REKOR SYSTEMS, INC.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed
by the Registrant [X]
Filed
by a Party other than the Registrant [ ]
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the appropriate box
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[
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Preliminary
Proxy Statement
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[ ]
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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[X]
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Definitive
Proxy Statement
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Definitive
Additional Materials
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[ ]
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Soliciting
Material Pursuant to Rule Sec.240.14a-12
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Rekor Systems, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant
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of Filing Fee (Check the appropriate box):
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computed on table below per Exchange Act Rules 14a-6(i) (1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was
determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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Fee
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Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
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Amount
previously paid:
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Form,
Schedule or Registration Statement No.:
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Date
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7172
Columbia Gateway Drive, Suite 400, Columbia, MD 21046
(410)
762-0800
June
28, 2019
Dear
Shareholder,
You are
cordially invited to attend the 2019 Annual Meeting of Shareholders
(the “Annual Meeting”) of Rekor Systems, Inc. to be
held at 10:00 a.m. (local time) on August 7, 2019, at 151 West
43
rd
Street, 10
th
Floor, New York, NY
10036. The attached notice of Annual Meeting and proxy statement
describe the matters to be presented at the Annual Meeting and
provide information about us that you should consider when you vote
your shares.
The
principal business of the meeting will be (i) to elect as
directors the nominees named in this proxy statement to serve until
2020 Annual Meeting of Shareholders and until their successors are
duly elected and qualified, (ii) to ratify the appointment of
Friedman LLP as our independent public accountant for the fiscal
year ending December 31, 2019, and (iii) to transact such other
business as may be properly brought before the Annual Meeting and
any adjournments thereof.
We hope
you will be able to attend the Annual Meeting. Whether you plan to
attend the Annual Meeting or not, it is important that your shares
are represented. Therefore, when you have finished reading the
proxy statement, you are urged to complete, sign, date and return
the enclosed proxy card promptly in accordance with the
instructions set forth on the card. This will ensure your proper
representation at the Annual Meeting, whether or not you can
attend.
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Sincerely,
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/s/
James K. McCarthy
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James
K. McCarthy
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Chairman
of the Board
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YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY PROMPTLY.
7172
Columbia Gateway Drive, Suite 400, Columbia, MD 21046
(410)
762-0800
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be Held August 7, 2019
To the
Shareholders of Rekor Systems, Inc.:
NOTICE
IS HEREBY GIVEN that the 2019 Annual Meeting of Shareholders (the
“Annual Meeting”) of Rekor Systems, Inc., a Delaware
corporation (the “Company”), will be held at 10:00 a.m.
(local time) on August 7, 2019, or such later date or dates as such
Annual Meeting date may be adjourned, at 151 West 43
rd
Street,
10
th
Floor, New York, NY 10036, for the purpose of considering and
taking action on the following proposals:
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1.
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Elect
as directors the nominees named in the proxy
statement;
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2.
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To ratify the appointment of
Friedman LLP
as our independent public accountant
for the fiscal year ending December 31, 2019;
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3.
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To transact such other business as may be properly brought before
the Annual Meeting and any adjournments thereof.
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The
foregoing
business items are more fully described
in the following pages, which are made part of this
notice.
The
Board recommends that you vote as follows:
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“
FOR
”
for the election of the Board nominees as directors;
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“
FOR
”
ratification of the selection of
Friedman LLP
as our independent public accountant
for our fiscal year ending December 31, 2019;
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You may
vote if you were the record owner of the Company’s common
stock at the close of business on June 28, 2019. The Board of
Directors of the Company has fixed the close of business on June
28, 2019 as the record date (the “Record Date”) for the
determination of shareholders entitled to notice of and to vote at
the Annual Meeting and at any adjournments thereof.
As of
the Record Date there were 19,382,185 shares of common stock
outstanding and entitled to vote at the Annual Meeting and 240,861
shares of Series B Convertible Preferred Stock (“Series B
Preferred Stock”) outstanding,
of which
481,722
shares of
underlying common stock are entitled to vote at the Annual
Meeting
. Holders of the shares of common stock are entitled
to one vote for each share of common stock held.
Each holder of Series B
Preferred Stock is entitled to a
number
of votes equal to the
number of shares of common stock issuable upon conversion of such
holder’s Series B Preferred Stock, but only for the election
of members of the Board of Directors.
A list of shareholders
of record will be available at the meeting and, during the 10 days
prior to the meeting, at the office of the Secretary of the Company
at 7172 Columbia Gateway Drive, Suite 400, Columbia, MD
21046.
All
shareholders are cordially invited to attend the Annual Meeting.
Whether you plan to attend the Annual Meeting or not, you are
requested to complete, sign, date and return the enclosed proxy
card as soon as possible in accordance with the instructions on the
proxy card. A pre-addressed, postage prepaid return envelope is
enclosed for your convenience.
By
Order of the Board of Directors of Rekor Systems,
Inc.,
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Sincerely,
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/s/
James K. McCarthy
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James
K. McCarthy
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Chairman
of the Board
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Your
vote is important. Please vote as promptly as possible even if you
plan to attend the Annual Meeting.
For
information on how to vote your shares, please see the instruction
from your broker or other fiduciary, as applicable, as well as
“General Information About the Annual Meeting” in the
proxy statement accompanying this notice.
We
encourage you to vote by completing, signing, and dating the proxy
card, and returning it in the enclosed envelope.
If you
have questions about voting your shares, please contact our
Corporate Secretary at Rekor Systems, Inc., at 7172 Columbia
Gateway Drive, Suite 400, Columbia, MD 21046, telephone number
(410) 762-0800.
If you
decide to change your vote, you may revoke your proxy in the manner
described in the attached proxy statement at any time before it is
voted.
We urge
you to review the accompanying materials carefully and to vote as
promptly as possible. Note that we have enclosed with this notice a
proxy statement/prospectus.
THE PROXY STATEMENT IS AVAILABLE AT:
https://www.iproxydirect.com/REKR
By
Order of the Board of Directors,
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Sincerely,
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/s/
James K. McCarthy
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James
K. McCarthy
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Chairman
of the Board
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 7, 2019 AT
10:00 A.M. EDT.
The Notice of Annual Meeting of Shareholders and our Proxy
Statement are available at:
https://www.iproxydirect.com/REKR
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REFERENCES TO ADDITIONAL INFORMATION
This
proxy statement incorporates important business and financial
information about Rekor Systems, Inc. that is not included in or
delivered with this document. You may obtain this information
without charge through the Securities and Exchange Commission
(“SEC”) website (www.sec.gov) or upon your written or
oral request by contacting the Corporate Secretary of Rekor
Systems, Inc., 7172 Columbia Gateway Drive, Suite 400, Columbia, MD
21046, telephone number (410) 762-0800.
To ensure timely delivery of these documents, any request should be
made no later than July 26, 2019 to receive them before the annual
meeting.
For
additional details about where you can find information about Rekor
Systems, Inc., please see the section entitled “Where You Can
Find More Information” in this proxy statement.
Table of Contents
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GENERAL
INFORMATION ABOUT THE ANNUAL MEETING
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1
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
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5
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ELECTION
OF DIRECTORS
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6
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EXECUTIVE
OFFICERS
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14
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EXECUTIVE
COMPENSATION
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15
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COMPENSATION
OF REKOR DIRECTORS
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18
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
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19
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RATIFICATION
OF THE APPOINTMENT OF FRIEDMAN LLP AS INDEPENDENT PUBLIC ACCOUNTANT
FOR THE FISCAL YEAR ENDING DECEMBER 31,
2019
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20
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OTHER
MATTERS
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21
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7172
Columbia Gateway Drive, Suite 400, Columbia, MD 21046
(410)
762-0800
FOR REKOR SYSTEMS, INC.
2018 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON AUGUST 7,
2019
This
proxy statement, along with the accompanying notice of the 2019
Annual Meeting of Shareholders, contains information about the 2019
Annual Meeting of Shareholders of Rekor Systems, Inc., including
any adjournments or postponements thereof (referred to herein as
the “Annual Meeting”). We are holding the Annual
Meeting at 10:00 a.m. EDT on August 7, 2019, at 151 West
43
rd
Street, 10
th
Floor, New York, NY
10036, or such later date or dates as such Annual Meeting date may
be adjourned. For directions to the meeting, please call (410)
762-0800.
In this
proxy statement, we refer to Rekor Systems, Inc. as
“Rekor,” the “Company,” “we,”
“us” or “our.”
Why Did You Send Me This Proxy Statement?
The
Board of Directors of the Company (referred to herein as the
“Board of Directors” or the “Board”) is
soliciting proxies, in the accompanying form, to be used at the
Annual Meeting on August 7, 2019 at 10:00 a.m. EDT and any
adjournments thereof. This proxy statement along with the
accompanying Notice of Annual Meeting of Shareholders summarizes
the purposes of the Annual Meeting and the information you need to
know to vote at the Annual Meeting.
Important Notice Regarding the Availability of Proxy Materials for
the Shareholder Meeting to Be Held on August 7, 2019: The proxy
statement and annual report to security holders are available
at
www.iproxydirect.com/REKR
.
The
following documents are being mailed on or about June 28, 2019 to
all shareholders entitled to notice of and to vote at the Annual
Meeting:
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1)
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This
proxy statement,
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2)
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The
accompanying proxy,
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3)
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Our
2018 Annual Report.
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The
2018 Annual Report includes our financial statements for the fiscal
year ended December 31, 2018 but is not a part of this proxy
statement. You can also find a copy of our 2018 Annual Report on
Form 10-K on the Internet through the Securities and Exchange
Commission’s electronic data system called EDGAR at
www.sec.gov
or
through the “Investor Relations” section of our website
at
www.rekorsystems.com
.
Who Can Vote?
Shareholders
who owned common stock or Series B Preferred Stock at the close of
business on June 28, 2019 (the “Record Date”), are
entitled to vote at the Annual Meeting. On the Record Date, there
were 19,382,185 shares of common stock outstanding and entitled to
vote. There were also 240,861 shares of Series B Preferred Stock
outstanding entitled to vote the equivalent of 481,722
shares of underlying common
stock, but only for the election of members of the Board of
Directors.
