Rekor Systems, Inc 8-K/A, filed Sep 14, 2021

Rekor Systems, Inc. (REKR)

8-K/A 2021-09-14 For: 2021-08-18

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Added on April 12, 2026

About this 8-K/A

Rekor Systems, Inc filed this 8-K/A on September 14, 2021, reporting on events of August 18, 2021.

Items reported

Item 9.01: Financial statements and exhibits

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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

Exhibit No.		Description

23.1		Consent of Independent Auditors of Waycare Technologies Ltd.
99.1		Audited consolidated financial statements of Waycare Technologies Ltd. For the year ended December 31, 2020 and the related notes to such financial statements, and unaudited consolidated financial statements of Waycare Technologies Ltd. For the six months ended June 30, 2021 and the related notes to such financial statements.
99.2		Unaudited pro forma condensed combined financial statements, which include a pro forma condensed combined balance sheet as of June 30, 2021 and pro forma condensed combined statements of operations for the year ended December 31, 2020 and for the six months ended June 30, 2021 and the notes related thereto.

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

		REKOR SYSTEMS, INC.

Date: September 14, 2021		/s/ Robert A. Berman
		Name: Robert A. Berman Title: President and Chief Executive Officer

/s/ KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
Tel-Aviv, Israel
September 14, 2021

	Page

Report of Independent Auditors	2

Consolidated Balance Sheet	3

Consolidated Statement of Comprehensive loss	4

Consolidated Statements of Convertible Preferred Shares and Shareholders' Deficiency	5

Consolidated Statement of Cash Flow	6

Notes to Consolidated Financial Statements	7 - 19

7172 Columbia Gateway Drive, Suite 400, Columbia, MD 21046
(Address of Principal Executive Offices)

Registrant's Telephone Number, Including Area Code: (410) 762-0800

KOST FORER GABBAY & KASIERER
A Member of Ernst & Young Global
Tel-Aviv, Israel
September 14, 2021

		December 31,
	Note	2020
ASSETS

CURRENT ASSETS:
Cash and cash equivalents		$	1,299
Restricted cash			82
Trade receivables			642
Other current assets	3		108

Total current assets			2,131

NON - CURRENT ASSETS:
Property and equipment, net	4		48

Total assets		$	2,179

LIABILITIES AND CONVERTIBLE PREFERRED SHARES AND SHAREHOLDERS DEFICIENCY

CURRENT LIABILITIES:
Trade payables		$	74
Employees and payroll accruals			300
Other accounts payables			217
Deferred revenues			93

Total current liabilities			684

Total liabilities		$	684

Commitments and Contingencies	5

Convertible preferred shares, NIS 0.01 par value per share, 2,552,902 shares authorized: 2,388,279 issued and outstanding as of December 31, 2020	6	$	9,625

SHAREHOLDERS' DEFICIENCY:	7
Ordinary shares, NIS 0.01 par value per share, 7,471,028 shares authorized: 943,545 issued and outstanding as of December 31, 2020			3
Additional paid in capital			791
Accumulated deficit			(8,924	)
Treasury shares		(*)

Total shareholders' deficiency			(8,130	)

Total liabilities, convertible preferred shares and shareholders' deficiency		$	2,179

		December 31, Year ended
	Note	2020

Revenues		$	2,034
Cost of revenues			709

Gross profit			1,325

Research and development expenses			2,842
Marketing, general and administrative expenses			2,158

Total operating expenses			5,000

Operating loss			3,676

Financial expenses, net			28

Loss before taxes on income			3,703

Taxes on income	8		22

Total comprehensive loss		$	3,725

	Convertible Preferred Shares		Amount		Ordinary Shares			Amount		Treasury Shares		Additional paid in capital		Accumulated deficit			Total Shareholders' deficiency

Balance as of January 1, 2020		2,388,279	$	9,625		1,051,300		$	3	$	(*)	$	388	$	(5,199	)	$	(4,808	)

Stock-based compensation		-		-		-			-		-		402		-			402
Exercise of options		-		-		33,912			-		-		1		-			1
Purchase of treasury shares		-		-		(141,667	)	(*)		(*)			-		-		(*)
Loss		-		-		-			-		-		-		(3,725	)		(3,725	)

