Knightscope(KSCP) - 2025 Q1 - Quarterly Report

Filing Information Registrant Information Knightscope, Inc., a Delaware corporation headquartered in Mountain View, CA, is filing its Quarterly Report on Form 10-Q for the period ended March 31, 2025 - Knightscope, Inc. is a Delaware corporation with its principal executive offices in Mountain View, CA[1][2] - The company's Class A Common Stock trades on The Nasdaq Capital Market under the symbol KSCP[3] Filer Status and Stock Information Knightscope is classified as a non-accelerated filer and a smaller reporting company, and it is not a shell company - The registrant is a non-accelerated filer and a smaller reporting company, and is not a shell company[4] Outstanding Common Stock as of May 9, 2025 | Class of Stock | Shares Outstanding | | :------------- | :----------------- | | Class A Common Stock | 6,564,466 | | Class B Common Stock | 336,759 | Cautionary Note on Forward-Looking Statements Forward-Looking Statements and Associated Risks This report contains forward-looking statements regarding future operations, financial position, business strategy, and market growth, subject to significant risks and uncertainties - Forward-looking statements in this report cover future operating results, financial position, business strategy, market growth, and product development, and are subject to various known and unknown risks and uncertainties[9][10] - Key risks include the need for significant capital resources, market acceptance of products, ability to protect intellectual property, limited operating history, and the ability to continue as a going concern[11] - The company has not yet generated profits or significant revenues, anticipates continued losses, and its independent registered public accounting firm expresses substantial doubt about its ability to continue as a going concern without securing additional funding[11] PART I — FINANCIAL INFORMATION Item 1. Financial Statements This section presents Knightscope's unaudited condensed financial statements, showing increased assets and equity, reduced net loss, and improved cash flow from operations Condensed Balance Sheets Condensed Balance Sheet Highlights (in thousands) | Metric | March 31, 2025 | December 31, 2024 | Change | | :----------------------------- | :------------- | :---------------- | :----- | | Total Assets | $29,810 | $28,185 | +$1,625 | | Total Liabilities | $11,647 | $12,404 | -$757 | | Total Stockholders' Equity | $18,163 | $15,781 | +$2,382 | | Cash and Cash Equivalents | $12,661 | $11,124 | +$1,537 | | Accounts Receivable, net | $2,014 | $1,731 | +$283 | | Inventory | $1,607 | $1,797 | -$190 | | Total Current Assets | $17,072 | $15,099 | +$1,973 | | Total Current Liabilities | $7,513 | $8,265 | -$752 | Condensed Statements of Operations Condensed Statements of Operations Highlights (in thousands, except per share data) | Metric | 3 Months Ended March 31, 2025 | 3 Months Ended March 31, 2024 | Change | % Change | | :------------------------------------- | :---------------------------- | :---------------------------- | :----- | :------- | | Total Revenue, net | $2,917 | $2,254 | +$663 | +29.4% | | Total Cost of Revenue, net | $3,585 | $3,699 | -$114 | -3.1% | | Gross Loss | $(668) | $(1,445) | +$777 | -53.8% | | Total Operating Expenses | $6,160 | $6,835 | -$675 | -9.9% | | Loss from Operations | $(6,828) | $(8,280) | +$1,452 | -17.5% | | Net Loss | $(6,897) | $(7,592) | +$695 | -9.2% | | Basic and Diluted Net Loss per Common Share | $(1.28) | $(3.99) | +$2.71 | -67.9% | Condensed Statements of Preferred Stock and Stockholders' Equity (Deficit) Stockholders' Equity Changes (in thousands) | Metric | Balance as of Dec 31, 2024 | Stock-based compensation | Proceeds from Equity Sale, net | Proceeds from Direct Registration Offering | Net Loss | Balance as of Mar 31, 2025 | | :----------------------------- | :------------------------- | :----------------------- | :----------------------------- | :--------------------------------------- | :------- | :------------------------- | | Total Stockholders' Equity | $15,781 | $422 | $7,411 | $1,436 | $(6,897) | $18,163 | - All preferred stock was converted into Class A or Class B Common Stock on May 15, 2024, resulting in no preferred stock remaining outstanding[96] Condensed Statements of Cash Flows Condensed Statements of Cash Flows Highlights (in thousands) | Metric | 3 Months Ended March 31, 2025 | 3 Months Ended March 31, 