What changed in this filing

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Item 1. Financial Statements

2026-08-13 compared with 2026-05-11 · 296 added, 158 removed, 876 unchanged (34% of the section changed)

4 unchanged sentences

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

March 31, 2026

June 30, 2026

December 31, 2025

21 unchanged sentences

Accounts payable and accrued expenses

$ 4,980 $ 4,362

Series A Prime Revenue Sharing Notes, net of debt discount of $ 66 and $ 131 , respectively

Series A Prime Revenue Sharing Notes - related party, net of debt discount of $ 33 and $ 66 , respectively

Loans payable, current portion

Loan payable, current portion

Lease liability operating, short-term

7 unchanged sentences

Lease liability operating, long-term

12,058 10,570

Lease liability financing, long-term

8 unchanged sentences

Stockholders' equity

Preferred stock, $ 0.0001 par value, 2,000,000 authorized, 505,000 shares designated as Series A and 240,861 shares designated as Series B as of March 31, 2026 and December 31, 2025, respectively.

No preferred stock was issued or outstanding as of March 31, 2026 or December 31, 2025, respectively.

Preferred stock, $ 0.0001 par value, 2,000,000 authorized, 505,000 shares designated as Series A and 240,861 shares designated as Series B as of June 30, 2026 and December 31, 2025.

No preferred stock was issued or outstanding as of June 30, 2026 or December 31, 2025.

Common stock, $ 0.0001 par value;

137,923,985 and 136,791,826 shares issued as of March 31, 2026 and December 31, 2025, respectively;

137,607,546 and 136,477,697 shares outstanding as of March 31, 2026 and December 31, 2025, respectively

Treasury stock, 316,439 and 314,129 shares as of March 31, 2026 and December 31, 2025, respectively

137,952,934 and 136,791,826 shares issued as of June 30, 2026 and December 31, 2025, respectively;

137,636,495 and 136,477,697 shares outstanding as of June 30, 2026 and December 31, 2025, respectively

Treasury stock, 316,439 and 314,129 shares as of June 30, 2026 and December 31, 2025, respectively

( 902 ) ( 900 )

12 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

$ 12,662 $ 12,359 $ 22,925 $ 21,557

Cost of revenue, excluding depreciation and amortization

5,551 6,245 10,430 11,006

Operating expenses:

General and administrative expenses

5,149 6,936 13,488 14,222

Selling and marketing expenses

686 1,700 1,601 3,457

Research and development expenses

2,435 3,652 5,921 7,629

Gain on lease remeasurement, net

( 2,753 ) - ( 2,753 ) -

Depreciation and amortization

1,372 1,561 2,833 3,117

Total operating expenses

Loss from operations

Other expense:

6,889 13,849 21,090 28,425

Income (loss) from operations

222 ( 7,735 ) ( 8,595 ) ( 17,874 )

Other income (expense):

Interest expense, net

( 517 ) ( 586 ) ( 1,010 ) ( 1,176 )

Loss on remeasurement of ATD Holdback Shares

- - - ( 120 )

Other expense

Total other expense, net

( 256 ) ( 337 ) ( 307 ) ( 362 )

Total other (expense) income, net

( 773 ) ( 923 ) ( 1,317 ) ( 1,658 )

$ ( 551 ) $ ( 8,658 ) $ ( 9,912 ) $ ( 19,532 )

Loss per common share

$ ( 0.00 ) $ ( 0.07 ) $ ( 0.07 ) $ ( 0.17 )

Weighted average shares outstanding

Basic and diluted

137,612,028 117,435,953 137,140,972 112,459,949

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

9 unchanged sentences

Total Stockholders' Equity

Balance as of April 1, 2026

137,607,546 $ 13 316,439 $ ( 902 ) $ 336,271 $ ( 300,914 ) $ 34,468

Stock-based compensation

- - - - 212 - 212

Issuance upon exercise of stock options

- - - - - - -

Issuance upon vesting of restricted stock units

28,949 - - - - - -

Shares withheld upon vesting of restricted stock units

- - - - - - -

- - - - - ( 551 ) ( 551 )

Balance as of June 30, 2026

137,636,495 $ 13 316,439 $ ( 902 ) $ 336,483 $ ( 301,465 ) $ 34,129

Balance as of April 1, 2025

110,912,209 $ 11 223,747 $ ( 804 ) $ 305,119 $ ( 270,967 ) 33,359

Stock-based compensation

- - - - 723 - 723

Issuance upon exercise of stock options

5,333 - - - 4 - 4

Issuance upon vesting of restricted stock units

1,630,801 - - - - - -

Shares withheld upon vesting of restricted stock units

( 76,541 ) - 76,541 ( 69 ) - - ( 69 )

Issuance of common stock pursuant to the 2025 Sales Agreement

9,766,000 1 - - 10,039 - 10,040

- - - - - ( 8,658 ) ( 8,658 )

Balance as of June 30, 2025

122,237,802 $ 12 300,288 $ ( 873 ) $ 315,885 $ ( 279,625 ) $ 35,399

Balance as of January 1, 2026

136,477,697 $ 13 314,129 $ ( 900 ) $ 335,310 $ ( 291,553 ) $ 42,870

Stock-based compensation

- - - - 1,134 - 1,134

Issuance upon exercise of stock options

50,000 - - - 39 - 39

Issuance upon vesting of restricted stock units

1,111,108 - - - - - -

Shares withheld upon vesting of restricted stock units

Balance as of March 31, 2026

( 2,310 ) - 2,310 ( 2 ) - - ( 2 )

- - - - - ( 9,912 ) ( 9,912 )

Balance as of June 30, 2026

137,636,495 $ 13 316,439 $ ( 902 ) $ 336,483 $ ( 301,465 ) $ 34,129

Balance as of January 1, 2025

104,541,073 $ 10 159,520 $ ( 711 ) $ 294,935 $ ( 260,093 ) $ 34,141

Stock-based compensation

- - - - 2,093 - 2,093

Issuance upon exercise of stock options

5,333 - - - 4 - 4

Issuance upon vesting of restricted stock units

2,253,235 - - - - - -

Shares withheld upon vesting of restricted stock units

( 140,768 ) - 140,768 ( 162 ) - - ( 162 )

ATD Holdback Shares

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

Issuance of common stock pursuant to the 2025 Sales Agreement

Balance as of March 31, 2025

14,914,600 2 - - 17,697 - 17,699

- - - - - ( 19,532 ) ( 19,532 )

Balance as of June 30, 2025

122,237,802 $ 12 300,288 $ ( 873 ) $ 315,885 $ ( 279,625 ) $ 35,399

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

3 unchanged sentences

(Dollars in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash Flows from Operating Activities:

