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What changed in Rekor Systems, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Rekor Systems, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+229 added−238 removedSource: 10-K (2025-03-31) vs 10-K (2024-03-25)

Top changes in Rekor Systems, Inc.'s 2024 10-K

229 paragraphs added · 238 removed · 132 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeWhenever possible, we endeavor to eliminate or reduce the risk of loss on a project through quality assurance and control, risk management, workplace safety, and other similar methods. Risk management is an integral part of our project management approach for fixed-price contracts and our project execution process.
Biggest changeInsurance and Risk Management We maintain insurance covering professional liability and claims involving bodily injury, property and economic loss. We consider our present limits of coverage, deductibles, and reserves to be adequate. Whenever possible, we endeavor to eliminate or reduce the risk of loss on a project through quality assurance and control, risk management, workplace safety, and other similar methods.
Our extensive technology portfolio, combined with our ability to deploy skilled teams anywhere in the world for traffic engineering and traffic services, positions us as a leading force in shaping the future of traffic management and infrastructure development. 14 Table of Contents Competitive Strengths Our unparalleled, patented technology has been prominently featured by renowned outlets and has driven our global expansion.
Our extensive technology portfolio, combined with our ability to deploy skilled teams anywhere in the world for traffic engineering and traffic services, positions us as a leading force in shaping the future of traffic management and infrastructure development. 14 Table of Contents Competitive Strengths Our patented technology has driven our global expansion and been prominently featured by renowned outlets.
As a comprehensive cross-agency platform, Rekor Command™ offers dedicated applications for traffic management centers, freeway service patrol, first responders and maintenance crews, aligning them all to better address traffic challenges while arming them with the vital information needed to identify, manage, and recover from incidents, events and irregularities on their roadways.
As a comprehensive cross-agency platform, Rekor Command ® offers dedicated applications for traffic management centers, freeway service patrol, first responders and maintenance crews, aligning them all to better address traffic challenges while arming them with the vital information needed to identify, manage, and recover from incidents and irregularities on their roadways.
Customers access their dashboard on web-based cloud instances and review on-demand traffic reports and analytics that breakdown vehicle volumes and patterns, FHWA 13-bin vehicle classification, electric vehicle volumes and hot spots, geospatial greenhouse gas emissions from vehicles, smog scores, average and spot speeds, along with a variety of other insights.
Customers access their dashboard on web-based cloud instances and review on-demand traffic reports and analytics that breakdown vehicle volumes and patterns, FHWA 13-bin vehicle classification, count, electric vehicle volumes and hot spots, geospatial greenhouse gas emissions from vehicles, smog scores, average and spot speeds, along with a variety of other insights.
As we continue to increase our roadway intelligence engagement with national, state and municipal DOTs, we remain focused on law enforcement communities – both directly and indirectly through strategic partners and resellers/integrators. Our market-leading solutions provide significant value to DOTs for traffic management, planning and operations, and to municipal planning organizations for urban mobility.
As we continue to increase our roadway intelligence engagement with national, state and municipal DOTs, we remain focused on law enforcement communities – both directly and indirectly through strategic partners and resellers/integrators. Our market-leading solutions can provide significant value to DOTs for traffic management, planning and operations, and to municipal planning organizations for urban mobility.
By integrating our platform directly into agency workflows, we empower our customers to address the growing concerns around safety, equity, and sustainability effectively. ● Industry-leading Privacy and Security : We use the most advanced security technologies and standards to safeguard all captured and connected data from unauthorized access or use.
By integrating our platform directly into agency workflows, we empower our customers to address the growing concerns around safety, equity, and sustainability effectively. ● Industry-leading Privacy and Security : We use advanced security technologies and standards to safeguard all captured and connected data from unauthorized access or use.
Our proprietary technology and machine learning models power all our solutions, including Rekor Command™ for transportation management, Rekor Discover™ for urban mobility, Rekor Scout® for public safety, plus various commercial use cases. The security of Rekor One®, and all our market facing solutions is our top priority.
Our proprietary technology and machine learning models power all our solutions, including Rekor Command ® for transportation management, Rekor Discover ® for urban mobility, Rekor Scout® for public safety, plus various commercial use cases. The security of Rekor One ® , and all our market facing solutions is a top priority.
The Vehicle Insite application helps users better plan for electric vehicle ("EV") charge station deployment, understand the movement of EVs and their adoption, and gather insights on where emissions and greenhouse gases are emitted from the roadway.
The Vehicle Insite application helps users better plan for EV charge station deployment, understand the movement of EVs and their adoption, and gather insights on where emissions and greenhouse gases are emitted from the roadway.
The platform can connect authorized law enforcement agencies to National Crime Information Center (“NCIC”) lists, allowing them to establish customized hotlists with alerts, apply customized data retention policies and share data with other agencies. Vehicles listed on "blacklists" (stolen, terrorists, amber alerts, etc.) generate an alarm in the dispatching room so that they can be intercepted by a patrol.
The platform can connect authorized law enforcement agencies to National Crime Information Center (“NCIC”) lists, allowing them to establish customized hotlists with alerts, apply customized data retention policies and share data with other agencies. Vehicles listed on “blacklists” (stolen, terrorists, amber alerts, etc.) generate an alarm in the dispatching room so that they can be intercepted by a patrol.
With many markets currently relying on outdated physical infrastructure, or in the early stages of technology adoption, we see immense potential for growth. Our diverse customer base includes cities, states, municipalities, law enforcement agencies, and more, and our success is evidenced by our multiple pilots, proof of concept, and full-scale deployment agreements throughout the Americas.
With many markets currently relying on outdated physical infrastructure, or in the early stages of technology adoption, we see immense potential for growth. Our diverse customer base includes cities, states, municipalities, law enforcement agencies, commercial customers and more, and our success is evidenced by our multiple pilots, proof of concept, and full-scale deployment agreements throughout the Americas.
In 2024, we will be working to extend our reach into smaller communities as we continue to serve medium-large DOT and law enforcement departments with our direct sales representatives. Given that our primary market is state and local governments in the United States, the majority of our sales efforts involve a request for proposal process and/or grant application process.
In 2025, we will be working to extend our reach into smaller communities as we continue to serve medium-large DOT and law enforcement departments with our direct sales representatives. Given that our primary market is state and local governments in the United States, the majority of our sales efforts involve a request for proposal process and/or grant application process.
Agencies can generate reports and extract data through a REST API or also by exporting data in multiple Traffic Monitoring Guide ("TMG") standard formats (PRN, .CSV, and .PDF) for integration with the tools they may already be using. With this technology agencies can make better-informed planning decisions with ground truth information.
Agencies can generate reports and extract data through a REST API or also by exporting data in multiple Traffic Monitoring Guide (“TMG”) standard formats (PRN, .CSV, and .PDF) for integration with the tools they may already be using. With this technology agencies can make better-informed planning decisions with ground truth information.
We are committed to staying abreast of our customers' technological developments, adhering to industry standards, and meeting their increasingly stringent demands for performance, productivity, quality, and predictability. As a result, we will continue to make significant investments in research and development and data and analytics as we strive to maintain our position as a leader in our field.
We are committed to staying abreast of our customers' technological developments, adhering to industry standards, and meeting their increasingly stringent demands for performance, productivity, quality, and predictability. As a result, we plan to continue to make significant investments in research and development and data and analytics as we strive to maintain our position as a leader in our field.
Assets that are typically integrated include freeway service patrol vehicles, highway police vehicles, city police vehicles, fire department vehicles, construction vehicles, EMS, maintenance vehicles, street sweep vehicles, and snowplows. 10 Table of Contents Rekor Discover ™ for Urban Mobility Traditional approaches to capturing roadway and infrastructure analytics for planning and engineering employ expensive, manual processes that use antiquated technology to capture a fraction of the information needed for a fraction of the time.
Assets that are typically integrated include freeway service patrol vehicles, highway police vehicles, city police vehicles, fire department vehicles, construction vehicles, EMS, maintenance vehicles, street sweep vehicles, and snowplows. 10 Table of Contents Rekor Discover ® for Urban Mobility Traditional approaches to capturing roadway and infrastructure analytics for planning and engineering generally employ expensive, manual processes that use antiquated technology to capture a fraction of the available information for a fraction of the time.
Our direct sales force is organized into groups aligned to the Intelligent Traffic Systems (“ITS”) chapters and other targeted market segments, with a primary focus on direct-to-end-user sales through a high-touch consultative process. In addition, we have established partnerships and strategic alliances that allow us to bundle our technology into purpose-built solutions for various national and global market segments.
Our direct sales force has been organized into groups aligned to the Intelligent Traffic Systems (“ITS”) chapters and other targeted market segments, with a primary focus on direct-to-end-user sales through a high-touch consultative process. In addition, we have established partnerships and strategic alliances that allow us to bundle our technology into purpose-built solutions for various national and global market segments.
This API supports nearly any programming language, analyzes still images of vehicles from different countries and responds in seconds with accurate license plate data, vehicle make, model, body type, color and orientation. 12 Table of Contents Rekor Hardware Products Rekor’s portfolio of AI-based state-of-the-art hardware products are purpose-built to optimize the value of our software as well as bring the advantages of edge processing to capture real-time roadway data.
This API supports nearly any programming language, analyzes still images of vehicles from different countries and responds in seconds with accurate license plate data, vehicle make, model, body type, color and orientation. 12 Table of Contents Rekor Hardware Products Rekor’s portfolio of innovative hardware products are purpose-built to optimize the value of our software as well as bring the advantages of edge AI processing to capture real-time roadway data.
Vehicle category classification, vehicle counts, and speed reports are made available in web-based dashboards or exported in multiple file formats that meet TMG standards. 13 Table of Contents Rekor Traffic Services With the addition of STS in 2022 and ATD in 2024, Rekor offers 3000+ personnel-years of unparalleled traffic data collection and traffic engineering expertise and services to our customers using both traditional and AI-based approaches.
Vehicle category classification, vehicle counts, and speed reports are made available in web-based dashboards or exported in multiple file formats that meet TMG standards. 13 Table of Contents Rekor Traffic Services With the addition of ATD in 2024, Rekor offers thousands of personnel-years of unparalleled traffic data collection and traffic engineering expertise and services to our customers using both traditional and AI-based approaches.
Whether its passenger vehicles, or multi-axle commercial trucks, Rekor Discover™ pulls ground truth insights, both in real-time and historically, allowing agencies to better organize and execute their next-generation roadway planning and city building initiatives in a smart, safe, and future-proof way.
Whether its passenger vehicles, or multi-axle commercial trucks, Rekor Discover ® pulls ground truth insights, both in real-time and historically, allowing agencies to better organize and execute their next-generation roadway planning and city building initiatives in a smart and safe forward-looking way.
With our commitment to intellectual property rights and our talented personnel, we are well-positioned to lead the market in delivering cutting-edge solutions and services. 18 Table of Contents Acquisitions On June 17, 2022, we completed the STS Acquisition. On January 2, 2024, we completed the ATD Acquisition.
With our commitment to intellectual property rights and our talented personnel, we are well-positioned to lead the market in delivering cutting-edge solutions and services. 18 Table of Contents Acquisitions On January 2, 2024, we completed the ATD Acquisition.
Rekor Discover ™ – Vehicle Insite Application Rekor Discover’s Vehicle Insite application analyzes real-time video to provide actionable, on-property vehicle intelligence such as vehicle characteristics, Electric Vehicle (EV) statistics and other visit metrics.
Rekor Discover ® – Vehicle Insite Application Rekor Discover’s Vehicle Insite application analyzes real-time video to provide actionable, on-property vehicle intelligence such as vehicle characteristics, Electric Vehicle (“EV”) statistics and other metrics.
When combined with high performance reads, parallel processing capability and best-in-class hardware such as those built and deployed by Rekor, Rekor Scout® can be an absolute force multiplier capturing license plate data and vehicle characteristics across multiple lanes at high vehicle speeds with a high degree of accuracy.