2024 | Change | | :-------------------------------------- | :---------------------------- | :---------------------------- | :----- | | Net cash used in operating activities | $(6,375) | $(8,611) | +$2,236 | | Net cash used in investing activities | $(449) | $(894) | +$445 | | Net cash provided by financing activities | $8,259 | $9,710 | -$1,451 | | Net change in cash, cash equivalents and restricted cash | $1,435 | $205 | +$1,230 | - The decrease in net cash used in operating activities was primarily due to a lower net loss and favorable changes in assets and liabilities, partially offset by a decrease in the change in fair value of warrant and derivative liabilities and a loss on disposal of ASRs[158] Notes to Condensed Financial Statements NOTE 1: The Company and Summary of Significant Accounting Policies Knightscope, Inc. is a public safety innovator building AI-driven Autonomous Security Robots (ASR) and Emergency Communication Devices (ECD) for the U.S. market - Knightscope, Inc. is a public safety innovator that builds Autonomous Security Robots (ASR) and Emergency Communication Devices (ECD), providing AI-driven solutions to the U.S. public safety market[31][32] - The company's financial statements are prepared on a going concern basis, but historical losses and negative cash flows raise substantial doubt about its ability to continue as a going concern without additional fundraising[37][38] - A 1-for-50 reverse stock split for Class A and Class B Common Stock became effective on September 13, 2024, with all share and per-share amounts retroactively adjusted[39] NOTE 2: Revenue and Deferred Revenue Revenue is generated from ASR leases and ECD sales, with deferred revenue primarily from Machine-as-a-Service subscriptions - Revenue is derived from ASR leases (operating leases, recognized ratably over 12-month terms) and ECD sales (recognized upon completion of services or product delivery)[72][74] Revenue by Product Line (in thousands) | Product Line | 3 Months Ended March 31, 2025 | 3 Months Ended March 31, 2024 | Change | % Change | | :----------- | :---------------------------- | :---------------------------- | :----- | :------- | | ASRs | $1,182 | $990 | +$192 | +19.4% | | ECDs | $1,735 | $1,264 | +$471 | +37.3% | | Total | $2,917 | $2,254 | +$663 | +29.4% | - Deferred revenue, primarily from Machine-as-a-Service (MaaS) subscriptions billed annually in advance, decreased from $1.88 million at December 31, 2024, to $1.34 million at March 31, 2025[75][78] NOTE 3: Fair Value Measurement Fair Value of Cash Equivalents (in thousands) | Asset Category | March 31, 2025 | December 31, 2024 | Level | | :------------- | :------------- | :---------------- | :---- | | Money market funds | $11,034 | $10,638 | Level 1 | - As of March 31, 2025, there were no Level 3 liabilities measured at fair value on a recurring basis, as preferred stock warrant liabilities were reclassified to equity in 2024[86][149] NOTE 4: Debt Obligations Debt Obligations (in thousands) | Debt Type | March 31, 2025 | December 31, 2024 | Change | | :------------------------------------------------- | :------------- | :---------------- | :----- | | Bonds, net | $3,971 | $3,952 | +$19 | | August 2024 Note | $909 | $1,364 | -$455 | | Insurance Notes | $458 | $0 | +$458 | | Total Debt | $5,338 | $5,316 | +$22 | | Less: current portion of debt obligations | $(1,367) | $(1,364) | -$3 | - The August 2024 Note, a $3.0 million senior secured promissory note, had an outstanding balance of $0.9 million as of March 31, 2025, down from $1.4 million at December 31, 2024[93][95] - The company financed $371 thousand in additional business insurance premiums in February 2025, with an outstanding balance of $458 thousand as of March 31, 2025[94][95] NOTE 5: Capital Stock and Warrants - All outstanding preferred stock was automatically converted into Class A or Class B Common Stock on May 15, 2024, and preferred warrants were reclassified from liabilities to equity[96][97] - The company's authorized Class A Common Stock was doubled to 228 million shares, and 40 million shares of 'blank check' preferred stock were authorized by stockholders[98][129][131] Outstanding Warrants as of March 31, 2025 | Class of shares | Number of Warrants | Exercise Price | Expiration Date | | :----------------------------------------- | :----------------- | :------------- | :-------------- | | Class A Common Stock (previously Series m-3 Preferred Stock) | 