$ ( 9,912 ) $ ( 19,532 )

Adjustments to reconcile net loss to net cash used in operating activities:

6 unchanged sentences

Loss on remeasurement of ATD Holdback Shares

Loss on sale of property and equipment

(Gain) loss on sale of property and equipment

Gain on remeasurement of operating lease liability

Loss on operating lease abandonment

6 unchanged sentences

Lease liability

( 93 ) ( 444 )

Net cash used in operating activities

( 6,132 ) ( 15,734 )

Cash Flows from Investing Activities:

Capital expenditures

( 393 ) ( 650 )

Proceeds from the sale of property and equipment

1 unchanged sentence

Net cash used in investing activities

( 193 ) ( 460 )

Cash Flows from Financing Activities:

2 unchanged sentences

Payments related to financing leases

( 487 ) ( 468 )

Repayments of loans payable

( 47 ) ( 38 )

Repurchases of common stock

( 2 ) ( 162 )

Repayment of STS Notes

Net cash (used in) provided by financing activities

( 497 ) 16,035

Net decrease in cash, cash equivalents and restricted cash

( 6,822 ) ( 159 )

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

$ 10,041 $ 5,170

Reconciliation of cash, cash equivalents and restricted cash:

Cash and cash equivalents at end of period

$ 9,766 $ 4,830

Restricted cash and cash equivalents at end of period

Cash, cash equivalents and restricted cash at end of period

$ 10,041 $ 5,170

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

9 unchanged sentences

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

Rekor is a roadway intelligence Company, working to modernize public safety, urban mobility, and transportation management through the development of cutting-edge solutions.

By collaborating closely with public and private sector customers, we deliver services and solutions that serve their current needs and allow them to participate in building a new digital infrastructure operating system for roadways.

Rekor is a technology company developing trusted-data, privacy, security, and intelligence solutions for real-world transportation, public-safety, video, and sensor networks.

We work to modernize public safety, urban mobility, and transportation management through cutting-edge solutions, with a focus on protecting the security and reliability of data and appropriate privacy protections.

By collaborating closely with public and private sector customers, we deliver services and solutions that enable them to improve the reliability, efficiency, accountability and security of their operations.

Our vision is to create safer, smarter, and more sustainable roadways and communities, improving the lives of citizens and the world around them.

Our products and services collect, connect, and organize mobility data, making it more useful and accessible, while providing actionable real-time insights to enable better decision-making.

This provides our customers with significantly enhanced situational awareness, rapid response capabilities, risk mitigation strategies, and predictive analytics.

This provides our customers with both enhanced real time and historical data and the tools to manage and use it efficiently, securely and responsibly.

Our products and services support improved planning and provide significantly enhanced situational awareness, rapid response capabilities, risk mitigation strategies, and predictive analytics.

In our efforts to safeguard privacy and ensure the reliability of data, we have developed proprietary techniques for anonymization of data and verification of video and audio records, which we believe have broad applicability to the media, insurance and other markets beyond our traditional client bases.

These unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

2 unchanged sentences

GAAP for annual financial statements.

In the opinion of management, these unaudited condensed consolidated interim financial statements reflect all adjustments, which include normal recurring adjustments, necessary for a fair statement of the Company’s unaudited condensed consolidated financial statements as of and for the periods ended March 31, 2026 and 2025 .

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

The results for the three months ended March 31, 2026 , are not necessarily indicative of the results to be expected for the year ending December 31, 2026 .

The results for the three and six months ended June 30, 2026 , are not necessarily indicative of the results to be expected for the year ending December 31, 2026 .

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10 -K for the full year ended December 31, 2025 .

20 unchanged sentences

The Company attributes losses to non-capital expenditures related to the scaling of existing products and services, development of new products and services and marketing efforts associated with these products and services.

As of and for the three months ended March 31, 2026 , the Company had a working capital deficit of $ 3,727,000 and a net loss of $ 9,361,000 .

As of and for the six months ended June 30, 2026 , the Company had a working capital deficit of $ 6,598,000 and a net loss of $ 9,912,000 .

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.

16 unchanged sentences

The Company will perform a qualitative assessment, to determine its fair value which includes an evaluation of relevant events and circumstances, including macroeconomic, industry and market conditions, the Company's overall financial performance, and trends in the value of the Company's common stock.

As of March 31, 2026 , the Company did not identify any events that would cause it to assess goodwill for impairment.

As of June 30, 2026 , the Company did not identify any events that would cause it to assess goodwill for impairment.

Fair Value of Financial Instruments

The carrying amounts reported in the condensed consolidated balance sheets for accounts receivable, notes receivable and accounts payable approximate fair value as of March 31, 2026 and December 31, 2025 due to the short-term maturity of these instruments.

The carrying amounts reported for long-term debt and long-term receivables also approximate fair value as of March 31, 2026 and December 31, 2025 , based on management’s evaluation of current rates compared to market rates of interest and other relevant factors.

The carrying amounts reported in the condensed consolidated balance sheets for accounts receivable, notes receivable and accounts payable approximate fair value as of June 30, 2026 and December 31, 2025 due to the short-term maturity of these instruments.

The carrying amounts reported for long-term debt and long-term receivables also approximate fair value as of June 30, 2026 and December 31, 2025 , based on management’s evaluation of current rates compared to market rates of interest and other relevant factors.

The Company applies the fair value framework established by ASC Topic 820, Fair Value Measurements and Disclosures ("ASC 820" ).

1 unchanged sentence

The Company’s goodwill and other intangible assets are measured at fair value upon acquisition and assessed for impairment on a recurring and non-recurring basis, respectively, using Level 3 inputs.

As of March 31, 2026 and December 31, 2025, the Company had no Level 1, Level 2 or Level 3 assets or liabilities outstanding.

As of June 30, 2026 and December 31, 2025, the Company had no Level 1, Level 2 or Level 3 assets or liabilities outstanding.

The Company historically considered its STS Contingent Consideration and ATD Holdback Shares to be Level 3 instruments.

The STS Contingent Consideration was remeasured to zero during the year ended December 31, 2025, and the ATD Holdback Shares were settled on January 2, 2025 through the issuance of 664,329 shares of the Company's common stock.

There were no transfers between fair value hierarchy levels during the three months ended March 31, 2026.

There were no transfers between fair value hierarchy levels during the six months ended June 30, 2026 .

Refer to the Company's 2025 Annual Report on Form 10 -K for additional information regarding the changes in fair value of these instruments during the year ended December 31, 2025.