When combined with high performance reads, parallel processing capability and best-in-class hardware such as those built and deployed by Rekor, Rekor Scout® acts as a force multiplier capturing license plate data and vehicle characteristics across multiple lanes at high vehicle speeds with a high degree of accuracy.
This helps Departments of Transportation ("DOTs") to understand historic patterns and arms them with the insights needed to make more proactive decisions around resource allocation and planning.
This helps DOTs to understand historic patterns and arms them with the insights needed to make more proactive decisions around resource allocation and planning.
The Rekor Discover™ platform ingests data from Rekor’s state-of-the-art hardware and fully automates comprehensive analytics and actionable insights about the movement of objects across the roadway.
The Rekor Discover ® platform ingests data from Rekor’s innovative hardware and fully automates comprehensive analytics and actionable insights about the movement of objects across the roadway.
Rekor Discover ™ – Count, Class and Speed Application The Count, Class and Speed ("CCS") application within the Rekor Discover™ platform delivers per vehicle record ("PVR") data and analytics that fully automate FHWA reporting requirements for 13-bin classification.
Rekor Discover ® – Count, Class and Speed Application The Count, Class and Speed (“CCS”) application within the Rekor Discover ® platform delivers per vehicle record (“PVR”) data and analytics that fully automate FHWA reporting requirements for 13-bin classification.
While we may continue to offer long-term licenses for certain strategic partnerships, we anticipate that the bulk of our revenue will come from our innovative subscription-based model. 9 Table of Contents Rekor One ® Intelligence Platform Rekor One®, is the bedrock of our cutting-edge AI-powered roadway intelligence platforms, serving multiple missions with modular and rapid development capabilities.
While we may continue to offer long-term licenses for certain strategic partnerships, we anticipate that the bulk of our revenue in the future will come from our newer SaaS model. 9 Table of Contents Rekor One ® Intelligence Platform Rekor One ® , is the bedrock of our innovative AI-powered roadway intelligence platforms, serving multiple missions with modular and rapid development capabilities.
Our platform also employs proprietary algorithms to strip PII from data, protecting the privacy of our customers and their data. ● Enhanced Accuracy and Capture for Vehicle Recognition : Our AI software achieves superior accuracy rates under broader parameters of vehicle speed, camera viewing angles, and lighting conditions, capturing vehicle traits, rust, damage, and other unique signatures that can be used to aid investigations ● Technology leading Vehicle Classification, Count, and Speed: Our AI software achieves superior accuracy and performance rates across all 13 classes and deep classification of vehicles for DOT studies in line with the latest FHWA guidelines. ● Intelligence-Based Policing : Our comprehensive data capture allows us to detect patterns and analytics around vehicles of interest for law enforcement, significantly enhancing the value of our products and services. ● Functionality with any IP Cameras : Our AI software supports images and vehicle recognition captured by almost any digital camera, providing a flexible, infrastructure-agnostic solution that is easily scalable across geographies. ● Edge Processing : Our hardware delivers low-latency alerting via defined edge processing at the edge of the network, enabling real-time data processing and scale without the need for expensive infrastructure such as fiber.
Our platform also employs proprietary algorithms to strip PII from data, protecting the privacy of our customers and their data. ● Enhanced Accuracy and Capture for Vehicle Recognition : Our AI software achieves superior accuracy rates under broader parameters of vehicle speed, camera viewing angles, and lighting conditions, capturing vehicle traits, rust, damage, and other unique signatures that can be used to aid investigations ● Technology leading Vehicle Classification, Count, and Speed: Our AI software also achieves superior accuracy and performance rates across all 13 classes and deep classification of vehicles for DOT studies in line with the latest FHWA guidelines. ● Intelligence-Based Policing : Our comprehensive data capture allows us to detect patterns and analytics around vehicles of interest for law enforcement, significantly enhancing the value of our products and services. ● Functionality with any IP Cameras : Our AI software supports images and vehicle recognition captured by almost any digital camera, providing a flexible, infrastructure-agnostic solution that is easily scalable across geographies. ● Edge Processing : Our hardware delivers low-latency alerting via defined edge processing at the edge of the network, enabling real-time data processing and scale without the need for expensive infrastructure such as fiber. ● SOC II Compliance: Each of our three platforms are SOC II Compliant. 15 Table of Contents Customer Segments and Markets Our technology and solutions are transforming the transportation infrastructure landscape, empowering customers in 90 countries around the world.
We are dedicated to addressing a wide range of market segments, including intelligent transportation systems, smart mobility, traffic analytics, incident detection and location systems, traffic and parking management, smart cities, vehicle regulatory compliance programs, and more.
We expect the market for our solutions and services to be significant. We are dedicated to addressing a wide range of market segments, including intelligent transportation systems, smart mobility, traffic analytics, incident detection and location systems, traffic and parking management, smart cities, vehicle regulatory compliance programs, and more.
For additional information, s ee Item 8 of Part II, “Financial Statements and Supplementary Data — Note 17 — Subsequent Events” Additional information concerning the STS and ATD Acquisitions is provided in this Annual Report on Form 10-K under ITEM 7 “Management’s Discussion and Analysis of Financial Conditions and Results of Operations.” Human Capital Management We look for our employees to represent the best and brightest in our industry and the talent we select to be a part of our team defines our culture and success.
Additional information concerning the ATD Acquisition is provided in this Annual Report on Form 10-K under ITEM 7 “Management’s Discussion and Analysis of Financial Conditions and Results of Operations.” Human Capital Management We look for our employees to represent the best and brightest in our industry and the talent we select to be a part of our team defines our culture and success.
To ensure our competitive edge, we are constantly developing cutting-edge technologies to enhance our existing offerings, expanding our range of solutions through rigorous research and development, as well as developing new AI models and algorithms, licensing intellectual property, and acquiring third-party datasets and technology.
To ensure our competitive edge, we must follow cutting-edge technologies and enhance our existing offerings, through rigorous research and development to expand our range of solutions. This involves developing new AI models and algorithms, licensing intellectual property, and acquiring third-party datasets and technology.
We also evaluate risk through internal risk analyses in which our management reviews higher-risk projects, contracts, or other business decisions that require corporate legal and risk management approval. Regulation We are regulated in some of the fields in which we operate.
Risk management is an integral part of our project management approach for fixed-price contracts and our project execution process. We also evaluate risk through internal risk analyses in which our management reviews higher-risk projects, contracts, or other business decisions that require corporate legal and risk management approval. Regulation We are regulated in some of the fields in which we operate.
While we will continue to pursue opportunities to sell perpetual licenses and hardware, our primary focus is on providing cutting-edge SaaS offerings and services with recurring annual revenues. Our eCommerce site allows us to serve individuals and smaller organizations at scale using a self-service recurring revenue model. We expect the market for our solutions and services to be extraordinary.
While we will continue to pursue opportunities to sell perpetual licenses and hardware, our focus has been on providing innovative SaaS and pay-for-data offerings and services with recurring annual revenues. Our eCommerce site allows us to serve individuals and smaller organizations at scale using a self-service recurring revenue model.
We have repeatedly earned trust and business over established incumbents in highly competitive bidding processes, owing to our award-winning proprietary technology and exceptional customer service. We provide a unique breadth, depth, and sophistication that our integrated platform delivers to multiple missions and agencies. We maintain our first-mover advantage by tirelessly investing in our competitive strengths and key differentiators.
We have earned trust and business over established incumbents as well as new entrants in highly competitive bidding processes, owing to our award-winning proprietary technology and exceptional customer service. We work to provide a unique breadth, depth, and sophistication that our integrated platform delivers to multiple missions and agencies.
Our global workforce is highly educated, technical and specialized, with a substantial majority of employees working in technical roles. As o f March 25, 2024, we had 351 employees, of which 347 were full-time and four considered part-time. We consider our employee relations to be good.
Our global workforce is highly educated, technical and specialized, with a substantial majority of employees working in technical roles. As o f March 18, 2025, we had 323 employees, of which 319 were full-time and four considered part-time.
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”). A New Operating System for Roadways The condition of national transportation infrastructure systems is a matter of great concern, particularly in the United States.
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”). A New Operating System for Roadways We believe the United States of America stands at a critical turning point in the evolution of its transportation and roadway infrastructure.
As such, our success is reliant upon a consistent and timely release of innovative products, new rich data services, and advanced technologies to the market.
Research and Development The highly competitive industries where we compete require that we keep up with the latest technological advancements. As such, our success is reliant upon a consistent and timely release of innovative products, new rich data services, and advanced technologies to the market.
With our ALPR software preloaded, customers can activate AI-based vehicle recognition services through a subscription online or by telephone. The device is shipped globally, with optional enhancements for solar power and various pole configurations. Research and Development The highly competitive industries where we compete are defined by swift technological advancements.
Our Edge Pro camera system is the first hardware device for sale directly through the eCommerce platform. With our ALPR software preloaded, customers can activate AI-based vehicle recognition services through a subscription online or by telephone. The device is shipped globally, with optional enhancements for solar power and various pole configurations.
A full call-center is also provided with our AutoNotice application to help facilitate payment or information distribution to non-compliant citizens remotely. We have active deployments of our AutoNotice application for contactless compliance scanning millions of plates and delivering thousands of notices/tickets, including a program for the State of Oklahoma that facilitates enrolling uninsured motorists into a diversion program.
We have an active deployment of our AutoNotice application for contactless compliance scanning millions of plates and delivering thousands of notices/tickets, including a program for the State of Oklahoma that facilitates enrolling uninsured motorists into a diversion program.
Rekor CarCheck ® Application Program Interface ("API") Rekor CarCheck® allows our powerful AI based vehicle and license plate recognition technology to be conveniently accessed for a wide range of commercial applications.
A full call-center is also provided with our AutoNotice application to help facilitate payment or information distribution to non-compliant citizens remotely. Rekor CarCheck ® Application Program Interface (“API”) Rekor CarCheck ® allows our powerful AI based vehicle and license plate recognition technology to be conveniently accessed for a wide range of commercial applications.
We work towards this by collecting, connecting, and organizing mobility data, and making it accessible and useful to our customers for real-time insights and decisioning for situational awareness, rapid response, risk mitigation, and predictive analytics for resource and infrastructure planning and reporting. To achieve these goals, we have developed a robust, interconnected hardware infrastructure and advanced, purpose-built software platforms.
We achieve this by collecting, connecting, and organizing the world’s mobility data, 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 realize this vision, we’ve developed a suite of interconnected AI-driven hardware and purpose-built software platforms.
Business Drivers and Growth Strategies Our products and services have demonstrated the ability to provide significant improvements in public safety and transportation management and we anticipate that this will drive our growth. The transportation infrastructure market is in the process of transformative change due to a convergence of political, economic, societal, and technological forces.
Business Drivers and Growth Strategies Rekor’s products and services have consistently demonstrated their ability to significantly enhance public safety, urban mobility, and transportation management, positioning the company as a leader in addressing critical infrastructure challenges. The transportation and roadway infrastructure market is undergoing transformative change, driven by a convergence of political, economic, societal, and technological forces.
The platform allows for self-service sign-up and a range of subscription options while also funneling customers directly to our sales support team if they need more information. Our Edge Pro camera system is the first hardware device for sale directly through the eCommerce platform.
It offers businesses and individuals around the world a convenient way to purchase our high-value vehicle recognition solutions with just a credit card and a click. The platform allows for self-service sign-up and a range of subscription options while also funneling customers directly to our sales support team if they need more information.
Rekor is making mobility data widely accessible and useful for all, empowering customers to make informed decisions and drive meaningful progress towards a brighter future. 8 Table of Contents Platforms, Products, and Solutions Rekor's revenue streams are driven by our cutting-edge software and data services, along with complementary hardware and peripheral products.
With a focus on innovation, security, and operational excellence, Rekor is shaping the future of transportation, delivering intelligent and connected solutions that pave the way for a brighter, more efficient, and sustainable future for all. 8 Table of Contents Platforms, Products, and Solutions Rekor's revenue streams are driven by our innovative software and data services, along with complementary hardware and peripheral products.
