596
18,766
Asset impairment charges
3,754
10,214
Depreciation and amortization
6,258
9,493
Total operating expenses
55,957
77,007
Loss from continuing operations
(28,886
)
(54,323
)
Other income (expense):
Loss on extinguishment of debt
-
(4,693
)
Interest expense, net
(2,297
)
(2,645
)
(Loss) gain on remeasurement of ATD Holdback Shares
(120
)
599
Loss on offering costs - Prepaid Advance
-
(888
)
Loss on settlement of Prepaid Advance
-
(900
)
Gain on the sale of Global Public Safety
-
1,500
Other expense, net
(115
)
(15
)
Total other expense, net
(2,532
)
(7,042
)
Loss before income taxes
(31,418
)
(61,365
)
Provision for income taxes
42
45
Net loss
$
(31,460
)
$
(61,410
)
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Comparison of the Years Ended December 31, 2025 and 2024
Revenue
Year ended December 31,
Change
(Dollars in thousands)
2025
2024
$
%
Revenue
$
48,450
$
46,028
$
2,422
5
%
The increase in revenue for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily attributable to our Public Safety product line. During the year ended December 31, 2025, revenue attributable to our Public Safety product line was $17,401,000 compared to $14,807,000 for the year ended December 31, 2024. This increase was primarily due to higher perpetual license sales in 2025.
Cost of Revenue, Excluding Depreciation and Amortization
Year ended December 31,
Change
(Dollars in thousands)
2025
2024
$
%
Cost of revenue, excluding depreciation and amortization
$
21,379
$
23,344
$
(1,965
)
-8
%
For the year ended December 31, 2025, cost of revenue, excluding depreciation and amortization decreased compared to prior year primarily due to a favorable revenue mix of software versus hardware, which resulted in higher margins from increased software license sales.
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Operating Expenses
Year ended December 31,
Change
(Dollars in thousands)
2025
2024
$
%
Operating expenses:
General and administrative expenses
$
25,177
$
30,676
$
(5,499
)
-18
%
Selling and marketing expenses
6,172
7,858
(1,686
)
-21
%
Research and development expenses
14,596
18,766
(4,170
)
-22
%
Asset impairment charges
3,754
10,214
(6,460
)
-63
%
Depreciation and amortization
6,258
9,493
(3,235
)
-34
%
Total operating expenses
$
55,957
$
77,007
$
(21,050
)
-27
%
General and Administrative Expenses
For the year ended December 31, 2025, the decrease in general and administrative expenses compared to the year ended December 31, 2024, was primarily due to:
●
a $2,960,000 decrease in payroll and payroll related expenses primarily due to cost-efficiency initiatives implemented to better align with operations.
●
a $1,900,000 decrease in expense attributable to the remeasurement of the contingent consideration associated with the acquisition of STS.
●
a $594,000 decrease in bad debt expense attributable to the absence of a significant, nonrecurring write-off recorded in the prior year. There was no comparable charge recognized in 2025.
●
a $289,000 decrease in professional fees due to the absence of higher accounting fees such as those associated with the acquisition of ATD in 2024.
●
a $332,000 decrease in board fees, including lower share-based compensation as part of cost-efficiency initiatives.
Selling and Marketing Expenses
The decrease in selling and marketing expenses during the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to a $1,670,000 decrease in payroll and payroll related expenses driven by cost-efficiency initiatives implemented to better align with operations.
Research and Development Expense
Research and development expenses during the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily due to a $3,774,000 decrease in payroll and payroll related expenses driven by cost-efficiency initiatives implemented to better align with operations.
Asset impairment charges
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. facilities. As a result, 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.
During 2024, sales performance was below expectations, driven in part by slower customer adoption, extended sales cycles and market conditions. As a result, we identified a triggering event and performed an analysis of its intangible assets. As a result of that analysis and updated projections on future cash flows, we recognized an impairment charge of $10,214,000 as of December 31, 2024.