11 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Recurring revenue

1 unchanged sentence

Product and service revenue

5,929 6,448 9,633 10,540

Total revenue

48 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Urban Mobility

1 unchanged sentence

Transportation Management

433 408 958 831

Public Safety

3,368 3,529 6,895 6,775

Total revenue

18 unchanged sentences

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

As of March 31, 2026 , the unsatisfied portion of the remaining performance obligation was approximately $ 22,250,000 .

As of June 30, 2026 , the unsatisfied portion of the remaining performance obligation was approximately $ 23,709,000 .

The Company expects to recognize approximately 88 % of this amount as revenue over the succeeding twelve months, and the remainder is expected to be recognized within the next five years thereafter.

3 unchanged sentences

When billing occurs after services have been provided, such unbilled amounts will generally be billed and collected within 60 to 120 days, but typically no longer than over the next twelve months.

Unbilled accounts receivables of $ 1,944,000 and $ 1,993,000 were included in accounts receivable, net, in the unaudited condensed consolidated balance sheets as of March 31, 2026 and December 31, 2025 , respectively.

Unbilled accounts receivables of $ 1,523,000 and $ 1,993,000 were included in accounts receivable, net, in the unaudited condensed consolidated balance sheets as of June 30, 2026 and December 31, 2025 , respectively.

Contract liabilities

1 unchanged sentence

This revenue and the corresponding decrease in liabilities are recognized on a contract-by-contract basis at the end of each reporting period and reflected on the unaudited condensed consolidated balance sheet for such period.

During the three months ended March 31, 2026 , $ 1,921,000 of the contract liabilities balance as of December 31, 2025 was recognized as revenue.

The services due for contract liabilities described above are shown below as of March 31, 2026 (dollars in thousands):

During the six months ended June 30, 2026 , $ 3,210,000 of the contract liabilities balance as of December 31, 2025 was recognized as revenue.

The services due for contract liabilities described above are shown below as of June 30, 2026 (dollars in thousands):

2026, remaining

Cash and Cash Equivalents, and Restricted Cash

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

The Company considers all highly-liquid debt instruments that are readily convertible into cash and have an original maturity of three months or less at the time of purchase to be cash equivalents

Cash subject to contractual restrictions and not readily available for use is classified as restricted cash.

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

Restricted cash for these client jurisdictions as of March 31, 2026 and December 31, 2025 were $ 424,000 and $ 297,000 , respectively, and correspond to equal amounts of related liabilities.

Restricted cash for these client jurisdictions as of June 30, 2026 and December 31, 2025 were $ 275,000 and $ 297,000 , respectively, and correspond to equal amounts of related liabilities.

Concentrations of Credit Risk

1 unchanged sentence

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

As of March 31, 2026 and December 31, 2025 , the Company had deposits totaling $ 12,599,000 and $ 16,863,000 , respectively, in multiple U.S.

As of June 30, 2026 and December 31, 2025 , the Company had deposits totaling $ 10,041,000 and $ 16,863,000 , respectively, in multiple U.S.

financial institutions and one Israeli financial institution.

Customer A accounted for 15 % of the unaudited condensed consolidated revenue for the three months ended March 31, 2026.

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

No other single customer accounted for more than 10% of the Company’s unaudited condensed consolidated revenues for the three months ended March 31, 2026 and 2025 , respectively.

As of March 31, 2026 and December 31, 2025 , Customer A accounted for 10 % and 15 % of the Company's unaudited condensed consolidated accounts receivable balance.

Customer A accounted for 11 % and 13 % of the unaudited condensed consolidated revenue for the three and six months ended June 30, 2026 , respectively.

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

As of June 30, 2026 and December 31, 2025 , Customer A accounted for 11 % and 15 % of the Company's unaudited condensed consolidated accounts receivable balance, respectively.

Accounts Payable and Other Current Liabilities

As of March 31, 2026 and December 31, 2025 , amounts owed to board members of $ 210,000 and $ 75,000 were presented as part of accounts payable and accrued expenses on the unaudited condensed consolidated balance sheets.

As of June 30, 2026 and December 31, 2025 , amounts owed to board members of $ 100,000 and $ 75,000 were presented as part of accounts payable and accrued expenses on the unaudited condensed consolidated balance sheets.

A summary of other current liabilities is as follows (in thousands):

March 31, 2026

June 30, 2026

December 31, 2025

12 unchanged sentences

The Company adopted ASU 2025 - 05 effective January 1, 2026 on a modified retrospective basis.

The adoption did not have a material impact on the Company's unaudited condensed consolidated financial statements or related disclosures for the three months ended March 31, 2026.

The adoption did not have a material impact on the Company's unaudited condensed consolidated financial statements or related disclosures for the three and six months ended June 30, 2026 .

Recently Issued Accounting Pronouncements Not Yet Adopted

16 unchanged sentences

NOTE 2 - LEASES

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

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

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

7 unchanged sentences

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.

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, including the operating lease ROU asset associated with the Tel Aviv office lease.

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

As a result of the decision, the Company identified a triggering event requiring an impairment assessment of the related long-lived assets, including 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 the operating lease ROU asset were less than its carrying amount and, accordingly, the asset was written down to its estimated fair value.

3 unchanged sentences

Refer to the Company's Annual Report on Form 10 -K for the year ended December 31, 2025 for additional information regarding the wind-down of operations in Tel Aviv.

No impairment charges related to the Company's right-of-use assets were recognized during the three months ended March 31, 2026.

No impairment charges related to the Company's right-of-use assets were recognized during the six months ended June 30, 2026 .

As part of the Company’s ongoing efforts to optimize operations and improve efficiency, the Company evaluated its lease portfolio and related renewal options.

In connection with this review, the Company took certain actions with respect to its leased locations, including communicating with landlords where appropriate.

In relation to the Tel Aviv lease, the Company notified the landlord of its intent to vacate the premises during the second quarter of 2026, which resulted in a remeasurement of the related lease liability.

Because the right-of-use asset associated with the Tel Aviv office had previously been fully impaired, the reduction in the lease liability resulted in the recognition of an approximately $ 2,753,000 gain on lease remeasurement during the second quarter of 2026.

The gain was recorded within gain on lease remeasurement, net in the unaudited condensed consolidated statements of operations.

Losses associated with lease abandonments and terminations are recorded within general and administrative expenses in the unaudited condensed consolidated statements of operations.

In January 2026, the Company entered into an amendment to the lease for its corporate headquarters in Columbia, Maryland that revised the timing of monthly base rent payments through the remaining lease term.

2 unchanged sentences

The modification did not result in a gain or loss.

During the three months ended March 31, 2026, the Company exercised its option to terminate its lease for office space in Plano, Texas, effective December 31, 2026.

The Company recognized a loss on lease termination of approximately $ 117,000 , which is included in general and administrative expenses in the condensed consolidated statements of operations.

