Company Operations and Workforce - As of March 29, 2023, the company had 268 employees, with 267 being full-time[86] - The company completed the Waycare Technology Acquisition on August 18, 2021[85] Financial Performance - For the year ended December 31, 2022, the company reported a loss from continuing operations of $83,454,000[94] - The company has approximately $114.74 million in federal net operating loss carryforwards (NOLs) and $106.87 million in state NOLs as of December 31, 2022[135] Business Growth and Market Challenges - The market for the company's Rekor One platform is new and unproven, with future success dependent on attracting new customers[97] - The company relies on third-party data providers and existing camera networks to grow its business, which may impact growth if agreements are not maintained[95] - The company may face challenges in retaining existing customers, which could adversely affect revenue and results of operations[108] - The company may need to raise additional capital in the future, which may not be available on acceptable terms[103] - The company’s operating margins may experience downward pressure due to investments in new markets and product development[101] - Economic downturns could lead to reduced demand for the company's services, adversely affecting cash flow and profitability[132] Regulatory and Compliance Risks - The General Data Protection Regulation (GDPR) imposes fines of up to €20 million or 4% of total worldwide annual turnover for non-compliance, whichever is higher[121] - The evolving data protection regulations may impose additional compliance costs and operational challenges for the company[122] - The company faces potential substantial tax liabilities if required to collect sales or related taxes in jurisdictions where it has not historically done so[118] - The company may face challenges due to government regulations affecting internet commerce and telecommunications, potentially reducing demand for its products and services[146] Cybersecurity and Operational Risks - Cybersecurity threats, including unauthorized access and data breaches, could lead to significant reputational damage and financial loss[127] - The company relies on third-party data centers, and any service disruption at these facilities could adversely affect operations and revenue[138] - International operations expose the company to risks such as currency fluctuations and varying legal standards, which may impact profitability[140] - The company may experience reputational harm and significant costs due to material defects or errors in its software applications[145] Shareholder and Stock Information - The company has 55,020,612 shares of common stock outstanding as of March 24, 2023, with 12.4% (6,821,752 shares) beneficially owned by officers, directors, and their affiliates[152] - Approximately 38.5% of the common stock is owned by executive officers, directors, and principal stockholders, allowing them significant influence over corporate matters[156] - 8,951,543 shares of common stock are subject to outstanding options, restricted stock units, and warrants, which will become eligible for sale in the public market[152] - The company has never declared or paid cash dividends on its common stock and does not intend to do so in the foreseeable future[155] - Future sales of substantial amounts of common stock could adversely affect the market price of the company's shares[153] Strategic Transition and Acquisitions - The company faces significant expenses related to acquisitions and the development of new products and services as part of its strategic transition to a technology-based company[94] - The company may not realize the anticipated benefits of acquisitions, which could lead to uncertainties affecting employee retention and customer relationships[115] - The company may face difficulties in mergers or acquisitions due to anti-takeover provisions in Delaware law and its own bylaws[160]

Rekor Systems, Inc. (NASDAQ:REKR) Q4 2022 Earnings Conference Call March 27, 2023 4:30 PM ET Company Participants Eyal Hen - CFO David Desharnais - President and COO Robert Berman - CEO Conference Call Participants Zach Cummins - B. Riley Securities Operator Good afternoon, ladies and gentlemen, and welcome to today's Rekor Systems Inc. Conference Call. My name is Ciarmoli and I will be your coordinator for today. [Operator Instructions] As a reminder, this conference call is being recorded for replay purpo ...

Rekor Systems, Inc. (NASDAQ:REKR) Q3 2022 Earnings Conference Call November 14, 2022 4:30 PM ET Company Participants Eyal Hen - Chief Financial Officer David Desharnais - President & Chief Operating Officer Robert Berman - Chief Executive Officer Charlie Degliomini - Executive Vice President, Government Relations & Corporate Communications Conference Call Participants Zach Cummins - B. Riley Operator Good afternoon, ladies and gentlemen, and welcome to today's Rekor Systems, Inc. Conference Call. My name is ...