Balance as of December 31, 2020		2,388,279	$	9,625		943,545		$	3	$ (*)		$	791	$	(8,924	)	$	(8,130	)

	December 31, Year ended
	2020
Cash flows from operating activities:

Loss	$	(3,725	)
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation on fixed assets		17
Stock-based compensation		402
Increase in trade receivables		(416	)
Decrease in other accounts receivable		162
Increase in trade payables		15
Increase in employees and payroll accruals		83
Increase in other accounts payable		195
Increase in deferred revenues		93

Net cash used in operating activities		(3,174	)

Cash flows from investing activities:

Purchase of property and equipment		(34	)

Net cash used in investing activities		(34	)

Cash flows from financing activities:

Proceeds from short-term deposit		24
Exercise of options		1

Net cash provided by financing activities		25

Decrease in cash, cash equivalents and restricted cash		(3,183	)
Cash, cash equivalents and restricted cash at the beginning of the period		4,564

Cash, cash equivalents and restricted cash at the end of the period	$	1,381

Supplemental disclosures of cash flow information:
Income tax payments	$	18

	a.	Waycare Technologies Ltd. ("the Company") was incorporated as a private company on June 27, 2016 under the laws of the state of Israel and began its operations on July 1, 2017.

		The Company develops systems in the smart transportation field, which identify car accidents, and traffic jams.

	b.	In April 2018, the Company has established a fully owned subsidiary in the United States, Waycare Technologies INC ("Waycare INC"). Waycare INC engages in sales and marketing services for the Company.

	c.	Since inception, the Company has incurred accumulated deficit of $8,924 and negative cash flows from operating activities. The Company is dependent upon additional funding sources in order to continue its activities and therefore there is uncertainty about the ability to generate positive cash flows from its activities in the future. The Purchaser is committed to financially support the Company in order to enable it to fulfil its financial obligation for a period of at least 12 months from the date the approval of the financial statements (see note 9).

	d.	In December 2019, a novel coronavirus (“COVID-19”) was reported in China. During March 2020, it was declared a pandemic by the World Health Organization (“WHO"). According to health authorities in different locations, the Company instructed its employees to work from home. The Company has also suspended all non-essential travel worldwide for its employees. It is not possible at this time to estimate the impact that COVID-19 could have on the Company business, as the impact will depend on future developments, which are highly uncertain and cannot be predicted.

	a.	Basis of presentation and principles of consolidation:

		These consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) as set forth in the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC). The consolidated financial statements include accounts of the Company’s wholly owned subsidiary. All intercompany accounts and transactions are eliminated.

	b.	Use of estimates:

		The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company’s management believes that the estimates, judgment and assumptions used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities at the dates of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

	c.	Functional currency, presentation currency and foreign currency:

		The functional currency of the Company and its subsidiaries is the U.S. dollar. Accordingly, monetary accounts maintained in currencies other than the U.S. dollar are re-measured into U.S. dollars in accordance with Accounting Standard Codification (“ASC”) No. 830 “Foreign Currency Matters.” All transaction gains and losses of the re-measured monetary balance sheet items are reflected in the consolidated statements of operations as financial income or expenses, as appropriate.

	d.	Cash equivalents:

		The Company considers highly liquid investments, including unrestricted short-term bank deposits with an original maturity of three months or less from the date of investment, to be cash equivalents.

	e.	Restricted Cash:

		As collateral for guarantees provided to secure credit cards payments and rental agreement, the Company pledged deposits in favor of a bank.

	f.	Fair value of financial instruments:

		The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

	·	Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.

