Rekor Systems Inc
For the period ended Sep 30, 2024. Filed Nov 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 14, 2024
REKR$0.34+4.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001437749-24-026792
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001437749-24-035319
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 109 previous paragraphs and 112 current paragraphs.
91 unchanged; 17 reworded; 4 added; 1 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 28 previous and 27 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
Prepaid Advance
Current report
We have elected to account for the prepaid advance at fair value in accordance with FASB ASC Topic 825, Financial Instruments, (“ASC 825”). In this regard, ASC 825-10-15-4 provides for the fair value option election (to the extent not otherwise prohibited by ASC 825-10-15-5) to be afforded to financial instruments, wherein the financial instrument is initially measured at estimated fair value as of the transaction issue date and then subsequently remeasured at estimated fair value as of each reporting period balance sheet date, with changes in the estimated fair value recognized as other income (expense) in the statement of operations. The determination of the fair value of the prepaid advance at inception and each reporting date requires judgement from Management. The fair value of the Prepaid Advance was calculated using a Monte Carlo simulation using quoted market prices of our outstanding common stock as of September 30, 2024. Based on observed price movements, we will model advance payoffs under the various scenarios. We determine the discount rate or yield of the Prepaid Advance and calculate the aggregate present value of all potential payoffs to estimate the fair value of the advance on each valuation date. Applying the stock price on close of market September 30, 2024, of $1.18 per share, volatility of 90%, a risk-free rate of 4% and an indicated yield of 12.5%, management determined the fair value of the Prepaid Advance to be $11,621,000. A change to these inputs could impact the fair value of the Prepaid Advance. During the three and nine months ended September 30, 2024, the Company recorded a change in fair value of the Prepaid Advance liability of $21,000.
Current report
Prepaid Advance
Current report
On August 14, 2024, the Company entered into a Prepaid Advance Agreement (the “Prepaid Advance”) with YA II PN, Ltd., a Cayman Islands exempt limited company (the “Investor”), an affiliate of Yorkville Advisors Global, LP. In accordance with the terms of the Prepaid Advance, the Investor advanced to the Company $15,000,000. After giving effect to the purchase price discount provided for in the Prepaid Advance, net proceeds to the Company was $14,100,000.
Removed paragraphs (1)
Previous report
These expenses were offset by
Reworded paragraphs (17)
Previous wording
Comparison of the Three and Six Months Ended June 30, 2024 and the Three and Six Months Ended June 30, 2023
Current wording
Comparison of the Three and Nine Months Ended September 30, 2024 and the Three and Nine Months Ended September 30, 2023
Previous wording
The increase in revenue for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, was primarily attributable to our acquisition of ATD in January 2024. During the three and six months ended June 30, 2024, revenue attributable to ATD was $3,341,000 and $5,705,000, respectively. The remainder of the increase in revenue for the six months ended June 30, 2024 was related to portable and short-term traffic services.
Current wording
The increase in revenue for the three and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023, was primarily attributable to our Urban Mobility revenue stream which consists of revenue derived from roadway data aggregation activities. During the three and nine months ended September 30, 2024, revenue attributable to ATD was $1,723,000 and $7,428,000, respectively, and is included as part of our Urban Mobility revenue stream. The remainder of the increase in revenue for the nine months ended September 30, 2024 was related to portable and short-term traffic services.
Previous wording
For the three and six months ended June 30, 2024, cost of revenue, excluding depreciation and amortization increased compared to the corresponding prior periods primarily due to an increase in personnel and other direct costs such as hardware that were incurred to support our increase in revenue. Additionally, during the three and six months ended June 30, 2024, $970,000 and $1,799,000 of the increase was related to our acquisition of ATD.
Current wording
For the three and nine months ended September 30, 2024, cost of revenue, excluding depreciation and amortization increased compared to the corresponding prior periods primarily due to an increase in personnel and other direct costs such as hardware that were incurred to support our increase in revenue. Additionally, during the three and nine months ended September 30, 2024, $809,000 and $2,608,000 of the increase was related to our acquisition of ATD.
Previous wording
For the six months ended June 30, 2024, the increase in general and administrative expenses was primarily due to:
Current wording
For the nine months ended September 30, 2024, the increase in general and administrative expenses was primarily due to:
Previous wording
For the six months ended June 30, 2024, the increase in selling and marketing expenses was primarily due toa $343,000 increase in advertising expense, of which approximately $164,000 was related to our acquisition of ATD.
Current wording
For the nine months ended September 30, 2024, the increase in selling and marketing expenses was primarily due toa $256,000 increase in advertising expense.
Previous wording
Research and development expenses during thethree and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023, remained consistent period over period.
Current wording
Research and development expenses during thethree and nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023, remained consistent period over period.
Previous wording
For the three and six months ended June 30, 2024, interest expense decreased period over period due to the early redemption of the 2023 Promissory Notes.
Current wording
For the three and nine months ended September 30, 2024, interest expense decreased period over period due to the early redemption of the 2023 Promissory Notes.
Previous wording
(Loss) gain on extinguishment of debt is a result of early redemption of the 2023 Promissory Notes. As part of the redemption, we recorded a Redemption Payment of $1,875,000 which we settled through the issuance of common stock and accelerated debt issuance costs of $2,818,000.
Current wording
(Loss) gain on extinguishment of debt is a result of early redemption of the 2023 Promissory Notes. As part of the redemption, we recorded accelerated debt issuance costs of $2,818,000 and a Redemption Payment of $1,875,000 which we settled through the issuance of common stock.