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Depreciation and Amortization
The decrease in depreciation and amortization during the year ended December 31, 2025, is attributable to an impairment that we recognized as of December 31, 2024, following the identification of a triggering event.
Other Income (Expense)
Year ended December 31,
Change
(Dollars in thousands)
2025
2024
$
%
Other income (expense):
Loss on extinguishment of debt
$
-
$
(4,693
)
$
4,693
100
%
Interest expense, net
(2,297
)
(2,645
)
348
13
%
(Loss) gain on remeasurement of ATD Holdback Shares
(120
)
599
(719
)
-120
%
Loss on offering costs - Prepaid Advance
-
(888
)
888
-100
%
Loss on settlement of Prepaid Advance
-
(900
)
900
-100
%
Gain on the sale of Global Public Safety
-
1,500
(1,500
)
100
%
Other expense, net
(115
)
(15
)
(100
)
-667
%
Total other expense, net
$
(2,532
)
$
(7,042
)
$
4,510
64
%
For the year ended December 31, 2025. the decrease in other expense, net compared to the year ended December 31, 2024, was primarily due to:
●
The absence of a $4,693,000 loss on extinguishment of debt recorded during 2024 in connection with the early redemption of the 2023 Promissory Notes.
●
The absence of non-operating charges recorded during 2024 related to the Prepaid Advance Agreement.
●
Partially offset by the absence of a $1,500,000 gain recognized during 2024 related to the sale of Global Public Safety.
●
Partially offset by a $719,000 unfavorable change related to the remeasurement of ATD Holdback Shares and a $348,000 decrease in net interest expense in 2025 compared to 2024.
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Non-GAAP Measures
EBITDA and Adjusted EBITDA
We calculate EBITDA as net loss before interest, taxes, depreciation and amortization. We calculate Adjusted EBITDA as net loss before interest, taxes, depreciation and amortization, adjusted for (i) impairment of intangible assets, (ii) loss on extinguishment of debt, (iii) stock-based compensation, (iv) losses or gains on sales of subsidiaries, (v) losses associated with equity method investments, (vi) merger and acquisition transaction costs and (vii) other unusual or non-recurring items. EBITDA and Adjusted EBITDA are not measurements of financial performance or liquidity under accounting principles generally accepted in the U.S. (“U.S. GAAP”) and should not be considered as an alternative to net earnings or cash flow from operating activities as indicators of our operating performance or as a measure of liquidity or any other measures of performance derived in accordance with U.S. GAAP. EBITDA and Adjusted EBITDA are presented because we believe they are frequently used by securities analysts, investors and other interested parties in the evaluation of a company’s ability to service and/or incur debt. However, other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than we do.
The following table sets forth the components of the EBITDA and Adjusted EBITDA for the periods included (dollars in thousands):
Year ended December 31,
2025
2024
Net loss
$
(31,460
)
$
(61,410
)
Provision for income taxes
42
45
Interest expense, net
2,297
2,645
Depreciation and amortization
6,258
9,493
EBITDA
$
(22,863
)
$
(49,227
)
Share-based compensation
2,908
4,829
Loss on extinguishment of debt
-
4,693
Asset impairment charges
3,754
10,214
Loss on offering costs - Prepaid Advance
-
888
Loss on settlement of Prepaid Advance
-
900
Gain on the sale of Global Public Safety
-
(1,500
)
(Gain) loss due to the remeasurement of the STS Earnout and Contingent Consideration, net
(1,900
)
100
Adjusted EBITDA
$
(18,101
)
$
(29,103
)
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Adjusted Gross Profit and Adjusted Gross Margin
Adjusted Gross Profit is a non-GAAP financial measure that we define as revenue less cost of revenue, excluding depreciation and amortization. We define Adjusted Gross Margin as our Adjusted Gross Profit divided by our revenue. We expect Adjusted Gross Margin to continue to improve over time to the extent that we can gain efficiencies through the adoption of our technology and successfully cross-sell and upsell our current and future offerings. However, our ability to improve Adjusted Gross Margin over time is not guaranteed and could be impacted by the factors affecting our performance. We believe Adjusted Gross Profit and Adjusted Gross Margin are useful to investors, as they eliminate the impact of certain non-cash expenses and allow a direct comparison of these measures between periods without the impact of non-cash expenses and certain other nonrecurring operating expenses.