	·	Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

	·	Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

	Cash equivalents, restricted cash , trade receivable, trade payable, employee and payroll accruals and accrued expenses are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date.

	g.	Concentration of credit risks:

		Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash and cash equivalents, restricted cash, and accounts receivable. Cash, cash equivalents and restricted cash are deposited in major banks in Israel and the US. Such investments in Israel and the US may be in excess of insured limits and are not insured in other jurisdictions. Generally, cash and cash equivalents may be redeemed upon demand and, therefore, bear minimal risk. The Company grants credit to its customers in the normal course of business.

	h.	Property and equipment, net:

		Property and equipment are measured at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis at annual rates which are considered adequate for the depreciation of the assets over their estimated useful life as follows:

		%
Computers and software		33
Office and furniture		15
Leasehold improvements		*

	*)	Leasehold improvements are amortized according to the straight-line method over the lease term or in accordance with the estimated life of the improvement, whichever is shorter.

	i.	Impairment of long-lived assets:

		The long-lived assets of the Company are reviewed for impairment in accordance with ASC No. 360, “Property, Plant and Equipment” (“ASC No. 360”), whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. During the years ended December 31, 2020, no impairment losses have been identified.

	j.	Severance pay:

		The Company agreements with most of the employees are in accordance with section 14 of the Severance Pay Law - 1963 which provide that the Company's contributions to severance pay fund shall cover its entire severance obligation. Accumulated amounts in the pension funds and with the insurance companies are not under the control or administration of the Company, and accordingly, neither those amounts nor the corresponding accrual for severance pay are reflected in the balance sheet. The obligation of the Company, under law and labor agreements, for termination benefits to employees not covered by the aforementioned pension or insurance plans, are included in the balance sheet, as the Company is legally released from the obligation to employees once the deposit amounts have been paid. Severance expense for the years ended December 31, 2020 amounted to $90.

	k.	Revenue recognition:

		The Company adopted ASC 606 on January 1, 2019, using the modified retrospective transition method applied to those contracts which were not completed as of January 1, 2019. The new standard application had no material effect on the pattern of revenue recognition. The Company derives its revenues mainly from subscription fees for the usage of its platform and related services. The Company recognizes revenue in accordance with ASC Topic 606, Revenue from contracts with customers (“ASC 606”) and determines revenue recognition through the following steps: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied. The Company recognizes revenue when its customer obtains control of promised services in an amount that reflects the consideration that the company expects to receive in exchange for those services. The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring goods or services to the customer, excluding taxes assessed by a governmental authority, that are collected by the Company from a customer. The Company services provided on a subscription basis and recognized ratably over the contract period. The Company applied the practical expedient in Topic 606 and did not evaluate contracts of one year or less for the existence of a significant financing component. The Company recognizes contract liabilities (deferred revenues) when it receives advance payments from customers before performance obligations have been performed.

	l.	Cost of sales:

		Cost of products is comprised of employee's salaries, servers cost and related costs.

	m.	Research and development expenses:

		Research and development expenses are charged to expenses, as incurred.

	n.	Accounting for stock-based compensation:

		ASC 718 - "Compensation-stock Compensation"- ("ASC 718") requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award is recognized as an expense over the requisite service periods in the Company's statements operations. The Company recognizes forfeitures of awards as they occur. The Company recognizes compensation expense for the value of its awards on a straight-line basis over the requisite service period of each of the awards. The Company estimates the fair value of stock options granted using the Black-Scholes option-pricing model. The option-pricing model requires a number of assumptions, of which the most significant are the expected stock price volatility and the expected option term. Since the Company is not traded, the expected volatility is derived from the average historical share volatilities of several unrelated public companies within the Company’s industry that the Company considers to be comparable to its own business . The expected term represents the period that options are expected to be outstanding. For option grants that are considered to be “plain vanilla,” the Company determines the expected term using the simplified method. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the options. The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. The Company has historically not paid dividends and has no foreseeable plans to pay dividends. The fair value for options granted in 2020 is estimated at the date of grant using a Black-Scholes options pricing model with the following assumptions:

	December 31, Year ended
	2020

Expected term (in years)		6.25
Expected volatility		80	%
Risk-free interest rate	0.20%-0.27		%
Dividend yield		0	%

	o.	Income taxes:

		The Company accounts for income taxes in accordance with ASC 740, “Income Taxes” (“ASC 740”). This standard prescribes the use of the liability method, whereby deferred tax asset and liability accounts balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value, and if it is more likely than not that some portion of the entire deferred tax asset will not be realized. The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740-10, “Income Taxes”. Accounting guidance addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements, under which a Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.

	p.	Recently issued accounting pronouncements:

		In February 2016, the FASB issued ASU 2016-02, "Leases". The updated standard aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. As currently issued and amended, the standard will become effective for the Company in 2022. Early adoption is permitted. The Company is currently evaluating the impact of adoption on its consolidated financial statement. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in the timelier recognition of losses. The new accounting standard will be effective for the fiscal year beginning on January 1, 2023, including interim periods within that year. The Company is currently evaluating the impact of adopting this new guidance on its financial statements.