During the six months ended June 30, 2026 , the Company exercised its option to terminate its lease for office space in Plano, Texas, effective December 31, 2026.

The Company recognized a loss on lease termination of approximately $ 117,000 , which is included in general and administrative expenses in the unaudited condensed consolidated statements of operations.

As a result of the lease termination, the Company recognized a $ 50,000 early termination liability, reduced its operating lease liability by approximately $ 77,000 , and reduced the corresponding right-of-use asset by approximately $ 144,000 .

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Operating lease cost

$ 623 $ 701 $ 1,332 $ 1,411

Finance lease cost

Amortization of right-of-use assets

284 301 589 606

Interest on lease liabilities

Finance lease cost

309 342 644 695

Total lease cost

1 unchanged sentence

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

March 31, 2026

June 30, 2026

December 31, 2025

6 unchanged sentences

Financing leases

Maturities of operating and financing lease liabilities for continuing operations on March 31, 2026 were as follows (dollars in thousands):

Maturities of operating and financing lease liabilities for continuing operations on June 30, 2026 were as follows (dollars in thousands):

Operating Leases

7 unchanged sentences

NOTE 3 – SUPPLEMENTAL NON-CASH DISCLOSURES OF CASH FLOW INFORMATION

Supplemental disclosures of cash flow information for the three months ended March 31, 2026 and 2025 were as follows (dollars in thousands):

Three Months Ended March 31,

Supplemental disclosures of cash flow information for the six months ended June 30, 2026 and 2025 were as follows (dollars in thousands):

Six Months Ended June 30,

Cash paid for interest

$ 1,166 $ 1,122

Cash paid for taxes

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

Decrease in deposits related to property and equipment received

Decrease in deposits related to Inventory received

Abandonment of financing lease

3 unchanged sentences

Settlement of ATD Holdback Shares with common stock

New Leases under ASC-842:

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

2 unchanged sentences

Intangible Assets Subject to Amortization

The following provides a breakdown of identifiable intangible assets, net as of March 31, 2026 and December 31, 2025 (dollars in thousands):

March 31, 2026

The following provides a breakdown of identifiable intangible assets, net as of June 30, 2026 and December 31, 2025 (dollars in thousands):

June 30, 2026

December 31, 2025

8 unchanged sentences

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

Amortization expense for the three months ended March 31, 2026 and 2025 was $ 300,000 in each period and is presented as part of depreciation and amortization in the unaudited condensed consolidated statements of operations.

Amortization expense for the three months ended June 30, 2026 and 2025 was $ 300,000 in each period, and for the six months ended June 30, 2026 and 2025 was $ 600,000 in each period, respectively, and is presented as part of depreciation and amortization in the unaudited condensed consolidated statements of operations.

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

As of March 31, 2026 , the estimated impact from annual amortization from intangible assets for each of the next five fiscal years and thereafter is as follows (dollars in thousands):

As of June 30, 2026 , the estimated impact from annual amortization from intangible assets for each of the next five fiscal years and thereafter is as follows (dollars in thousands):

2026, remaining

2 unchanged sentences

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

As of March 31, 2026 , the aggregate balance of these notes payable was fully satisfied.

As of June 30, 2026 , the aggregate balance of these notes payable was fully satisfied.

Series A Prime Revenue Sharing Notes

11 unchanged sentences

If the sinking fund requirement takes effect, the Company is required to maintain a cash balance sufficient to amortize the principal amount due on all series of Prime Revenue Sharing Notes outstanding under the Indenture in equal monthly installments by the respective due dates of each such series.

The amount related to the interest reserve was $ 500,000 as of March 31, 2026 and is held by a third party and is presented as part of deposits on the consolidated balance sheets.

The Company is not in default of any requirements as they relate to the Series A Prime Revenue Sharing Notes and the sinking fund requirement has not been triggered as of March 31, 2026.

The amount related to the interest reserve was $ 500,000 as of June 30, 2026 and is held by a third party and is presented as part of deposits on the consolidated balance sheets.

The Company is not in default of any requirements as they relate to the Series A Prime Revenue Sharing Notes and the sinking fund requirement has not been triggered as of June 30, 2026 .

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

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

For the three months ended March 31, 2026 and 2025 , the Company recognized approximately $ 497,000 in interest expense related to the Series A Prime Revenue Sharing Notes.

Interest expense related to the Series A Prime Revenue Sharing Notes was $ 497,000 for each of the three months ended June 30, 2026 and 2025 , and $ 994,000 for each of the six months ended June 30, 2026 and 2025 .

Interest Expense

The following table presents the interest expense net of interest income related to the contractual interest and the amortization of debt issuance costs for the Company’s debt arrangements (dollars in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Contractual interest expense

$ 536 $ 561 $ 1,075 $ 1,126

Amortization of debt issuance costs

Total interest expense

585 611 1,173 1,225

interest income

Total interest expense, net

$ 517 $ 586 $ 1,010 $ 1,176

Schedule of Principal Amounts Due of Debt

The principal amounts due for loans and notes payable are shown below as of March 31, 2026 (dollars in thousands):

The principal amounts due for loans and notes payable are shown below as of June 30, 2026 (dollars in thousands):

2026, remaining

2 unchanged sentences

NOTE 6 – INCOME TAXES

The Company maintains a full valuation allowance against its net deferred taxes, outside of the deferred tax liability related to the indefinite lived intangibles, through March 31, 2026 .

The Company maintains a full valuation allowance against its net deferred taxes, outside of the deferred tax liability related to the indefinite lived intangibles, through June 30, 2026 .

The Company files income tax returns in Israel, the United States and in various states.

Federal, state or foreign income tax audits were in process as of March 31, 2026 .

Federal, state or foreign income tax audits were in process as of June 30, 2026 .

The Company evaluated the recoverability of the net deferred income tax assets and the level of the valuation allowance required with respect to such net deferred income tax assets.

2 unchanged sentences

If it is determined in future periods that portions of the Company’s net deferred income tax assets satisfy the realization standard, the valuation allowance will be reduced accordingly.

For the three months ended March 31, 2026 and 2025, the Company did not record any interest or penalties related to unrecognized tax benefits.

For the six months ended June 30, 2026 and 2025, the Company did not record any interest or penalties related to unrecognized tax benefits.

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

The 2019 through 2024 tax years remain subject to examination by the Internal Revenue Service.

As of March 31, 2026 and December 31, 2025 , our evaluation revealed no uncertain tax positions that would have a material impact on the unaudited condensed consolidated financial statements.

For the three months ended March 31, 2026 and 2025 , the Company did not record any expense or benefit related to income tax.