The following table sets forth the components of the Adjusted Gross Profit and Adjusted Gross Margin for the periods included (dollars in thousands) :
Year ended December 31,
2025
2024
(Dollars in thousands, except percentages)
Revenue
$
48,450
$
46,028
Cost of revenue, excluding depreciation and amortization
21,379
23,344
Adjusted Gross Profit
$
27,071
$
22,684
Adjusted Gross Margin
55.9
%
49.3
%
Adjusted Gross Margin for the year ended December 31, 2025 increased from 49.3% to 55.9% compared to the year ended December 31, 2024 . The fluctuation in Adjusted Gross Margin is typically correlated to the mix of software sales versus service type work. Typically our software sales carry a higher Adjusted Gross Margin.
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Key Performance Indicators
We regularly review several indicators, including the following key indicators, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
Recurring Revenue
As part of the ongoing development of our selling strategy, we have been focusing on sales that employ contracts with recurring revenue. We expect these contracts to provide a more predictable stream of revenues, compared to one-time sales of hardware and software licenses which are generally more difficult to predict. Our recurring revenue model and revenue retention rates provide significant visibility into our future operating results and cash flow from operations. This visibility enables us to better manage and invest in our business. The following table sets forth our recurring revenue for the periods included (dollars in thousands):
Year ended December 31,
2025
2024
Change
$
%
Recurring revenue
$
23,865
$
22,590
$
1,275
6
%
We expect to continue efforts to secure long-term contracts with recurring revenue as part of our business model, which is intended to cause recurring revenue growth in future periods to continue to increase. However, procurement requirements for some of our largest customers may result in periods when there is an increase one-time sales as compared to recurring revenues, which may cause the proportion of recurring revenues generated in those periods to fluctuate. In addition, there may be an increase in one time sales as a result of initial installations related to the development of recurring revenue.
Performance Obligations
While a portion of the total contract value won in a particular period represents revenue earned during the period, the remainder represents future performance obligations that can provide an indication of our future revenues. As of December 31, 2025, we had appro ximately $25,921,000 of performance obligations with respect to contracts that were closed prior to December 31, 2025 but have a contractual period beyond December 31, 2025 . These contracts generally cover a term of one to five years, during which the Company will recognize revenue ratably over the contract term. We currently expect to recognize approximately $17,701,000 of this amount over the succeeding twelve months, and the remainder is expected to be recognized over the following four years. On occasion, our customers will prepay the full contract or a substantial portion of the contract. Amounts related to the prepayment of the contract related to the performance obligation for a service period that is not yet met are recorded as part of our contract liabilities balance. Performance obligations may decline or increase significantly as large contracts approach their expiration date and are then renewed.
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Lease Obligations
As of December 31, 2025 , we had significant leased building space at the following locations:
●
Columbia, Maryland – The corporate headquarters
●
Tel Aviv, Israel
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. facilities.
We believe our facilities are in good condition and adequate for their current use, although we have consolidated engineering operations in the United States and are no longer using our Tel Aviv office. We expect to improve, replace and increase facilities as considered appropriate to meet the needs of our planned operations.
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Liquidity and Capital Resources
The net cash flows from operating, investing and financing activities for the periods below were as follows (dollars in thousands):
Year ended December 31,
2025
2024
Change
$
%
Net cash used in operating activities
$
(20,372
)
$
(32,469
)
$
12,097
37
%
Net cash used in investing activities
(2,172
)
(9,030
)
6,858
76
%
Net cash provided by financing activities
34,078
31,115
2,963
10
%
Net increase (decrease) in cash, cash equivalents and restricted cash
$
11,534
$
(10,384
)
$
21,918
211
%
Net cash used in operating activities for the year ended December 31, 2025, decreased by $12,097,000, which was primarily attributable to a lower net loss, partially offset by lower non-cash adjustments during the year, primarily a $6,460,000 decrease in impairment charges, $4,693,000 loss on extinguishment of debt, and $900,000 loss on settlement of prepaid advance recognized in the prior year, as well as lower amortization of intangible assets and share-based compensation, and changes in working capital.
