UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period from                      to

Commission File Number: 001-41248

Knightscope, Inc.

(Exact name of registrant as specified in its charter)

Delaware	46-2482575
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

1070 Terra Bella Avenue

Mountain View, CA 94043

(Address of Principal Executive Offices)

(650) 924-1025

(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes  ☒    No   ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒	Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes  ☐    No  ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading symbol	Name of Exchange on which registered
Class A Common Stock, par value $0.001 per share	KSCP	Nasdaq Global Market

As of May 5, 2023, there were 43,917,405 shares of the registrant’s Class A Common Stock outstanding.

TABLE OF CONTENTS

		Page
Part I	Financial Information	5
Item 1.	Financial Statements	5
	Condensed Consolidated Balance Sheets as of March 31, 2023 (Unaudited) and December 31, 2022	5
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (Unaudited)	6
	Condensed Consolidated Statements of Stockholders’ Deficit for the three months ended March 31, 2023 and 2022 (Unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30
Item 4.	Controls and Procedures	30
Part II	Other Information	31
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	32
Signatures		33

2

Cautionary Note on Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements contained in this Quarterly Report on Form 10-Q other than statements of historical fact, including but not limited to, statements regarding our future operating results and financial position, including projections of our future financial performance, our business strategy and plans, market growth, our objectives for future operations, industry trends, anticipated trends in our business and other characterizations of future events or circumstances are forward-looking statements. Words such as “believe,” “may,” “will,” “estimate,” “potential,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “target,” and similar expressions are intended to identify forward-looking statements.

Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

● The success of our products and product candidates will require significant capital resources and years of development efforts;

● Our limited number of deployments and the risk of limited market acceptance of our products;

● Our ability to protect our intellectual property and to develop, maintain and enhance a strong brand;

● Our limited operating history by which performance can be gauged;

● Our ability to operate and collect digital information on behalf of our clients, which is dependent on the privacy laws of jurisdictions in which our Autonomous Security Robots (“ASR”) operate, as well as the corporate policies of our clients, which may limit our ability to fully deploy our technologies in various markets;

● Our ability to raise capital and the availability of future financing; and

● Unpredictable events, such as the COVID-19 pandemic, banking failures, and a rise in the inflation rate resulting in supply chain constraints, increased operating costs, and associated business disruptions could seriously harm our future revenues and financial condition, delay our operations, increase our costs and expenses, and impact our ability to raise capital.

We have based these forward-looking statements on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward- looking statements are subject to a number of risks, uncertainties, and assumptions and other factors that could cause actual results to differ materially from those stated, including those described in “Risk Factors” in Part I, Item 1A of our most recent Annual Report on Form 10-K, in Part II, Item 1A of this Quarterly Report on Form 10-Q, as such factors may be updated in our filings with the Securities and Exchange Commission, (“the SEC”). Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. In particular, disruptions and delays with certain vendors in our supply chain, as a result of the COVID-19 pandemic as well as increased operating costs resulting from a rise in the inflation rate, may adversely impact component manufacturers’ ability to meet our client demand timely. Additionally, the prioritization of shipments of certain products, as a result of the pandemic, could cause delays in our ability to deploy our ASRs. Such disruptions could result in a delay in our ability to recognize revenue on sales. The physical security industry in general and our financial position and operating results, in particular, have been material, are changing rapidly, and cannot be predicted.

3

You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. Our forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q, and we undertake no obligation to update any of these forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q or to conform these statements to actual results or revised expectations, except as required by applicable law.

In this Quarterly Report on Form 10-Q, the words “we,” “us,” “our,” and “Knightscope” refer to Knightscope, Inc., unless the context requires otherwise.

4

PART I —FINANCIAL INFORMATION

Item 1. Financial Statements

KNIGHTSCOPE, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

	March 31,		December 31,
	2023		2022
	(unaudited)		(1)
ASSETS
Current assets:
Cash and cash equivalents	$	2,375	$	4,810
Restricted cash		100		—
Accounts receivable (net of allowance for credit losses of $22 as of March 31, 2023 and $229 as of December 31, 2022)		1,856		1,370
Inventory		2,698		2,560
Prepaid expenses and other current assets		1,365		1,349
Total current assets		8,394		10,089
Autonomous Security Robots, net		5,804		5,850
Property, equipment and software, net		1,007		614
Operating lease right-of-use-assets		1,849		2,012
Goodwill		1,344		1,344
Intangible assets, net		1,919		2,056
Other assets		95		117
Total assets	$	20,412	$	22,082
LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	1,688	$	2,457
Accrued expenses		1,843		2,403
Deferred revenue		2,386		1,711
Debt obligations		866		2,144
Operating lease liabilities, current		807		731
Other current liabilities		1,423		1,063
Total current liabilities		9,013		10,509
Debt obligations		4,112		6,554
Preferred stock warrant liability		6,068		10,011
Derivative liability		467		1,146
Other noncurrent liabilities		334		356
Operating lease liabilities, noncurrent		1,130		1,309
Total liabilities		21,124		29,885
Commitments and contingencies (Note 8)
Preferred Stock, $0.001 par value; 43,405,324 shares authorized as of March 31, 2023 and December 31, 2022, 9,579,238 and 11,351,841 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively; aggregate liquidation preference of $35,858 and $37,733 as of March 31, 2023 and December 31, 2022, respectively		34,693		35,783
Stockholders’ deficit:
Class A Common Stock, $0.001 par, 114,000,000 shares authorized as of March 31, 2023 and December 31, 2022, 37,314,704 and 28,029,238 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		37		28
Class B Common Stock, $0.001 par, 30,000,000 shares authorized as of March 31, 2023 and December 31, 2022, 10,357,822 and 10,319,884 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		10		10
Additional paid-in capital		106,332		95,716
Accumulated deficit		(141,784)		(139,340)
Total stockholders’ deficit		(35,405)		(43,586)
Total liabilities, preferred stock and stockholders’ deficit	$	20,412	$	22,082

(1) The condensed consolidated balance sheet as of December 31, 2022 was derived from the audited consolidated balance sheet as of that date.

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

KNIGHTSCOPE, INC.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share data)

(Unaudited)

	Three Months Ended March 31,
	2023		2022
Revenue, net
Service	$	1,748	$	944
Product		1,149		—
Total revenues		2,897		944
Cost of revenue, net
Service		2,242		1,493
Product		868		—
Total cost of revenues, net		3,110		1,493
Gross loss		(213)		(549)
Operating expenses:
Research and development		1,397		1,838
Sales and marketing		1,128		3,490
General and administrative		3,639		2,326
Restructuring charges		144		—
Total operating expenses		6,308		7,654
Loss from operations		(6,521)		(8,203)
Other income (expense):
Interest expense, net		(502)		(8,911)
Change in fair value of warrant liabilities		4,622		7,522
Change in fair value of convertible notes		43		—
Other (expense) income, net		(86)		(5)
Total other income (expense)		4,077		(1,394)
Loss before income tax expense		(2,444)		(9,597)
Income tax expense		—		—
Net loss	$	(2,444)	$	(9,597)
Basic and diluted net loss per common share	$	(0.06)	$	(0.30)
Weighted average shares used to compute basic and diluted net loss per share		42,746,330		31,702,815

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

KNIGHTSCOPE, INC.

Condensed Consolidated Statements of Stockholders’ Deficit

(In thousands, except share and per share data)

(Unaudited)

	Series m			Series m‑1			Series m‑2			Series m‑3			Series S			Series A			Series B			Class A			Class B
	Preferred			Preferred			Preferred			Preferred			Preferred			Preferred			Preferred			common			common				Additional				Total
	stock			stock			stock			stock			stock			stock			stock			stock			stock				Paid-in-		Accumulative		Stockholders’
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares		Amount		capital		Deficit		Deficit
Balance as of December 31, 2021	4,574,917	$	11,881	186,872	$	1,319	1,251,666	$	3,755	16,757	$	46	3,705,239	$	29,995	6,155,564	$	2,663	3,726,092	$	7,559	5,936,929	$	6		13,131,197	$	13	$	30,745	$	(113,697)	$	(82,933)
Stock based compensation																														725				725
Warrants exercised																						156,483								370				370
Conversion of debt obligations to Class A Common Stock																						6,513,385		7						16,004				16,011
Stock options exercised																						73,001				25,000				97				97
Offering proceeds, net of issuance costs																						2,236,619		2						19,454				19,456
Share conversion to common stock	(2,537,007)		(6,589)	(186,872)		(1,319)	(425,000)		(1,275)	(16,757)		(46)	(849,496)		(6,877)	(1,846,752)		(799)	(168,721)		(342)	8,961,400		9		(2,777,946)		(3)		17,241				17,247
Share conversion costs																														(50)				(50)
Net loss																																(9,597)		(9,597)
Balance as of March 31, 2022	2,037,910	$	5,292	—	$	—	826,666	$	2,480	—	$	—	2,855,743	$	23,118	4,308,812	$	1,864	3,557,371	$	7,217	23,877,817	$	24		10,378,251	$	10	$	84,586	$	(123,294)	$	(38,674)

	Series m			Series m‑1			Series m‑2			Series m‑3			Series S			Series A			Series B			Class A			Class B
	Preferred			Preferred			Preferred			Preferred			Preferred			Preferred			Preferred			common			common				Additional				Total
	stock			stock			stock			stock			stock			stock			stock			stock			stock				Paid-in-		Accumulative		Stockholders’
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares		Amount		capital		Deficit		Deficit
Balance as of December 31, 2022	1,855,328	$	4,818	—	$	—	160,000	$	480	—	$	—	2,714,732	$	21,977	3,086,160	$	1,335	3,535,621	$	7,173	28,029,238	$	28		10,319,884	$	10	$	95,716	$	(139,340)	$	(43,586)
Stock based compensation																														446				446
Conversion of debt obligations to Class A Common Stock																						2,893,824		3						4,171				4,174
Stock options exercised																						213,020								225				225
Proceeds from Equity Sale, net of issuance costs																						4,424,645		4						4,690				4,694
Share conversion to common stock	(46,830)		(122)										(21,232)		(172)	(1,667,779)		(721)	(36,762)		(75)	1,753,977		2		37,938				1,088				1,090
Share conversion costs																														(4)				(4