As of June 30, 2026 and December 31, 2025 , our evaluation revealed no uncertain tax positions that would have a material impact on the unaudited condensed consolidated financial statements.

For the three and six months ended June 30, 2026 and 2025 , the Company did not record any expense or benefit related to income tax.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

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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.

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

There was no activity related to the Company warrants during the period ended March 31, 2026 .

The table below shows the Company's outstanding warrants as of March 31, 2026 :

There was no activity related to the Company warrants during the period ended June 30, 2026 .

The table below shows the Company's outstanding warrants as of June 30, 2026 :

2023 Promissory Notes (1)

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2025 Underwriting Agreement (4)

Outstanding warrants as of March 31, 2026

Outstanding warrants as of June 30, 2026

1,000,000 481,100 2,850,000 8,571,428 12,902,528

Weighted average strike price of outstanding warrants as of March 31, 2026

Weighted average strike price of outstanding warrants as of June 30, 2026

$ 2.00 $ 1.82 $ 3.25 $ 2.40 $ 2.54

Intrinsic value of outstanding warrants as of March 31, 2026

Intrinsic value of outstanding warrants as of June 30, 2026

$ - $ - $ - $ - $ -

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The 2017 Plan permits the granting of stock options, stock appreciation rights, restricted and unrestricted stock awards, phantom stock, performance awards and other stock-based awards for the purpose of attracting and retaining quality employees, directors and consultants.

As of March 31, 2026, an aggregate of 15,280,949 shares of common stock were authorized for issuance under the 2017 Plan.

As of June 30, 2026 , an aggregate of 15,280,949 shares of common stock were authorized for issuance under the 2017 Plan.

Stock Options

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

For the three months ended March 31, 2026 and 2025 there was no stock compensation expense related to stock options.

A summary of stock option activity under the Company’s 2017 Plan during the period ended March 31, 2026 is as follows:

For the three and six months ended June 30, 2026 and 2025 there was no stock compensation expense related to stock options.

A summary of stock option activity under the Company’s 2017 Plan during the period ended June 30, 2026 is as follows:

Number of Shares Subject to Option Weighted Average Exercise Price

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( 50,000 ) 0.78

Outstanding and exercisable balance as of March 31, 2026

( 8,833 ) 0.80

As of March 31, 2026 , there was $ 0 of unrecognized stock compensation expense related to unvested stock options granted under the 2017 Plan.

Outstanding and exercisable balance as of June 30, 2026

364,201 $ 1.18 2.45 $ -

As of June 30, 2026 , there was $ 0 of unrecognized stock compensation expense related to unvested stock options granted under the 2017 Plan.

Restricted Stock Units

Stock compensation expense related to Restricted Stock Units ("RSUs") for the three months ended March 31, 2026 and 2025 was $ 922,000 and $ 1,370,000 respectively, and is presented based on the awardees' operating department, as general administrative, selling and marketing and research and development expenses in the unaudited condensed consolidated statements of operations.

Stock compensation expense related to Restricted Stock Units ("RSUs") for the three months ended June 30, 2026 and 2025 was $ 212,000 and $ 723,000 , respectively, and for the six months ended June 30, 2026 and 2025 was $ 1,134,000 and $ 2,093,000 , respectively, and is presented based on the awardees' operating department, as general administrative, selling and marketing and research and development expenses in the unaudited condensed consolidated statements of operations.

On March 20, 2026, in connection with the Company's amended and restated employment agreement with Robert A.

Berman, the Company's President and Chief Executive Officer, the Company granted 1,000,000 fully vested shares of common stock to Mr.

Berman, with a grant date fair value of $ 0.88 per share, resulting in $ 880,000 of stock-based compensation expense recorded during the three months ended March 31, 2026.

Berman, with a grant date fair value of $ 0.88 per share, resulting in $ 880,000 of stock-based compensation expense recorded during the six months ended June 30, 2026 .

These shares were issued to Mr.

Berman in April 2026.

A summary of RSU activity under the Company’s 2017 Plan for the three months ended March 31, 2026 is as follows:

A summary of RSU activity under the Company’s 2017 Plan for the six months ended June 30, 2026 is as follows:

Number of Shares

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( 375,047 ) 1.33 1.48

Outstanding balance as of March 31, 2026

Outstanding balance as of June 30, 2026

2,381,818 $ 0.95 1.40

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

As of March 31, 2026 , there was $ 482,000 of unrecognized stock compensation expense related to unvested RSUs granted under the 2017 Plan that will be recognized over an average remaining period of 1.5 years.

As of June 30, 2026 , there was $ 1,927,000 of unrecognized stock compensation expense related to unvested RSUs granted under the 2017 Plan that will be recognized over an average remaining period of 1.40 years.

Rekor Labs Profit Interests

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In connection with that authorization, Rekor Labs granted profits interests to certain service providers representing 3.5 % of Rekor Labs’ fully diluted equity as of the grant date, subject to the terms and conditions of the applicable grant agreements and the amended and restated limited liability company agreement.

The profits interests are subject to a participation threshold of $ 5,000 .

The profits interests vest in full upon the consummation of a Fundamental Transaction, as defined in the amended and restated limited liability company agreement, within six months following the grant date, subject to the applicable participant’s continued service through the applicable vesting date.

The Company accounts for the profits interest awards as share-based compensation arrangements under ASC 718, Compensation — Stock Compensation.

Because vesting of the awards is contingent upon the occurrence of a Fundamental Transaction within six months following the grant date, the Company evaluated whether the vesting condition was probable as of March 31, 2026.

As of March 31, 2026, the Company determined that the vesting condition was not probable and, accordingly, no compensation expense was recognized related to the awards during the three months ended March 31, 2026.

As of June 30, 2026, the Company determined that the vesting condition remained not probable and, accordingly, no additional compensation expense was recognized related to the awards during the three and six months ended June 30, 2026.

The Company will continue to reassess the probability of vesting at each reporting date.

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands, except per share data)

Basic and diluted loss per share

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15,648,547 7,415,057 15,648,547 7,415,057

As the Company had a net loss for the three months ended March 31, 2026 , the following 13,701,640 potentially dilutive securities were excluded from diluted loss per share:

As the Company had a net loss for the three and six months ended June 30, 2026 , the following 15,648,547 potentially dilutive securities were excluded from diluted loss per share:

12,902,528 for outstanding warrants, 364,201 related to outstanding options, and 2,381,818 related to outstanding RSUs.

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

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

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

NOTE 11 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date these unaudited condensed consolidated financial statements were issued and has determined that there are no events requiring disclosure.