You do
not need to attend the Annual Meeting to vote your shares. Shares
represented by valid proxies, received in time for the Annual
Meeting and not revoked prior to the Annual Meeting, will be voted
at the Annual Meeting. A shareholder may revoke a proxy before the
proxy is voted by delivering to our Secretary a signed statement of
revocation or a duly executed proxy card bearing a later date. Any
shareholder who has executed a proxy card but attends the Annual
Meeting in person may revoke the proxy and vote at the Annual
Meeting.
1
How Many Votes Do I Have?
Each
share of common stock that you own entitles you to one vote.
Each holder of
Series B Preferred Stock as of the Record Date is entitled
to
the number
of votes equal to the number of shares of common stock issuable
upon conversion of such holder’s Series B Preferred Stock as
of the Record Date; provided, however, that a holder is only
entitled to vote shares of common stock underlying the Series B
Preferred Stock in the case of a vote to be taken for the election
of members of the Board of Directors.
How Do I Vote?
Whether
you plan to attend the Annual Meeting or not, we urge you to vote
by proxy. All shares represented by valid proxies that we receive
through this solicitation, and that are not revoked, will be voted
in accordance with your instructions on the proxy card or as
instructed via Internet or telephone. You may specify whether your
shares should be voted for or against each nominee for director,
and how your shares should be voted with respect to each of the
other proposals. Except as set forth below, if you properly submit
a proxy without giving specific voting instructions, your shares
will be voted in accordance with the Board’s recommendations
as noted below. Voting by proxy will not affect your right to
attend the Annual Meeting. If your shares are registered directly
in your name through our stock transfer agent, Issuer Direct
Corporation, or you have stock certificates, you may
vote:
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By mail.
Complete
and mail the enclosed proxy card in the enclosed postage prepaid
envelope. Your proxy will be voted in accordance with your
instructions. If you sign the proxy card but do not specify how you
want your shares voted, they will be voted as recommended by the
Board.
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In person at the meeting.
If you attend the meeting, you may
deliver your completed proxy card in person or you may vote by
completing a ballot, which will be available at the Annual
Meeting.
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If your shares are held in “street name” (held in the
name of a bank, broker or other nominee), you must provide the
bank, broker or other nominee with instructions on how to vote your
shares and can do so as follows:
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By Internet or by telephone.
Follow the instructions you
receive from your broker to vote by Internet or
telephone.
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By mail.
You will
receive instructions from your broker or other nominee explaining
how to vote your shares.
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In person at the meeting.
Contact the broker or other
nominee who holds your shares to obtain a broker’s proxy card
and bring it with you to the meeting. You will not be able to
attend the Annual Meeting unless you have a proxy card from your
broker.
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How Does The Board Recommend That I Vote On The
Proposals?
The
Board recommends that you vote as follows:
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“
FOR
”
for the election of the Board nominees as directors;
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“
FOR
”
ratification of the selection of
Friedman LLP
as our independent public accountant
for our fiscal year ending December 31, 2019;
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If any other matter is presented, the proxy card provides that your
shares will be voted by the proxy holder listed on
the
proxy card in accordance
with his or her best judgment. At the time this proxy statement was
printed, we knew of no matters that needed to be acted on at the
Annual Meeting, other than those discussed in this proxy
statement.
May I Change or Revoke My Proxy?
If you
give us your proxy, you may change or revoke it at any time before
the Annual Meeting. You may change or revoke your proxy in any one
of the following ways:
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signing
a new proxy card and submitting it as instructed
above;
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if your
shares are held in street name, re-voting by Internet or by
telephone as instructed above – only your latest Internet or
telephone vote will be counted;
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if your
shares are registered in your name, notifying the Company’s
Secretary in writing before the Annual Meeting that you have
revoked your proxy; or
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attending
the Annual Meeting in person and voting in person. Attending the
Annual Meeting in person will not in and of itself revoke a
previously submitted proxy unless you specifically request
it.
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2
What If I Receive More Than One Proxy Card?
You may
receive more than one proxy card or voting instruction form if you
hold shares of our common stock in more than one account, which may
be in registered form or held in street name. Please vote in the
manner described under “How Do I Vote?” on the proxy
card for each account to ensure that all of your shares are
voted.
Will My Shares Be Voted If I Do Not Return My Proxy
Card?
If your
shares are registered in your name or if you have stock
certificates, they will not be voted if you do not return your
proxy card by mail or vote at the Annual Meeting as described above
under “How Do I Vote?” If your broker cannot vote your
shares on a particular matter because it has not received
instructions from you and does not have discretionary voting
authority on that matter, or because your broker chooses not to
vote on a matter for which it does have discretionary voting
authority, this is referred to as a “broker non-vote.”
The New York Stock Exchange (“NYSE”) has rules that
govern brokers who have record ownership of listed company stock
(including stock such as ours that is listed on The Nasdaq Capital
Market) held in brokerage accounts for their clients who
beneficially own the shares. Under these rules, brokers who do not
receive voting instructions from their clients have the discretion
to vote uninstructed shares on certain matters (“routine
matters”), but do not have the discretion to vote
uninstructed shares as to certain other matters (“non-routine
matters”). Under NYSE interpretations, Proposal 1 (election
of directors), is considered a non-routine matter, and
Proposal 2 (the ratification of our independent public accountant)
is considered a routine matter. If your shares are held in street
name and you do not provide voting instructions to the bank, broker
or other nominee that holds your shares as described above under
“How Do I Vote?,” the bank, broker or other nominee has
the authority, even if it does not receive instructions from you,
to vote your unvoted shares for Proposal 2 (the ratification of our
independent public accountant), but does not have authority to vote
your unvoted shares for Proposal 1 (election of directors). We
encourage you to provide voting instructions. This ensures your
shares will be voted at the Annual Meeting in the manner you
desire.
What Vote is Required to Approve Each Proposal and How are Votes
Counted?
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Proposal 1:
Election of Directors
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The
nominees for director who receive a majority of the votes FOR
election will be elected as director. You may vote either FOR all
of the nominees, WITHHOLD your vote from all of the nominees or
WITHHOLD your vote from any one or more of the nominees. Votes that
are withheld will not be included in the vote tally for the
election of directors. Brokerage firms do not have authority to
vote customers’ unvoted shares held by the firms in street
name for the election of directors. As a result, any shares not
voted by a beneficial owner will be treated as a broker non-vote.
Such broker non-votes will have no effect on the results of this
vote.
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Proposal 2:
Ratification of the Appointment of Friedman LLP
as our Independent Public Accountant
for the Fiscal Year Ending December 31, 2019
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The
affirmative vote of a majority of the votes cast for this proposal
is required to ratify the appointment of the Company’s
independent public accountant. Abstentions will be counted towards
the tabulation of votes cast on this proposal and will have the
same effect as a negative vote. Brokerage firms have authority to
vote customers’ unvoted shares held by the firms in street
name on this proposal. If a broker does not exercise this
authority, such broker non-votes will have no effect on the results
of this vote. We are not required to obtain the approval of our
shareholders to appoint the Company’s independent accountant.
However, if our shareholders do not ratify the appointment of
Friedman LLP as the Company’s independent public accountant
for the fiscal year ending December 31, 2019, the Audit Committee
of the Board may reconsider its appointment.
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What Constitutes a Quorum for the Annual Meeting?
The
presence, in person or by proxy, of the holders of a majority of
the Shares entitled to vote at the Annual Meeting is necessary to
constitute a quorum at the Annual Meeting. Votes of shareholders of
record who are present at the Annual Meeting in person or by proxy,
abstentions, and broker non-votes are counted for purposes of
determining whether a quorum exists.
3
Householding of Annual Disclosure Documents
The
Securities and Exchange Commission (the “SEC”)
previously adopted a rule concerning the delivery of annual
disclosure documents. The rule allows us or brokers holding our
shares on your behalf to send a single set of our annual report and
proxy statement to any household at which two or more of our
shareholders reside, if either we or the brokers believe that the
shareholders are members of the same family. This practice,
referred to as “householding,” benefits both
shareholders and us. It reduces the volume of duplicate information
received by you and helps to reduce our expenses. The rule applies
to our annual reports, proxy statements and information statements.
Once shareholders receive notice from their brokers or from us that
communications to their addresses will be
“householded,” the practice will continue until
shareholders are otherwise notified or until they revoke their
consent to the practice. Each shareholder will continue to receive
a separate proxy card or voting instruction card.
Those
shareholders who either (i) do not wish to participate in
“householding” and would like to receive their own sets
of our annual disclosure documents in future years or (ii) who
share an address with another one of our shareholders and who would
like to receive only a single set of our annual disclosure
documents should follow the instructions described
below:
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shareholders whose shares are registered in their own name should
contact our transfer agent,
Issuer Direct
Corporation, and inform them of their
request by calling them at 919.744.2722 or writing them at 500
Perimeter Park Drive, Suite D, Morrisville NC
27560.
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Shareholders whose shares are held by a broker or other nominee
should contact such broker or other nominee directly and inform
them of their request, shareholders should be sure to include their
name, the name of their brokerage firm and their account
number.
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Who is paying for this proxy solicitation?
In
addition to mailed proxy materials, our directors, officers and
employees may also solicit proxies in person, by telephone, or by
other means of communication. We will not pay our directors,
officers and employees any additional compensation for soliciting
proxies. We may reimburse brokerage firms, banks and other agents
for the cost of forwarding proxy materials to beneficial
owners.
When are shareholder proposals due for next year’s annual
meeting?
At our
annual meeting each year, our Board of Directors submits to
shareholders its nominees for election as directors. In addition,
the Board of Directors may submit other matters to the shareholders
for action at the annual meeting.
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934,
shareholders may present proper proposals for inclusion in the
Company’s proxy statement for consideration at the 2020
annual meeting of shareholders by submitting
their
proposals to the Company in
a timely manner.
These proposals must meet the shareholders
eligibility and other requirements of the SEC. To be considered for
inclusion in next year’s proxy materials, you must submit
your proposal in writing by February 27, 2020 to our Corporate
Secretary, 7172 Columbia Gateway Drive, Suite 400, Columbia, MD
21046
4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table sets forth certain information, as of the Record
Date, with respect to the beneficial ownership of the outstanding
Common Stock by (i) any holder of more than five (5%) percent; (ii)
each of the Company’s executive officers and directors; and
(iii) the Company’s directors and executive officers as a
group. Except as otherwise indicated, each of the shareholders
listed below has sole voting and investment power over the shares
beneficially owned.