Previous wording
Other income for the three and six months ended June 30, 2024, increased as a result of the remeasurement of the ATD Holdback Shares.
Current wording
Other income for the three and nine months ended September 30, 2024, increased as a result of the remeasurement of the ATD Holdback Shares.
Previous wording
Adjusted Gross Margin for the three months ended June 30, 2024 increased compared to the three months ended June 30, 2023, while the Adjusted Gross Margin for the six months ended June 30, 2024 decreased compared to the six months ended June 30, 2023. 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.
Current wording
Adjusted Gross Margin For the three months ended September 30, 2024 decreased compared to the three months ended September 30, 2023. The Adjusted Gross Margin for the nine months ended September 30, 2024 decreased compared to the nine months ended September 30, 2023. 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.
Previous wording
As of June 30, 2024, we had approximately $21,023,000 of contracts that were closed prior to June 30, 2024 but have a contractual period beyond June 30, 2024. This represents a decrease of $5,367,000 or 20% compared to $26,390,000 of performance obligations as of December 31, 2023. These contracts generally cover a term of one to five years, in which the Company will recognize revenue ratably over the contract term. We currently expect to recognize approximately $15,578,000 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.
Current wording
As of September 30, 2024, we had approximately $23,613,000 of contracts that were closed prior to September 30, 2024 but have a contractual period beyond September 30, 2024. This represents a decrease of $2,777,000 or 11% compared to $26,390,000 of performance obligations as of December 31, 2023. These contracts generally cover a term of one to five years, in which the Company will recognize revenue ratably over the contract term. Performance obligations for large contracts gradually decrease as they approach the renewal stage and increase if and when renewed. We currently expect to recognize approximately $15,898,000 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.
Previous wording
Net cash used in operating activities for the six months ended June 30, 2024 had a decrease of $1,274,000, which was primarily attributable to the timeliness of collections related to our accounts receivable balance.
Current wording
Net cash used in operating activities for the nine months ended September 30, 2024 had a decrease of $886,000, which was primarily attributable to increased loss in our operations.
Previous wording
The increase in net cash used in investing activities of $9,231,000 was primarily due to the net cash outflow of $9,222,000 related to the acquisition of ATD.
Current wording
The increase in net cash used in investing activities of $9,207,000 was primarily due to the net cash outflow of $9,222,000 related to the acquisition of ATD.
Previous wording
Net cash provided by financing activities for the six months ended June 30, 2024 decreased by $5,104,000 from the prior six month period ended June 30, 2023. During the six months ended June 30, 2024, as part of our 2024 Public Offering, we received net proceeds of $26,362,000, these proceeds were partially offset by the repayment of our 2023 Promissory Notes. During the six months ended June 30, 2023, as part of the 2023 Promissory Notes and the 2023 Registered Direct Offering, we received net proceeds of $11,100,000 and $9,159,000, respectively.
Current wording
Net cash provided by financing activities for the nine months ended September 30, 2024 increased by $7,000 from the prior nine month period ended September 30, 2023. During the nine months ended September 30, 2024, as part of our 2024 Public Offering and Prepaid Advance, we received net proceeds of $26,362,000 and $14,100,000, respectively, these proceeds were partially offset by the repayment of our 2023 Promissory Notes. During the nine months ended September 30, 2023, as part of the 2023 Promissory Notes and the 2023 Registered Direct Offering, we received net proceeds of $11,100,000 and $9,159,000, respectively.
Previous wording
For the three and six months ended June 30, 2024 and 2023, we funded our operations primarily through cash from operating activities, the issuance of debt and the sale of equity. As of June 30, 2024, we had cash and cash equivalents and restricted cash of $3,417,000 and a working capital deficit of $3,375,000, as compared to cash and cash equivalents and restricted cash of $15,713,000 and working capital of $8,100,000 as of December 31, 2023.
Current wording
For the three and nine months ended September 30, 2024 and 2023, we funded our operations primarily through cash from operating activities, the issuance of debt and the sale of equity. As of September 30, 2024, we had cash and cash equivalents and restricted cash of $10,967,000 and a working capital deficit of $7,389,000, as compared to cash and cash equivalents and restricted cash of $15,713,000 and working capital of $8,100,000 as of December 31, 2023.
Previous wording
We have generated losses since our inception and have relied on cash on hand and external sources of financing to support cash flow from operations. We attribute losses to non-capital expenditures related to the scaling of existing products, development of new products and service offerings and marketing efforts associated with these products and services. As of and for the six months ended June 30, 2024, we had working capital deficit of $3,375,000 and a net loss of $28,409,000.
Current wording
We have generated losses since our inception and have relied on cash on hand and external sources of financing to support cash flow from operations. 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 nine months ended September 30, 2024, we had working capital deficit of $7,389,000 and a net loss of $41,055,000.
Previous wording
Our cash decreased by $12,296,000 for the six months ended June 30, 2024 primarily due to the cash paid to acquire ATD and redeem the 2023 Promissory Notes and the net loss of $28,409,000, partially offset by external financing activity.
Current wording
Our cash decreased by $4,746,000 for the nine months ended September 30, 2024 primarily due to the cash paid to acquire ATD and redeem the 2023 Promissory Notes and the net loss of $41,055,000, partially offset by external financing activity.