We are dedicated to fulfilling the critical demand for real-time and predictive roadway intelligence, ensuring that our solutions are not just innovative but also instrumental in shaping the future of public safety, urban mobility, and transportation management. 5 Table of Contents Roadway Intelligence Powered by Rekor Our Rekor One® roadway intelligence engine is purpose-built to be a single source of truth, powered by AI and fueled by rich data.
Our innovative solutions are designed to redefine roadway intelligence and play a transformative role in shaping modern transportation, ensuring safety, efficiency, and resilience for generations to come. 5 Table of Contents Roadway Intelligence Powered by Rekor The Rekor One® roadway intelligence engine is a single source of truth for transforming transportation and mobility data into actionable insights.
To date, we have been able to locate and engage highly qualified employees as needed and do not expect our growth efforts to be constrained by a lack of qualified personnel. Seasonality We derive revenues substantially from the sale of software, hardware and related services and do not currently anticipate a significant seasonality impact on our revenues.
Seasonality We derive revenues substantially from the sale of software, hardware and related services and do not currently anticipate a significant seasonality impact on our revenues. There is a portion of our revenue that requires our technicians and field support teams to work outside.
In 2024, we will continue to capture and submit proposals and apply for grants for our customers, while also seeking opportunities to submit concurrently with strategic partners. Our eCommerce platform offers businesses and individuals around the world a convenient way to purchase our high-value vehicle recognition solutions with just a credit card and a click.
In 2025, we will continue to capture and submit proposals and apply for grants for our customers, while also seeking opportunities to submit concurrently with strategic partners. Our eCommerce platform allows us to provide products and services to international customers and begin to penetrate markets outside North America without the need for a large international sales force.
There is a portion of our revenue that requires our technicians and field support team to work outside, their ability to work and provide services to our end customers can be impacted by inclement weather in the winter months.
Their ability to work and provide services to our end customers can be impacted by inclement weather in the winter months and storm seasons. Should our penetration of tolling and other markets involving per recognition fees expand, we would also expect to become more subject to seasonal traffic patterns.
ITEM 1. BUSINESS Overview Rekor is working to revolutionize public safety, urban mobility, and transportation management using AI-powered solutions designed to meet the distinct demands of each market we serve. We work hand-in-hand with our customers to deliver mission-critical traffic and engineering services that assist them in achieving their goals.
ITEM 1. BUSINESS Overview Rekor is at the forefront of the effort to modernize public safety, urban mobility, and transportation management through cutting-edge artificial intelligence (“AI”)-powered solutions tailored to the unique needs of each market we serve.
Our Rekor One® roadway intelligence engine allows us to deliver a range of solutions that serve government and commercial customers in the public safety, urban mobility and transportation management areas.
This engine enables Rekor’s solutions to deliver precise, predictive insights that empower stakeholders to address critical challenges in public safety, urban mobility, and transportation management. Over the past three years, Rekor has successfully delivered products and services to a diverse range of customers across public and private sectors.
The competition in roadway intelligence takes various forms - some solely focused on Automatic License Plate Recognition ("ALPR") and vehicle recognition technology, while others specialize in data creation, aggregation, insights platforms, or smart city technologies. Additionally, there are a variety of vendors supporting the classification, counting, and speed of vehicles according to FHWA guidelines.
The competitive landscape includes new and legacy-based companies focused on siloed areas such as Automatic License Plate Recognition ("ALPR"), vehicle recognition technology, data aggregation, insights platforms, and smart city technologies. Additionally, many vendors rely on disconnected, analog, or previous-generation technologies for vehicle classification, counting, and speed analysis.
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Our vision is to improve the lives of citizens and the world around them by enabling safer, smarter, and greener roadways and communities.
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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 new digital infrastructure operating system for roadways. 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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These powerful tools, enriched by a diverse range of data and state-of-the-art AI, can produce a level of roadway intelligence that we believe is unmatched. Our solutions empower clients to efficiently manage and optimize the complex interactions of vehicles in motion, ensuring smooth operations within and around public safety, urban mobility, and transportation systems.
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Powered by vast and diverse multi-modal datasets and proprietary AI technologies, we have designed these solutions with the objective of delivering unparalleled roadway intelligence. They enable clients to more effectively monitor, manage, and optimize the movement of vehicles, traffic, and activities in and around roadways and communities with precision.
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As the private sector continues to innovate and make headlines with cutting-edge technologies such as autonomous vehicles, flying taxis, and smart delivery drones, it's paradoxical that essential issues such as roadway congestion, safety, vehicle emissions and equitable access are worsening at an alarming rate.
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Through real-time insights and predictive analytics, our platforms drive 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. As of March 18, 2025, we had 323 employees, of which 319 were full-time and four considered part-time.
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On February 2, 2023, the US Department of Transportation declared a national crisis and state of emergency for roadway safety and launched an urgent roadway safety call-to-action demanding stakeholders to commit to specific actions to reverse the spike in serious injuries and deaths on our roadways.
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For over 70 years, the nation has relied on legacy technologies and outdated analog and manual methodologies, resulting in inefficiencies, rising costs, and preventable safety hazards.
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According to a report from the American Society of Civil Engineers ("ASCE"), US infrastructure has been graded a C minus, indicating that there is significant and urgent need for improvement. Over 65% of the 4.2 million miles of US roadways are rated in poor condition, which impacts the safety of drivers and passengers.
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While private-sector innovations like sensor technology, Internet of Things (“IoT”), AI, cloud computing, autonomous vehicles, and smart drones are advancing rapidly, fundamental challenges such as poor roadway quality, traffic congestion, and driver safety continue to escalate. In February of 2023, the U.S.
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The issue of congestion is also a serious concern, estimated to cost US citizens a whopping $120 billion per year in economic and productivity losses. Furthermore, transportation-related greenhouse gas emissions – motorists' emissions, particularly when trapped in traffic account for a significant proportion of the country's total emissions are a leading contributor to declining sustainability, which has far-reaching environmental impacts.
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Department of Transportation declared a national roadway safety emergency, calling for urgent action to address the alarming rise in injuries and fatalities. The American Society of Civil Engineers (“ASCE”) provides a report card for America’s infrastructure every four years. In 2021 ASCE graded overall U.S. infrastructure a C-minus.
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Addressing the road infrastructure issue is imperative for both economic and ecological reasons. Last but not least, tragically, more than 43,000 people lose their lives each year while using the nation's transportation network of streets, roads, and highways, which represents a stark failure in public safety and policy.
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Roads, which had been rated C+ in 1988, were rated D, “poor or at-risk,” with over 40% of roadways considered in poor or mediocre condition. ASCE’s most recent report card, released March 25, 2025, showed a slight improvement for overall infrastructure to C, crediting better awareness and increased investment by government for slowing the investment gap.
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If these transportation network issues remain unaddressed, it has been projected that the United States will face a $10 trillion loss in its gross domestic product.
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The 2025 grade for roads improved modestly to D+, with 39% of roads in poor or mediocre condition and an annual funding gap estimated at $684 billion.
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To address these urgent issues and ensure the competitiveness of the US economy, an unprecedented amount of funding has been made available from the federal government through the Infrastructure Investment and Jobs Act ("IIJA"), the Inflation Reduction Act, and the CHIPS and Science Act, that is available to help create a digitally-enabled transportation infrastructure that can serve the public good and provide new economic value.
Added
The report noted that deficiencies jeopardize public safety, contributing to an estimate of over 40,000 roadway deaths in 2023, but also impose significant economic costs, including an estimated average $1,400 per driver cost related to deteriorated and congested roads.
Removed
This represents a once-in-a-generation level of investment and bipartisan support for creating and scaling digital transportation infrastructure for the 21st century.
Added
Among the top policy objectives that the ASCE’s 2025 report called for was the continuing need to support the development of innovative technologies and ensure that reliable data is collected and released frequently regarding the condition, capacity, operations, maintenance, safety, and resilience of infrastructure systems.
Removed
Rather than a complete reset or rebuilding of infrastructure, the focus is rather to leverage their power of funding and policymaking to build on previous investments, promote new technology layers, and ensure universal access to digital infrastructure systems throughout the country.
Added
Recognizing the urgent need for modernization, the federal government has recently taken significant steps to invest in the transform the nation's infrastructure. The Infrastructure Investment and Jobs Act (“IIJA”) and Inflation Reduction Act (“IRA”) provided historic levels funding for transportation infrastructure system modernization.
Removed
The ultimate objective is to adopt an augmented approach to existing physical infrastructure that blends the strengths of physical, digital, and operational infrastructure with mobility data, including mobile phones, connected vehicles, roadway sensors, and more.
Added
Additionally, the Creating Helpful Incentives to Produce Semiconductors (“CHIPS”) and Science Act provided support for AI-driven innovation and semiconductor production, critical components for modernizing infrastructure through technology.
Removed
The goal is to enable and coordinate private and public collaboration through a digital-enabled mobility internet and operating system for the roadways that will advance smarter, safer, greener roadways for all.
Added
These legislative efforts are consistent with the foundation set by President Trump’s 2019 "American AI Initiative" and his most recent 2025 Executive Order 14179, which prioritized public-private collaboration and the adoption of AI technologies across sectors like transportation.
Removed
This is a unique moment for Rekor, and one that we have been preparing for since 2018. 4 Table of Contents Roadway Intelligence Rekor has become a leader in roadway intelligence by collecting, connecting, and organizing global mobility data since its inception.
Added
These federal actions have provided a strategy and funding mechanisms for states to tackle the long-standing challenges of updating outdated, legacy systems for roadway intelligence gathering.
Removed
Today, our comprehensive portfolio of products and services offers multiple cutting-edge Internet of Things ("IoT") devices for roadside data collection, an array of curated and integrated data sets from a network of transportation ecosystem data providers, as well as platforms, applications, and data streams that have been tailored for use by a demanding customer base consisting of federal state and local government agencies and large corporate clients.
Added
Since 2018, Rekor has worked to deserve a place at the forefront of this wave of transformation and modernization of roadways, actively designing, building, and deploying its AI solutions through public-private collaborations with departments of transportation (“DOTs”), public safety agencies, and private sector partners.
Removed
We specialize in collecting and aggregating mobility-related data from multiple sources into our Rekor One® roadway intelligence engine, transforming this data into knowledge and actionable insights, and securely distributing those insights to multiple users across various software platforms and applications. Our proprietary technologies use recent advances in artificial intelligence, machine learning, data analysis, edge processing, and communications.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends on our common stock in the foreseeable future. We currently anticipate that for the foreseeable future we will retain all of our future earnings for the development, operation and growth of our business and general corporate purposes.
Biggest changeWe currently anticipate that for the foreseeable future we will retain all of our future earnings for the development, operation and growth of our business and general corporate purposes. Any future determination to pay dividends on our common stock will be at the discretion of our Board of Directors.
Our operating results may be harmed if we are required to collect sales or other related taxes for our licensing and subscription products and services or pay regulatory fees in jurisdictions where we have not historically done so.
Our operating results may be harmed if we are required to collect sales or other related taxes or duties for our licensing and subscription products and services or pay regulatory fees in jurisdictions where we have not historically done so.
These efforts require us to educate our clients about the use and benefit of our services, including the technical capabilities and potential cost savings to an organization. Commercial clients typically undertake a significant evaluation and pilot testing process that has in the past, resulted in lengthy sales cycles, typically several months.
These efforts require us to educate our clients about the use and benefit of our services, including the technical capabilities and potential cost savings to an organization. Both governmental and commercial clients typically undertake a significant evaluation and pilot testing process that has in the past resulted in lengthy sales cycles, typically several months.
Because demand for our solutions and services are sensitive to changes in the level of economic activity, our business may suffer during economic downturns. During periods of weak economic growth or economic contraction, the demand for outsourced services could decline. In addition, market forces may restrict our ability to sustain funding for our sales and support efforts.
Because demand for our solutions and services is sensitive to changes in the level of economic activity, our business may suffer during economic downturns. During periods of weak economic growth or economic contraction, the demand for outsourced services could decline. In addition, market forces may restrict our ability to sustain funding for our sales and support efforts.