	December 31,
	2020

Government authorities	$	43
Prepaid Expanses		65

	$	108

	December 31,
	2020
Cost:
Office and Furniture	$	5
Leasehold Improvement		3
Computers and software		68

	$	76

Accumulated depreciation	$	(28	)

Depreciated cost	$	48

Year ended December 31,	Operating leases payments

2021	$	95
2022		71

Total	$	166

	December 31, 2020
	Authorized		Issued and outstanding
Preferred shares A of NIS 0.01 par value each		1,628,181		1,475,538
Preferred shares A1 of NIS 0.01 par value each		250,982		239,002
Preferred shares A2 of NIS 0.01 par value each		152,378		152,378
Preferred shares A3 of NIS 0.01 par value each		359,052		359,052
Preferred shares A4 of NIS 0.01 par value each		162,309		162,309

Total		2,552,902		2,388,279

	December 31, 2020
	Authorized		Issued and outstanding
	Number of shares

Ordinary shares of NIS 0.01 par value each		7,471,028		943,545

	c.	Treasury shares:

		In November 2020, the Company purchased 141,667 Ordinary shares from one of the shareholders in price of 0.01 NIS per share.

	Number of options			Weighted average exercise price		Weighted average remaining contractual term (in years)		Aggregate Intrinsic value

Outstanding as of January 1, 2020		327,139		$	0.45		9.74	$	314,524

Granted		92,008			0.29
Exercised		(33,912	)		0.03
Forfeited		(56,223	)		0.77

Outstanding as of December 31, 2020		329,012		$	0.39		8.24	$	256,208

Exercisable as of December 31, 2020		219,267		$	0.34

	b.	Income taxes on non-Israeli subsidiary:

		Non-Israeli subsidiary is taxed according to the laws in its respective country of residence.

	c.	Net operating losses carry forwards:

		The Company has accumulated losses for tax purposes as of December 31, 2020 in the amount of approximately $6,000 which may be carried forward and offset against taxable income in the future for an indefinite period.

	d.	Tax assessment:

		The Company has not received assessments since its inception.

	e.	Deferred taxes:

	December 31,
	2020

Loss carryforward	$	1,508
Research and development expenses		445
Accruals and reserves		11

Deferred tax assets before valuation allowance		1,964
Less - valuation allowance		(1,964	)

Net deferred tax assets	$	-

	December 31,
	2020

Domestic (Israel)	$	3,778
Foreign		(76	)

Total	$	3,703

	1.	In April 2021 the Company entered into a loan agreement with the bank in total amount of $1,500. During the six months period ended June 30, 2021, the Company repaid $100, the remainder was paid subsequent to June 30, 2021 by the Company and Rekor, System Inc as part of the completion of the acquisition (see Note 9(2)).

	2.	On August 6, 2021, the Company signed an agreement of a Shares Purchase Agreement ("SPA") to be fully acquired by Rekor Systems Inc. (the "Buyer"), for an aggregate purchase price of $61,000, subject to the terms of the agreement. The SPA contains customary representations, warranties, and covenants of the Company and the Buyer.

	Page

Consolidated Balance Sheets	2 – 3

Consolidated Statements of Comprehensive loss	4

Consolidated Statements of Convertible Preferred Shares and Shareholders' Deficiency	5

Consolidated Statements of Cash Flows	6

Notes to Interim Consolidated Financial Statements	7 - 10

		June 30,		December 31
	Note	2021		2020
		Unaudited

ASSETS

CURRENT ASSETS:
Cash and cash equivalents		$	903	$	1,299
Restricted cash			88		82
Short-term deposits			14		-
Trade receivables			1,280		642
Other current assets			131		108

Total current assets			2,416		2,131

NON - CURRENT ASSETS:
Property and equipment, net			70		48

Total assets		$	2,486	$	2,179