Net cash used in investing activities for the year ended December 31, 2025, decreased by $6,858,000, which was primarily attributable to the absence of the $9,222,000 net cash outflow related to the acquisition of ATD in the prior year, partially offset by higher capital expenditures during the year.
Net cash provided by financing activities for the year ended December 31, 2025 increased by $2,963,000 from the year ended December 31, 2024. During the year ended December 31, 2025, we received net proceeds of $22,350,000 from the At Market Issuance Sales Agreement (the "2025 Sales Agreement") and $13,891,000 from the underwriting agreement with William Blair & Company, L.L.C., that we entered into in December 2025 relating to an underwritten direct offering (the "2025 Underwriting Agreement"). During the year ended December 31, 2024, we received net proceeds of $26,362,000 from our public offering and net proceeds of $14,100,000 from the Prepaid Advance Agreement, which were partially offset by the repayment of $12,500,000 of our 2023 Promissory Notes. These activities were partially offset by scheduled repayments of our STS Notes and payments related to financing leases in both periods.
For the years ended December 31, 2025 and 2024 , we funded our operations primarily through cash from operating activities, the issuance of debt and the sale of equity. As of December 31, 2025 , we had restricted cash of $297,000, cash and cash equivalents of $16,566,000 and working capital of $1,640,000, as compared to restricted cash of $316,000 cash, cash and cash equivalents of $5,013,000 and working capital of $1,707,000 as of December 31, 2024 .
Liquidity and Going Concern
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. GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management has considered various scenarios, forecasts, projections, and estimates and will make certain key assumptions. These assumptions include, among other factors, its ability to raise additional capital, the expected timing and nature of the Company’s programs and projected cash expenditures and its ability to delay or curtail these programs or expenditures to the extent management has the proper authority to do so and considers it probable that those implementations can be achieved within the look-forward period.
We have generated losses and negative operating cashflows since our inception and have relied on external sources of financing to support our cash flow from operations. We attribute 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 existing and new products and services. As of and for the year ended
December 31, 2025, we had working capital of
$1,640,000 and a net loss of
$31,460,000.
Based on the Company's current business plan assumptions and the expected cash burn rate, the Company believes that the existing cash is insufficient to fund its current level of operations for the next twelve months following the issuance of these consolidated financial statements. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
On February 10, 2025, we entered into an At Market Issuance Sales Agreement (the "Sales Agreement") with Northland Securities, Inc. (the "Agent"), pursuant to which we could, from time to time, offer and sell shares of our 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 us 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. We 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, we elected to voluntarily terminate our Sales Agreement.
As of December 31, 2025, we issued 18,888,832 shares of our 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.
On December 13, 2025, we entered into the 2025 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. Each unit consisted of one share of our common stock and one warrant to purchase one share of our 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 were approximately $13.9 million. We intend to use the net proceeds for working capital, capital expenditures and general corporate purposes. The December 2025 offering, together with the proceeds from the Sales Agreement, contributed to the increase in our cash and cash equivalents from $5,013,000 as of December 31, 2024 to $16,566,000 as of December 31, 2025.
In connection with the December 2025 offering, we entered into a Side Letter Agreement with Anson Advisors Inc. (the “Side Letter”). Among other things, the Side Letter prohibits us from effecting or entering into any “Variable Rate Transaction” (as defined in the Side Letter) while the investor holds any of the December 2025 warrants, which expire on December 16, 2032. A “Variable Rate Transaction” generally includes any transaction in which we issue or sell securities that are convertible into, exchangeable for, or represent the right to receive shares of common stock at a price that is subject to being reset at a future date based on trading prices or volumes, or upon the occurrence of specified events. This restriction may limit the types of financing instruments available to us during the period in which the warrants remain outstanding. The Side Letter also provides the investor with participation rights in future firm-commitment underwritten offerings, subject to customary exceptions.