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

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the inability of our strategic plans and goals to expand our geographic markets, customer base and product and service offerings;

risks associated with pandemics and other global health emergencies, and their impact U.S.

risks associated with pandemics and other global health emergencies, and their impact on U.S.

and international markets and economies;

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The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this report and the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Annual Report”) and any updates contained herein as well as those set forth in our reports and other filings made with the SEC.

Rekor is a roadway intelligence Company, working to modernize public safety, urban mobility, and transportation management through the development of cutting-edge solutions.

By collaborating closely with public and private sector customers, we deliver services and solutions that enable them to achieve their objectives effectively, while simultaneously building a new digital infrastructure operating system for roadways.

Rekor is a technology company developing trusted-data, privacy, security, and intelligence solutions for real-world transportation, public-safety, video, and sensor networks.

We work to modernize public safety, urban mobility, and transportation management through cutting-edge solutions , with a focus on protecting the security and reliability of data and appropriate privacy protections.

Our vision is to create safer, smarter, and more sustainable roadways and communities, improving the lives of citizens and the world around them.

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Our products and services collect, connect, and organize mobility data, making it more useful, and accessible, while providing actionable real-time insights to enable better decision-making.

This provides our customers with significantly enhanced situational awareness, rapid response capabilities, risk mitigation strategies, and predictive analytics.

This provides our customers with both enhanced real time and historical data and the tools to manage and use it efficiently, securely and responsibly.

Our products and services support improved planning and provide significantly enhanced situational awareness, rapid response capabilities, risk mitigation strategies, and predictive analytics.

We are also focused on developing privacy and evidence architecture for responsible vehicle recognition.

This approach is designed to protect non-relevant information by default, apply purpose-based retention, provide auditable access controls, and verify the integrity of video evidence, while preserving authorized public-safety and transportation uses.

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

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

We also have a separate subsidiary, Rekor Labs LLC ("Rekor Labs"), which is working to commercialize a patent-pending technology for verifying the authenticity of video data.

Although this technology was developed to respond to requests from public safety customers, we believe it has broad applicability and should therefore be pursued as a separate venture.

We also have a separate subsidiary, Rekor Labs LLC ("Rekor Labs"), which develops media-authentication and data-security technologies, including Go-Secure.Video, a technology designed to authenticate video at the point of capture and support later verification of whether the video has been altered.

Although developed in response to public-safety requirements, we believe this technology has broader applicability.

A New Operating System for U.S.

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

For over 70 years, the nation has relied on analog technologies and manual methodologies that have resulted in rising costs, inefficiencies, and safety hazards that are now preventable.

Federal, state and local transportation agencies are now looking to implement private-sector innovations like sensor technology, Internet of Things (“IoT”), AI, cloud computing, autonomous vehicles, and smart drones.

Over the past decade, the United States of America has begun to implement a critical turning point in the evolution of its transportation and roadway infrastructure.

After many years of reliance on analog technologies and manual methodologies that have resulted in rising costs, and have involved inefficiencies and safety hazards that are now preventable, Federal, state and local transportation agencies are now looking to exploit innovations like sensor technology, Internet of Things (“IoT”), AI, cloud computing and autonomous vehicles.

These technologies are advancing rapidly and can address fundamental challenges such as poor roadway quality, traffic congestion, and driver safety.

Since 2018, Rekor has worked to deserve a place at the forefront of a wave of transformation and modernization of roadways, actively designing, building, and deploying AI solutions and other advanced complementary technologies through public-private collaborations with departments of transportation (“DOTs”), public safety agencies, and private sector partners.

Since 2018, Rekor has worked to deserve a place at the forefront of this wave of transformation and modernization actively designing, building, and deploying AI solutions and other advanced complementary technologies through public-private collaborations with departments of transportation (“DOTs”), public safety agencies, and private sector partners.

Rekor is committed to helping lay the foundation of a groundbreaking new digital infrastructure operating system for roadways—and has already delivered proven value across multiple domains:

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Uninsured Driver Reduction:

Automated enforcement ensures insurance compliance, improving public safety and reducing costs to government and consumers.

Automated enforcement ensures compliance, improving public safety and reducing costs for all.

By providing advanced AI-driven insights to assist forward-thinking infrastructure managers, Rekor is helping to reshape how transportation systems operate.

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By applying a digital layer to existing physical infrastructure and roadways, Rekor is creating a next-generation digital operating system for roadways, delivering real-time intelligence that powers economic growth, operational excellence, and improved quality of life for communities.

While doing so, Rekor has been mindful of the challenges to personal privacy and the risks of malicious security breaches, developing proprietary processes for anonymizing data and ensuring its security and responsible transmission and use.

Roadway Intelligence Powered by Rekor

Rekor is working towards transforming transportation and mobility data into actionable insights.

Rekor has been continuously working on better ways to transform transportation and mobility data into actionable insights.

Powered by advanced AI and fueled by diverse data sources, Rekor delivers historical and real-time, as well as predictive alerts that can be used to enhance mobility, safety, and operational efficiency across public and private sectors.

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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.

AI for Infrastructure – We believe that the application of AI to the analysis of conditions on roadways and other transportation infrastructure can significantly improve 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.

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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.

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

As larger agencies implement the new systems, we have seen and responded to increased familiarity and awareness among smaller agencies.

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

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As with any large market, this will require considerable effort and resources.

Increasing Concerns Regarding Personal Privacy and Authenticity of Data.

Rekor has conscientiously developed its products and services with sensitivity to concerns about privacy and security, incurring higher costs to develop proprietary methods and process to support responsible security and privacy protections.

These have included processes that allow vehicle data to be anonymized, aggregated and used responsibly and video and audio content to be verified as original from the point of capture as well as identify content that has been altered.

Serious concerns about these issues have increasingly been recognized.

We believe the processes we have developed can play a role in addressing these issues and will continue to pursue their adoption.

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 weight requirements and regulations such as motor vehicle insurance and registration requirements.

We believe that future legislation will increasingly allow for automated enforcement of weight requirements for trucks and 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 or incursions into restricted lanes.

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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.

Graphic Processing Unit ( “ GPU ” ) Improvements – The roadway intelligence market has benefited 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.

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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.

Inability to Achieve Profitability - Rekor has not yet achieved sustained profitability and continues to incur losses, notwithstanding the decreases in its operating expenses during the first half of 2026 resulting from its cost-containment initiatives.

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.

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Our historical operating results in dollars are presented below.

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

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Research and development expenses

Gain on lease remeasurement, net

Depreciation and amortization

Total operating expenses

Loss from operations

Other expense:

Income (loss) from operations

Other income (expense):

Interest expense, net

Gain (loss) on remeasurement of ATD Holdback Shares

Other expense

Total other expense, net

Comparison of the Three Months Ended March 31, 2026 and the Three Months Ended March 31, 2025

Total other (expense) income, net

Comparison of the Three and Six Months Ended June 30, 2026 and the Three and Six Months Ended June 30, 2025

Total Revenue

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

The increase in revenue for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was driven across each of our revenue streams.

