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Rekor Systems, Inc.


The law firm of Kirby McInerney LLP announces that a class action lawsuit has been filed in the U.S. District Court for the District of Maryland (Northern Division) on behalf of those who acquired Rekor Systems, Inc. f/k/a Novume Solutions, Inc. (“Rekor” or the “Company”) (NASDAQ: REKR) securities between April 12, 2019 and May 25, 2021, inclusive (the “Class Period”). Investors have until August 30, 2021 to apply to the Court to be appointed as lead plaintiff in the lawsuit.
 
Rekor, through its subsidiaries, provides vehicle identification and management systems based on artificial intelligence in the United States, Canada, and internationally.
 
One of the main drivers of Rekor’s business is its automatic license plate recognition (“ALPR”) technology, which the Company has pitched to investors as a major market opportunity since at least 2018. For example, Rekor has consistently touted the purportedly lucrative prospects of its uninsured vehicle enforcement diversion (“UVED”) partnership with the State of Oklahoma (“Oklahoma”), under which the Company receives compensation and commission fees in exchange for using its technology to scan vehicle license plates and compare them against a database to identify vehicles without auto-insurance. Fueled by management commentary, Rekor’s stock price has ballooned under the market perception that the Oklahoma UVED partnership is not only lucrative but the first stepping-stone to capturing similar deals with other municipalities.
 
The lawsuit alleges that, throughout the Class Period, defendants made materially false and misleading statements regarding the Company’s business, operations, and compliance policies.  Specifically, defendants made false and/or misleading statements and/or failed to disclose that: (i) Rekor’s ALPR technology and UVED-related business is outclassed by global competitors with an established, dominant market share; (ii) 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; (iii) 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; (iv) accordingly, Rekor had overstated its potential revenues, profitability, and overall ALPR- and UVED-related business prospects; and (v) as a result, the Company’s public statements were materially false and misleading at all relevant times.
 
On May 10, 2021, a bill authorizing the establishment of a state UVED program was excluded from the Texas Legislature’s Daily House Calendar and left pending in a state committee. Because May 10, 2021 was the deadline for the Texas UVED bill to move from the committee, news sources reported significant market speculation that the bill was dead. Further, on a post-market earnings call that same day to discuss Rekor’s first quarter 2021 financial results, defendant Berman also indicated that Rekor may not secure a UVED agreement with Texas. On this news, Rekor’s stock price declined by $5.20 per share, or approximately 27.5%, from $18.91 per share on May 7, 2021 to close at $13.71 per share on May 10, 2021. Then, following defendants’ post-market conference call with investors the same day, Rekor’s stock price fell an additional $2.45 per share, or approximately 17.87%, to close at $11.26 per share on May 11, 2021—representing a two-day total decline of $7.65 per share, or approximately 40.45%.
 
Then, on May 26, 2021, private investor Western Edge published a report addressing Rekor, entitled “Rekor Systems: Lackluster Growth Runway And Exaggerated Insurance Scheme Raise Substantial Downside Risk.” The Western Edge report alleged, among other things, that global competition was “miles ahead” of Rekor in ALPR development and market establishment; that the Company’s “realized results suggest management’s potential revenue guidance could be overstated by up to 80%”; and that investors were at risk of facing a “massive downside if [the Company’s] growth doesn’t show up.” The Western Edge report also noted that Rekor’s predecessor in the Oklahoma UVED partnership had exited it because “the program is not economically feasible” given costs associated with the program and because “there was typically no consequences for individuals that simply ignored the fines/insurance requirements after they were identified.”
 
Also on May 26, 2021, Mariner Research Group (“Mariner”) published a report addressing Rekor, entitled “REKR – Government documents do not support investor expectations.” The Mariner report “highlight[ed] government documentation which shows that REKR’s revenue opportunities are likely a fraction of what investors expect[.]” Among other things, Mariner alleged that “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.” The Mariner report likewise echoed the issues disclosed in the Western Edge report, including, inter alia, those that had caused Rekor’s predecessor in the Oklahoma UVED partnership to exit the program. On this news, Rekor’s stock price declined by $0.44 per share, or approximately 3.9%, from $11.21 per share on May 25, 2021 to close at $10.77 per share on May 26, 2021.
 
If you purchased or otherwise acquired Rekor securities, have information, or would like to learn more about these claims, please contact Thomas W. Elrod of Kirby McInerney LLP at 212-371-6600, by email at investigations@kmllp.com, or by filling out this contact form, to discuss your rights or interests with respect to these matters without any cost to you.  

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