Our NOLs at December 31, 2023 may also be impaired under similar provisions of state law and may expire unused or underused, which would prevent us from using our NOL carryforwards to offset future taxable income.
Our NOLs at December 31, 2024 may also be impaired under similar provisions of state law and may expire unused or underused, which would prevent us from using our NOL carryforwards to offset future taxable income.
In addition, manufacturing or logistics in these locations or transit to final destinations can be disrupted for a variety of reasons, including natural and man-made disasters, information technology system failures, commercial disputes, military actions, economic, business, labor, environmental, public health or political issues, or international trade disputes.
In addition, manufacturing or logistics in these locations or transit to final destinations can be disrupted or become more costly for a variety of reasons, including international trade disputes, natural and man-made disasters, information technology system failures, commercial disputes, military actions, and economic, business, labor, environmental, public health or political issues.
The market for an ecosystem that connects government agencies, service providers and, ultimately, drivers is relatively new and some aspects of it are unproven, therefore, it is subject to several risks and uncertainties. We believe that our future success will significantly depend in large part on the growth, if any, of this market.
The market for an ecosystem that connects government agencies, service providers and, ultimately, drivers is relatively new and some aspects of it are unproven. As a result, it is subject to several risks and uncertainties. We believe that our future success will significantly depend in large part on the growth, if any, of this market.
As of March 25, 2024, our executive officers, directors, five percent or greater stockholders and their respective affiliates owned in the aggregate approximately 5.1% of our common stock. These stockholders have the ability to influence us through this ownership position and may have a determining role in matters requiring stockholder approval.
As of March 28, 2025, our executive officers, directors, five percent or greater stockholders and their respective affiliates owned in the aggregate approximately 13.1% of our common stock. These stockholders have the ability to influence us through this ownership position and may have a determining role in matters requiring stockholder approval.
Our information security procedures are overseen by our Chief Information Security Officer, supported by our Chief Technology Officer and our IT Manager, who are responsible to provide regular reports to our Chief Executive Officer and Chief Financial Officer as well as the technology and social responsibility committee and the governance committee of our Board.
Our information security procedures are overseen by our Vice President of Risk Management, supported by our Chief Technology Officer and our IT Manager, who are responsible to provide regular reports to our Interim President and Chief Executive Officer and Chief Financial Officer as well as the Technology and Social Responsibility Committee and the Governance Committee of our Board.
Our Information Security Policy and procedures are reviewed on an ongoing basis. These procedures are implemented by our Chief Information Security Officer, assisted by Managed Service Provider (“MSP”). Our MSP has over 15 years of experience and possesses various cybersecurity certifications.
Our Information Security Policy and procedures are reviewed on an ongoing basis. These procedures are implemented by our Vice President of Risk Management, assisted by a managed service provider (“MSP”). Our MSP has over 15 years of experience and possesses various cybersecurity certifications.
In addition , 12,395,649 shares of our common stock that are subject to outstanding options, restricted stock units and warrants as of March 25, 2024, wil l become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements, and Rules 144 and 701 under the Securities Act.
In addition , 9,255,659 shares of our common stock that are subject to outstanding options, restricted stock units and warrants as of March 28, 2025, wil l become eligible for sale in the public market to the extent permitted by the provisions of various vesting agreements, and Rules 144 and 701 under the Securities Act.
The price per share at which we may sell additional shares of our common stock or other securities convertible into or exchangeable for our common stock in future transactions may be higher or lower than the price per share paid by investors. We do not intend to pay dividends on our common stock for the foreseeable future.
The price per share at which we may sell additional shares of our common stock or other securities convertible into or exchangeable for our common stock in future transactions may be higher or lower than the price per share paid by investors.
We may be limited in the portion of net operating loss carryforwards that we can offset future taxable income for U.S. federal and state income tax purposes. As of December 31, 2023 , we had gross federal and state net operating loss carryforwards, or NOLs, of approximately $156,392,000 and $149,122,000 , respectively.
We may be limited in the portion of net operating loss carryforwards that we can offset future taxable income for U.S. federal and state income tax purposes. As of December 31, 2024, we had gross federal and state net operating loss carryforwards, or NOLs, of approximately $190,624,000 and $180,859,000 , respectively.
The use of advanced vehicle recognition systems and marketplace data to obtain data on vehicles, drivers and the environment is still relatively new and potential customers may not recognize the need for, or benefits of, our platform and solutions.
The use of advanced vehicle recognition systems and marketplace data to obtain data on vehicles, drivers and the environment is still relatively new and potential customers may not recognize the need for, or benefits of, our platform and solutions. They also may have difficulty understanding or have misconceptions about the technologies we use.
Risks Relating to Our Corporate Structure and Business We are currently not profitable, and we may be unable to become profitable on a quarterly or annual basis. For the year ended December 31, 2023, we had a loss from continuing operations of $45,685,000 .
Risks Relating to Our Corporate Structure and Business We are currently not profitable, and we may be unable to become profitable on a quarterly or annual basis. For the year ended December 31, 2024, we had a net loss of $61,410,000 .
Based on shares outstanding as of March 25, 2024, 4,388,872 shares of common stock, or 5.1%, a re beneficially owned by our officers, directors and their affiliated entities, and will be subject to volume limitations under Rule 144 under the Securities Act and various vesting agreements.
Based on shares outstanding as of March 28, 2025, 14,479,276 shares of common stock, or 13.1%, a re beneficially owned by our officers, directors and their affiliated entities, and will be subject to volume limitations under Rule 144 under the Securities Act and various vesting agreements.
Any future determination to pay dividends on our common stock will be at the discretion of our Board of Directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
We spend substantial time, effort and money on our commercial sales efforts without any assurance that these efforts will produce any sales. In addition, subscriptions are frequently subject to budget constraints and unplanned administrative, processing and other delays.
Government oversight and alignment of operational needs and political support may also introduce delay. We may spend substantial time, effort and money on our sales efforts without any assurance that these efforts will produce any sales. In addition, sales and subscriptions are frequently subject to budget constraints and unplanned administrative, processing and other delays.
A significant portion of our expenses are fixed in advance. In addition, we have experienced and expect to continue to experience significant expenses related to acquisitions and the development of new products and services.
We have experienced and expect to continue to experience significant expenses related to acquisitions and the development of new products and services.
In addition, the Board’s Technology and Social Responsibility Committee includes a member who has had extensive experience in cybersecurity, including in particular cybersecurity standards for smart city transportation systems. See Risk Factors in this Annual Report on Form 10-K for a description of the risks from cybersecurity threats that may materially affect us and how they may do so.
See Risk Factors in this Annual Report on Form 10 -K for a description of the risks from cybersecurity threats that may materially affect us and how they may do so.
W e cannot assure that we will be profitable in the future or that our financial performance will sustain a sufficient level to completely support operations. Our ability to become profitable in future periods could be impacted by government activity and regulation, economic instability and other items that are not in our control.
Our ability to become profitable in future periods could be impacted by factors that are not in our control, including government activity and regulation, economic instability and other items. e. ,.
As of March 25, 2024 , we have a total of 85,324,918 shar es of common stock outstanding .
As of March 28, 2025 , we have a total of 110,912,209 shar es of common stock outstanding .
Moreover, if they do not recognize the need for and benefits of our platform and solutions, they may decide to adopt alternative services to satisfy some portion of their business needs. Our ability to expand the market that our platforms and solutions address depends upon a number of factors, including the cost, performance and perceived value associated with them.
This could cause them to move cautiously in deploying our products and services or choose other vendors or providers who might appear to offer similar products. Our ability to expand the market that our platforms and solutions address depends upon a number of factors, including the cost, performance and perceived value associated with them.
Added
Although we have deliberately incurred losses in the past as we worked to develop, test and popularize our products and services, a significant portion of our expenses are fixed in advance and we cannot assure that we will be profitable in the future or that our financial performance will sustain a sufficient level to completely support operations.
Added
On February 10, 2025, we entered into an At Market Issuance Sales Agreement pursuant to which we may, from time to time, offer and sell shares of our common stock having an aggregate offering price of up to $25,000,000. As of March 28, 2025, we issued 5,148,600 shares under the Sales Agreement.
Added
We do not intend to pay dividends on our common stock for the foreseeable future. We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends on our common stock in the foreseeable future.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeIn July 2023, subsequent to the announcement of an agreement the Company entered into with one of its stockholders in connection with the exercise of warrants held by the stockholder, which the Company refers to as the July Warrant Exercise Transaction, the Company received a letter from HCW claiming entitlement to certain “tail” fees and warrant consideration stemming from the agreement with the Company's stockholder.
Biggest changeIn July 2023, the Company entered into an agreement with one of its warrant holders in connection with the exercise of warrants, which the Company refers to as the July Warrant Exercise Transaction.
On February 29, 2024, HCW initiated a new action with the filing of complaint in New York State Supreme Court. In this lawsuit, HCW advances the same breach of contract theory and seeks to recover the same damages as sought in the prior now-dismissed lawsuit.
On February 29, 2024, HCW initiated the new action with the filing of complaint in New York State Supreme Court. In this lawsuit, HCW advances the same breach of contract theory and seeks to recover the same damages as sought in the prior now-dismissed lawsuit.
On February 29, 2024, HCW filed a notice of discontinuance without prejudice and advised the court that it intends to commence a new proceeding by filing a new complaint that would address the claim in this lawsuit and subsequent events. On March 4, 2024, the court discontinued this lawsuit without prejudice.
On February 29, 2024, HCW filed a notice of discontinuance without prejudice and advised the court that it intended to commence a new proceeding by filing a new complaint that would address the claim in this lawsuit and subsequent events. On March 4, 2024, the court discontinued this lawsuit without prejudice.
In addition, HCW seeks to recover an additional $2,156,000 in damages plus the value of warrants to purchase an aggregate of up to 805,000 shares of common stock at an exercise price of $3.125 per share in connection with Rekor’s February 2024 offering.
In addition, HCW seeks to recover an additional $2,156,000 in damages plus the value of warrants to purchase an aggregate of up to 805,000 shares of common stock at an exercise price of $3.125 per share in connection with Rekor’s February 2024 offering, which we refer to as the 2024 Public Offering.
The Company believed then, and believes now, that this claim is without merit. As a result of this claim and for other reasons articulated to HCW, the Company terminated its engagement letter with HCW, including for cause, which, the Company believes, eliminated both the “tail” provision and the ROFR provision with respect to this transaction.
As a result of this claim and for other reasons articulated to HCW, the Company terminated its engagement letter with HCW, including for cause, which, the Company believes, eliminated both the “tail” provision and the ROFR provision with respect to the engagement letter.
HCW alleges that Rekor breached its engagement letter with HCW by failing to give Rekor notice of this offering and failing to provide HCW with the opportunity to exercise the ROFR with respect to this transaction. The Company believes these claims are without merit. The Company intends to vigorously defend itself in this lawsuit.
HCW alleges that Rekor breached its engagement letter with HCW by failing to give HCW notice of this offering and failing to provide HCW with the opportunity to exercise the ROFR with respect to this transaction.
It is the Company’s opinion that the outcome of these proceedings, individually and collectively, will not be material to the Company’s consolidated financial statements as a whole.
It is the Company’s opinion that the outcome of these proceedings, individually and collectively, will not be material to the Company’s consolidated financial statements as a whole. H.C Wainwright & Co., LLC In March 2023, the Company entered into an engagement letter with H.C. Wainwright & Co., LLC, ("HCW"), related to a capital raise.
On February 28, 2024, the OALJ issued an Order setting forth a revised schedule governing the case with the start of the hearing schedule for December 2, 2024. The Company believes these claims are without merit. The Company intends to vigorously defend itself in this lawsuit.
On February 28, 2024, the OALJ issued an Order setting forth a revised schedule governing the case with the start of the hearing scheduled for March 3, 2025. In advance of the March 3, 2025 hearing, the parties agreed to bifurcate the matter into two separate hearings.
