Rekor Systems, Inc.

Previous wording

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 wording

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.

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. 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.

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 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.

Previous 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.

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 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.

Previous 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.

Current wording

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.

Previous 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:

Current wording

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:

Previous 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.

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. 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.

Previous 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.

Current wording

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. 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

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

Current wording

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

Previous wording

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 wording

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.

Previous 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.

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 during the year ended December 31, 2025.

Previous wording

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

Current wording

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.

Previous wording

Adjusted Gross Profit is a non-GAAP financial measure that we define as revenue less cost of revenue, excluding depreciation and amortization. We define Adjusted Gross Margin as our Adjusted Gross Profit divided by our revenue. We expect Adjusted Gross Margin to continue to improve over time to the extent that we can gain efficiencies through the adoption of our technology and successfully cross-sell and upsell our current and future offerings. However, our ability to improve Adjusted Gross Margin over time is not guaranteed and could be impacted by the factors affecting our performance. We believe Adjusted Gross Profit and Adjusted Gross Margin are useful to investors, as they eliminate the impact of certain non-cash expenses and allow a direct comparison of these measures between periods without the impact of non-cash expenses and certain other nonrecurring operating expenses.

Current wording

Adjusted Gross Profit is a non-GAAP financial measure that we define as revenue less cost of revenue, excluding depreciation and amortization. We define Adjusted Gross Margin as our Adjusted Gross Profit divided by our revenue. We expect Adjusted Gross Margin to continue to improve over time to the extent that we can gain efficiencies through the adoption of our technology and successfully cross-sell and upsell our current and future offerings. However, our ability to improve Adjusted Gross Margin over time is not guaranteed and could be impacted by the factors affecting our performance. We believe Adjusted Gross Profit and Adjusted Gross Margin are useful to investors, as they eliminate the impact of certain non-cash expenses and allow a direct comparison of these measures between periods without the impact of non-cash expenses.

Previous 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.

Current wording

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. Typically our software sales carry a higher Adjusted Gross Margin.

Previous 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.

Current wording

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. 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 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.

Current wording

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. 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 88% 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

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 wording

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

Previous wording

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 wording

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 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.

Previous 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.

Current wording

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.

Previous wording

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 wording

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.

Previous wording

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 wording

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.

Previous 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.

Current wording

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.

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

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

Previous wording

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 wording

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.

Previous wording

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 wording

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 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.

Previous wording

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.

Current wording

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 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.