Our ability to generate positive operating results and execute our business strategy will depend on (i) our ability to continue the growth of our customer base, (ii) our ability to continue to improve our quarterly financial metrics such as net loss and cash used from operating activities (iii) the continued performance of our contractors, subcontractors and vendors, (iv) our ability to maintain and build good relationships with investors, lenders and other financial intermediaries, (v) our ability to maintain timely collections from existing customers, and (vi) the ability to scale our business processes. To the extent that events outside of our control have a significant negative impact on economic and/or market conditions, they could affect payments from customers, services and supplies from vendors, our ability to continue to secure and implement new business, raise capital, and otherwise, depending on the severity of such impact, materially adversely affect our operating results.
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Off-Balance Sheet Arrangements, Contractual Obligations and Commitments
As of the date of this Annual Report on Form 10-K, we did not have any off-balance sheet arrangements that have had or are reasonably likely to have a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures.
We have certain contractual obligations for future payments. See Note 7 to our consolidated financial statements for our required operating and financing lease payments and Note 9 for our required debt payments.
Recent Developments
Effective January 14, 2026, Timothy Davenport and Viraj Mehta each resigned from the Board of Directors. Mr. Davenport had served on the Board since January 2023, and Mr. Mehta had served on the Board since May 2024. The resignations were not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices.
Effective March 25, 2026, Prof. Sanjay Sarma resigned from the Board of Directors. Prof. Sarma had served on the Board since January 2023. The resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices.
Following these departures, the Board of Directors consists of six members: Robert A. Berman (Chairman), Paul A. de Bary (Lead Director), Glenn Goord, David P. Hanlon, Steven D. Croxton, and Andrew Meyers.
The Board of Directors set March 25, 2026 as the record date for the Company's 2026 Annual Meeting of Stockholders, to be held on May 15, 2026.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of our operations is based upon our audited consolidated financial statements as of and for the years ended December 31, 2025 and 2024, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. On an ongoing basis, we evaluate our estimates and assumptions based on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Our actual results could differ from these estimates under different assumptions or conditions.
We believe the application of the estimates inherently required therein, are reasonable. These estimates are periodically reevaluated, and adjustments are made when facts and circumstances dictate a change. Rekor bases its estimates on historical experience and on various other assumptions that the management of Rekor believes to be reasonable under the circumstances, the results of which form management’s basis for making judgments about the carrying values of assets and liabilities that may not be readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, or if management made different judgments or utilized different estimates.
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Valuation of long lived assets
Fixed assets and amortizable intangible assets are reviewed for impairment as events or changes in circumstances occur indicating that the carrying value of the asset may not be recoverable. Undiscounted cash flow analyses are used to determine if the carrying amount of the asset is recoverable. If impairment is determined to exist, the charge is calculated based on estimated fair value.
Our analysis requires a blend of judgment and estimation, relying on both quantitative data and qualitative insights to assess our ability to sustain our operations over the forward-looking period. Management’s analysis involves a comprehensive evaluation of numerous factors to determine whether we can continue our operations during the look-forward period.
We evaluate our recent financial performance and our ability to meet our projected financial performance. Factors such as financial projections, profitability and cash flow require estimation and are examined to gauge our financial health.
Conducting a fair value analysis is an exercise in judgment, requiring us to evaluate data points, forecasts, and qualitative insights to arrive at a comprehensive assessment of our ability to derive value from our assets during the look-forward period. In this process, we must exercise caution, recognizing the inherent uncertainties and limitations of our estimations and financial analysis while striving to provide a feasible plan.
New Accounting Pronouncements
See Item 8 of Part II, “Financial Statements and Supplementary Data — Note 1 — Business and Significant Accounting Policies”.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide the information required by this Item.