Rekor Systems, Inc.

On May 10, 2021, a Texas bill authorizing the establishment of a state uninsured vehicle enforcement diversion (“UVED”) was left pending in state committee, leading to significant market speculation that the bill was dead. The same day, during a conference call, Rekor indicated that the Company may not secure a UVED agreement with Texas.

On this news, the Company’s stock price fell $5.20, or 27.5%, to close at $13.71 per share on May 10, 2021, thereby injuring investors. The stock price continued to decline during the next trading session by $2.45, or nearly 18%, to close at $11.26 per share on May 11, 2021.

Then on May 26, 2021, Western Edge published a report entitled “Rekor Systems: Lackluster Growth Runway and Exaggerated Insurance Scheme Raise Substantial Downside Risk,” alleging, among other things, that the Company’s “realized results suggest management’s potential revenue guidance could be overstated by up to 80%.” The report also noted that Rekor’s predecessor in the Oklahoma UVED partnership had exited it because “the program is not economically feasible.”

The same day, Mariner Research Group published a report entitled “REKR - Government documents do not support investor expectations.” According to the report, “government documentation . . . shows that REKR’s revenue opportunities are likely a fraction of what investors expect.” For example, “Oklahoma government budgets imply that REKR’s much vaunted UVED program is a sub $2MM revenue opportunity--almost 96% less than the > $40MM in revenue intimated by Rekor’s CEO.”

On this news, Rekor’s stock price fell $0.44 per share, or 3.93%, to close at $10.77 per share on May 26, 2021.

The complaint filed alleges that throughout the Class Period, Defendants made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations, and prospects. Specifically, Defendants failed to disclose to investors that: (1) Rekor's automatic license plate recognition (“ALPR”) technology and UVED-related business is outclassed by global competitors with an established, dominant market share; (2) it was unlikely that states would pass legislation authorizing deals similar to Rekor's Oklahoma UVED partnership because of, inter alia, state and local privacy laws and related public concerns; (3) Rekor's UVED partnership was not as profitable as Defendants had led investors to believe because of known impediments to enrollment rates and costs associated with the partnership; (4) accordingly, Rekor had overstated its potential revenues, profitability, and overall ALPR- and UVED-related business prospects; and (5) as a result, Defendants' statements about its business, operations, and prospects, were materially false and misleading and/or lacked a reasonable basis at all relevant times.