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Name and address
of beneficial owner (1)
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Number of Shares
Beneficially Owned (2)
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Percent of class
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Directors and Named Executive Officers
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Robert A.
Berman
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4,462,104
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(3)
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23.0
%
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James
McCarthy
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2,725,835
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14.1
%
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Richard
Nathan
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1,613,103
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(4)
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8.3
%
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Matthew
Hill
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1,225,000
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(5)
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6.1
%
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Paul de
Bary
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118,499
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(6)
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*
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Glenn
Goord
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150,999
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(7)
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*
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Christine
Harada
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70,999
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(8)
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*
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David P.
Hanlon
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70,999
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(8)
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*
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Steven D.
Croxton
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48,499
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(9)
|
*
|
|
Eyal
Hen
|
-
|
(10)
|
*
|
|
Riaz Latifullah
(7)
|
174,595
|
(11)
|
*
|
|
All current
Directors and named executive officers as a group (11
persons)
|
10,660,632
|
|
51.8
%
|
|
5% or Greater Shareholders
|
|
|
|
|
Avon Road
Partners, L.P.
|
4,440,104
|
(3)
|
22.9
%
|
|
|
|
|
|
|
|
|
|
|
* Less
than 1%
|
(1)
|
The
address of those listed is c/o Rekor Systems, Inc., 7172 Columbia
Gateway Drive, Suite 400, Columbia, MD 21046. Unless otherwise
indicated, all shares are owned directly by the beneficial
owner.
|
|
(2)
|
Based
on 19,382,185 shares of our common stock issued and outstanding as
of the June 28, 2019.
|
|
(3)
|
As the
general partner of Avon Road, Mr. Berman may be deemed to be the
beneficial owner of 4,462,104 shares of Rekor Systems, Inc. common
stock, or 23.0% of the class of securities. He may be deemed to
share with Avon Road (and not with any third-party) the power to
vote or direct the vote of and to dispose or direct the disposition
of the 4,440,104 shares of Rekor Systems, Inc. common stock
beneficially owned by Avon Road, or 22.9% of the class of
securities.
|
|
(4)
|
Consists
of: 1,593,020 shares of our common stock; a Unit Warrant to
purchase 4,849 shares of our common stock exercisable within 60
days of June 28, 2019; and 15,234 shares of our common stock
acquirable through the conversion of 10,000 shares of Rekor
Systems, Inc. Series A Preferred Stock.
|
|
(5)
|
Consists
of 600,000 shares of Rekor Systems, Inc. common stock and warrants
to purchase 625,000 shares of our common stock.
|
|
(6)
|
Consists
of options to purchase 108,499 shares of our common stock
exercisable within 60 days of June 28, 2019, and 10,000 shares of
our common stock.
|
|
(7)
|
Consists
of options to purchase 70,999 shares of our common stock
exercisable within 60 days of June 28, 2019, and 80,000 shares of
our common stock.
|
|
(8)
|
Consists
of options to purchase 70,999 shares of our common stock
exercisable within 60 days of June 28,2019.
|
|
(9)
|
Consists of options to purchase 48,499 shares of our common stock
exercisable within 60 days of June 28, 2019.
|
|
(10)
|
Mr.
Hen serves as our Chief Financial Officer and Principal Financial
and Accounting Officer since May 15, 2019.
|
|
(11)
|
Consists
of options to purchase 174,595 shares of our common stock
exercisable within 60 days of June 28, 2019.
|
|
|
|
5
PROPOSAL NO. 1
Our
Board currently consists of seven members. The Corporate Governance
Committee and Board have unanimously approved the recommended slate
of seven directors.
The
following table shows the Company’s nominees for election to
the Board. Each nominee, if elected, will serve until the next
Annual Meeting of Shareholders and until a successor is named and
qualified, or until his earlier resignation or removal. All
nominees are members of the present Board of Directors. We have no
reason to believe that any of the nominees is unable or will
decline to serve as a director if elected. Unless otherwise
indicated by the shareholder, the accompanying proxy will be voted
for the election of the eight persons named under the heading
“Nominees for Directors.” Although the Company knows of
no reason why any nominee could not serve as a director, if any
nominee shall be unable to serve, the accompanying proxy will be
voted for a substitute nominee.
Nominees for Director
|
Name of
Nominee
|
Age
|
Principal
Position
|
Director
Since
|
|
James K.
McCarthy
|
67
|
Chairman of the
Board and Strategic Advisor
|
2016
|
|
Robert
Berman
|
59
|
President and Chief
Executive Officer, and Director
|
2016
|
|
Paul A. de
Bary
|
72
|
Lead
Director
|
2017
|
|
Richard Nathan,
Ph.D.
|
74
|
Director
|
2016
|
|
Glenn
Goord
|
67
|
Director
|
2016
|
|
Christine J.
Harada
|
46
|
Director
|
2017
|
|
David
Hanlon
|
75
|
Director
|
2018
|
|
Steven D.
Croxton
|
52
|
Director
|
2019
|
The
Governance Committee and the Board seek, and the Board is comprised
of, individuals whose characteristics, skills, expertise, and
experience complement those of other Board members. We have set out
below biographical and professional information about each of the
nominees, along with a brief discussion of the experience,
qualifications, and skills that the Board considered important in
concluding that the individual should serve as a current director
and as a nominee for re-election as a member of our
Board.
Nominees Biographies
James K. McCarthy, Chairman
James
K. McCarthy has served as the Chairman of our Board of Directors
since March 2016 and as Strategic Advisor to our Company since
April 2018. Mr. McCarthy served as our Chief Strategy Officer from
March 2016 to March 2017, and from April 2017 to March 2018, was
the host of
The Bridge
, a
weekly 30-minute broadcast television program produced by us
devoted exclusively to bridging the gap between the government and
the private sector. Mr. McCarthy founded AOC Key Solutions in 1983
and served as its Technical Director until our acquisition of AOC
Key Solutions in March 2016. At AOC Key Solutions, Mr.
McCarthy’s career spans over 30 years of marketing strategy
creation, proposal development, and oral presentation coaching to
contractors seeking to expand their market shares or to enter the
government contracts market sector. Mr. McCarthy has worked at AOC
Key Solutions since 1983. Mr. McCarthy has served in an advisory
role with the George Washington University, Virginia Science and
Technology Campus, Technology Accelerator and has been a frequent
speaker with the George Mason University Procurement and Technical
Assistance Center. Mr. McCarthy has also served on the board of
Coalition for Government Procurement and on the Veterans Institute
for Procurement GovCon Council. Mr. McCarthy holds a BA in
Political Science and Government and an MA in Public Policy and
Government from Ohio University
.
Director Qualifications
Mr.
McCarthy is a well-respected and acknowledged thought leader in the
government contracting environment. He has extensive executive
leadership and management experience and continues to lead the
development and execution of our businesses. We believe that his
entrepreneurial background building Rekor’s first
acquisition, AOC Key Solutions, combined with his leadership
experience and his industry reputation and visibility, allow him to
be a qualified member of our Board of Directors and to serve as
Chairman.
6
Robert A. Berman, Chief Executive Officer and Director
Robert
Berman has served as our President and Chief Executive Officer and
a member of our Board of Directors since March 2016. Since January
2000, Mr. Berman has served as the General Partner of Avon Road
Partners, L.P., a limited partnership investing in real estate and
the broadcast media industry. From 2006 through March 2015, Mr.
Berman held the office of Chairman and Chief Executive Officer at
Cinium Financial Services Corporation, a privately-held specialty
finance company, and its predecessor, Upper Hudson Holdings, LLC..
Prior to Cinium, Mr. Berman was Chief Executive Officer of Empire
Resorts, Inc., a NASDAQ-listed gaming company, from
2002-2005.
Director Qualifications
Mr.
Berman has extensive experience in the private equity and public
company markets. We believe his strong understanding of the
financial markets and the M&A process, and his previous senior
executive roles with public companies make him a qualified member
of our Board of Directors and to serve as our Chief Executive
Officer.
Richard Nathan, PhD, Director
Richard
Nathan, Ph.D., has served on our Board of Directors since March
2016. From April 2016 until his retirement in February 2018, Dr.
Nathan served as our Chief Operating Officer. Prior to that, Dr.
Nathan was the Chief Executive Officer of AOC Key Solutions, where
he worked for over 17 years. Dr. Nathan has over 45 years of
corporate management, program management and business and proposal
development experience and experience managing service and
technical contracts for federal departments and agencies and state
governments. Dr. Nathan holds a BS in Chemistry from the
Massachusetts Institute of Technology and a PhD in Chemistry from
the Polytechnic Institute of Brooklyn.
Director Qualifications
Dr.
Nathan has a strong technical background and understanding of the
government contracting, aviation, and aerospace world from where
the majority of Rekor’s revenue is derived. We believe this
expertise, when combined with his entrepreneurial background having
built strong operating companies, makes him a qualified member of
our Board of Directors.
Glenn Goord, Director
Glenn
Goord has served on our Board of Directors since March 2016. From
1996 until his retirement in 2006, Mr. Goord served as Commissioner
of the New York State Department of Correctional Services
(“NYSDCS”), where he oversaw the state prison system.
Mr. Goord received the Carl Robison Award, the highest honor
bestowed by the Middle Atlantic States Correctional Association, in
1997. In 1998 he received the Charles Evans Hughes Award for public
service from the Albany based Capital Area Chapter for the American
Society for Public Administration (ASPA). In 2002, ASPA awarded Mr.
Goord its highest honor, the Governor Alfred E. Smith Award, for
his direction of the NYSDCA’s efforts to aid New York City
following the September 11, 2001 terrorist attack. Mr. Goord holds
a BA in Psychology from Fairleigh Dickinson University
.
Director Qualifications
Mr. Goord
has a strong background in government operations and procurement.
His insights into how government operates is a key skill for board
decision making on Rekor strategy in certain industry segments. We
believe his operational experience makes him a qualified member of
our Board of Directors and the committees on which he
participates.
Paul A. de Bary, Lead Director
Paul
A. de Bary has served on our Board of Directors since January 2017
and as Lead Director since November 2017. Mr. de Bary was a member
of the board of managers of TDI, LLC, an agent for a manufacturer
of digital X-ray systems for medical, veterinary and industrial
applications from 2001 to 2018. He has also served as chairman of
the Board of Ethics of the Town of Greenwich, Connecticut since
2008. From 1996 to 2015, he was a managing director at Marquette de
Bary Co., Inc., a New York based broker-dealer, where he served as
a financial advisor for state and local government agencies, public
and private corporations and non-profit organizations, as well as
general counsel. He previously served as a director of Empire
Resorts, Inc. (Nasdaq: NYNY) from 1996 to 2010, where he served as
chairman of its audit committee as well as, at various times
throughout his tenure as a director, a member of the governance and
compensation committees and various special committees. Mr. de Bary
is a member of the American Bar Association, the New York State Bar
Association and the Association of the Bar of the City of New York.
Mr. de Bary holds a JD, an MBA and an A.B. from Columbia
University.
Director Qualifications
Mr. de
Bary has a diverse background that includes experience as a lawyer,
investment banker and member of several boards of directors,
including those of public companies. We believe these experiences,
combined with his skills and knowledge related to public market
decision-making and audit committee roles and responsibilities,
makes him qualified member of our Board of Directors and the
committees on which he participates.
7
Christine J. Harada, Director
Christine
J. Harada has served on our Board of Directors since August 2017.
Ms. Harada has over 20 years of experience leading government and
management consulting organizations. From November 2015 to January
2017, she served as the Federal Chief Sustainability Officer. Prior
to that role, Ms. Harada was the Acting Chief of Staff of the U.S.
General Services Administration (“GSA”) from March 2015
through November 2015. While at the GSA, Ms. Harada also served as
Associate Administrator, Government-wide Policy and Chief
Acquisition Officer for the GSA from June 2014 through February
2015. Ms. Harada’s private sector experience includes serving
as Global Manager, Transformation/Large Scale Change Practice at
the Boston Consulting Group from May 2013 through June 2014, and
her tenure as a principal at Booz Allen Hamilton from January 2004
through April 2013. Ms. Harada holds an M.A., in International
Studies from the Lauder Institute and an MBA, Finance from the
Wharton School at the University of Pennsylvania. She also holds an
M.S. in Aeronautics/Astronautics from Stanford University and a
B.S. Aeronautics/Astronautics from the Massachusetts Institute of
Technology.
Director Qualifications
Ms.
Harada has in-depth knowledge of the inner workings of the federal
government, as well as detailed background in corporate best
practices. We believe her skills and experiences make her a
qualified member of our Board of Directors and the committees on
which she participates.
David P. Hanlon,
David
Hanlon has served on our Board of Directors since November 2018.
Mr. Hanlon is a founding principal of Executive Hospitality
Partners, a strategic and asset management firm. Since 2008, he has
served as Chief Executive Officer of Hanlon Investments which
provides project development consulting services to casinos, hotels
and resorts. Mr. Hanlon has served as a member of Cornell
University’s Industry Advisory Board, as well as on the Board
of Directors of the Cornell Football Association and was elected to
be a lifetime member of the Cornell University Administrative
Advisory Board. He was also an advisor to the Wharton
Entrepreneurial Program. Mr. Hanlon holds a B.S. in Hotel
Administration from Cornell, an MBA in Finance and an M.S. in
Accounting from the Wharton School at the University of
Pennsylvania and graduated from the Advanced Management Program at
the Harvard Business School.
Director Qualifications
Mr.
Hanlon has extensive leadership and executive management experience
and experience serving on public company boards of directors. We
believe his skills and experience make him a qualified member of
our Board of Directors and the committees on which he
participates.
Steven D. Croxton, Director
Mr.
Croxton, age 52, is Managing Director of Rice, Voelker, LLC and has
more than 30 years’ experience in investment and commercial
banking. During his career, Mr. Croxton has been involved in
financing and advisory transactions totaling more than $35 billion
for a variety of public and private corporations. He has previously
served on the Board of Directors of Peninsula Gaming, LLC, and has
held leadership roles with responsibilities related to investment,
corporate, and international banking. Mr. Croxton earned a B.S. in
Finance from Louisiana State University, and a Master of
International Management from the American Graduate School of
International Management (now Thunderbird School of Global
Management), and holds FINRA Series 7, 24, 63, and 79
licenses.
Director Qualifications
Mr.
Croxton has in-depth knowledge of the capital market, as well as
extensive background in financing and advisory of public
corporations. We believe his skills and experiences make him a
qualified member of our Board of Directors and the committees on
which he participates.
Unless
authority to vote for the nominees named above is withheld, the
shares represented by the enclosed proxy will be voted FOR the
election of such nominees as directors. In the event that any of
the nominees shall become unable or unwilling to serve, the shares
represented by the enclosed proxy will be voted for the election of
such other person as the Board may recommend in such
nominee’s place. The Board has no reason to believe that any
of the nominees will be unable or unwilling to serve.
8
Family Relationships
There
are no family relationships among our executive officers and
directors.
Involvement in Certain Legal Proceedings
During
the past ten years, none of our directors, executive officers,
promoters, control persons, or nominees has been:
|
●
|
the
subject of any bankruptcy petition filed by or against any business
of which such person was a general partner or executive officer
either at the time of the bankruptcy or within two years prior to
that time;
|
|
|
|
|
●
|
convicted
in a criminal proceeding or is subject to a pending criminal
proceeding (excluding traffic violations and other minor
offenses);
|
|
|
|
|
●
|
subject
to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction or any
Federal or State authority, permanently or temporarily enjoining,
barring, suspending or otherwise limiting his involvement in any
type of business, securities or banking activities;
|
|
|
|
|
●
|
found
by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities
law;
|
|
|
|
|
●
|
the
subject of, or a party to, any Federal or State judicial or
administrative order, judgment, decree, or finding, not
subsequently reversed, suspended or vacated, relating to an alleged
violation of (a) any Federal or State securities or commodities law
or regulation; (b) any law or regulation respecting financial
institutions or insurance companies including, but not limited to,
a temporary or permanent injunction, order of disgorgement or
restitution, civil money penalty or temporary or permanent
cease-and-desist order, or removal or prohibition order; or (c) any
law or regulation prohibiting mail or wire fraud or fraud in
connection with any business entity; or
|
|
|
|
|
●
|
the
subject of, or a party to, any sanction or order, not subsequently
reversed, suspended or vacated, of any self-regulatory organization
(as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C.
78c(a)(26))), any registered entity (as defined in Section 1(a)(29)
of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any
equivalent exchange, association, entity or organization that has
disciplinary authority over its members or persons associated with
a member.
|
Vote Required
The
nominees for director who receive a majority of the votes FOR
election will be elected as director. You may vote either FOR all
of the nominees, WITHHOLD your vote from all of the nominees or
WITHHOLD your vote from any one or more of the nominees. Votes that
are withheld will not be included in the vote tally for the
election of directors. Brokerage firms do not have authority to
vote customers’ unvoted shares held by the firms in street
name for the election of directors. As a result, any shares not
voted by a beneficial owner will be treated as a broker non-vote.
Such broker non-votes will have no effect on the results of this
vote.
THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES NAMED
ABOVE AS DIRECTORS, AND PROXIES SOLICITED BY THE BOARD WILL BE
VOTED IN FAVOR THEREOF UNLESS A SHAREHOLDER HAS INDICATED OTHERWISE
ON THE PROXY.
9
Information about the Board of Directors and
Committees
Corporate Governance
Independence of Directors
Our
Board is currently comprised of eight members, five of whom are
independent directors. Messrs. McCarthy, Nathan and Berman are not
independent directors.
The
Board, upon recommendation of the Governance Committee, unanimously
determined that each of our five non-employee directors is
“independent,” as such term is defined in the Nasdaq
Stock Market Rules (“Stock Market Rules”).
The
definition of “independent director” included in the
Stock Market Rules includes a series of objective tests, such as
that the director is not an employee of the Company, has not
engaged in various types of specified business dealings with the
Company, and does not have an affiliation with an organization that
has had specified business dealings with the Company. Consistent
with the Company’s Corporate Governance Principles, the
Board’s determination of independence is made in accordance
with the Stock Market Rules, as the Board has not adopted
supplemental independence standards. As required by the Stock
Market Rules, the Board also has made a subjective determination
with respect to each director that such director has no material
relationship with the Company (either directly or as a partner,
shareholder or officer of an organization that has a relationship
with the Company), even if the director otherwise satisfies the
objective independence tests included in the definition of an
“independent director” included in the Stock Market
Rules.
In
determining that each individual who served as a member of the
Board is independent, the Board considered that, in the ordinary
course of business, transactions may occur between the Company and
entities with which some of our directors are affiliated. The Board
unanimously determined that the relationships discussed below were
not material. No unusual discounts or terms were
extended.
Board Leadership Structure
Our
Board of Directors is currently led by its Chairman, James
McCarthy. Our Board of Directors recognizes that it is important to
determine an optimal Board leadership structure to ensure the
independent oversight of management as the Company continues to
grow. We separate the roles of Chief Executive Officer and Chairman
of the Board in recognition of the differences between the two
roles. The Chief Executive Officer is responsible for setting the
strategic direction for the Company and the day-to-day leadership
and performance of the Company, while the Chairman of the Board of
Directors provides guidance to the Chief Executive Officer and
presides over meetings of the full Board of Directors. We believe
that this separation of responsibilities provides a balanced
approach to managing the Board of Directors and overseeing the
Company.
Our
organizational guidelines provide for a Lead Director to be elected
whenever the Chair of the Board of Directors is not an independent
director. The responsibilities of the Lead Director are to: 1)
preside at meetings of our stockholders and Board of Directors if
the Chair is absent; 2) call meetings and executive sessions of the
independent directors of the Board; 3) establish the agenda and
preside at all executive sessions and other meetings of the
independent directors of the Board and communicate the results of
meetings of the independent directors to the Chair and other
members of management, as appropriate; 4) communicate with the
independent directors of the Board between meetings as necessary or
appropriate, serve as a liaison between the Chair and the
independent directors and communicate independent director
consensus on important issues to the Chair; 5) approve Board
meeting agendas and schedules for regular meetings of the Board of
Directors to assure there is sufficient time for discussion of all
agenda items and approve meeting materials and other information to
be sent to the Board in advance of regular meetings; 6) evaluate
the quality and timeliness of information sent to the Board by the
Chief Executive Officer and other members of management; 7) oversee
the evaluation of the Chief Executive Officer and assist the Board
Chair on matters of Board succession planning and crisis
management; 8) assist the Chair of the Governance Committee with
individual director evaluations; and 9) be available for
consultation and direct communication at the request of major
stockholders. Mr. de Bary currently serves as Lead
Director.
Director Attendance at Board, Committee, and Other
Meetings
Directors
are expected to attend Board meetings and meetings of the
committees on which they serve, with the understanding that on
occasion a director may be unable to attend a meeting. The Board
does not have a policy on director attendance at the
Company’s annual meeting.
The
non-management directors (who also constitute all of the
independent directors) meet in executive sessions in connection
with regularly scheduled Board meetings and at such other times as
the non-management directors deem appropriate. These sessions are
led by the lead director.
In 2018, the Board
held six regular and special meetings, the non-management directors
held two meetings and no special executive sessions, the Audit
Committee held
six
regular and
special meetings, the Compensation Committee held five regular and
special meeting, and the Governance Committee held five regular and
special meetings. Each director attended
100%
or more of the
regular and special meetings of the Board and of the committees on
which he or she served that were held during his or her term of
office. Each of the non-management (and independent) directors
attended
100%
or more of the
regular and special executive sessions that were held during his or
her term of office.
10
Board Role in Risk Oversight
Our
Board of Directors has responsibility for the oversight of our risk
management processes and, either as a whole or through its
committees, regularly discusses with management our major risk
exposures, their potential impact on our business and the steps we
take to manage them. The risk oversight process includes receiving
regular reports from Board committees and members of senior
management to enable our Board to understand the Company’s
risk identification, risk management and risk mitigation strategies
with respect to areas of potential material risk, including
operations, finance, legal, regulatory, strategic and reputational
risk.
The
Audit Committee reviews information regarding liquidity and
operations and oversees our management of financial risks.
Periodically, the Audit Committee reviews our policies with respect
to risk assessment, risk management, loss prevention and regulatory
compliance. Oversight by the Audit Committee includes direct
communication with our external auditors, and discussions with
management regarding significant risk exposures and the actions
management has taken to limit, monitor or control such exposures.
The Compensation Committee is responsible for assessing whether any
of our compensation policies or programs has the potential to
encourage excessive risk-taking. The Governance Committee manages
risks associated with the independence of the board, corporate
disclosure practices, and potential conflicts of interest. While
each committee is responsible for evaluating certain risks and
overseeing the management of such risks, the entire Board is
regularly informed through committee reports about such risks.
Matters of significant strategic risk are considered by our Board
as a whole.
Committees of the Board
Our
Board has three standing committees: Audit, Compensation, and
Governance. Each of the committees is solely comprised of and
chaired by independent directors, each of whom the Board has
affirmatively determined is independent pursuant to the Stock
Market Rules. Each of the committees operates pursuant to its
charter. The committee Charters are reviewed annually by the
Governance Committee. If appropriate, and in consultation with the
chairs of the other committees, the Corporate Governance Committee
proposes revisions to the charters. The responsibilities of each
committee are described in more detail below. The charters for the
three committees are available on the Company’s website at
www.rekorsystems.com
by
following the link to “Investors” and then to
“Corporate Governance.”
Audit Committee
We
have an Audit Committee comprised of directors who are
“independent” within the meaning of Nasdaq Rule
5605(b)(1). The Audit Committee assists our Board in overseeing the
financial reporting process and maintaining the integrity of our
financial statements, and of our financial reporting processes and
systems of internal audit controls, and our compliance with legal
and regulatory requirements. The Audit Committee is responsible for
reviewing the qualifications, independence and performance of our
independent registered public accounting firm and review our
internal controls, financial management practices and investment
functions and compliance with financial legal and regulatory
requirements. The Audit Committee is also responsible for
performing risk and risk management assessments as well as
preparing any report of the Audit Committee that may be required by
the proxy rules of the SEC to be included in the
Corporation’s annual proxy statement. Our Board has
identified and appointed Paul de Bary as its “audit committee
financial expert,” as defined by the SEC in Item 407 of
Regulation S-K. Mr. de Bary serves as the Chair of the Audit
Committee, and is joined on the committee by Ms. Harada, Mr.
Croxton, and Mr. Goord.
Compensation Committee
We have
a Compensation Committee comprised of members who are
“Non-Employee Directors” within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) and “outside directors”
within the meaning of Section 162(m) of the Code. They are
also “independent” directors within the meaning of
NASDAQ Rule 5605(b)(1). The Compensation Committee is responsible
for overseeing the establishment and maintenance of our overall
compensation and incentive programs to discharge the Board’s
responsibilities relating to compensation of our executive officers
and directors, including establishing criteria for evaluating
performance and setting appropriate levels of compensation, and to
produce an annual report on executive compensation for inclusion in
the Corporation’s proxy statement in accordance with the
rules and regulations of the SEC. The Compensation Committee
advises and makes recommendations to our Board on all matters
concerning director compensation. Mr. Goord serves as Chair of the
Compensation Committee and is joined by Ms. Harada, Mr. Croxton and
Mr. Hanlon.
Compensation Committee Interlocks and Insider
Participation
None of
the members of the Compensation Committee has been, during 2016 or
2017, an officer or employee of Rekor or any of its subsidiaries or
predecessor companies, or was formerly an officer of Rekor or any
of its subsidiaries or predecessor companies or had any
relationship requiring disclosure by us under Item 404 of
Regulation S-K. No interlocking relationship as described in
Item 407(e)(4) of Regulation S-K exists between any of our
executive officers or Compensation Committee members, on the one
hand, and the executive officers or Compensation Committee members
of any other entity, on the other hand, nor has any such
interlocking relationship existed in the past.
11
Governance Committee
Our
Board has a Governance Committee that that (1) reviews and
recommends improvements to our governance guidelines and corporate
policies; (2) monitors compliance with our Code of Conduct; (3)
trains new members of the Board of Directors; (4) reviews the
performance of the Board of Directors and its various committees
and makes recommendations intended to improve that performance, (5)
evaluates and makes recommendations concerning changes in the
charters of the various Committees of the Board of Directors, (6)
evaluates the performance of the Chief Executive Officer of the
Corporation, (7) oversees the development and implementation of
succession planning for Corporation senior management positions;
(8) identifies and recommends candidates for nomination as members
of the Board of Directors and its committees; and (9) such other
matters as may be required to ensure compliance with applicable
federal and state laws or the requirements of any exchange on which
the Company maintains a listing for its securities. The committee
is required to be comprised of entirely “independent”
directors within the meaning of NASDAQ Rule 5605(b)(1). Ms.
Harada currently serves as the Chair of the Governance Committee
and is joined on the committee by Mr. Hanlon and Mr. de
Bary.
The
Chair and members of each committee are summarized in the table
below:
|
Name
|
Audit
Committee
|
Compensation
Committee
|
Corporate
Governance Committee
|
|
Christine Harada
– (Independent)
|
Member
|
Member
|
Chair
|
|
Paul de Bary
– (Independent)
|
Chair
|
-
|
Member
|
|
Glenn Goord –
(Independent)
|
Member
|
Chair
|
-
|
|
David P. Hanlon
– (Independent)
|
-
|
Member
|
Member
|
|
Steven D. Croxton
– (Independent)
|
Member
|
Member
|
-
|
Consideration of Director Nominees
We seek
directors with the highest standards of ethics and integrity, sound
business judgment, and the willingness to make a strong commitment
to the Company and its success. The Governance Committee works with
the Board on an annual basis to determine the appropriate and
desirable mix of characteristics, skills, expertise, and experience
for the full Board and each committee, taking into account both
existing directors and all nominees for election as directors, as
well as any diversity considerations and the membership criteria
applied by the Governance Committee. The Governance Committee and
the Board, which do not have a formal diversity policy, consider
diversity in a broad sense when evaluating board composition and
nominations; and they seek to include directors with a diversity of
experience, professions, viewpoints, skills, and backgrounds that
will enable them to make significant contributions to the Board and
the Company, both as individuals and as part of a group of
directors. The Board evaluates each individual in the context of
the full Board, with the objective of recommending a group that can
best contribute to the success of the business and represent
shareholder interests through the exercise of sound judgment. In
determining whether to recommend a director for re-election, the
Governance Committee also considers the director’s attendance
at meetings and participation in and contributions to the
activities of the Board and its committees.
The
Governance Committee will consider director candidates recommended
by shareholders, and its process for considering such
recommendations is no different than its process for screening and
evaluating candidates suggested by directors, management of the
Company, or third parties.
Corporate Governance Matters
We are
committed to maintaining strong corporate governance practices that
benefit the long-term interests of our shareholders by providing
for effective oversight and management of the Company. Our
governance policies, including our Code of Conduct and Committee
Charters can be found on our website at
www.rekorsystems.com
by
following the link to “Investors” and then to
“Corporate Governance.”
The
Governance Committee regularly reviews our Code of Conduct and
Committee Charters to ensure that they take into account
developments at the Company, changes in regulations and listing
requirements, and the continuing evolution of best practices in the
area of corporate governance.
The
Board conducts an annual self-evaluation in order to assess whether
the directors, the committees, and the Board are functioning
effectively.
12
Code of Conduct
We have
adopted a Code of Conduct, which serves as our Code of Ethics,
which applies to all of our employees, including our Chief
Executive Officer and our Chief Financial Officer. Our Code of
Conduct is available on our website at
www.rekorsystems.com
. If we
amend or grant a waiver of one or more of the provisions of our
Code of Conduct, we intend to satisfy the requirements under Item
5.05 of Item 8-K regarding the disclosure of amendments to or
waivers from provisions of our Code of Conduct that apply to our
Principal Executive and Principal Financial Officer by posting the
required information on our website at the above address. Our
website is not part of this Proxy Statement.
Communications with the Board of Directors
Shareholders
and other parties may communicate directly with the Board of
Directors or the relevant board member by addressing communications
to:
Rekor
Systems, Inc.
c/o
Corporate Secretary
7172
Columbia Gateway Drive, Suite 400, Columbia, MD 21046
All
shareholder correspondence will be compiled by our corporate
secretary. Communications will be distributed to the Board of
Directors, or to any individual director or directors as
appropriate, depending on the facts and circumstances outlined in
the communications. Items that are unrelated to the duties and
responsibilities of the Board of Directors may be excluded, such
as:
|
|
●
|
junk
mail and mass mailings;
|
|
|
|
|
|
|
●
|
resumes
and other forms of job inquiries;
|
|
|
|
|
|
|
●
|
surveys;
and
|
|
|
|
|
|
|
●
|
solicitations
and advertisements.
|
In
addition, any material that is unduly hostile, threatening, or
illegal in nature may be excluded, provided that any communication
that is filtered out will be made available to any outside director
upon request.
Section 16(a) Beneficial Ownership Reporting
Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires the
Company’s directors, executive officers, and shareholders who
own more than 10% of the Company’s stock to file forms with
the SEC to report their ownership of the Company’s stock and
any changes in ownership. The Company assists its directors and
executives by identifying reportable transactions of which it is
aware and preparing and filing the forms on their behalf. All
persons required to file forms with the SEC must also send copies
of the forms to the Company. We have reviewed all forms provided to
us. Based on that review and on written information given to us by
our executive officers and directors, we believe that all Section
16(a) filings during the past fiscal year were filed on a timely
basis and that all directors, executive officers and 10% beneficial
owners have fully complied with such requirements during the past
fiscal year.
13
The
following persons are our executive officers and hold the offices
set forth opposite their names.
|
Name
|
Age
|
Principal
Occupation
|
Officer
Since
|
|
Robert A.
Berman
|
59
|
Chief Executive
Officer, President and Member of the Board
|
2017
|
|
Eyal
Hen
|
46
|
Chief Financial
Officer
|
2019
|
|
Riaz
Latifullah
|
62
|
Executive Vice
President, Corporate Development
|
2017
|
Robert A. Berman, Chief Executive Officer, President and Member of
the Board
The
biography
for
Robert A. Berman is set forth above in the section entitled
“Nominees Biographies -
Robert A. Berman, Chief
Executive Officer and Director.”
Eyal Hen, Chief Financial Officer
Mr.
Hen has more than 16 years’ experience as a global finance
and business management executive in corporate environments, most
recently with VAYA Pharma Inc. and Ormat Technologies, Inc.
(NYSE:ORA). His expertise working as a finance executive in the
public markets, where he oversaw financial reporting, compliance
initiatives, investor communications, and financing, will be
instrumental as the Company continues its growth. Mr. Hen holds a
BA in Economics and Accounting from Ben Gurion University (Israel)
and an MBA from the University of Phoenix.
Riaz Latifullah, Executive Vice President, Corporate
Development
Mr.
Latifullah serves as Executive Vice President, Corporate
Development. On May 1, 2018, Mr. Latifullah was appointed as our
Principal Financial and Accounting Officer, a role he assumed on an
interim basis upon the resignation of our former Chief Financial
Officer. Prior to joining Rekor, Mr. Latifullah served as the Chief
Financial Officer of the American Grandparents Association /
Grandparents.com. Mr. Latifullah spent 13 years with AARP, a
non-profit organization that advocates on behalf of people over age
50. With AARP he served as Vice President, Financial Management,
Senior Director Strategic Markets and Director Brand Operations. As
an in-house entrepreneur with AARP he created and launched five
start-up operations bringing significant changes to the
organization. In other positions before AARP Mr. Latifullah
served as General Manager for TV on the WEB, an internet video
production company, a Government Relations Representative for the
U.S. Merchant Marine Academy Alumni Foundation and an Investment
Banking Associate for Ryan, Lee and Company. Mr. Latifullah holds
an MBA from Stanford University, an MSE in Naval Architecture and
Marine Engineering from the University of Michigan and a BS in
Marine Engineering from the U.S. Merchant Marine
Academy.
14
The
following table sets forth information about the annual paid
compensation of our: Principal Executive Officer, Mr. Berman; two
most highly compensated executive officers other than the Principal
Executive Officer, Messrs. James McCarthy and Latifullah, who
were serving as executive officers as of December 31, 2018; The
information in this table for the Company’s most recently
completed fiscal year is based on the information available to the
Company as of the date of the Company’s Annual Report on Form
10-K for the year ended 2018.
|
Name/Capacities
in which compensation was received
|
|
Year
|
Salary
($)
|
Bonus
($)
|
Options
($)
|
All other
compensation
($)
|
Total
($)
|
|
Robert Berman
|
|
2018
|
395,000
|
-
|
-
|
-
|
395,000
|
|
Chief Executive
Officer
|
|
2017
|
395,000
|
-
|
-
|
-
|
395,000
|
|
James K.
McCarthy
|
|
2018
|
328,628
(1)
|
-
|
-
|
11,000
(2)
|
339,628
|
|
Strategic Advisor
(3)
|
|
2017
|
293,231
|
-
|
-
|
8,931
(2)
|
302,162
|
|
Riaz Latifullah
(4)
|
|
2018
|
271,667
|
100,000
(5)
|
-
|
-
|
371,667
|
|
EVP, Corporate
Development
|
|
2017
|
258,333
|
-
|
97,251
(6)
|
-
|
355,584
|
|
(1)
|
Amount
includes compensation for unused paid time off.
|
|
(2)
|
Amount
represents 401(k) matching contribution.
|
|
(3)
|
Mr.
James McCarthy served as: Chief Strategy Officer of KeyStone
through March 31, 2017; Host of The Bridge produced by Novume Media
from April 2017 through March 2018; and Strategic Advisor of AOC
Key Solutions since April 2018.
|
|
(4)
|
Mr.
Latifullah served as Chief Financial Officer until August 28, 2017
at which time he transitioned to EVP of Corporate
Development.
|
|
(5)
|
Amount
represents subjective bonus.
|
|
(6)
|
Amount
represents the fair value of the issuance of 174,595 stock options
to Mr. Latifullah on December 23, 2016.
|
15
Outstanding Equity Awards at Fiscal Year-End
The
following table sets forth information with respect to unexercised
stock options, stock that has not vested, and equity incentive plan
awards held by our named executive officers at December 31,
2018.
|
|
Option
Awards
|
Stock
Awards
|
||||
|
Name and
Principal Position
|
Number of
Securities Underlying Unexercised Options -
Exercisable
|
Number of
Securities Underlying Unexercised Options -
Unexercisable
|
Option Exercise
Price($)
|
Option
Expiration Date
|
Number of Shares
of Stock that Have not Vested
|
Market Value of
Shares of Stock that Have not Vested($)
|
|
Robert
Berman
|
-
|
-
|
-
|
-
|
-
|
-
|
|
James
McCarthy
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Riaz Latifullah
(1)
|
174,595
|
-
|
1.42
|
12/23/26
|
-
|
-
|
|
(1)
|
The
option was granted on December 23, 2016, vests in equal monthly
installments over 24 months starting March 1, 2017 and fully vested
on March 1, 2019.
|
|
|
|
Compensation Committee Interlocks and Insider
Participation
No
member of our Compensation Committee is a current or former officer
or employee of Rekor or its subsidiaries. No executive officer of
Rekor served as a director or member of the Compensation Committee
of any entity that has one or more executive officers serving as a
member of our Board of Directors or Compensation
Committee.
Employment Agreements
We
have entered into employment agreements with our executives in
connection with his or her commencement of employment with
us.
Berman Employment Agreement
The
Employment Agreement entered into May 15, 2019 with Robert Berman
(“Berman Employment Agreement”) provides that
Mr. Berman will serve as our Chief Executive Officer and
President. The agreement has a term of five years with
automatically renewing one-year terms thereafter. This agreement
supersedes Mr. Berman’s previous employment agreement which
otherwise would have expired by its terms on March 31, 2022.
Mr. Berman’s base salary is $495,000 per annum, and he
is eligible for a bonus as determined by our Compensation
Committee. Mr. Berman is also eligible to receive all such
other benefits as are provided to other management
employees.
Mr.
Berman was granted options to purchase 100,000 shares of common
stock of the Company with an exercise price per share as follows:
50,000 shares at $1.00 and 50,000 shares at $1.50.
In the
event of a “Change of Control”, as defined in the
Berman Employment Agreement, whether during the initial term or
thereafter, we shall have the right to terminate the Berman
Employment Agreement. Mr. Berman 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 in control (as such is
defined in the Berman Employment Agreement).
Mr. Berman
also agreed as consideration for entering into the Berman
Employment Agreement, that for the period during his employment and
for twelve months thereafter, (i) he will not compete with the
Company in the “Geographic Area”, as defined in the
Berman Employment Agreement, and (ii) he will not solicit any
of our existing employees, suppliers or customers.
16
Hen Employment Agreement
The
Employment Agreement with Eyal Hen (the “Hen Employment
Agreement”) provides that Mr. Hen will serve as our Chief
Financial Officer for an initial three-year term that began on May
15, 2019, subject to automatic extension. His base salary of
$335,000 per annum and will be eligible for a bonus as determined
by the Board of Directors of the Company (the “Board”)
in its sole discretion. Mr. Hen is also eligible to receive
all such other benefits as are provided to other management
employees.
Mr. Hen
was granted options to purchase 50,000 shares of common stock of
the Company, $0.0001 par value per share (“ Common
Stock”), pursuant to the Company’s 2017 Equity Award
Plan (the “2017 Plan”), which will vest in three equal
annual installments on the first (May 15, 2020), second (May 15,
2021), and third (May 15, 2022) anniversaries of the grant date, at
a strike price of $0.78 per share, the closing price of the
Company’s Common Stock on May 15, 2019.
Mr. Hen
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 the Hen Employment
Agreement).
Mr. Hen
also agreed as consideration for entering into the Hen Employment
Agreement, that for the period during his employment and for twelve
months thereafter, (i) he will not compete with the Company in
the “Geographic Area”, as defined in the Hen Employment
Agreement, and (ii) he will not solicit any of our existing
employees, suppliers or customers.
James K. McCarthy Offer Letter
The
amended and restated James K. McCarthy Offer Letter (the
“McCarthy Offer Letter”) provides that
Mr. McCarthy will serve as our Host and Moderator -- The
Bridge on TV. His employment is at will, subject to providing
120-days’ notice of resignation or termination. We may pay
Mr. McCarthy’s salary in lieu of notice for some or all
of the 120-day notice period. His base salary is $298,989 per
annum, and he is eligible for a bonus as determined by our
Compensation Committee. Mr. McCarthy will also be eligible to
receive all such other benefits as are provided to other management
employees.
Mr. McCarthy
also agreed that, for the period during his employment and for two
years thereafter, (i) he will not compete with the Company in
the “Restricted Territory”, as defined in Exhibit A to
the McCarthy Offer Letter, and (ii) he will not solicit any of
our existing employees, suppliers or customers.
Nathan Employment Agreement
The
employment agreement with Richard Nathan (the “Nathan
Employment Agreement”) provided for Dr. Nathan to serve
as our Chief Operating Officer for a term until December 31,
2017, with an option to extend the term. Dr. Nathan retired as
Chief Operating Officer effective February 28, 2018. His base
salary was $225,200 per annum, and he was eligible for a bonus as
determined by our Compensation Committee. Dr. Nathan also
agreed that, for two years after his employment: (i) he will
not compete with the Company in the “Restricted
Territory”, as defined in Exhibit A to the Nathan Employment
Agreement; and (ii) he will not solicit any of our existing
employees, suppliers or customers.
Latifullah Employment Agreement
The
employment agreement with Riaz Latifullah (the “Latifullah
Employment Agreement”) provides that Mr. Latifullah shall be
Executive Vice President of Corporate Development, effective May
15, 2019, for an initial term to end on April 7, 2022, subject
to automatic extension. Mr. Latifullah’s annual base salary
is $305,000, and he will be eligible for a bonus as determined by
the Board in its sole discretion. Mr. Latifullah is also
eligible to receive all such other benefits as are provided to
other management employees.
On May 8, 2019, pursuant to the Latifullah Employment Agreement,
Mr. Latifullah was granted options to
purchase
20,000
shares of Common Stock,
pursuant to the 2017 Plan, which will vest in three equal annual
installments on the first (May 8, 2020), second (May 8, 2021), and
third (May 8, 2022) anniversaries of the grant date, at a strike
price of $0.80 per share,
the closing price of the
Company’s Common Stock on May 8, 2019
.
Mr. Latifullah is eligible to receive two times his base salary
then in effect if Mr. Latifullah’s employment with the
Company is terminated within 120 days of a change of control (as
such term is defined in the Latifullah Employment
Agreement).
Mr. Latifullah
also agreed as consideration for entering into the Latifullah
Employment Agreement, that for the period during his employment and
for twelve months thereafter, (i) he will not compete with the
Company in the “Geographic Area”, as defined in the
Latifullah Employment Agreement, and (ii) he will not solicit
any of our existing employees, suppliers or customers.
17
Bonus Eligibility
Bonuses
for our executive officers may be conditioned on the achievement of
objective goals, which may not be waived after being set, based on
one or more of the following performance measures: earnings;
operating profits (including measures of earnings before interest,
taxes, depreciation and amortization); free cash flow or adjusted
free cash flow; cash from operating activities; revenues; net
income (before or after tax); financial return ratios; market
performance; stockholder return and/or value; net profits; earnings
per share; profit returns and margins; stock price; working
capital; capital investments; returns on assets; returns on equity;
returns on capital investments; selling, general and administrative
expenses; discounted cash flows; productivity; expense targets;
market share; cost control measures; strategic initiatives; changes
between years or periods that are determined with respect to any of
the above-listed performance criteria; net present value; sales
volume; cash conversion costs; leverage ratios; maintenance of
liquidity; integration of acquired businesses; operational
efficiencies, including Lean Six Sigma initiatives; regulatory
compliance, including the Sarbanes-Oxley Act of 2002; and economic
profit.
The following table provides the total compensation for each person
who served as a non-employee member of our Board of Directors
during fiscal year 2018, including all compensation awarded to,
earned by or paid to each person who served as a non-employee
director for some portion or all of fiscal year
2018
:
|
Name
|
Fees earned or
paid in cash($)
|
Stock
awards($)
|
Option
awards($)
|
Non-equity
incentive plan compensation($)
|
Nonqualified
deferred compensation earnings($)
|
All other
compensation($)
|
Total($)
|
|
Paul de Bary
(2)
|
65,925
|
-
|
-
|
-
|
-
|
-
|
65,925
|
|
Glenn Goord
(3)
|
49,444
|
-
|
-
|
-
|
-
|
-
|
49,444
|
|
Christine Harada
(4)
|
49,722
|
-
|
-
|
-
|
-
|
-
|
49,722
|
|
Marta
Tienda
|
30,486
|
|
|
|
|
|
30,486
|
|
David P. Hanlon
(5)
|
4,167
|
-
|
34,289
|
-
|
-
|
-
|
38,456
|
|
(1)
|
The
amount shown reflects the aggregate grant date fair value of option
awards computed in accordance with Financial Accounting Standards
Board Accounting Standards Codification 718.
|
|
(2)
|
As of
December 31, 2018, Mr. de Bary held fully-vested options to
purchase 48,499 shares of our common stock at a strike price of
$1.5464 per share.
|
|
(3)
|
As of
December 31, 2018, Mr. Goord held fully-vested options to purchase
48,499 shares of our common stock at a strike price of $1.2887 per
share.
|
|
(4)
|
As of
December 31, 2018, Ms. Harada held fully-vested options to purchase
48,499 shares of our common stock at a strike price of $1.6753
per share.
|
|
(5)
|
As of
December 31, 2018, Mr. Hanlon held fully-vested options to purchase
48,499 shares of our common stock at a strike price of $0.73
per share.
|
Effective
August 23, 2017 and as presently in effect, our non-employee
directors are compensated for their services as
follows:
|
|
|
Board Meeting
Fee
|
Committee
Meeting Fee
|
||
|
Position
|
Annual Fee($)
(1)
|
In
Person($)
|
Telephonic($)
|
In
Person($)
|
Telephonic($)
|
|
Board
Member
|
25,000
|
1,000
|
500
|
500
|
250
|
|
Audit Committee
Chair
|
20,000
|
1,500
|
500
|
500
|
250
|
|
Compensation
Committee Chair
|
10,000
|
1,500
|
500
|
500
|
250
|
|
Governance
Committee Chair
|
10,000
|
1,500
|
500
|
500
|
250
|
|
Special
Committee
|
-
|
1,500
|
500
|
500
|
250
|
|
Lead
Director
|
10,000
|
-
|
-
|
-
|
-
|
|
(1)
|
Payments
are made on a quarterly basis.
|
Directors
who are officers or employees of Rekor or its subsidiaries do not
receive any compensation for service on our Board, but employee
directors will be reimbursed for expenses incurred in attending
meetings of our Board or any committees thereof.
18
The
Governance Committee has responsibility for reviewing and, if
appropriate, for approving any related party transactions that
would be required to be disclosed pursuant to applicable SEC
rules.
Described
below are any transactions during the fiscal year ended December
31, 2018 and 2017 and any currently proposed transactions to which
the Company was a party in which:
|
●
|
The amounts involved exceeded or will exceed the lower of either
$120,000 or 1% of the average of the Company’s total assets
at year-end for the last two completed fiscal years;
and
|
|
|
|
|
●
|
A director, executive officer, holder of more than 5% of the
outstanding capital stock of the Company, or any member of such
person’s immediate family had or will have a direct or
indirect material interest.
|
Firestorm Acquisition
As part
of the consideration for the acquisition of Firestorm
Solutions, LLC and Firestorm Franchising, LLC in January 2017, we
issued subordinated promissory notes to Harry Rhulen, our
President, and Suzanne Loughlin, our General Counsel and Chief
Administrative Officer. The principal amount of the promissory note
to Mr. Rhulen is $166,666.66 and the principal amount of the
promissory note to Ms. Loughlin is $166,666.67. Each of the
promissory notes bears interest at a rate of 2%. In connection with
the acquisition, we also paid cash of $125,000 to each of
Mr. Rhulen and Ms. Loughlin, issued warrants to purchase
105,209 shares of our common stock, exercisable over a period of
five years, at an exercise price of $2.58 per share, and issued
warrants to purchase 105,209 shares of our common stock,
exercisable over a period of five years, at an exercise price of
$3.60 per share.
Prior
to the consummation of the Firestorm Acquisition, Mr. Rhulen and
Ms. Loughlin were not officers of the Company.
Avon Road Note Purchase Agreement
On
March 16, 2016, we entered into a Subordinated Note and
Warrant Purchase Agreement pursuant to which we agreed to issue up
to $1,000,000 in subordinated debt and warrants to purchase up to
242,493 shares of our common stock at an exercise price of $1.031
per share to Avon Road Partners, L.P., an affiliate of Robert
Berman, our CEO and a member of our Board of Directors.
Simultaneously with the entry into the Subordinated Note and
Warrant Purchase Agreement we issued subordinated notes with a face
amount of $500,000 and warrants to purchase 121,247 shares of our
common stock to the Avon Road. These warrants were to expire on
March 16, 2019 and were exercised on December 11, 2017
for proceeds of $125,006. There are no Avon Road Subordinated Note
Warrants outstanding as of December 31, 2017. Simple interest
accrues on the unpaid principal of the note at a rate equal to the
lower of (a) 9% per annum, or (b) the highest rate
permitted by applicable law. On March 12, 2019, Rekor entered into
a note purchase agreement pursuant to which investors, including
OpenALPR Technology, (the “2019 Lenders”) loaned
$20,000,000 to Rekor (the “2019 Promissory Notes”) and
the Company issued to the 2019 Lenders warrants to purchase
2,500,000 shares of Rekor common stock (the “March 2019
Warrants”). The loan is due and payable on March 11, 2021 and
bears interest at 16% per annum, of which at least 10% per annum
shall be paid in cash. The full remaining portion of all interest,
if any, shall accrue and be paid-in-kind. The notes also require a
premium, if paid before the maturity date, a $1,000,000 exit fee
due at maturity, and compliance with affirmative, negative and
financial covenants, including a fixed charge ratio, minimum
liquidity and maximum capital expenditures, as defined. Transaction
costs were approximately $403,250 fora work fee payable over 10
months, $290,000 in legal fees and a $200,000 closing fee. The loan
is secured by a security interest in substantially all of the
assets of Rekor. The March 2019 Warrants are exercisable over a
period of five years, at an exercise price of $0.74 per share, and
are valued at $705,943. The warrants are exercisable commencing
March 12, 2019 and expire on March 12, 2024. The 2019 Promissory
Notes has an effective interest rate of 24.87%. On March 12,
2019, the $500,000 balance due on the Avon Road Note was exchanged
for an equal amount of 2019 Promissory Notes, together with
attendant warrants on the same terms and conditions as the other
holders of the 2019 Promissory Notes.
The
foregoing transaction was reviewed and approved by officers and
directors other than Mr. Berman.
Review, Approval, or Ratification of Transactions with Related
Parties
The
Charter of our Governance Committee requires that any transaction
with a related person that must be reported under applicable rules
of the SEC must be reviewed and either approved, disapproved or
ratified by our Governance Committee.
Prior
to August 2017, we had no formal, written policy or procedure for
the review and approval of related-party transactions.
Director Independence
Paul
de Bary, Glen Goord, Christina Harada, Steven D. Croxton, and David
P. Hanlon are each “independent” within the meaning of
Nasdaq Rule 5605(b)(1).
19
PROPOSAL NO. 2
RATIFICATION OF THE APPOINTMENT OF FRIEDMAN LLP AS
INDEPENDENT PUBLIC ACCOUNTANT FOR THE FISCAL YEAR ENDING DECEMBER
31, 2019
Effective
June 28, 2019, the Audit Committee has appointed Friedman LLP,
independent public accountant, to audit our financial statements
for the fiscal year ending December 31, 2019.
A representative of
Friedman LLP
is expected to be present
in
person at
the 2019 Annual Meeting and will have an opportunity to make a
statement if he desires to do so. It is also expected that such
representative will be available to respond to appropriate
questions.
The
Audit Committee retained Friedman LLP as the Company’s
independent registered public accounting firm to perform the audit
of the Company’s consolidated financial statements for the
fiscal year ending December 31, 2019, and the audit of the
Company’s internal control over financial reporting as of
December 31, 2019.
Our
independent registered public accounting firm for 2018 and 2017 was
BD & Company, Inc., (“BD & Company”). BD &
Company served as our principal auditor from May 2017 until June
2019. They did not provide any services, and no fees were paid to
them, in 2016. CohnReznick LLP (“CohnReznick”) provided
principal auditor services from November 3, 2016 through April 28,
2017 but did not issue an audit report. Ericksen, Krentel &
Laporte, LLP (“Ericksen Krentel”) served as our
principal auditor in 2016 and provided accounting services in
2017.
The
Audit Committee has considered whether the provision of services,
other than services rendered in connection with the audit of our
annual financial statements, was compatible with maintaining BD
& Company’s independence. The Audit Committee has
determined that the rendering of non-audit services by BD &
Company during 2018 was compatible with maintaining the
firm’s independence.
Aggregate
fees billed or incurred related to the following years for
professional services rendered by BD & Company for 2018 and
2017 are set forth below.
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2018
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2017
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Audit
fees
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$
204,782
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$
241,661
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Audit-related
fees
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104,380
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-
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Tax
fees
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39,825
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24,875
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All other
fees
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-
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-
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Total
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$
348,987
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$
266,536
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Aggregate
fees billed or incurred related to the following years for
professional services rendered by CohnReznick for 2018 and 2017 are
set forth below.
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2018
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2017
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Audit
fees
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$
-
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$
35,850
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Audit-related
fees
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-
|
-
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Tax
fees
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-
|
-
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All other
fees
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-
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-
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Total
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$
-
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$
35,850
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Aggregate
fees billed or incurred related to the following years for
professional services rendered by Ericksen Krentel for 2018 and
2017 are set forth below.
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2018
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2017
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|
Audit
fees
|
$
-
|
$
-
|
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Audit-related
fees
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-
|
-
|
|
Tax
fees
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-
|
-
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All other
fees
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-
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25,128
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Total
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$
-
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$
25,128
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Audit
Fees for 2018 and 2017 include fees associated with the audits of
the annual financial statements and the quarterly reviews of the
unaudited interim financial statements included in the
Company’s Quarterly Reports on Form 10-Q. Audit-related fees
for 2018 primarily include costs associated with SEC filings and
the supplemental audit and disclosure document for the
Company’s franchising business. Tax fees for 2018 and 2017
include fees associated with the preparation and review of tax
returns, advising on the impact of local tax laws, and tax
planning. All other fees for 2017 include accounting services
related to annual financial reporting.
20
Policy on Audit Committee Pre-Approval of Audit and Permissible
Non-Audit Services of Independent Auditors
Consistent
with SEC policies and guidelines regarding audit independence, the
Audit Committee is responsible for the pre-approval of all audit
and permissible non-audit services provided by our principal
accountants on a case-by-case basis. Our Audit Committee has
established a policy regarding approval of all audit and
permissible non-audit services provided by our principal
accountants. Our Audit Committee pre-approves these services by
category and service. Our Audit Committee has pre-approved all of
the services provided by our principal accountants.
No Appraisal Rights
Under
Delaware law, our shareholders are not entitled to appraisal rights
with respect to our proposed ratification of the appointment of
Friedman LLP as our independent public accountant and we will not
independently provide our shareholders with any such
rights.
Vote Required
The
affirmative vote of a majority of the votes cast for this proposal
is required to ratify the appointment of the Company’s
independent public accountant. Abstentions will be counted towards
the tabulation of votes cast on this proposal and will have the
same effect as a negative vote. Brokerage firms have authority to
vote customers’ unvoted shares held by the firms in street
name on this proposal. If a broker does not exercise this
authority, such broker non-votes will have no effect on the results
of this vote. We are not required to obtain the approval of our
shareholders to appoint the Company’s independent accountant.
However, if our shareholders do not ratify the appointment of
Friedman LLP as the Company’s independent public accountant
for the fiscal year ending December 31, 2019, the Audit Committee
may reconsider its appointment.
THE BOARD RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT
OF FRIEDMAN LLP AS INDEPENDENT PUBLIC ACCOUNTANT, AND PROXIES
SOLICITED BY THE BOARD WILL BE VOTED IN FAVOR THEREOF UNLESS A
SHAREHOLDER HAS INDICATED OTHERWISE ON THE PROXY.
As of
the date of this Proxy Statement, the Board knows of no other
business that will be presented at the Annual Meeting. If any other
business is properly brought before the Annual Meeting, it is
intended that proxies in the enclosed form will be voted in respect
thereof in accordance with the best judgment and in the discretion
of the persons voting the proxies.
21
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REKOR SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
ANNUAL
MEETING OF SHAREHOLDERS – AUGUST 7, 2019 AT 10:00 AM EDT
TIME
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CONTROL ID:
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REQUEST ID:
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The
undersigned hereby appoints James K. McCarthy, Chairman, and Eyal
Hen, Chief Financial Officer, as proxy of the undersigned, with
power of substitution, to vote all shares held by the undersigned
which are entitled to be voted at the Meeting of the Shareholders
of Rekor Systems, Inc. (the “Company”) to be held
August 7, 2019, or such later date or dates as such Annual Meeting
date may be adjourned, at 151 West 43rd Street, 10th Floor, New
York, NY 10036, for the purpose of considering and taking action on
the following proposals:
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(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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Important Notice Regarding the Availability of Proxy
Materials
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for the Shareholder Meeting To Be Held on August 7,
2019
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The
Notice of the Meeting, Proxy Statement, Proxy Card, Annual Report
on Form 10-K
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are
available at https://www.iproxydirect.com/REKR
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VOTING INSTRUCTIONS
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If you vote by phone, fax or internet, please DO NOT mail your
proxy card.
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MAIL:
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Please
mark, sign, date, and return this Proxy Card promptly using the
enclosed envelope.
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FAX:
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Complete
the reverse portion of this Proxy Card and Fax to
202-521-3464.
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INTERNET:
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https://www.iproxydirect.com/REKR
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PHONE:
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1-866-752-VOTE(8683)
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ANNUAL MEETING OF THE SHAREHOLDERS OF REKOR SYSTEMS,
INC.
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PLEASE COMPLETE, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN
HERE:
☒
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PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
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Proposal 1
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FOR ALL
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WITHHOLD
ALL
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FOR ALL
EXCEPT
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Election
of Directors.
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☐
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☐
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James
K. McCarthy
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☐
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CONTROL
ID:
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Robert
Berman
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☐
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REQUEST
ID:
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Dr.
Richard Nathan
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☐
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Glenn
Goord
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☐
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Paul A.
de Bary
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☐
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Christine J.
Harada
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☐
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David
P. Hanlon
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☐
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Steven
D. Croxton
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☐
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Proposal 2
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FOR
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AGAINST
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ABSTAIN
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Ratify
the appointment of Friedman LLP as our independent public
accountant for the fiscal year ending December 31,
2019.
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☐
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☐
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☐
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Proposal 3
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FOR
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AGAINST
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ABSTAIN
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To
transact such other business as may be properly brought before the
Annual Meeting and any adjournments thereof.
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☐
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☐
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☐
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MARK “X” HERE IF YOU PLAN TO ATTEND THE MEETING:
☐
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THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE FOR ALL
PERSONS LISTED IN PROPOSAL 1 AND A VOTE FOR PROPOSALS 2 AND
3.
The
undersigned hereby revokes any proxy or proxies heretofore given to
vote or act with respect to the capital stock of the Company and
hereby ratifies and confirms all that the Proxy, or his
substitutes, or any of them, may lawfully do by virtue
hereof.
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MARK
HERE FOR ADDRESS CHANGE ☐ New Address (if
applicable):
________________________________________________________
____________________________
IMPORTANT:
Please sign exactly as your name or names appear
on this Proxy. When shares are held jointly, each holder should
sign. When signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If the signer is a
corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.
Dated:
________________________, 2019
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(Print
Name of Shareholder and/or Joint Tenant)
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(Signature
of Shareholder)
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(Second
Signature if held jointly)
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TABLE OF CONTENTS