Removed
Firestorm Principals On August 19, 2019, we filed suit in the United States District Court for the Southern District of New York against three former executives of the Company who were founders of two related former subsidiaries (the “Firestorm Principals”)—Rekor Systems, Inc. v. Suzanne Loughlin, et al., Case no. 1:19-cv-07767-VEC.
Added
Subsequent to the July Warrant Exercise Transaction, the Company received a letter from HCW claiming entitlement to certain “tail” fees and warrant consideration stemming from the July Warrant Exercise Transaction. The Company believed then, and believes now, that this claim is without merit.
Removed
The Firestorm Principals answered together with counterclaims on February 28, 2020. In 2020, the Firestorm Principals filed various suits in New York, Delaware and Virginia against directors and officers of the Company, alleging breach of fiduciary duty and libel. On March 22, 2023, the Company entered into a settlement agreement with the Firestorm Principals.
Added
On May 3, 2024, Rekor answered HCW’s complaint and filed counterclaims against HCW and Armistice Capital LLC ("Armistice") relating to Rekor’s March 2023 Registered Direct Offering, Armistice’s trading activity in Rekor common stock, and Rekor’s 2024 Public Offering. After HCW and Armistice moved to dismiss Rekor’s counterclaims, Rekor filed amended counterclaims on October 1, 2024.
Removed
Pursuant to the terms of the settlement agreement, the parties have mutually released and discharged all existing and potential actions, causes of action, suits, proceedings, debts, dues, contracts, damages or claims against each other, including certain claims for officer indemnification of the Firestorm Principals.
Added
Rekor seeks to recover damages from HCW and Armistice. HCW and Armistice have now moved to dismiss the amended counterclaims. Those motions are pending. Discovery is ongoing in the matter. The Company believes HCW's claims are without merit. The Company intends to vigorously defend itself in this lawsuit.
Removed
In exchange for the mutual releases, the Company transferred certain Firestorm assets to CrisisRisk Strategies, LLC, made a payment of $175,000, and the Firestorm Principals extinguished of all rights to enforce their claims for payment with respect to principal and interest on the promissory notes issued in connection with the Company’s acquisition of Firestorm, and are giving up their rights to exercise the warrants issued in connection with the same.
Added
The first hearing from March 3-5, 2025 was set to address liability and the second from April 24-25, 2025 was set to address damages. The parties were able to settle the claim filed by one employee in advance of the March 3, 2025 hearing. The hearing did proceed for the claim filed by another employee.
Removed
As a result of the settlement agreement, the Company recorded a reduction to notes payable, the related accrued interest and other assets and liabilities already presented as discontinued operations.
Added
The Court did not make a finding on liability at the hearing. The Court has requested that the parties prepare and submit post-hearing briefs on or before April 19, 2025. The Company does not know when the Court will make its findings after the receipt of the briefs.
Removed
The Company also cancelled warrants to purchase 631,254 shares of common stock, which were issued in connection with the acquisition of Firestorm. 31 Table of Contents H.C Wainwright & Co., LLC In March 2023, the Company entered into an engagement letter with H.C. Wainwright & Co., LLC, ("HCW"), related to a previous capital raise the Company completed in March 2023.
Added
The parties are next set to appear before the Court on April 24-25, 2025 to address damages. The Company believes these claims are without merit. The Company intends to vigorously defend itself in this lawsuit.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeAny future determination relating to dividend policy will be made at the discretion of our Board of Directors and will depend on a number of factors, including, but not limited to, our future earnings, capital requirements, financial condition, future prospects, applicable Delaware law, which provides that dividends are only payable out of surplus or current net profits and other factors our Board of Directors might deem relevant. 33 Table of Contents Recent Sales of Unregistered Securities STS Acquisition As previously disclosed under Item 3.02 in the Company’s Current Report on Form 8-K filed with the SEC on June 17, 2022, as part of the purchase price the Company issued to the sellers of STS 798,666 unregistered shares of the Company’s common stock, valued at $2,000,000.
Biggest changeAny future determination relating to dividend policy will be made at the discretion of our Board of Directors and will depend on a number of factors, including, but not limited to, our future earnings, capital requirements, financial condition, future prospects, applicable Delaware law, which provides that dividends are only payable out of surplus or current net profits and other factors our Board of Directors might deem relevant. 32 Table of Contents Recent Sales of Unregistered Securities 2023 Promissory Notes with Warrants As previously disclosed under Item 3.02 in the Company’s Current Report on Form 8-K filed with the SEC on January 18, 2023, the Company entered into a securities purchase agreement with certain accredited investors, pursuant to which the Company agreed to issue and sell to the investors in a private placement transaction (i) up to $15,000,000 in aggregate principal amount of senior secured promissory notes (the "2023 Promissory Notes"), and (ii) warrants to purchase up to an aggregate of 7,500,000 shares of common stock of the Company.
The noteholders elected to accept $1,875,000 of the Redemption Payment in the form of 750,000 unregistered shares of the Company’s common stock, par value $0.0001 per share, having a value of $2.50 per share, with the remainder of the Redemption Payment to be paid in cash.
The noteholders elected to accept $1,875,000 of the Redemption Payment in the form of 750,000 unregistered shares of the Company’s common stock, par value $0.0001 per share, having a value of $2.50 per share, with the remainder of the Redemption Payment paid in cash.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 32 Table of Contents PART II ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the Nasdaq Capital Market under the symbol “REKR”.
ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 31 Table of Contents PART II ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the Nasdaq Capital Market under the symbol “REKR”.
The 2023 Promissory Notes were redeemed at the redemption price of 115% of the $12,500,000 aggregate principal amount of the 2023 Promissory Notes, or approximately $14,375,000, plus accrued and unpaid interest to the redemption date of approximately $263,000 (the “Redemption Payment”).
The 2023 Promissory Notes at the redemption price of 115% of the $12,500,000 aggregate principal amount of the 2023 Promissory Notes, or approximately $14,375,000, plus accrued and unpaid interest to the redemption date of approximately $263,000, (the “Redemption Payment”).
Holders As of March 25, 2024, there were 58 registered holders of record of our common stock, excluding stockholders for whom shares are held in “nominee” or “street name.” The actual number of common stockholders is greater than the number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
Holders As of March 28, 2025, there were 48 registered holders of record of our common stock, excluding stockholders for whom shares are held in “nominee” or “street name.” The actual number of common stockholders is greater than the number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
ATD Acquisition As previously disclosed under Item 3.02 in the Company’s Current Report on Form 8-K filed with the SEC on January 3, 2024, as part of the purchase price the Company issued to the sellers of ATD 3,496,464 unregistered shares of the Company’s common stock, valued at $10,000,000.
ATD Acquisition As previously disclosed under Item 3.02 in the Company’s Current Report on Form 8-K filed with the SEC on January 3, 2024, as part of the purchase price for the ATD acquisition the Company issued 2,832,135 shares of the Company’s common stock as part of the consideration.
On February 27, 2024, the Company filed a registration statement on Form S-3 to register these shares. 2023 Promissory Notes Redemption On March 4, 2024, the Company completed the redemption of all its outstanding senior secured notes (the “2023 Promissory Notes”).
The shares issued and issuable in connection with the ATD Acquisition have been registered on a resale registration statement on Form S-3, declared effective by the SEC on June 17, 2024. 2023 Promissory Notes Redemption On March 4, 2024, the Company completed the redemption of all the 2023 Promissory Notes.
Removed
The stock consideration paid to the sellers was issued pursuant to an exemption under Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Regulation D, as promulgated thereunder.
Added
New Registered Direct Warrants On July 25, 2023, we entered into a letter agreement with an institutional investor in connection with the Registered Direct Warrants.
Removed
Senior Notes with Warrants As previously disclosed under Item 3.02 in the Company’s Current Report on Form 8-K filed with the SEC on January 18, 2023, the Company entered into a securities purchase agreement with certain accredited investors, pursuant to which the Company agreed to issue and sell to the investors in a private placement transaction (i) up to $15,000,000 in aggregate principal amount of senior secured promissory notes, and (ii) warrants to purchase up to an aggregate of 7,500,000 shares of common stock of the Company.
Added
Pursuant to the letter agreement, we agreed to issue to the institutional investor 2,850,000 unregistered warrants (the "2023 Private Warrants") to purchase shares of our common stock in exchange for the imposition of volume and trading restrictions on the 6,872,853 shares of common stock issued to the institutional investor in connection with exercise of the 2023 Private Warrants.
Removed
The stock consideration paid to the sellers was issued pursuant to an exemption under Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Regulation D, as promulgated thereunder.
Added
The 2023 Private Warrants terminate on January 25, 2029, and are exercisable after issuance only for cash. The 2023 Private Warrants have an exercise price of $3.25 per share. The shares of common stock underlying the 2023 Private Warrants have been registered for resale on Form S-3.
Removed
Use of Proceeds We have generated losses since our inception and have relied on cash on hand, external bank lines of credit, short-term borrowing arrangements, issuance of debt, the sale of a note, sale of our non-core subsidiaries, and the sale of common stock to provide cash for operations.
Added
Additionally, 664,329 shares were be issued and delivered to the Seller on the twelve-month anniversary of the Closing Date. The ATD Holdback Shares were deemed to be liability based and are measured at fair value each reporting period.
Removed
We attribute losses to financing costs, public company corporate overhead, lower than expected revenue, and lower gross profit of some of our subsidiaries.
Added
On July 19, 2024, the Company filed a registration statement on Form S-3 to register these shares, which was declared effective by the SEC on July 30, 2024.
Removed
Our cash proceeds have been primarily used for the acquisitions described above, research and development, legal, financing costs, acquisition costs and sales and marketing expenses related to new product development and our strategic shift to develop and promote the capabilities of our technology offerings.
Added
Warrant Exercise Agreements On June 20, 2024, the Company entered into various Warrant Exercise Agreements with certain holders of the 2023 Warrants (each an “Exercising Holder” and collectively, the “Exercising Holders”), pursuant to which the Company reduced the strike price of the 2023 Warrants from $2.00 per warrant to $1.40 per warrant to induce their exercise.
Added
In June 2024, all but one of the Exercising Holders subsequently exercised 1,400,000 warrants for common stock in exchange for $1,960,000. In July 2024, the remaining Exercising Holder exercised 2,275,000 warrants for common stock in exchange for $3,185,000.
Added
In consideration for the Company’s agreement to reduce the exercise price, the Exercising Holders agreed to a concomitant reduction in the number of shares into which the 2023 Warrants are exercisable, from 5,250,000 to 3,675,000.
Added
This modification resulted in a decrease in the overall fair value of the equity classified warrants and since no incremental value was given to the Exercising Holders, nothing was recorded in the consolidated financial statements related to the modification.
Added
The shares issued in connection with the Warrant Exercise Agreement have been registered on a resale registration statement on Form S-3 filed with the SEC on July 19, 2024, and declared effective by the SEC on July 30, 2024.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeYear ended December 31, (Dollars in thousands) 2023 2022 Revenue $ 34,933 $ 19,920 Cost of revenue, excluding depreciation and amortization 16,499 10,890 Operating expenses: General and administrative expenses 27,038 26,612 Selling and marketing expenses 7,347 8,329 Research and development expenses 18,271 18,616 Depreciation and amortization 7,894 6,422 Goodwill impairment - 34,835 Total operating expenses 60,550 94,814 Loss from continuing operations (42,116 ) (85,784 ) Other income (expense): Gain on extinguishment of debt 527 - Gain on the sale of business - 2,643 Interest expense, net (3,596 ) (21 ) Other expense, net (468 ) (1,279 ) Total other income (expense) (3,537 ) 1,343 Loss before income taxes (45,653 ) (84,441 ) (Provision) benefit for income taxes (32 ) 987 Net loss from continuing operations $ (45,685 ) $ (83,454 ) 41 Table of Contents Comparison of the Years Ended December 31, 2023 and 2022 Revenue Year ended December 31, Change (Dollars in thousands) 2023 2022 $ % Revenue $ 34,933 $ 19,920 $ 15,013 75 % The increase in revenue for the year ended December 31, 2023, compared to the year ended December 31, 2022, was primarily attributable to our Urban Mobility product line.
Biggest changeYear ended December 31, (Dollars in thousands) 2024 2023 Revenue $ 46,028 $ 34,933 Cost of revenue, excluding depreciation and amortization 23,344 16,499 Operating expenses: General and administrative expenses 30,676 27,038 Selling and marketing expenses 7,858 7,347 Research and development expenses 18,766 18,271 Impairment of intangible assets 10,214 - Depreciation and amortization 9,493 7,894 Total operating expenses 77,007 60,550 Loss from continuing operations (54,323 ) (42,116 ) Other income (expense): (Loss) gain on extinguishment of debt (4,693 ) 527 Interest expense, net (2,645 ) (3,596 ) Gain on remeasurement of ATD Holdback Shares 599 - Loss on offering costs - Prepaid Advance (888 ) - Loss on settlement of Prepaid Advance (900 ) - Gain on the sale of Global Public Safety 1,500 - Other expense, net (15 ) (468 ) Total other expense, net (7,042 ) (3,537 ) Loss before income taxes (61,365 ) (45,653 ) Provision for income taxes 45 32 Net loss $ (61,410 ) $ (45,685 ) 39 Table of Contents Comparison of the Years Ended December 31, 2024 and 2023 Revenue Year ended December 31, Change (Dollars in thousands) 2024 2023 $ % Revenue $ 46,028 $ 34,933 $ 11,095 32 % The increase in revenue for the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily attributable to our Urban Mobility product line.
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. 49 Table of Contents Balance Sheet Arrangements, Contractual Obligations and Commitments As of the date of this Annual Report on Form 10-K, we did not have any off-balance sheet arrangements that have had or are reasonably likely to have a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures.
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. 47 Table of Contents Off-Balance Sheet Arrangements, Contractual Obligations and Commitments As of the date of this Annual Report on Form 10-K, we did not have any off-balance sheet arrangements that have had or are reasonably likely to have a material effect on our financial condition, revenues or expenses, results of operations, liquidity, capital resources or capital expenditures.
Liquidity Analysis Our liquidity analysis requires a blend of judgment and estimation, relying on both quantitative data and qualitative insights to assess our ability to sustain our operations over the forward-looking period. Management’s analysis involves a comprehensive evaluation of numerous factors to determine whether we can continue our operations during the look-forward period.
Our analysis requires a blend of judgment and estimation, relying on both quantitative data and qualitative insights to assess our ability to sustain our operations over the forward-looking period. Management’s analysis involves a comprehensive evaluation of numerous factors to determine whether we can continue our operations during the look-forward period.
Other than as discussed above and elsewhere in this Annual Report on Form 10-K, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition. 38 Table of Contents Components of Operating Results Revenues The Company derives its revenues primarily from the sale of its roadway data aggregation, traffic management and licensing offerings.
Other than as discussed above and elsewhere in this Annual Report on Form 10-K, we are not aware of any trends, events or uncertainties that are likely to have a material effect on our financial condition. 36 Table of Contents Components of Operating Results Revenues The Company derives its revenues primarily from the sale of its roadway data aggregation, traffic management and licensing offerings.
We expense direct costs of revenues when they incur. 39 Table of Contents Operating Expenses Our operating expenses consist of general and administrative expenses, sales and marketing, research and development and depreciation and amortization. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, payroll taxes and stock-based compensation expenses.
We expense direct costs of revenues when they incur. 37 Table of Contents Operating Expenses Our operating expenses consist of general and administrative expenses, sales and marketing, research and development and depreciation and amortization. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, payroll taxes and stock-based compensation expenses.
Critical Accounting Estimates Our discussion and analysis of our financial condition and results of our operations is based upon our audited consolidated financial statements as of and for the years ended December 31, 2023 and 2022, which have been prepared in accordance with U.S. GAAP.
Critical Accounting Estimates Our discussion and analysis of our financial condition and results of our operations is based upon our audited consolidated financial statements as of and for the years ended December 31, 2024 and 2023, which have been prepared in accordance with U.S. GAAP.
As with any large market, this will require considerable effort and resources. 36 Table of Contents ● 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.
As with any large market, this will require considerable effort and resources. ● Expansion of Automated Enforcement of Motor Vehicle Laws – We expect contactless compliance programs to be expanded as the types of vehicle related violations authorized for automated enforcement increase and experience provides localities with a better understanding of the circumstances where it is and is not beneficial.
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. 47 Table of Contents Lease Obligations As of December 31, 2023 , we had significant leased building space at the following locations: ● Columbia, Maryland – The corporate headquarters ● Tel Aviv, Israel We believe our facilities are in good condition and adequate for their current use.
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. 45 Table of Contents Lease Obligations As of December 31, 2024 , we had significant leased building space at the following locations: ● Columbia, Maryland – The corporate headquarters ● Tel Aviv, Israel We believe our facilities are in good condition and adequate for their current use.
Edge processing allows us to scale a network dramatically without the bandwidth, cost, latency and dependability limitations that are experienced by other networks where raw video needs to be streamed to the cloud for processing. ● Accelerated Business Development and Marketing – Our ability to compete in a large, competitive and rapidly evolving industry will require us to achieve and maintain a visible leadership position.
Edge processing allows us to scale a network dramatically without the bandwidth, cost, latency and dependability limitations that are experienced by other networks where raw video needs to be streamed to the cloud for processing. 35 Table of Contents ● Accelerated Business Development and Marketing – Our ability to compete in a large, competitive and rapidly evolving industry will require us to achieve and maintain a visible leadership position.
However, the speed at which these markets grow to the degree to which our products and services are adopted is uncertain. 37 Table of Contents ● Infrastructure Investment and Jobs Act ( “ IIJA ” ) and the Bipartisan Infrastructure Law ( “ BIL ” ) - The IIJA, signed into law on November 15, 2021, provides for significant national investments in the transportation systems in the United States, including over $150 billion in new spending on roadway infrastructure, including intelligent transportation systems.
However, the speed at which these markets grow to the degree to which our products and services are adopted is uncertain. ● Infrastructure Investment and Jobs Act ( “ IIJA ” ) and the Bipartisan Infrastructure Law ( “ BIL ” ) - The IIJA, signed into law on November 15, 2021, provides for significant national investments in the transportation systems in the United States, including over $150 billion in new spending on roadway infrastructure, including intelligent transportation systems.
Depreciation and Amortization Depreciation and amortization expenses are primarily attributable to our capital investments and consist of fixed asset depreciation, amortization of intangibles considered to have definite lives, and amortization of capitalized internal-use software costs.
Depreciation and Amortization Depreciation and amortization expenses are primarily attributable to our capital investments and consist of fixed asset depreciation, amortization of intangibles considered to have finite lives, and amortization of capitalized internal-use software costs.
Beyond the many recurring federal grant programs that could support customer purchases, and the $350 billion in American Rescue Plan Act allocations that public agencies are receiving now, we are particularly excited about the prospect of benefitting from the following new grant sources that are contained in the IIJA: $200 million annually for a “Safe Streets and Roads for All” program that would make competitive grants for state projects that significantly reduce or eliminate transportation-related fatalities. $150 million for the current administration to establish a grant program to modernize state data collection systems $500 million for the Strengthening Mobility and Revolutionizing Transportation (“SMART”) Grant Program that would support demonstration projects on smart technologies that improve transportation efficiency and safety. ● Recent Acquisitions - Over the past two years, Rekor has acquired two subsidiaries as part of its plans to advance its appeal to national and local transportation agencies.
Beyond the many recurring federal grant programs that could support customer purchases, and the $350 billion in American Rescue Plan Act allocations that public agencies are receiving now, we are particularly excited about the prospect of benefitting from the following new grant sources that are contained in the IIJA: $200 million annually for a “Safe Streets and Roads for All” program that would make competitive grants for state projects that significantly reduce or eliminate transportation-related fatalities. $150 million for the current administration to establish a grant program to modernize state data collection systems $500 million for the Strengthening Mobility and Revolutionizing Transportation (“SMART”) Grant Program that would support demonstration projects on smart technologies that improve transportation efficiency and safety. ● Recent Acquisition - In the current year, Rekor has acquired one subsidiary as part of its plans to advance its appeal to national and local transportation agencies.
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. 40 Table of Contents Results of Operations Our historical operating results in dollars are presented below.
We expect to maintain this full valuation allowance for the foreseeable future as it is more likely than not that those deferred tax assets may not be realized based on our history of losses. 38 Table of Contents Results of Operations Our historical operating results in dollars are presented below.
Each of these acquisitions has led to increased visibility for the Company among national and state level DOTs in the United States and Israel. ● Challenges to Executing on the Corporate Strategy – As an acquirer and integrator of established technology companies in the ITS industry, there is an inherent risk associated with the successful implementation and execution of the strategy.
This acquisition has led to increased visibility for the Company among national and state level DOTs in the United States. ● Challenges to Executing on the Corporate Strategy – As an acquirer and integrator of established technology companies in the ITS industry, there is an inherent risk associated with the successful implementation and execution of the strategy.
We anticipate that a sustained presence in the market, the continued development of strategic partnerships and other economies of scale will reduce the level of costs necessary to support sales of our products and services.
If we are able to maintain a sustained presence in the market, the continued development of strategic partnerships and other economies of scale will reduce the level of costs necessary to support sales of our products and services.
ITEM 6. [RESERVED] 34 Table of Contents ITEM 7.
ITEM 6. [RESERVED] 33 Table of Contents ITEM 7.
We believe that our comprehensive offering of solutions positions the Company well to emerge as a technology leader in the expanded market for roadway intelligence that will benefit from this legislation.
We believe that there will continue to be bi-partisan support for these programs and that our comprehensive offering of solutions positions the Company well to emerge as a technology leader in the expanded market for roadway intelligence that will benefit from this legislation.
Conducting a liquidity analysis is an exercise in judgment, requiring us to evaluate data points, forecasts, and qualitative insights to arrive at a comprehensive assessment of our ability to remain cash flow positive during the look-forward period.
Conducting a fair value analysis is an exercise in judgment, requiring us to evaluate data points, forecasts, and qualitative insights to arrive at a comprehensive assessment of our ability to derive value from our assets during the look-forward period.
Cost of Revenue, Excluding Depreciation and Amortization Year ended December 31, Change (Dollars in thousands) 2023 2022 $ % Cost of revenue, excluding depreciation and amortization $ 16,499 $ 10,890 $ 5,609 52 % For the year ended December 31, 2023, 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.
Cost of Revenue, Excluding Depreciation and Amortization Year ended December 31, Change (Dollars in thousands) 2024 2023 $ % Cost of revenue, excluding depreciation and amortization $ 23,344 $ 16,499 $ 6,845 41 % For the year ended December 31, 2024, cost of revenue, excluding depreciation and amortization increased compared to prior year primarily due to an increase in personnel and other direct costs such as hardware that were incurred to support our increase in revenue.
Opportunities, Trends and Uncertainties We look to identify the various trends, market cycles, uncertainties and other factors that may provide us with opportunities and present challenges that impact our operations and financial condition from time to time.
See Note 2 to our consolidated financial statements for additional information related to our acquisition of ATD. Opportunities, Trends and Uncertainties We look to identify the various trends, market cycles, uncertainties and other factors that may provide us with opportunities and present challenges that impact our operations and financial condition from time to time.
The following table sets forth the components of the Adjusted Gross Profit and Adjusted Gross Margin for the periods included (dollars in thousands) : Year ended December 31, 2023 2022 (Dollars in thousands, except percentages) Revenue $ 34,933 $ 19,920 Cost of revenue, excluding depreciation and amortization 16,499 10,890 Adjusted Gross Profit $ 18,434 $ 9,030 Adjusted Gross Margin 52.8 % 45.3 % Adjusted Gross Margin, for the year ended December 31, 2023 increased to 52.8% from 45.3% for the year ended December 31, 2022 .
The following table sets forth the components of the Adjusted Gross Profit and Adjusted Gross Margin for the periods included (dollars in thousands) : Year ended December 31, 2024 2023 (Dollars in thousands, except percentages) Revenue $ 46,028 $ 34,933 Cost of revenue, excluding depreciation and amortization 23,344 16,499 Adjusted Gross Profit $ 22,684 $ 18,434 Adjusted Gross Margin 49.3 % 52.8 % Adjusted Gross Margin for the year ended December 31, 2024 decreased from 52.8% to 49.3% compared to the year ended December 31, 2023 .
Performance Obligations While a portion of the total contract value won in a particular period represents revenue earned during the period, the remainder represents future performance obligations that can provide an indication of our future revenues.
In addition, there may be an increase in one time sales as a result of initial installations related to the development of recurring revenue. Performance Obligations While a portion of the total contract value won in a particular period represents revenue earned during the period, the remainder represents future performance obligations that can provide an indication of our future revenues.
Additionally, the Company has worked diligently to reduce its software and data costs. 46 Table of Contents Key Performance Indicators We regularly review several indicators, including the following key indicators, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
Typically our software sales carry a higher Adjusted Gross Margin. 44 Table of Contents Key Performance Indicators We regularly review several indicators, including the following key indicators, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
General The information provided in this discussion and analysis of Rekor’s financial condition, and results of operations covers the years ended December 31, 2023 and 2022. In 2022, we divested our Automated Traffic Safety Enforcement ("ATSE") business, a non-core business unit.
General The information provided in this discussion and analysis of Rekor’s financial condition, and results of operations covers the years ended December 31, 2024 and 2023.
Selling and Marketing Expenses The decrease in selling and marketing expenses during the year ended December 31, 2023, compared to the year ended December 31, 2022, was primarily due to a $965,000 decrease in stock-based compensation expenses.
Selling and Marketing Expenses The increase in selling and marketing expenses during the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily due to a $610,000 increase as result of the acquisition of ATD.
The following table sets forth our recurring revenue for the periods included (dollars in thousands) : Year ended December 31, 2023 2022 Change $ % Recurring revenue $ 20,755 $ 13,091 $ 7,664 59 % As we continue to focus on long-term contracts with recurring revenue as part of our business model, we expect recurring revenue growth in future periods to continue to increase as we move to market our suite of products through our Rekor One™ platform.
The following table sets forth our recurring revenue for the periods included (dollars in thousands): Year ended December 31, 2024 2023 Change $ % Recurring revenue $ 22,590 $ 20,755 $ 1,835 9 % We expect to continue efforts to secure long-term contracts with recurring revenue as part of our business model, which is intended to cause recurring revenue growth in future periods to continue to increase.
We evaluate our recent financial performance, liquidity position, and our ability to meet our financial obligations as they become due. Factors such as financial projections, profitability, cash flow, and debt commitments require estimation and are examined to gauge our financial health. Our ability to manage our cash flow is another critical aspect of the analysis.
We evaluate our recent financial performance and our ability to meet our projected financial performance. Factors such as financial projections, profitability and cash flow require estimation and are examined to gauge our financial health.
As of December 31, 2023 , we had unrestricted cash and cash equivalents from continuing operations of $15,385,000 and working capital of $8,100,000, as compared to unrestricted cash and cash equivalents of $1,924,000 and a working capital deficit of $6,010,000 as of December 31, 2022 .
As of December 31, 2024 , we had unrestricted cash and cash equivalents of $5,329,000 and working capital of $1,707,000, as compared to unrestricted cash and cash equivalents of $15,713,000 and working capital of $8,100,000 as of December 31, 2023 .
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 existing and new products and services.
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 existing and new products and services. As of and for the year ended December 31, 2024, the Company had working capital of $1,707,000 and a net loss of $61,410,000.
The following table sets forth the components of the EBITDA and Adjusted EBITDA for the periods included (dollars in thousands): Year ended December 31, 2023 2022 Net loss from continuing operations $ (45,685 ) $ (83,454 ) Provision (benefit) for income taxes 32 (987 ) Interest expense, net 3,596 21 Depreciation and amortization 7,894 6,422 EBITDA $ (34,163 ) $ (77,998 ) Gain on extinguishment of debt $ (527 ) $ - Share-based compensation 4,352 6,616 Gain on the sale of ATSE - (2,643 ) Loss (gain) due to the remeasurement of the STS Earnout and Contingent Consideration, net 384 (883 ) Impairment of SAFE agreement 101 - Goodwill impairment - 34,835 Legal judgements and settlements 801 1,608 One-time consulting fees 365 1,024 Adjusted EBITDA $ (28,687 ) $ (37,441 ) 45 Table of Contents Adjusted Gross Profit and Adjusted Gross Margin Adjusted Gross Profit is a non-GAAP financial measure that we define as revenue less cost of revenue, excluding depreciation and amortization.
The following table sets forth the components of the EBITDA and Adjusted EBITDA for the periods included (dollars in thousands): Year ended December 31, 2024 2023 Net loss $ (61,410 ) $ (45,685 ) Provision for income taxes 45 32 Interest expense, net 2,645 3,596 Depreciation and amortization 9,493 7,894 EBITDA $ (49,227 ) $ (34,163 ) Share-based compensation 4,829 4,352 Loss (gain) on extinguishment of debt 4,693 (527 ) Impairment of intangible assets 10,214 - Loss on offering costs - Prepaid Advance 888 - Loss on settlement of Prepaid Advance 900 - Gain on the sale of Global Public Safety (1,500 ) - Loss due to the remeasurement of the STS Earnout and Contingent Consideration, net 100 384 Impairment of SAFE agreement - 101 Adjusted EBITDA $ (29,103 ) $ (29,853 ) 43 Table of Contents Adjusted Gross Profit and Adjusted Gross Margin Adjusted Gross Profit is a non-GAAP financial measure that we define as revenue less cost of revenue, excluding depreciation and amortization.
For the years ended December 31, 2023 and 2022 , we funded our operations primarily through cash from the sale of equity, operating activities from our subsidiaries and the issuance of debt.
Lastly, in the fourth quarter of 2023, we raised $14,330,000 related to our Series A Prime Revenue Sharing Notes. For the years ended December 31, 2024 and 2023 , we funded our operations primarily through cash from operating activities, the issuance of debt and the sale of equity.
We expect to improve, replace and increase facilities as considered appropriate to meet the needs of our planned operations. 48 Table of Contents Liquidity and Capital Resources The net cash flows from operating, investing and financing activities for the periods below were as follows (dollars in thousands): Year ended December 31, 2023 2022 Change $ % Net cash used in operating activities - continuing operations $ (32,178 ) $ (40,070 ) $ 7,892 20 % Net cash provided by (used in) investing activities - continuing operations 270 (8,264 ) 8,534 -103 % Net cash provided by financing activities - continuing operations 45,602 23,868 21,734 91 % Net increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents - continuing operations $ 13,694 $ (24,466 ) $ 38,160 -156 % Net cash used in operating activities for the year ended December 31, 2023, had a net decrease of $7,892,000, which was attributable to the improvement of our Adjusted EBITDA of $8,754,000 which saw a 23% improvement period over period.
We expect to improve, replace and increase facilities as considered appropriate to meet the needs of our planned operations. 46 Table of Contents Liquidity and Capital Resources The net cash flows from operating, investing and financing activities for the periods below were as follows (dollars in thousands): Year ended December 31, 2024 2023 Change $ % Net cash used in operating activities - continuing operations $ (32,469 ) $ (32,178 ) $ (291 ) -1 % Net cash (used in) provided by investing activities (9,370 ) 270 (9,640 ) -3570 % Net cash provided by financing activities 31,455 45,602 (14,147 ) -31 % Net (decrease) increase in cash, cash equivalents and restricted cash and cash equivalents - continuing operations $ (10,384 ) $ 13,694 $ (24,078 ) -176 % Net cash used in operating activities for the year ended December 31, 2024, increased by $291,000, which was primarily attributable to an increased loss which was offset by non-cash adjustments during the year, primarily the loss on extinguishment of debt of $4,693,000.
These contracts generally cover a term of one to five years, during which the Company will recognize revenue ratably over the contract term. We currently expect to recognize approximately $18,624,000 of this amount over the succeeding twelve months, and the remainder is expected to be recognized over the following four years.
We currently expect to recognize approximately $12,036,000 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.
New Accounting Pronouncements See Item 8 of Part II, “Financial Statements and Supplementary Data — Note 1 — Business and Significant Accounting Policies” 51 Table of Contents
During the measurement period, we may make adjustments to the fair value of assets acquired and liabilities assumed, with offsetting adjustments to goodwill. New Accounting Pronouncements See Item 8 of Part II, “Financial Statements and Supplementary Data — Note 1 — Business and Significant Accounting Policies”. 49 Table of Contents
In connection with the sale of ATSE, we recognized a gain on the sale of the business of $2,643,000 during the year ended December 31, 2022. Gain on extinguishment of debt is a result of the settlement agreement in the Firestorm litigation.
In connection with the sale of Global Public Safety , we recognized a gain on the sale of the business of $1,500,000 during the year ended December 31, 2024.
During the year ended December 31, 2023, revenue attributable to our Urban Mobility product line was $16,773,000, compared to $7,692,000 compared for the year ended December 31, 2022. Additionally, our contactless compliance revenue increased $1,110,000 for the year ended December 31, 2023 compared to the year ended December 31, 2022.
During the year ended December 31, 2024, revenue attributable to our Urban Mobility product line was $28,688,000 compared to $16,773,000 for the year ended December 31, 2023. During the year ended December 31, 2024, revenue attributable to our ATD acquisition was $10,125,000 and is included as part of our Urban Mobility revenue stream.
Our cash increased by $13,245,000 for the year ended December 31, 2023 primarily due to net cash provided by financing activities of $45,602,000 which was offset by the net cash used in operating activities of $32,627,000.
The increase in net cash used in investing activities was primarily due to the net cash outflow of $9,222,000 related to the acquisition of ATD. Net cash provided by financing activities for the year ended December 31, 2024 decreased by $14,147,000 from the year ended December 31, 2023.
In this process, we must exercise caution, recognizing the inherent uncertainties and limitations of our estimations and financial analysis while striving to provide feasible plan that can successfully mitigate conditions and events that may raise doubt of our ability to continue as a going concern.
In this process, we must exercise caution, recognizing the inherent uncertainties and limitations of our estimations and financial analysis while striving to provide feasible plan. Business Combinations We account for business combinations by recognizing the fair value of acquired assets and liabilities. The excess purchase consideration over the fair value of acquired assets and liabilities is recorded as goodwill.
As of December 31, 2023, we had appro ximately $26,390,000 of performance obligations with respect to contracts that were closed prior to December 31, 2023 but have a contractual period beyond December 31, 2023 . This represents growth of $4,978,000 or 23% compared to $21,412,000 of performance obligations as of December 31, 2022.
As of December 31, 2024, we had appro ximately $14,450,000 of performance obligations with respect to contracts that were closed prior to December 31, 2024 but have a contractual period beyond December 31, 2024 . These contracts generally cover a term of one to five years, during which the Company will recognize revenue ratably over the contract term.
Research and Development Expense The decrease in research and development expenses during the year ended December 31, 2023, compared to the year ended December 31, 2022, was primarily attributable to a decrease in subcontractor labor expenses as the Company utilized its current workforce to focus on the development of new products and software. 43 Table of Contents Depreciation and Amortization The increase in depreciation and amortization during the period is attributable primarily to the increased technology-based intangible assets that were acquired as part of our acquisition of STS.
As a result of the forementioned factors and their potential future impact, the Company recognized an impairment charge of $10,214,000 as of December 31, 2024. 41 Table of Contents Depreciation and Amortization The increase in depreciation and amortization during the year is attributable primarily to the intangible assets that were acquired as part of our acquisition of ATD.
Other Income (Expense) Year ended December 31, Change (Dollars in thousands) 2023 2022 $ % Other income (expense): Gain on extinguishment of debt $ 527 $ - $ 527 - Gain on the sale of business - 2,643 (2,643 ) -100 % Interest expense, net (3,596 ) (21 ) (3,575 ) -17024 % Other expense, net (468 ) (1,279 ) 811 63 % Total other income (expense) $ (3,537 ) $ 1,343 $ (4,880 ) 363 % Interest expense increased period over period due to the issuance of the 2023 Promissory Notes.
Other Income (Expense) Year ended December 31, Change (Dollars in thousands) 2024 2023 $ % Other income (expense): (Loss) gain on extinguishment of debt $ (4,693 ) $ 527 $ (5,220 ) -991 % Interest expense, net (2,645 ) (3,596 ) 951 26 % Gain on remeasurement of ATD Holdback Shares 599 - 599 - Loss on offering costs - Prepaid Advance (888 ) - (888 ) - Loss on settlement of Prepaid Advance (900 ) - (900 ) - Gain on the sale of Global Public Safety 1,500 - 1,500 - Other expense, net (15 ) (468 ) 453 97 % Total other expense, net $ (7,042 ) $ (3,537 ) $ (3,505 ) -99 % Loss on extinguishment of debt was a result of early redemption of the 2023 Promissory Notes.
Actual results may differ from these estimates under different assumptions or conditions, or if management made different judgments or utilized different estimates. 50 Table of Contents Revenue Recognition Judgment is required for the estimation of the standalone selling price (“SSP”) and the allocation of the transaction price by relative SSPs.
Actual results may differ from these estimates under different assumptions or conditions, or if management made different judgments or utilized different estimates. 48 Table of Contents Valuation of long lived assets Fixed assets and amortizable intangible assets are reviewed for impairment as events or changes in circumstances occur indicating that the carrying value of the asset may not be recoverable.
On December 6, 2022, we divested our ATSE business, a non-core business unit, for approximate ly $3,390,000. On January 2, 2024, we completed the acquisition of All Traffic Data Services, LLC (“ATD”) for an aggregate purchase price of $19,795,000, consisting of $9,795,000 in cash which included closing adjustments and $10,000,000 of stock consideration.
In 2024, we completed the acquisition of 100% of the issued and outstanding limited liability company interests of All Traffic Data Systems (“ATD”). 34 Table of Contents Acquisitions and Dispositions On January 2, 2024, we completed the acquisition of All Traffic Data Services, LLC (“ATD”) for an aggregate purchase price of $20,576,000.
We established a valuation allowance against deferred tax assets in the fourth quarter of 2017 and have continued to maintain a full valuation allowance through the year ended December 31, 2023 . 44 Table of Contents Non-GAAP Measures EBITDA and Adjusted EBITDA We calculate EBITDA as net loss before interest, taxes, depreciation and amortization.
Additionally, during the year the Company elected to terminate the Prepaid Advance Agreement. All amounts due were settled and we recorded $900,000 in charges related to the settlement of the Prepaid Advance liability. 42 Table of Contents Non-GAAP Measures EBITDA and Adjusted EBITDA We calculate EBITDA as net loss before interest, taxes, depreciation and amortization.
Removed
As a result of the divestiture, we determined that ATSE met the criteria to be considered discontinued and it was no longer presented with continuing operations. Additionally, in 2022, we completed the acquisition of 100% of the issued and outstanding capital stock of Southern Traffic Services, Inc. ("STS").
Added
We acquired one of the leading existing providers of traffic data services in the United States.
Removed
This acquisition is included in the presentation of our continuing operations. 35 Table of Contents Acquisitions and Dispositions On June 17, 2022 , we completed the acquisition of STS by acquiring 100% of the issued and outstanding capital stock of STS.
Added
The costs of revenue increased at a higher rate than our revenue increased as our mix of revenue shifted to more labor intensive activities. As we continue to deploy our technology, we anticipate our margins to improve.
Removed
The acquisition included total consideration of $12,799,000 including: cash consideration of $6,500,000, $1,001,000 related to an earnout based on the achievement of certain performance metrics ("STS Earnout") and $1,298,000 contingent on the closing of a future contract ("STS Contingent Consideration"), 798,666 shares of the Company’s common stock, valued at $2,000,000, and a $2,000,000 note.
Added
Additionally, during the year ended December 31, 2024, $3,672,000 of the increase was related to our acquisition of ATD. 40 Table of Contents Operating Expenses Year ended December 31, Change (Dollars in thousands) 2024 2023 $ % Operating expenses: General and administrative expenses $ 30,676 $ 27,038 $ 3,638 13 % Selling and marketing expenses 7,858 7,347 511 7 % Research and development expenses 18,766 18,271 495 3 % Impairment of intangible assets 10,214 - 10,214 - Depreciation and amortization 9,493 7,894 1,599 20 % Total operating expenses $ 77,007 $ 60,550 $ 16,457 27 % General and Administrative Expenses For the year ended December 31, 2024, the increase in general and administrative expenses compared to the year ended December 31, 2023, was primarily due to: ● a $2,150,000 increase in payroll and payroll related expenses which includes $1,294,000 related to our operations of ATD. ● a $661,000 and $323,000 increase in rent and utility expense, respectively, which are primarily related to the additional leases as part of the ATD acquisition. ● a $269,000 increase in insurance expense which is primarily related to higher premiums and the addition of the ATD operations. ● a $236,000 increase in board fees, excluding share-based compensation due to the additional board members in 2024.
Removed
In the first of these acquisitions, we acquired a leader in the development of predictive analytics for traffic management using a combination of internally generated and third party data sources. This acquisition was designed to assure transportation agencies that we were developing the most advanced data analysis systems to support their missions in safety and efficiency.
Added
Research and Development Expense Research and development expenses during the year ended December 31, 2024, compared to the year ended December 31, 2023, remained consistent.
Removed
In the second acquisition, we acquired one of the leading existing providers of traffic data services in the United States. Uniquely, this Company had innovated a change in the service model from providing, servicing and maintaining agency resources to a data services model where overlapping entities could benefit from our modular approach to data collection and dissemination.
Added
Impairment of Intangible Assets As a result of sales performance being below expectation in part due to slower customer adoption, longer sales cycles and market conditions, the Company identified a triggering event and performed an analysis of its intangible assets.
Removed
The analysis of operations is solely related to continuing operations and does not consider the results of discontinued operations.
Added
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. Interest expense decreased period over period due to the early redemption of the 2023 Promissory Notes.
Removed
The remaining increase in revenue growth during the year ended December 31, 2023, compared to the year ended December 31, 2022 was primarily attributable to increased sales in sales of the Company's software and hardware products.
Added
On August 14, 2024, we entered into a Prepaid Advance Agreement under which funds were advanced to the Company and the lender had the ability to satisfy the advance in exchange for shares in the Company. We incurred issuance costs and original issuance discounts totaling approximately $888,000 associated with the issuance of the Prepaid Advance.
Removed
The costs of revenue increased at a lower rate than our revenue increased as the Company was able to realize efficiencies in its operations and better manage its software costs. 42 Table of Contents Operating Expenses Year ended December 31, Change (Dollars in thousands) 2023 2022 $ % Operating expenses: General and administrative expenses $ 27,038 $ 26,612 $ 426 2 % Selling and marketing expenses 7,347 8,329 (982 ) -12 % Research and development expenses 18,271 18,616 (345 ) -2 % Depreciation and amortization 7,894 6,422 1,472 23 % Goodwill impairment - 34,835 (34,835 ) -100 % Total operating expenses $ 60,550 $ 94,814 $ (34,264 ) -36 % General and Administrative Expenses The increase in general and administrative expenses during the year ended December 31, 2023, compared to the year ended December 31, 2022, were primarily due to increases related to our automobile fleet and insurance.
Added
The fluctuation in Adjusted Gross Margin is typically correlated to the mix of software sales versus service type work.
Removed
These costs were partially offset due to a decrease in our personnel costs related to a reduction of salaries and overall payroll during the year. Additionally, for the year ended December 31, 2022, the Company recognized a $1,001,000 gain related to the remeasurement of the STS Earnout which decreased the Company's general and administrative expenses during the period.
Added
During the year ended December 31, 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.
Removed
Goodwill Impairment During the third quarter of 2022, we experienced a significant decline in our market capitalization, which management deemed a triggering event related to goodwill. As a result, we performed an interim impairment assessment as of September 30, 2022 and determined that as of the reporting date we had an impairment related to goodwill in the amount of $34,835,000.
Added
On February 10, 2025, the Company entered into an At Market Issuance Sales Agreement (the “Sales Agreement”) with Northland Securities, Inc., 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, having an aggregate offering price of up to $25,000,000.
Removed
Other expense, net increased in the current period compared to the prior period as a result of legal judgements and settlements that happened during the year ended December 31, 2022. For additional details regarding our legal settlements please s ee Item 3 of Part I, “Legal Proceedings”.
Added
See Note 16 to our consolidated financial statements for additional information related to the Sales Agreement.
Removed
As part of the settlement, we recorded a reduction to notes payable, the related accrued interest and other assets and liabilities which were part of the Firestorm entities.
Added
We have certain contractual obligations for future payments. See Note 7 to our consolidated financial statements for our required operating and financing lease payments and Note 9 for our required debt payments.
Removed
Income Tax Provision (Benefit) The provision for income taxes for the year ended December 31, 2023 , was $32,000 , a s compared to tax benefit of $987,000 for the year ended December 31, 2022 , which is due primarily to the step-up in the basis of intangible assets related to the STS acquisition.
Added
Undiscounted cash flow analyses are used to determine if the carrying amount of the asset is recoverable. If impairment is determined to exist, the charge is calculated based on estimated fair value.
Removed
As the Company continues to scale and standardize its product offerings it has begun to realize operational efficiencies that have resulted in an improved Adjusted Gross Margin.
Added
When determining the fair value of assets acquired and liabilities assumed, we make estimates and assumptions, especially with respect to intangible assets such as identified customer relationships and trade names. We generally determine the fair value of acquired customer relationships using the multi-period excess earnings method, a form of the income approach.
Removed
Total Contract Value The total contract value of contracts won in the current period also provides us with visibility into our future operating results and cash flows from operations.
Added
Estimates in valuing identifiable intangible assets include, but are not limited to, projected revenue growth rates, customer retention rates and an appropriate discount rate. Our estimate of fair value is based upon assumptions we believe to be reasonable, but which are inherently uncertain and, as a result, actual results may differ from estimates.
Removed
Total contract value is a non-GAAP measure in which there are certain assumptions that we make when determining the total contract value of an agreement, such as the success rate of renewal periods, cancellations and usage estimates.
Removed
For the year ended December 31, 2023, we won contracts valued at $49,087,000 , compared to $21,962,000 of contracts won for the year ended December 31, 2022. This represents growth of $27,125,000 or 124% , period over period.
Removed
On occasion, our customers will prepay the full contract or a substantial portion of the contract.
Removed
The net increase in net cash used in investing activities of $8,534,000 was primarily due to a decrease in the outflow of funds related to merger and acquisition activities and capital expenditures.
Removed
During the year ended December 31, 2023, the Company had net cash outflows of $1,388,000 related to capital expenditures compared to $4,171,000 for the year ended December 31, 2022. Additionally, during the year ended December 31, 2022, the Company had net cash outflows of $6,389,000 related to the acquisition of STS.
Removed
This outflow was partially offset by $3,051,000 in cash proceeds from the sale of the Company's ATSE business unit. Net cash provided by financing activities for the year ended December 31, 2023 increased by $21,734,000 from the prior year ended December 31, 2022.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeItem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 35 Item 7A. Quantitative and Qualitative Disclosures about Market Risk. 52 Item 8. Financial Statements and Supplementary Data. 52 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 103
Biggest changeItem 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 34 Item 7A. Quantitative and Qualitative Disclosures about Market Risk. 50 Item 8. Financial Statements and Supplementary Data. 50 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 99

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