Revenue attributable to our Scout product line increased by $281,000, revenue attributable to our Discover product line increased by $682,000, and revenue attributable to our Command product line increased by approximately $102,000 over the same period.

The increase in revenue for the three and six months ended June 30, 2026, compared with the corresponding periods in 2025, reflected growth across our revenue streams, led by our Discover product line.

Growth was supported by continued expansion within our existing customer base, including increased deployments and adoption of recurring services, which contributed to the growth in our recurring revenue base.

Cost of Revenue, Excluding Depreciation and Amortization

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

Cost of revenue, excluding depreciation and amortization

Cost of revenue, excluding depreciation and amortization, increased by 2% for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, primarily due to the higher revenue in 2026.

Cost of revenue, excluding depreciation and amortization, decreased for the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025, primarily due to a favorable revenue mix of software versus hardware, which resulted in higher margins from increased software license sales.

Operating Expenses

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

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Research and development expenses

Gain on lease remeasurement, net

Depreciation and amortization

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General and Administrative Expenses

General and administrative expenses increased by 14% for the three months ended March 31, 2026 , compared to the three months ended March 31, 2025.

The increase was primarily driven by a $455,000 increase in labor costs, driven by the absence of prior-year salary reductions and compensation arrangements, and a $531,000 increase in professional fees, primarily related to higher legal, accounting and other advisory costs.

General and administrative expenses decreased by 26% and 5% for the three and six months ended June 30, 2026 , compared to the three and six months ended June 30, 2025, respectively.

The decrease was primarily driven by reductions in payroll and related expenses of $903,000 and $448,000, respectively, as a result of cost-containment initiatives implemented to better align with our strategic priorities.

Selling and Marketing Expenses

Selling and marketing expenses decreased by 48% for the three months ended March 31, 2026 , compared to the three months ended March 31, 2025.

This decrease was primarily due to a reduction in payroll and related expenses of approximately $673,000 resulting from cost-containment initiatives implemented to better align operations with our strategic priorities.

Selling and marketing expenses decreased by 60% and 54% for the three and six months ended June 30, 2026 , compared to the three and six months ended June 30, 2025, respectively.

The decrease was primarily due to a reduction in payroll and related expenses of approximately $872,000 and $1,544,000, respectively, resulting from cost-containment initiatives implemented to better align operations with our strategic priorities.

Research and Development Expense

For the three months ended March 31, 2026 , the 12% decrease in r esearch and development expenses was primarily due to a reduction in payroll and related expenses of approximately $621,000 resulting from cost-containment initiatives implemented to better align operations with our strategic priorities.

Research and development expenses decreased by 33% and 22% for the three and six months ended June 30, 2026 , compared to the three and six months ended June 30, 2025, respectively.

The decrease was primarily driven by reductions in payroll and related expenses of $1,451,000 and $2,072,000, respectively, as a result of cost-containment initiatives implemented to better align with our strategic priorities.

Gain on Lease Remeasurement, Net

In the second quarter of 2026 the Company remeasured its lease in Tel Aviv.

Because the associated right-of-use asset had previously been fully impaired, the reduction in the lease liability resulted in the recognition of an approximately $2,753,000 gain on lease remeasurement during the second quarter of 2026.

Depreciation and Amortization

The decrease in depreciation and amortization during the period is attributable to a reduction in the depreciation base resulting from the impairment of property and equipment recognized in connection with the wind-down of our Tel Aviv operations during the year ended December 31, 2025 .

Other Expense

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

Other expense:

Other income (expense):

Interest expense, net

Gain (loss) on remeasurement of ATD Holdback Shares

Other expense

Total other expense, net

For the three months ended March 31, 2026, interest expense, net decreased by 16%, due to higher interest income from interest-bearing accounts .

Total other (expense) income, net

For the three and six months ended June 30, 2026, interest expense, net decreased by 12% and 14%, compared to the three and six months ended June 30, 2025, respectively, due to higher interest income from interest-bearing accounts .

Non-GAAP Measures (Unaudited)

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Interest, net

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Share-based compensation

Gain on lease remeasurement, net

Adjusted EBITDA

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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:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands, except percentages)

Cost of revenue, excluding depreciation and amortization

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Adjusted Gross Margin

Adjusted Gross Margin for the three months ended March 31, 2026 increased compared to the three months ended March 31, 2025.

Adjusted Gross Margin for the three and six months ended June 30, 2026 increased compared to the three and six months ended June 30, 2025.

The fluctuation in Adjusted Gross Margin is typically correlated to the mix of software sales versus service type work.

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The following table sets forth our recurring revenue for the periods included (dollars in thousands):

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Recurring revenue

Recurring revenue increased by 28% for the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

Recurring revenue increased by 14% and 21% for the three and six months ended June 30, 2026, compared to the three and six months ended June 30, 2025, respectively.

We expect to continue to focus on 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.

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Performance Obligations

As of March 31, 2026, we had approximately $22,250,000 of contracts that were closed prior to March 31, 2026 but have a contractual period beyond March 31, 2026.

As of June 30, 2026, we had approximately $23,709,000 of contracts that were closed prior to June 30, 2026 but have a contractual period beyond June 30, 2026.

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

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Lease Obligations

As of March 31, 2026, our principal leased facility was our corporate headquarters in Columbia, Maryland.

As of June 30, 2026, our principal leased facility was our corporate headquarters in Columbia, Maryland.

We also leased office space in Plano, Texas.

As described in Note 2 — Leases, we ceased operations at our previously-occupied office space in Tel Aviv, Israel during the three months ended March 31, 2026.

As described in Note 2 — Leases, we ceased operations at our previously-occupied office space in Tel Aviv, Israel during the six months ended June 30, 2026.

In January 2026, we entered into an amendment to the lease for our corporate headquarters in Columbia, Maryland that revised the timing of monthly base rent payments through the remaining lease term.

During the three months ended March 31, 2026, we exercised our option to terminate our lease for office space in Plano, Texas, effective December 31, 2026.

During the six months ended June 30, 2026, we exercised our option to terminate our lease for office space in Plano, Texas, effective December 31, 2026.

In December 2025, we initiated a plan to wind down the operations of our wholly owned subsidiary, Waycare Technologies LTD subsidiary in Tel Aviv, Israel, and consolidate all engineering functions into our U.S.

Tel Aviv operations ceased on February 24, 2026.

