Rekor Systems, Inc.
For the period ended Mar 31, 2026. Filed May 11, 2026.
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.
Mar 31, 2026 · Filed May 11, 2026
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 2025-09-30; filed 2025-11-13.
0001437749-25-034814
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2026-03-31; filed 2026-05-11.
0001437749-26-016117
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 103 previous paragraphs and 99 current paragraphs.
57 unchanged; 25 reworded; 17 added; 21 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 16 previous and 19 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 (17)
Current report
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.
Current report
By combining advanced technology, domain expertise, and implementation capacity, Rekor can offer end-to-end roadway intelligence solutions for public agencies and private sector clients. Using our solutions, we are able to generate unique and deep insights that enable proactive and data-driven decision-making, enabling governments and businesses to unlock the full potential of their infrastructure, and foster safer, smarter, and more efficient roadways.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
For the three months ended March 31, 2026, the 12%decrease in research 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.
Current report
Other Expense
Current report
For the three months ended March 31, 2026, interest expense, net decreased by 16%, due to higher interest income from interest-bearing accounts.
Current report
Non-GAAP Measures (Unaudited)
Current report
As of March 31, 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. 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.
Current report
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. facilities. 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.
Current report
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.
Current report
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.
Current report
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.
Current report
In February 2025, we entered into an At Market Issuance Sales Agreement (the "2025 Sales Agreement") with Northland Securities, Inc. for the offer and sale of shares of our common stock having an aggregate offering price of up to $25,000,000. 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. See Note 8 — Stockholders' Equity for additional information.
Current report
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. The amendment defers a portion of the base rent payments otherwise due during 2026 into 2027, reducing our near-term cash payment obligations. 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. 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.
Removed paragraphs (21)
Previous report
Rekor serves governmental and commercial customers by providing advanced roadway intelligence products and services. Our customers include federal, state and local governments and large commercial customers in the North America, as well as commercial customers in many other countries. Rekor generates and distributes roadway data used in the management, maintenance and planning of transportation infrastructure. We have been working for many years to develop and deploy proprietary systems that modernize and improve the collection and use of roadway data. Our systems employ advanced models developed using machine learning and other recent advances in artificial intelligence (“AI”) to enhance public safety, urban mobility, and transportation management. By collaborating closely with our public and private sector customers, we deliver mission-critical services and solutions that enable them to achieve their objectives effectively, while simultaneously working toward creating a connected, data-driven infrastructure ecosystem.
Previous report
Inspired by the Open System Interconnection (“OSI”) model, Rekor works to integrate fragmented transportation systems into a cohesive, unified network. Collaborating with government agencies, infrastructure operators, transit providers, and technology partners, we can consolidate hardware, software, and data into a connected platform that delivers smarter, safer, and more efficient roadways.
Previous report
Within this suite, Rekor has developed specialized AI-powered platforms that serve as core revenue streams:
Previous report
Revenue increased for the three and nine months ended September 30, 2025, compared to the corresponding periods in 2024, primarily due to higher perpetual license sales in Q3 2025.
Previous report
Cost of revenue, excluding depreciation and amortization, decreased for the three and nine month periods ended September 30, 2025, compared to the corresponding prior-year periods, primarily due to a favorable revenue mix of software versus hardware, which resulted in higher margins from increased software license sales.
Previous report
General and administrative expenses decreased for the three and nine months ended September 30, 2025, compared to the prior-year periods. The decrease was primarily driven by reductions in payroll and related expenses of $1,085,000 and $1,766,000, respectively, as a result of cost-containment initiatives implemented to better align with operations. In addition, bad debt expense decreased by $591,000 and $798,000, respectively, and professional fees decreased by $571,000 and $390,000, respectively.
Previous report
For the three and nine months ended September 30, 2025, thedecrease in selling and marketing expenses was primarily due toa$388,000 and $1,091,000 decrease relatedto payroll and payroll related costs as a result ofcost-containment initiatives implemented to better align with operations.
Previous report
For the three and nine months ended September 30, 2025, thedecrease in research and development expenses was primarily due toa $1,000,000 and $3,138,000 decrease relatedto payroll and payroll related costs as a result ofcost-containment initiatives implemented to better align with operations.
Previous report
Other Income (Expense)
Previous report
For the three months ended September 30, 2025, interest expense increased by 15%, however, for the nine months ended September 30, 2025 interest expense decreased compared to the corresponding period in 2024 due to the early redemption of the 2023 Promissory Notes.
Previous report
Loss on extinguishment of debt is a result of early redemption of the 2023 Promissory Notes in 2024. As part of the redemption, we recorded accelerated debt issuance costs of $2,818,000 and a redemption payment of $1,875,000 which we settled through the issuance of common stock.
Previous report
Additionally, in 2024 we recorded non-operating items, including a loss on offering costs related to our Prepaid Advance and a gain on the sale of Global Public Safety. These items were one-time in nature and did not recur in 2025.
Previous report
Non-GAAP Measures
Previous report
As of September 30, 2025, we had material leased building space at the following locations in the U.S. and Israel:
Previous report
We believe our facilities are in good condition and adequate for their current use. We expect to improve, replace and increase or decrease facilities as considered appropriate to meet the needs of our planned operations.
Previous report
The decrease in net cash used in investing activities of $6,580,000 was primarily due to the net cash outflow of $9,222,000 related to the acquisition of ATD. The decrease in net cash used in investing activities was partially offset by an increase in capital expenditures, which are directly tied to revenue generating contracts.
Previous report
Net cash provided by financing activities for the nine months ended September 30, 2025 decreased by $10,722,000 from the prior nine month period ended September 30, 2024. During the nine months ended September 30, 2025, as part of our Sales Agreement, we received net proceeds of $22,350,000. During the nine months ended September 30, 2024, as part of our 2024 Public Offering and Prepaid Advance, we received net proceeds of $26,362,000 and $14,100,000, respectively, these proceeds were partially offset by the repayment of our 2023 Promissory Notes.
Previous report
Our cash decreased by $1,918,000 for the nine months ended September 30, 2025 primarily due to the net loss of $23,681,000, this amount was partially offset by external financing activity.
Previous report
On February 10, 2025, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with Northland Securities, Inc. (the “Agent”), pursuant to which the Company may, from time to time, offer and sell shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”), having an aggregate offering price of up to $25,000,000. The Agent is entitled to receive from the Company a commission in an amount equal to (i) 3.0% of the gross sales price per share sold through it as agent in agency transactions and (ii) 6.0% of the purchase price per share sold to the Agent, as principal in principal transactions. The Company incurred issuance costs of approximately $245,000 related to legal, accounting, and other fees in connection with the Sales Agreement. These costs were charged against the gross proceeds of the Sales Agreement and presented as a reduction to additional paid-in capital on the accompanying consolidated balance sheets.
Previous report
On August 12, 2025, the Company elected to voluntarily terminate its Sales Agreement.
Previous report
As of September 30, 2025 the Company issued 18,888,832 shares of its common stock at a weighted average selling price of $1.23 per share in accordance with the Sales Agreement. Net cash provided from the Sales Agreement was $22,350,000 after paying $245,000 related to the issuance cost, as well as 3.0% or $699,000 related to cash commissions provided to the Agent. See Note 9 – Stockholders’ Equity for details on shares issued under the Sales Agreement.
Reworded paragraphs (25)
Previous wording
Our vision is to create safer, smarter, and more sustainable roadways and communities, improving the lives of citizens and the world around them. Our approach leverages its AI capabilities to collect, organize and analyze mobility data and distribute it securely and efficiently, making it useful, accessible, and actionable for real-time insights and decision-making. This provides our customers with significantly enhanced situational awareness, rapid response capabilities, risk mitigation strategies, and predictive analytics. To assist our customers in realizing this vision, we’ve developed purpose-built software platforms and a complimentary suite of interconnected AI-enabled hardware offerings. We’ve designed these solutions to exploit a set of diverse multi-modal datasets using our proprietary AI technologies, with the objective of delivering unparalleled roadway intelligence. They enable clients to more effectively monitor, manage, and optimize the movement of vehicles and activities in and around roadways and communities with precision. Through real-time insights and predictive analytics, our platforms enable rapid decision-making, proactive risk mitigation, and streamlined operations across public safety, urban mobility, and transportation systems and agencies, ensuring smarter and safer outcomes for all.
Current wording
Our vision is to create safer, smarter, and more sustainable roadways and communities, improving the lives of citizens and the world around them. To implement this vision, we have developed a suite of interconnected AI-driven hardware and purpose-built software platforms. Powered by vast and diverse multi-modal datasets and proprietary AI technologies, these solutions deliver advanced roadway intelligence, enabling clients to more effectively monitor, manage, and optimize the movement of vehicles, traffic, and activities in and around roadways and communities with precision and sensitivity to privacy and environmental concerns. 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.
Previous wording
Our operations are conducted primarily by our wholly-owned subsidiaries, Rekor Recognition Systems, Inc. (“Rekor Recognition”), Waycare Technologies, Ltd. (“Waycare”), Southern Traffic Services, Inc. (“STS”), and All Traffic Data Systems (“ATD”).
Current wording
Our operations are conducted primarily by our wholly-owned subsidiaries, Rekor Recognition Systems, Inc. (“Rekor Recognition”), Waycare Technologies, Ltd. and Waycare Technologies, Inc. (combined “Waycare”), Southern Traffic Services, Inc. (“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.
Previous wording
A New Operating System for Roadways
Current wording
A New Operating System for U.S. Roadways
Previous wording
We believe the United States of America is undergoing significant transition in the evolution of its transportation and roadway infrastructure. For over 70 years, the nation has relied on legacy technologies that depend on analog and manual methodologies, resulting in inefficiencies, rising costs, and preventable safety hazards. While innovations like sensor technology, Internet of Things (“IoT”), AI, cloud computing, and autonomous vehicles are advancing rapidly, fundamental challenges such as poor roadway quality, traffic congestion, and driver safety continue. A concentrated recent effort by federal, state and local governments to repair and upgrade the nation’s roadways has provided an exciting opportunity to modernize the nation’s transportation infrastructure and address these challenges.
Current wording
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. These technologies are advancing rapidly and can address fundamental challenges such as poor roadway quality, traffic congestion, and driver safety.
Previous wording
Since 2018, Rekor has positioned itself to participate in this modernization effort by actively designing, building, testing and deploying its AI solutions through public-private collaborations with departments of transportation (“DOTs”), public safety agencies, and private sector partners. Rekor is committed to keep a leadership role in laying the foundation of a new digital infrastructure operating system for roadways—and has already delivered proven value across multiple domains:
Current wording
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. 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:
Previous wording
With these forward-thinking infrastructure strategies, Rekor is playing a leading role in reshaping how transportation systems operate. Its solutions empower agencies to prevent accidents, reduce inefficiencies, and optimize resources, driving smarter, safer, and more efficient roadways across the nation.
Current wording
By providing advanced AI-driven insights to assist forward-thinking infrastructure managers, Rekor is helping to reshape how transportation systems operate. Its solutions empower public agencies and public sector clients to prevent accidents, reduce inefficiencies, and optimize resources, driving smarter, safer, and more efficient roadways across the nation.
Previous wording
Rekor is a leader in roadway intelligence, committed to supporting the process of revolutionizing transportation systems by collecting, connecting, and organizing the world’s mobility data. Improving and making effective use of roadway intelligence requires the ability to harness vast amounts and varieties of data from roadways, vehicles, transportation systems, and hundreds of external elements like weather, special events, and work zones, and do the analysis and distribution that transforms them into actionable insights that operators and planners can use productively. These unique insights permit our customers to enhance public safety, visualize and optimize traffic flows more quickly, and improve other operational efficiencies. Through our Rekor One® roadway intelligence engine, we aggregate these datasets from diverse sources and securely deliver these insights to government agencies and private-sector clients, driving smarter, more effective decision-making across transportation management, urban mobility, and public safety ecosystems, as well as multiple commercial market segments.
Current wording
Roadway intelligence involves harnessing vast amounts and varieties of data from roadways, vehicles, transportation systems, and hundreds of external elements like weather, special events, and work zones, transforming it into actionable insights. Rekor is committed to revolutionizing transportation systems by collecting, connecting, and organizing mobility data. Through our Rekor One® roadway intelligence engine, we aggregate datasets from diverse sources and securely deliver insights to government agencies and private-sector clients, driving smarter, more effective decision-making across transportation management, urban mobility, and public safety ecosystems.
Previous wording
Our mission extends beyond connectivity—we are building dynamic, AI-enabled networks to modernize traffic management, public safety, and emergency services. By supporting the establishment of a digital overlay on existing physical infrastructure, Rekor is helping to create a new generation digital operating system for roadways, delivering real-time intelligence that powers economic growth, operational excellence, and improved quality of life for communities.
Current wording
Our mission extends beyond connectivity—we are working toward building a dynamic, AI-driven network to modernize traffic management, public safety, and emergency services. By applying a digital layer to existing physical infrastructure and roadways, Rekor is creating a next-generation digital operating system for roadways, delivering real-time intelligence that powers economic growth, operational excellence, and improved quality of life for communities.
Previous wording
The Rekor One® roadway intelligence engine serves as a central data and analytics platform that integrates multimodal mobility and roadway data into actionable insights. Powered by advanced AI and fueled by diverse data sources, Rekor delivers real-time and predictive solutions that enhance mobility, safety, and operational efficiency across public and private sectors. Our platforms aggregate and analyze trillions of data points from IoT devices, roadway sensors, cameras, and an expansive partner network, enabling customers to make proactive, informed decisions and optimize resources, and enabling us to deliver tailored solutions for government and commercial customers in public safety, urban mobility, and transportation management.
Current wording
Rekor is working towards transforming 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. Our platforms aggregate and analyze trillions of data points from roadway sensors and other IoT devices, enabling customers to make proactive, informed decisions and optimize resources, and enabling us to deliver tailored solutions for government and commercial customers in public safety, urban mobility, and transportation management.
Previous wording
The Company derives its revenues primarily from the sale of its roadway data aggregation, traffic management and licensing offerings. These offerings include a mixture of data collection, implementation, engineering, customer support and maintenance services as well as software and hardware. Revenue is recognized upon transfer of control of promised products and services to the Company’s customers, in an amount that reflects the consideration the Company expects to receive in exchange for those products and services.
Current wording
The Company derives its revenues primarily from the sale of its roadway data aggregation, traffic management, public safety and licensing offerings. These offerings include a mixture of data collection, implementation, engineering, customer support and maintenance services as well as software and hardware. Revenue is recognized upon transfer of control of promised products and services to the Company’s customers, in an amount that reflects the consideration the Company expects to receive in exchange for those products and services.
Previous wording
Direct costs of revenues consist primarily of the portion of technical and non-technical salaries and wages and payroll-related costs incurred in connection with revenue-generating activities. Direct costs of revenues also include production expenses, data subscriptions, sub-consultant services and other expenses that are incurred in connection with our revenue-generating activities. Direct costs of revenues exclude the portion of technical and non-technical salaries and wages related to marketing efforts, vacations, holidays, and other time not spent directly generating fees under existing contracts. Such costs are included in operating expenses. We expense direct costs of revenues when they incur.
Current wording
Direct costs of revenues consist primarily of the portion of technical and non-technical salaries and wages and payroll-related costs incurred in connection with revenue-generating activities. Direct costs of revenues also include production expenses, data subscriptions, sub-consultant services and other expenses that are incurred in connection with our revenue-generating activities. Direct costs of revenues exclude the portion of technical and non-technical salaries and wages related to marketing efforts, vacations, holidays, and other time not spent directly generating fees under existing contracts. Such costs are included in operating expenses. We expense direct costs of revenues when they are incurred.
Previous wording
Our operating expenses consist of general and administrative expenses, sales and marketing, research and development and depreciation and amortization. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, payroll taxes and stock-based compensation expenses.
Current wording
Our operating expenses consist of general and administrative expenses, sales and marketing, research and development and depreciation and amortization. Personnel costs have been the most significant component of operating expenses and consist of salaries, benefits, bonuses, payroll taxes and stock-based compensation expenses.
Previous wording
General and administrative expenses consist of personnel costs for our executive, finance, legal, human resources, and administrative departments. Additional expenses include office leases, professional fees, and insurance.
Current wording
General and administrative expenses consist of personnel costs for our executive, finance, legal, human resources, and administrative departments, office leases, professional fees, insurance and related expenses.
Previous wording
We expect our general and administrative expenses to continue to remain high for the foreseeable future due to the costs associated with our growth and the costs of accounting, compliance, legal, insurance, and investor relations as a public company. Our general and administrative expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses. However, our general and administrative expenses have decreased as a percentage of our revenue and, to the extent we continue to be successful in generating increased revenue, we expect our general and administrative expenses to decrease as a percentage of our revenue over the long term.
Current wording
We expect our general and administrative expenses to continue to reflect actions taken to align our cost structure with current revenue levels, while continuing to include the costs associated with operating as a public company, including accounting, compliance, legal, insurance and investor relations. Our general and administrative expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.
Previous wording
Other income (expense) consists primarily of legal settlements, legal judgements, interest income and expense in connection with our debt arrangements, costs associated with the extinguishment of our debt arrangements, gains on the sale of subsidiaries, gains or losses on the sale of fixed assets, gain or losses on the change in fair value of our liabilities, and interest income earned on cash and cash equivalents and note receivables.
Current wording
Other income (expense) consists primarily of interest expense incurred on our debt arrangements, partially offset by interest income earned on cash and cash equivalents and notes receivable, as well as other items that may include legal settlements, legal judgements, gains or losses on the sale of fixed assets, and gains or losses on the change in fair value of our liabilities.
Previous wording
Income tax provision consists primarily of income taxes in certain domestic jurisdictions in which we conduct business. We have recorded deferred tax assets for which a full valuation allowance has been provided, including net operating loss carryforwards and tax credits. We expect to maintain this full valuation allowance for the foreseeable future as it is more likely than not that some or all of those deferred tax assets may not be realized based on our history of losses.
Current wording
Income tax provision consists primarily of income taxes in certain domestic jurisdictions in which we conduct business. We have recorded deferred tax assets for which a full valuation allowance has been provided, including net operating loss carryforwards and tax credits. We expect to maintain this full valuation allowance for the foreseeable future as it is more likely than not that some or all of those deferred tax assets will not be realized based on our history of losses.
Previous wording
Comparison of the Three and Nine Months Ended September 30, 2025 and the Three and Nine Months Ended September 30, 2024
Current wording
Comparison of the Three Months Ended March 31, 2026 and the Three Months Ended March 31, 2025
Previous wording
The decrease in depreciation and amortization during the period is attributable to an impairment we recognized as of December 31, 2024, following the identification of a triggering event.
Current wording
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.
Previous wording
Adjusted Gross Margin for the three and nine months ended September 30, 2025 increased compared to the three and nine months ended September 30, 2024. The fluctuation in Adjusted Gross Margin is typically correlated to the mix of software sales versus service type work. Typically our software sales carry a higher Adjusted Gross Margin.
Current wording
Adjusted Gross Margin for the three months ended March 31, 2026 increased compared to the three months ended March 31, 2025. 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 part of the ongoing development of our selling strategy, we have been focusing on sales that employ contracts with recurring revenue. We expect these contracts to provide a more predictable stream of revenues, compared to one-time sales of hardware and software licenses which are generally more difficult to predict. Our recurring revenue model and revenue retention rates provide significant visibility into our future operating results and cash flow from operations. This visibility enables us to better manage and invest in our business. The following table sets forth our recurring revenue for the periods included (dollars in thousands):
Current wording
As part of the ongoing development of our selling strategy, we have been focusing on sales that employ contracts with recurring revenue. We expect these contracts to provide a more predictable stream of revenues, compared to one-time sales of hardware and software licenses which are generally more difficult to predict. Our recurring revenue provides significant visibility into our future operating results and cash flow from operations. This visibility enables us to better manage and invest in our business. The following table sets forth our recurring revenue for the periods included (dollars in thousands):
Previous wording
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. However, procurement requirements for some of our largest customers may result in periods when there is an increase one-time sales as compared to recurring revenues, which may cause the proportion of recurring revenues generated in those periods to fluctuate. In addition, there may be an increase in one time sales as a result of initial installations related to the development of recurring revenue.
Current wording
Recurring revenue increased by 28% for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. 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. However, procurement requirements for some of our largest customers may result in periods when there is an increase one-time sales as compared to recurring revenues, which may cause the proportion of recurring revenues generated in those periods to fluctuate. In addition, there may be an increase in one time sales as a result of initial installations related to the development of recurring revenue.
Previous wording
As of September 30, 2025, we had approximately $13,157,000 of contracts that were closed prior to September 30, 2025 but have a contractual period beyond September 30, 2025. These contracts generally cover a term of one to five years, in which the Company will recognize revenue ratably over the contract term. 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 86% 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 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. 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 72% 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 nine months ended September 30, 2025 had a decrease of $6,970,000, which was primarily attributable to a reduction in our net loss.
Current wording
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.
Previous wording
For the three and nine months ended September 30, 2025 and 2024, we funded our operations primarily through cash from operating activities, the issuance of debt and the sale of equity. As of September 30, 2025, we had cash and cash equivalents and restricted cash of $3,411,000 and a working capital of $6,959,000, as compared to cash and cash equivalents and restricted cash of $5,329,000 and working capital of $1,707,000 as of December 31, 2024.
Current wording
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.
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 nine months ended September 30, 2025, we had working capital of $6,959,000 and a net loss of $23,681,000.
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 three months ended March 31, 2026, we had working capital deficit of $3,727,000 and a net loss of $9,361,000.