Rekor Systems, Inc. (NASDAQ:REKR) Q2 2022 Earnings Conference Call August 11, 2022 4:30 PM ET Company Participants Eyal Hen - CFO, Principal Financial & Accounting Officer Robert Berman - Executive Chairman & CEO Conference Call Participants Michael Latimore - Northland Capital Markets Zachary Cummins - B. Riley Securities KC Ambrecht - Shay Capital Operator Good afternoon, ladies and gentlemen, and welcome to today's Rekor Systems, Inc. conference call. My name is Latanya, and I will be your coordinator fo ...

Table of Contents (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission File Number: 001-38338 Rekor Systems, Inc. (Exact name of registrant as specified in its charter) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Indicate ...

Rekor Systems, Inc. (NASDAQ:REKR) Q1 2022 Earnings Conference Call May 16, 2022 4:30 PM ET Company Participants Robert Berman - President and CEO Eyal Hen - CFO David Desharnais - President Conference Call Participants Zach Cummins - B. Riley Securities Jaeson Schmidt - Lake Street Operator Good afternoon, ladies and gentlemen, and welcome to today’s Rekor Systems Inc. Conference Call. My name is Diego and I will be your coordinator for today. [Operator instructions] As a reminder, this conference call is b ...

Table of Contents (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _________ Commission File Number: 001-38338 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Rekor Systems, Inc. FORM 10-Q Delaware 81-5266334 (I.R.S. Employer Identification No.) 6721 C ...

Rekor Systems, Inc. (NASDAQ:REKR) Q4 2021 Earnings Conference Call March 31, 2022 4:30 PM ET Company Participants Robert Berman - President and CEO Eyal Hen - CFO David Desharnais - President Conference Call Participants Max Michaelis - Lake Street Capital Markets Zach Cummins - B. Riley Operator Good afternoon, ladies and gentlemen, and welcome to Rekor Systems Conference Call. My name is Robin. I'll be your coordinator for today. [Operator instructions] As a reminder, this conference call is being recorde ...

```markdown Part I [Business](index=4&type=section&id=Item%201.%20Business) Rekor Systems, Inc. offers AI-powered intelligent infrastructure solutions for transportation and public safety, focusing on SaaS and strategic growth - Rekor positions itself as a leader in intelligent infrastructure, using its **AI-powered platform**, software, and smart optical devices to address challenges in transportation management and public safety across **80 countries**[14](index=14&type=chunk) - The company's core business model is shifting towards subscription-based **Software as a Service (SaaS)** offerings, although it continues to provide long-term licenses and hardware sales for strategic and large-scale projects[30](index=30&type=chunk) - Rekor estimates a total addressable global intelligent infrastructure market of **$148 billion by 2026**, driven by initiatives like the **2021 Infrastructure Investment and Jobs Act**[18](index=18&type=chunk)[60](index=60&type=chunk) - The company's growth strategy includes a "**land and expand**" approach, focusing on scaling its **Rekor One™ platform**, expanding services to existing customers, and fostering cooperation within its network. Future growth may be accelerated through strategic partnerships, mergers, and acquisitions[66](index=66&type=chunk)[67](index=67&type=chunk)[69](index=69&type=chunk) - On **August 18, 2021**, Rekor completed the acquisition of **Waycare Technologies, Ltd.**, a key strategic move to enhance its intelligent infrastructure solutions[85](index=85&type=chunk) [Platforms, Products, and Solutions](index=8&type=section&id=Platforms%2C%20Products%2C%20and%20Solutions) Rekor's AI-powered Rekor One™ platform supports its Traffic Management and Public Safety solutions, complemented by software and Edge Series hardware - The core of the company's technology is the **Rekor One™ platform**, a single, **AI-powered** intelligence system that serves as the foundation for all its solutions across traffic management, public safety, and commercial markets[31](index=31&type=chunk) - **Traffic Management Solutions**, built on **Rekor One™**, include modules for Roadway Monitoring and Response (RMR), Traffic and Infrastructure Analytics (TIA), and Live and Archival Traffic View (LATV)[34](index=34&type=chunk) - **Public Safety Solutions** leverage license plate and vehicle recognition technology. Key products include **Rekor Contactless Compliance** for automated violation management, **Rekor Scout™** for camera-based vehicle recognition, and **Rekor Blue™**, a mobile app for law enforcement[42](index=42&type=chunk)[43](index=43&type=chunk)[44](index=44&type=chunk) - The company offers a differentiated portfolio of **AI-based hardware**, the **Rekor Edge Series (Edge Pro and Edge Max)**, designed for edge processing to capture and transform roadway data at the source in real-time[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) [Competition](index=18&type=section&id=Competition) Rekor competes across intelligent infrastructure segments, including ALPR, differentiating itself with comprehensive, single-platform solutions - Competitors are classified into **four main groups**: data creators, data aggregators, insights platforms, and smart city technology providers[71](index=71&type=chunk)[76](index=76&type=chunk) - The company also faces competition from specialized **ALPR** and vehicle recognition vendors in public safety, as well as providers of automated safety solutions for red-light and speed enforcement[72](index=72&type=chunk) - Rekor's competitive differentiation strategy relies on providing end-to-end solutions on a **single platform**, efficiently collecting and aggregating data, and delivering tailored, actionable insights to multiple agencies[75](index=75&type=chunk) [Human Capital](index=20&type=section&id=Human%20Capital) As of March 31, 2022, Rekor employed 250 highly technical personnel, maintaining good employee relations and anticipating no staffing constraints - As of **March 31, 2022**, the company had **250 employees**, of whom **249** were full-time[86](index=86&type=chunk) - The workforce is described as highly educated and technical, with a substantial majority in technical roles. The company reports good employee relations[85](index=85&type=chunk)[86](index=86&type=chunk) [Risk Factors](index=22&type=section&id=Item%201A.%20Risk%20Factors) The company faces material risks including unprofitability, reliance on third-party data, an unproven market, competition, long sales cycles, cybersecurity, data privacy, and macroeconomic impacts - The company is not currently profitable, reporting a loss from continuing operations of **$26.8 million** for the year ended **December 31, 2021**, and may not achieve profitability in the future[95](index=95&type=chunk) - The market for the **Rekor One platform** is new and unproven, and its success depends on attracting new customers to adopt the platform and its services[98](index=98&type=chunk) - The business relies on third-party data providers and access to existing camera networks; failure to maintain these relationships could adversely impact growth[96](index=96&type=chunk) - The company may need to raise additional capital in the future, which may not be available on acceptable terms, or at all, potentially leading to dilution for existing stockholders[103](index=103&type=chunk) - The company faces risks related to data privacy and security, including compliance with regulations like **GDPR**, and could incur liability from improper disclosure of confidential or personal data[119](index=119&type=chunk)[120](index=120&type=chunk) - As of **December 31, 2021**, the company had significant federal and state net operating loss (NOL) carryforwards of approximately **$51.8 million** and **$43.6 million**, respectively, whose future use may be limited[134](index=134&type=chunk) [Properties](index=32&type=section&id=Item%202.%20Properties) Rekor Systems, Inc. leases all its office properties, including its principal executive offices in Columbia, Maryland, deeming them adequate for current and future needs - The company does not own any real property and leases all its office spaces, including its principal executive offices in **Columbia, Maryland**[161](index=161&type=chunk) [Legal Proceedings](index=33&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in several legal proceedings, including a lawsuit against former Firestorm executives for fraudulent inducement and a breach of contract claim from Fordham Financial Management - Rekor is in ongoing litigation with former executives of its acquired subsidiary, **Firestorm**, alleging fraudulent inducement and seeking rescission of the acquisition. The defendants have filed counterclaims[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) - **Fordham Financial Management, Inc.** has sued the company for an alleged breach of an underwriting agreement. The company believes the claims have no merit and is vigorously defending the action[168](index=168&type=chunk)[170](index=170&type=chunk) - A putative shareholder class action lawsuit filed in **June 2021**, alleging violations of the Securities Exchange Act, was voluntarily dismissed without prejudice in **November 2021**[171](index=171&type=chunk) - A lawsuit filed by subsidiary **OpenALPR** against a former customer, **Plate Capture Solutions, Inc. (PCS)**, was dismissed with prejudice in **August 2021**, closing the matter[167](index=167&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=36&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Rekor's common stock trades on Nasdaq under "REKR"; the company has never paid dividends, and preferred stock converted to common stock after a 2021 public offering and Waycare acquisition - The company's common stock is listed on the **Nasdaq Capital Market** under the symbol "**REKR**"[176](index=176&type=chunk) - Rekor has never paid cash dividends and does not plan to in the foreseeable future, intending to reinvest all earnings into the business[178](index=178&type=chunk) - Following a public offering in **February 2021**, all outstanding **Series A** and **Series B Preferred Stock** automatically converted into an aggregate of **1,416,785 shares** of common stock[179](index=179&type=chunk)[180](index=180&type=chunk) - The acquisition of **Waycare** on **August 18, 2021**, was paid for with **$39.9 million** in cash and **2,784,474 shares** of common stock valued at **$20.3 million**[182](index=182&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=38&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In FY2021, Rekor's revenue grew 55% to $14.3 million, but net loss widened to $26.8 million due to increased operating expenses, while key performance indicators show positive recurring revenue and performance obligations - The company completed the acquisition of **Waycare Technologies Ltd.** on **August 18, 2021**, and sold its professional services subsidiaries, **AOC Key Solutions** and **TeamGlobal**, in **2020**, shifting its focus entirely to its technology operations[187](index=187&type=chunk)[189](index=189&type=chunk)[190](index=190&type=chunk) - Key market opportunities driving the business include the growing **Smart City market**, the application of **AI for infrastructure**, connected vehicle data, and the expansion of automated motor vehicle law enforcement[192](index=192&type=chunk) - The **Infrastructure Investment and Jobs Act (IIJA)**, signed in **November 2021**, is identified as a significant business driver, providing substantial new federal funding for intelligent transportation systems[199](index=199&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) In 2021, revenue increased 55% to $14.3 million due to new programs and Waycare, but operating loss widened to $31.2 million from $11.8 million in 2020 due to higher operating expenses and M&A costs Consolidated Results of Operations (Continuing Operations) | (Dollars in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | **Revenue** | **$14,294** | **$9,234** | | Cost of revenue | $6,236 | $3,518 | | **Loss from operations** | **$(31,215)** | **$(11,848)** | | Total other income (expense) | $769 | $(2,091) | | Income tax benefit (provision) | $3,819 | $(23) | | **Net loss from continuing operations** | **$(26,777)** | **$(13,962)** | - Revenue increased by **$5.1 million** (**55%**) in **2021**, driven by new offerings like the **Oklahoma's UVED Program** (which generated **$1.3 million**) and revenue from the newly acquired **Waycare** (**$925,000**)[213](index=213&type=chunk)[214](index=214&type=chunk)[215](index=215&type=chunk) - Total operating expenses increased by **124%** to **$39.3 million** in **2021**. This was primarily due to a **$12.7 million** increase in G&A expenses (including **$2.0 million** in M&A costs) and a **$5.1 million** increase in R&D expenses, both driven by higher headcount[219](index=219&type=chunk)[220](index=220&type=chunk)[222](index=222&type=chunk) [Non-GAAP Measures](index=48&type=section&id=Non-GAAP%20Measures) Adjusted EBITDA for 2021 was a loss of $21.8 million, widening from $9.0 million in 2020, while Adjusted Gross Margin decreased to 56.4% due to a higher mix of lower-margin hardware sales Adjusted EBITDA Reconciliation | (Dollars in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Net loss from continuing operations | $(26,777) | $(13,962) | | Income tax (benefit) provision | $(3,819) | $23 | | Interest expense | $89 | $2,503 | | Depreciation and amortization | $3,552 | $1,961 | | **EBITDA** | **$(26,955)** | **$(9,475)** | | Adjustments: | | | | (Gain) loss on extinguishment of debt | $(886) | $3,281 | | Share-based compensation | $3,909 | $796 | | Merger and acquisition transaction costs | $2,025 | - | | **Adjusted EBITDA** | **$(21,757)** | **$(9,029)** | Adjusted Gross Profit and Margin | (Dollars in thousands, except percentages) | 2021 | 2020 | | :--- | :--- | :--- | | Revenue | $14,294 | $9,234 | | Cost of revenue, excluding D&A | $6,236 | $3,518 | | **Adjusted Gross Profit** | **$8,058** | **$5,716** | | **Adjusted Gross Margin** | **56.4%** | **61.9%** | [Key Performance Indicators](index=50&type=section&id=Key%20Performance%20Indicators) Key performance indicators show recurring revenue grew 28% to $4.6 million, total contract value won increased 35% to $8.9 million, and remaining performance obligations rose 35% to $22.6 million in 2021 Key Performance Indicators (YoY Growth) | Indicator | 2021 | 2020 | Growth | Growth % | | :--- | :--- | :--- | :--- | :--- | | Recurring Revenue | $4,634,000 | $3,616,000 | $1,018,000 | 28% | | Total Contract Value Won | $8,936,000 | $6,613,000 | $2,323,000 | 35% | | Performance Obligations (Year-End) | $22,587,000 | $16,705,000 | $5,882,000 | 35% | - Of the **$22.6 million** in remaining performance obligations at year-end **2021**, the company expects to recognize approximately **41%** as revenue over the succeeding twelve months[238](index=238&type=chunk) [Liquidity and Capital Resources](index=52&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2021, Rekor had $25.8 million in cash; net cash used in operations increased to $18.0 million, while financing activities provided $71.0 million, primarily from a public offering Cash Flow Summary (Continuing Operations) | (Dollars in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(18,028) | $(11,175) | | Net cash (used in) provided by investing activities | $(47,367) | $4,588 | | Net cash provided by financing activities | $70,992 | $25,447 | - The company ended **2021** with **$25.8 million** in unrestricted cash and cash equivalents and **$17.0 million** in working capital[245](index=245&type=chunk) - Management believes it has the ability to continue as a going concern for at least **one year** from the filing date, supported by current cash and a new at-the-market equity program established in **February 2022** for up to **$50 million**[245](index=245&type=chunk)[277](index=277&type=chunk) [Financial Statements and Supplementary Data](index=53&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for 2021 and 2020, along with Friedman LLP's auditor report, which includes critical audit matters such as revenue, liquidity, and the Waycare acquisition - The independent auditor, **Friedman LLP**, issued an unqualified opinion on the financial statements. Critical Audit Matters identified were: evaluation of standalone selling prices for revenue, liquidity, and the accounting for the acquisition of **Waycare Technologies, Ltd.**[284](index=284&type=chunk)[288](index=288&type=chunk) Consolidated Balance Sheet Highlights | (Dollars in thousands) | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | **Total Assets** | **$125,879** | **$40,402** | | Cash and cash equivalents | $25,796 | $20,595 | | Goodwill | $53,451 | $6,336 | | Intangible assets, net | $21,406 | $7,038 | | **Total Liabilities** | **$24,792** | **$8,542** | | **Total Stockholders' Equity** | **$101,087** | **$25,191** | - The acquisition of **Waycare** for **$60.2 million** resulted in the preliminary allocation of **$47.1 million** to goodwill and **$16.9 million** to acquired technology intangible assets[411](index=411&type=chunk)[412](index=412&type=chunk) - In **2020**, the company sold its subsidiaries **AOC Key Solutions** and **TeamGlobal**, which comprised its Professional Services Segment. The results of these operations are now classified as discontinued operations[311](index=311&type=chunk)[422](index=422&type=chunk) [Controls and Procedures](index=113&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021, with no material changes reported during the fiscal year - Management concluded that the company's disclosure controls and procedures were effective as of **December 31, 2021**[530](index=530&type=chunk) - Based on the **COSO 2013 framework**, management concluded that the company's internal control over financial reporting was effective as of **December 31, 2021**[532](index=532&type=chunk) - No changes in internal control over financial reporting occurred during the fiscal year that materially affected, or are reasonably likely to materially affect, these controls[535](index=535&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=114&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The company's executive team includes Robert A. Berman (CEO), Eyal Hen (CFO), and Rodney Hillman (COO); the Board has six members, five independent, with four standing committees and a Code of Conduct - The executive team is led by **Robert A. Berman** (CEO & Executive Chairman), **David Desharnais** (President, as of Jan 2022), **Eyal Hen** (CFO), and **Rodney Hillman** (COO)[540](index=540&type=chunk) - The Board of Directors is comprised of **six members**, with **five** determined to be independent under Nasdaq rules. **Robert A. Berman** is the only non-independent director[552](index=552&type=chunk) - The Board has **four standing committees: Audit, Compensation, Governance, and Nominations**, all chaired by and composed of independent directors[556](index=556&type=chunk)[557](index=557&type=chunk) - The company has adopted a **Code of Conduct** that serves as its **Code of Ethics** and is available on its website[568](index=568&type=chunk) [Executive Compensation](index=122&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation in 2021 primarily comprised base salary and equity awards, with CEO Robert A. Berman receiving $1.67 million, and awards granted under the 2017 Equity Award Plan 2021 Summary Compensation Table | Name | Position | Base Salary ($) | Equity Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | | Robert Berman | CEO | 645,000 | 1,000,004 | 1,669,881 | | Eyal Hen | CFO | 405,000 | 187,900 | 600,768 | | Rodney Hillman | COO | 342,500 | - | 354,858 | - The company's **2017 Equity Award Plan** is the primary vehicle for equity incentive awards. In **2021**, the number of shares available for issuance under the plan was increased by **4,368,733**[579](index=579&type=chunk) - Employment agreements provide for severance payments of **two times** base salary if a named executive officer is terminated within **120 days** of a Change of Control[596](index=596&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=127&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of March 31, 2022, directors and executive officers collectively owned 12.4% of common stock, with Robert A. Berman holding 7.3%, and other significant shareholders including Goldman Sachs, Arctis Global, and BlackRock - As of **March 31, 2022**, all directors and named executive officers as a group beneficially owned **5,564,807 shares**, representing **12.4%** of the outstanding common stock[602](index=602&type=chunk) - CEO **Robert A. Berman** beneficially owned **3,265,323 shares**, or **7.3%** of the class[602](index=602&type=chunk) - Shareholders beneficially owning more than **5%** of common stock include **Goldman Sachs Group Inc.** (**5.1%**), **Arctis Global, LLC** (**5.2%**), and **BlackRock, Inc.** (**5.0%**)[602](index=602&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=128&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The Governance Committee reviews related-party transactions, including the 2020 sale of AOC Key Solutions and CEO Robert Berman's participation in a promissory note exchange and stock purchase - The **Governance Committee**, composed of independent directors, reviews and approves related-party transactions[606](index=606&type=chunk)[607](index=607&type=chunk) - In **April 2020**, the company sold its **AOC Key Solutions** subsidiary to an entity formed by the subsidiary's management. Directors with relationships to the founders recused themselves from the decision[608](index=608&type=chunk) - In **July 2020**, affiliates of CEO **Robert Berman** and CSO **Matt Hill** participated in an exchange of **2019 Promissory Notes** for company common stock[609](index=609&type=chunk) [Principal Accountant Fees and Services](index=130&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Friedman LLP serves as the principal auditor, with all services pre-approved by the Audit Committee; aggregate fees were $289,000 in 2021 and $220,000 in 2020, primarily for audit services Accountant Fees | (Dollars in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Audit fees | $289 | $204 | | All other fees | - | $16 | | **Total** | **$289** | **$220** | - The company's principal auditor is **Friedman LLP**, and the Audit Committee pre-approves all services[612](index=612&type=chunk)[613](index=613&type=chunk) Part IV [Exhibits, Financial Statements Schedules](index=131&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statements%20Schedules) This section lists the financial statements and schedules, as detailed in Item 8, and provides an index of all filed exhibits, including governance documents and material contracts - This section lists the financial statements and schedules included in the report and provides an index of all exhibits filed, such as the **Certificate of Incorporation**, **bylaws**, and **material agreements**[616](index=616&type=chunk)[617](index=617&type=chunk)[618](index=618&type=chunk) ```

Financial Data and Key Metrics Changes - Revenue for Q3 2021 was $2.6 million, an increase of 23% compared to $2.1 million in Q3 2020 [10] - Revenue declined sequentially from $4.3 million in Q2 2021 [11] - Recurring revenues for Q3 2021 were $1.2 million, up 28% from $964,000 in Q3 2020 [11] - Year-to-date revenue for the nine months ended September 30, 2021, was $11.1 million, a 74% increase from $6.4 million in the same period last year [12] - Adjusted gross margin for Q3 2021 was 46%, down from 54% in Q3 2020 [17] - Total operating expenses for Q3 2021 were $10.9 million, compared to $4.5 million in Q3 2020 [19] - Adjusted EBITDA for Q3 2021 was a loss of $6.7 million, compared to a loss of $2.7 million in Q3 2020 [21] Business Line Data and Key Metrics Changes - The company is transitioning from a product-oriented transactional revenue model to a solution-oriented recurring revenue model [8] - The Oklahoma Uninsured Vehicle Enforcement Diversion Program generated $345,000 in revenue for Q3 2021 [15] - The year-over-year increase in revenue is attributed to the expansion of product and service offerings [14] Market Data and Key Metrics Changes - Remaining performance obligations in Q3 2021 were $23.8 million, a 57% increase from $15.2 million in Q2 2021 [12] - Total contract value won during the nine months ended September 30, 2021, was $7.7 million, an increase of 108% from $3.7 million in the same period in 2020 [13] Company Strategy and Development Direction - The company aims to capture a significant share of the emerging intelligent infrastructure market, projected to be $148 billion by 2026 [35] - The introduction of the Rekor One platform is designed to provide a comprehensive solution for multiple agencies [28] - The company plans to focus on subscription-based revenue to generate long-term growth [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth prospects despite the short-term impact of the new revenue model [23] - The company is committed to investing in innovation and expanding its geographic footprint [63] - Management highlighted the importance of building relationships with clients and providing verifiable results [47] Other Important Information - The company has been awarded the Intelligent Traffic System World Congress Hall of Fame Industry Award for the Americas [69] - The acquisition of Waycare is expected to enhance the company's capabilities and accelerate growth [68] Q&A Session Summary Question: How many square miles does Rekor have visibility on today through pilots? - Management indicated that square miles will be a component of KPIs and mentioned specific cities like Chattanooga [73][74] Question: What is the expected revenue recognition from performance obligations? - Management expects to recognize 36% of performance obligations over the next 12 months, amounting to nearly $9 million [76] Question: How does Rekor plan to engage with cities implementing contactless compliance solutions? - Management sees significant opportunities in cities like Philadelphia and Pittsburgh for contactless compliance solutions [78] Question: Can you explain the typical process for starting a pilot and securing a contract? - Management described a land and expand strategy where initial pilots lead to long-term contracts as stakeholders see the value [81] Question: What is the expected cash burn rate going forward? - Management noted that the cash burn rate will likely increase with the Waycare acquisition and ongoing investments, but they have access to capital markets if needed [90]