In connection with this initiative, during the three months ended March 31, 2026, we incurred employee-related separation costs of approximately $278,000, which are reflected within general and administrative expenses and research and development expenses in our unaudited condensed consolidated statements of operations.

Tel Aviv operations substantially ceased on February 24, 2026.

In connection with this initiative, during the six months ended June 30, 2026, we incurred employee-related separation costs of approximately $278,000, which are reflected within general and administrative expenses and research and development expenses in our unaudited condensed consolidated statements of operations.

Additionally, during the three months ended June 30, 2026, we notified the landlord of our intent to vacate the Tel Aviv premises, which resulted in a remeasurement of the related operating lease liability.

Because the right-of-use asset associated with the Tel Aviv office had previously been fully impaired, this remeasurement resulted in a gain of approximately $2,753,000, which is reflected within gain on lease remeasurement, net in our unaudited condensed consolidated statements of operations.

Liquidity and Capital Resources

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

Three Months Ended March 31,

Six Months Ended June 30,

Net cash used in operating activities

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Net decrease in cash, cash equivalents and restricted cash

Net cash used in operating activities for the three months ended March 31, 2026 decreased by $4,334,000 compared to the three months ended March 31, 2025.

The decrease primarily attributable to a reduction in our net loss of approximately $1,513,000, favorable working capital movements driven primarily by changes in accounts receivable and accounts payable, and lower operating cash outflows resulting from the wind-down of our Tel Aviv, Israel operations, which ceased on February 24, 2026.

Net cash used in investing activities for the three months ended March 31, 2026 increased by $26,000 compared to the three months ended March 31, 2025, primarily due to higher capital expenditures, partially offset by higher proceeds from notes receivable.

Net cash (used in) provided by financing activities for the three months ended March 31, 2026 decreased by $7,552,000 compared to the three months ended March 31, 2025.

During the three months ended March 31, 2025, we received net proceeds of approximately $7,659,000 from the 2025 Sales Agreement, which was terminated in August 2025.

We received no proceeds from the 2025 Sales Agreement during the three months ended March 31, 2026.

Cash outflows during the three months ended March 31, 2026 included scheduled payments related to financing leases.

For the three months ended March 31, 2026 and 2025, we funded our operations primarily through cash from operating activities and the sale of equity.

As of March 31, 2026, we had cash and cash equivalents and restricted cash of $12,599,000 and working capital deficit of $3,727,000, as compared to cash and cash equivalents and restricted cash of $16,863,000 and working capital of $1,640,000 as of December 31, 2025.

Net cash used in operating activities for the six months ended June 30, 2026 decreased by $9,602,000 compared to the six months ended June 30, 2025.

The decrease was primarily attributable to a reduction in our net loss of approximately $9,620,000 resulting from the realignment of the business operations.

Net cash used in investing activities for the six months ended June 30, 2026 decreased by $267,000 compared to the six months ended June 30, 2025, primarily due to lower capital expenditures.

Net cash (used in) provided by financing activities for the six months ended June 30, 2026 decreased by $16,532,000 compared to the six months ended June 30, 2025.

During the six months ended June 30, 2025, we received net proceeds of approximately $17,699,000 from the 2025 Sales Agreement, which was terminated in August 2025.

We received no proceeds from the 2025 Sales Agreement during the six months ended June 30, 2026.

Cash outflows during the six months ended June 30, 2026 included scheduled payments related to financing leases.

For the three and six months ended June 30, 2026 and 2025, we funded our operations primarily through cash from operating activities and the sale of equity.

As of June 30, 2026, we had cash and cash equivalents and restricted cash of $10,041,000 and working capital deficit of $6,598,000, as compared to cash and cash equivalents and restricted cash of $16,863,000 and working capital of $1,640,000 as of December 31, 2025.

Management has assessed going concern uncertainty to determine whether there is sufficient cash on hand, together with expected capital raises and working capital, to assure operations for a period of at least one year from the date these consolidated financial statements are issued, which is referred to as the “look-forward period”, as defined in U.S.

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We attribute losses to non-capital expenditures related to the scaling of existing products, development of new products and service offerings and marketing efforts associated with these products and services.

As of and for the three months ended March 31, 2026, we had working capital deficit of $3,727,000 and a net loss of $9,361,000.

Our cash, cash and cash equivalents and restricted cash decreased by $4,264,000 for the three months ended March 31, 2026 primarily due to the net loss of $9,361,000, this amount was partially offset by non-cash expenses which are highlighted in our condensed consolidated statements of cash flows and favorable working capital movements.

As of and for the six months ended June 30, 2026, we had working capital deficit of $6,598,000 and a net loss of $9,912,000.

Our cash and cash equivalents and restricted cash decreased by $6,822,000 for the six months ended June 30, 2026 primarily due to the net loss of $9,912,000, this amount was partially offset by non-cash expenses which are highlighted in our unaudited condensed consolidated statements of cash flows and favorable working capital movements.

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

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The 2025 Sales Agreement was terminated on August 12, 2025.

We did not receive any proceeds from the 2025 Sales Agreement during the three months ended March 31, 2026, and the agreement is no longer available as a financing source.

We did not receive any proceeds from the 2025 Sales Agreement during the six months ended June 30, 2026, and the agreement is no longer available as a financing source.

See Note 8 — Stockholders' Equity for additional information.

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Total contractual lease payments under the lease were not significantly changed by the amendment.

During the three months ended March 31, 2026, we exercised our option to terminate our lease for office space in Plano, Texas, effective December 31, 2026.

During the six months ended June 30, 2026, we exercised our option to terminate our lease for office space in Plano, Texas, effective December 31, 2026.

In connection with the termination, we expect to pay a termination fee of approximately $50,000 in 2026, in addition to monthly rent payments through the December 31, 2026 effective date.

Refer to Note 2 — Leases for additional information.

As of June 30, 2026, we had $15.0 million aggregate principal amount of Series A Prime Revenue Sharing Notes outstanding, all of which, together with accrued and unpaid interest, matures on December 15, 2026.

We are evaluating refinancing alternatives with respect to the Series A Prime Revenue Sharing Notes.

Based on our current liquidity and expected operating requirements, we expect that satisfaction of the Series A Prime Revenue Sharing Notes at maturity will require refinancing, restructuring or other additional sources of capital, and there can be no assurance that we will be able to refinance, restructure or otherwise satisfy the notes on acceptable terms, or at all.

See Note 5 — Debt.

Based on the Company's current business plan assumptions and the expected cash burn rate, the Company believes that the existing cash is insufficient to fund its current level of operations.

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

As of March 31, 2026, we did not have any material commitments for capital expenditures.

As of June 30, 2026, we did not have any material commitments for capital expenditures.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements