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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 15, 2024
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Rekor Systems, Inc. |
(Exact name of registrant as specified in its charter) |
Delaware |
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001-38338 |
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81-5266334 |
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(State or Other Jurisdiction of Incorporation) |
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(Commission File Number) |
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(IRS Employer Identification No.) |
6721 Columbia Gateway Drive, Suite 400, Columbia, MD 21046 | ||
(Address of Principal Executive Offices) | ||
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Registrant's Telephone Number, Including Area Code: (410) 762-0800 |
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Common Stock, $0.0001 par value per share |
REKR |
The Nasdaq Stock Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter)
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02. Results of Operations and Financial Condition.
On May 15, 2024, Rekor Systems, Inc. (the “Company”) issued a press release summarizing the Company’s financial results for the first quarter ended March 31, 2024. A copy of this press release is furnished as Exhibit 99.1 hereto and incorporated herein by reference.
The foregoing information is intended to be furnished under Item 2.02 of Form 8-K, “Results of Operations and Financial Condition.” This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
A conference call has been scheduled for May 15, 2024, at 4:30 PM ET. Listeners may access the call live by telephone at (877) 407-8037 (toll free) and internationally at (201) 689-8037; or, via the Internet here. An archived webcast will also be available to replay this conference call directly from the investor relations section of the Company’s website at https://www.rekor.ai/investors.
In its discussion, management may reference certain non-GAAP financial measures related to company performance. A reconciliation of that information to the most directly comparable GAAP measures is provided in the press release, furnished herewith, and a copy of which can also be accessed in the investor relations section of the Company's website referenced above.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Appointment of Principal Executive Officer
On May 14, 2024, the board of directors (the “Board”) of the Company appointed David Desharnais as Chief Executive Officer of the Company, effective May 16, 2024. In this capacity, he will be the Company's principal executive officer. Mr. Desharnais will succeed Robert A. Berman, who will cease to serve as the Chief Executive Officer of the Company effective May 16, 2024. Mr. Berman will continue to serve as Executive Chairman of the Board.
Mr. Desharnais, 52, has served as the Company’s President and Chief Operating Officer since September 30, 2022, and as President since joining the Company on January 3, 2022. Mr. Desharnais has over two decades of experience leading growth strategies for technology driven businesses from start-ups to multinational corporations and across multiple industries. Prior to joining the Company in January 2022, Mr. Desharnais most recently served as Executive Vice President, Chief Digital Product Officer and as a member of the board of directors for IDEMIA, where he was responsible for global strategy and teams across product management, engineering and application development, customer delivery and integration, cybersecurity, data and analytics, strategic alliances and digital labs. Prior to IDEMIA, Mr. Desharnais was an executive at Amazon, where he served as the General Manager of Worldwide Industries for Amazon Web Services (AWS). Prior to Amazon, Mr. Desharnais was an executive at American Express, where he served as Senior Vice President and General Manager for Digital and Commercial Platforms and Global Commercial Payments. Mr. Desharnais graduated summa cum laude with a Bachelor of Science in electrical engineering technology from University of Calgary, and received a Master of Business Administration in strategy, finance, and marketing from the University of Washington, Michael G. Foster School of Business.
Mr. Berman’s current annual base salary will be reduced to $250,000 effective as of May 16, 2024, and the other terms of his employment agreement, as described in the Company’s Definitive Proxy Statement 2024 Annual Meeting of Shareholders, filed on Schedule 14A with the Securities and Exchange Commission on March 25, 2024 (the “2024 Proxy Statement”), will remain the same.
The terms of Mr. Desharnais’ employment agreement, as described in the 2024 Proxy Statement, will remain the same aside from his change in title. Mr. Desharnais’ employment agreement provides for an initial three-year term beginning in January 2022, subject to automatic extension. Mr. Desharnais earns an annual base salary of $795,000, and is eligible to receive annual performance bonuses in an amount up to $700,000 per year, as determined by the Board based on performance metrics mutually determined by the Company and the Mr. Desharnais. He is eligible to receive two times his base salary then in effect if his employment with the Company is terminated within 120 days of a change of control (as such term is defined in his employment agreement). Mr. Desharnais is eligible for benefits available to management employees generally, as outlined in the 2024 Annual Meeting Proxy.
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Election of Director
On May 14, 2024, the Board approved an increase to the size of the Board by one seat, to ten members, and appointed Viraj Mehta to fill the resulting vacancy, effective as of May 16, 2024. Mr. Mehta will assume the title of Executive Director and will serve for a term expiring at the Company’s 2025 annual meeting of stockholders.
Mr. Mehta, age 41, has twenty years of experience investing in markets primarily in the financial, industrial, infrastructure and technology sectors. He started his career at Goldman Sachs as an investment research analyst covering industrials and financials. After this, he worked at several hedge funds including Point72 Asset Management and Moore Capital as a Portfolio Manager, before launching his own fund Arctis Global, LLC (“Arctis”) in 2020 where he is currently the Chief Investment Officer.
Mr. Mehta’s fund, Arctis Global Master Fund Limited, an affiliate of Arctis, is an approximately 11.6% holder of common stock of the Company based on its Schedule 13G/A filed with the Securities and Exchange Commission on February 14, 2024, inclusive of warrants to purchase common stock that are exercisable within 60 days of the date of this Current Report on Form 8-K.
The Board has determined that Ms. Mehta is not an independent director within the meaning of NASDAQ Rule 5605. The Board has also determined that Tim Davenport, Chief Operating Officer and Partner of Arctis, is not an independent director within the meaning of NASDAQ Rule 5605. As a result, Mr. Davenport relinquished his membership on the Board’s Audit Committee effective as of May 14, 2024.
The Board has determined that Mr. Mehta’s skills and experiences within the finance industry and with financial strategy make him a qualified member of the Board.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. |
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Description |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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REKOR SYSTEMS, INC. |
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Date: May 15, 2024 |
/s/ Robert A. Berman |
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Name: Robert A. Berman Title: Chief Executive Officer |
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EXHIBIT 99.1
Rekor Systems, Inc. Reports First Quarter 2024 Financial Results
David Desharnais, President and COO, appointed as CEO; Viraj Mehta, Chief Investment Officer at Arctis Global, named Executive Director of the Board; Company Founder Robert A. Berman continues as Chairman.
Highlights:
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| · | Q1 2024 gross revenue increased 58% to $9.8 million as compared to $6.2 million in Q1 2023 |
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| · | Recurring revenue increased 18% to $5.0 million in Q1 2024 as compared to $4.2 million in Q1 2023 |
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| · | Closed All Traffic Data acquisition in January 2024 |
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| · | Completed a $26.4 million Public Offering in February 2024 |
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| · | Completed early redemption of Senior Secured Notes |
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| · | Company president and COO David Desharnais appointed CEO, effective May 16, 2024 |
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| · | Viraj Mehta, Chief Investment Officer of Arctis Global, appointed Executive Director of the Board |
COLUMBIA, MD – May 15, 2024 - Rekor Systems, Inc. (NASDAQ: REKR) ("Rekor" or the "Company"), a leader in developing and implementing state-of-the-art roadway intelligence technology, today disclosed financial results for the quarter ending March 31, 2024. Showing significant improvement across all key metrics, the Company maintained its year-over-year revenue growth pattern and established a foundation for future innovation and sustained financial stability. The Company also announced that its Board of Directors has appointed David Desharnais, currently President and COO, as the new CEO, and Viraj Mehta, Chief Investment Officer of Arctis Global, as an Executive Director of the Board, both effective May 16, 2024. Rekor's founder and outgoing CEO, Robert A. Berman, will continue to serve as the Chairman of the Board.
"The successful acquisition of All Traffic Data and completing a $26.4 million public offering are significant accomplishments in Q1. We remain focused on leveraging our core technologies and market leadership to advance our strategic objectives and continue delivering value to our shareholders," said Eyal Hen, CFO Rekor.
First Quarter Ended March 31, 2024 Financial Results
This section highlights the changes for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.
Revenues
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The increase in revenue for the three-month period ended March 31, 2024, compared to the three months ended March 31, 2023, was primarily attributable to our acquisition of ATD. During the three months ended March 31, 2024, revenue attributable to ATD was $2,364,000.
Cost of Revenue, excluding Depreciation and Amortization
For the three months ended March 31, 2024, the cost of revenue, excluding depreciation and amortization, increased compared to the three months ended March 31, 2023, primarily due to an increase in personnel and other direct costs such as hardware that were incurred to support our increase in revenue. Additionally, $829,000 of the increase was related to our acquisition of ATD.
Loss from Operations Excluding Goodwill Impairment
The increase in operating loss for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, was primarily attributable to our increased operating expenses year over year as a result of our acquisition of ATD.
Additional Key Performance Indicators and Non-GAAP Measures
Performance Obligations
As of March 31, 2024, the Company had approximately $22,912,000 in remaining performance obligations not yet satisfied or partially satisfied. This is a decrease of approximately 13%, down from $26,390,000 of remaining performance obligations as of December 31, 2023. Total performance obligations decreased over time as the contract term of the Company's long-term contracts began to near.
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. The total contract value is a non-GAAP measure in which there are certain assumptions that we make when determining the total value of a contract, such as the success rate of renewal periods, cancellations, and usage estimates. For the three months ended March 31, 2024, we won contracts valued at $7,846,000, compared to $12,083,000 for contracts won for the three months ended March 31, 2023. This represents a decline of $4,237,000 or 35%, period over period, primarily related to large statewide contracts that closed in the first quarter of 2023. These multi-year contracts are still in effect in 2024.
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Adjusted Gross Profit and Adjusted Gross Margin
Adjusted Gross Margin for the three months ended March 31, 2024, decreased compared to the three months ended March 31, 2023. During the three months ended March 31, 2024, the Company had a lower mix of software sales which typically carry a higher Adjusted Gross Margin.
EBITDA and Adjusted EBITDA
The Company calculates EBITDA as net loss before interest, taxes, depreciation, and amortization. The Company calculates Adjusted EBITDA as net loss before interest, taxes, depreciation, and amortization, adjusted for (i) impairment of intangible assets, (ii) loss on extinguishment of debt, (iii) stock-based compensation, (iv) losses or gains on sales of subsidiaries, and (v) other unusual or non-recurring items. EBITDA and Adjusted EBITDA are not measurements of financial performance or liquidity under accounting principles generally accepted in the U.S. ("U.S. GAAP") and should not be considered as an alternative to net earnings or cash flow from operating activities as indicators of our operating performance or as a measure of liquidity or any other measures of performance derived in accordance with U.S. GAAP. EBITDA and Adjusted EBITDA are presented because we believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of a company's ability to service and/or incur debt. However, other companies in our industry may calculate EBITDA and Adjusted EBITDA differently than we do.
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The following table sets forth the components of the EBITDA and Adjusted EBITDA for the periods included (dollars in thousands):
Rekor has scheduled a conference call to discuss the first quarter 2024 results on Wednesday, May 15, 2024, at 4:30 P.M. (Eastern).
Any person interested in participating in the call should please dial in approximately 10 minutes prior to the start of the call using the following information:
North America: 877-407-8037/ 201-689-8037
International:
Click here for participant International Toll-Free access numbers
Webcast: https://event.choruscall.com/mediaframe/webcast.html?webcastid=BcC5BcCM
REPLAY INFORMATION
A replay will be made available online approximately two hours following the live call for a period of two weeks. To access the replay, use the following numbers:
Replay Dial-In: 877-660-6853 / 201-612-7415
Access ID: 13746266
An archived webcast will also be available to replay this conference call directly from the Company's website under Investors, Events & Presentations.
About Rekor Systems, Inc.
Rekor Systems, Inc. (NASDAQ: REKR) is a leader in developing and implementing state-of-the-art roadway intelligence systems using AI-enabled computer vision and machine learning. As a pioneer in the implementation of digital infrastructure, Rekor is collecting, connecting, and organizing the world's mobility data – laying the foundation for a digitally-enabled operating system for the roadway. With our Rekor One® Roadway Intelligence Engine at the core of our technology, we aggregate and transform trillions of data points into intelligence through proprietary computer vision, machine learning, and big data analytics that power our platforms and applications. Our solutions provide actionable insights that give governments and businesses a comprehensive picture of roadways while providing a collaborative environment that drives the world to be safer, greener, and more efficient. To learn more, please visit our website: https://rekor.ai, and follow Rekor on social media on LinkedIn, X (formerly Twitter), Threads, and Facebook.
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Forward-Looking Statements
This press release and its links and attachments contain statements concerning Rekor Systems, Inc. and its future expectations, plans, and prospects that constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the impact of Rekor's core suite of AI-powered technology and the size and shape of the global market for ALPR systems. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements that are not statements of historical fact may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "may," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential," or "continue," by the negative of these terms or by other similar expressions. You are cautioned that such statements are subject to many risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual circumstances, events or results may differ materially from those projected in the forward-looking statements, particularly as a result of various risks and other factors identified in our filings with the Securities and Exchange Commission. All forward-looking statements contained in this press release speak only as of the date on which they were made and are based on management's assumptions and estimates as of such date. We do not undertake any obligation to publicly update any forward-looking statements, whether as a result of the receipt of new information, the occurrence of future events, or otherwise.
Company Contact:
Rekor Systems, Inc.
Eyal Hen
Chief Financial Officer
Phone: +1 (443) 545-7260
ehen@rekor.ai
Media & Investor Relations Contact:
Rekor Systems, Inc.
Charles Degliomini
ir@rekor.ai
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REKOR SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
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REKOR SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except share data)
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