28,656 | $200.00 | Dec 31, 2027 | | Class A Common Stock (previously Series S Preferred Stock) | 121,455 | $93.87 | Dec 31, 2027 | | Class A Common Stock (Vendor Warrants) | 2,929 | $0.001 | 6 years from each issuance | | Class A Common Stock (Underwriter Warrants) | 36,300 | $18.29 | Nov 21, 2029 | NOTE 6: Stock-Based Compensation Stock-Based Compensation Expense (in thousands) | Expense Category | 3 Months Ended March 31, 2025 | 3 Months Ended March 31, 2024 | Change | | :--------------- | :---------------------------- | :---------------------------- | :----- | | Cost of revenue, net | $46 | $57 | -$11 | | Research and development | $148 | $122 | +$26 | | Sales and marketing | $21 | $48 | -$27 | | General and administrative | $207 | $107 | +$100 | | Total | $422 | $334 | +$88 | - The weighted average grant date fair value of options granted during the three months ended March 31, 2025, was $2.28 per share[111] - As of March 31, 2025, unamortized stock-based compensation expense was $2.1 million, to be recognized over a weighted average remaining vesting term of 1.4 years[112] NOTE 7: Commitments and Contingencies Operating Lease Liabilities (in thousands) | Lease Metric | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Operating lease right-of-use assets | $265 | $407 | | Total operating lease liabilities | $268 | $412 | | Operating lease costs (Q1) | $190 | $989 | - The company has a purchase commitment of $0.8 million for ASR raw materials, with $80,000 paid in the three months ended March 31, 2025[116] - A use tax liability of $0.4 million has been recorded as of March 31, 2025, for potential sales tax exposure on its MaaS product offering[119] NOTE 8: Segment Information - Knightscope operates as a single reportable segment, with its Chief Executive Officer (CODM) reviewing financial information at a company level for resource allocation and performance evaluation[40][120][121] - All long-lived assets are located in the United States, and substantially all revenue is attributed to sellers and buyers based in the United States[40] NOTE 9: Subsequent Events - On April 9, 2025, Knightscope entered into a sublease agreement for 33,355 square feet of office space in Sunnyvale, California, to serve as its new corporate headquarters[115][122] - The sublease term commenced on April 16, 2025, and expires on June 30, 2030, with total lease payments of approximately $5.27 million[122] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Knightscope's financial condition and results, highlighting its mission, capital structure changes, operational improvements, and ongoing liquidity challenges Overview - Knightscope is dedicated to transforming public safety through AI-driven robotics (ASRs), emergency communication solutions (ECDs), and real-time monitoring via cloud-based platforms like KSOC, KEMS, and KNOC[125][126] - The company's products are manufactured in the United States and provide scalable, 24/7 autonomous monitoring and proactive threat deterrence[125][126] Recent Developments - The company completed a 1-for-50 reverse stock split on September 13, 2024, and doubled authorized Class A Common Stock to 228 million shares on April 5, 2024[127][129] - All outstanding preferred stock was converted to common stock on May 15, 2024, and 40 million shares of 'blank check' preferred stock were authorized[130][131] - Warrants with anti-dilution features were extinguished on August 1, 2024, in exchange for a $3.0 million senior secured promissory note[132][133] - Operational efficiency efforts are showing promise, including streamlined field services for ECD clients and improved ASR K5 v5 performance, leading to higher install base and customer retention[134][135] Results of Operations Key Financial Results (in thousands) | Metric | 3 Months Ended March 31, 2025 | 3 Months Ended March 31, 2024 | Change | % Change | | :------------------------------------- | :---------------------------- | :---------------------------- | :----- | :------- | | Total Revenue, net | $2,917 | $2,254 | +$663 | +29.4% | | Gross Loss | $(668) | $(1,445) | +$777 | -53.8% | | Total Operating Expenses | $6,160 | $6,835 | -$675 | -9.9% | | Net Loss | $(6,897) | $(7,592) | +$695 | -9.2% | - Total revenue increased by approximately $0.7 million, driven by a $0.4 million increase in service revenue and a $0.2 million increase in product revenue[140] - General and administrative expenses decreased by approximately $0.9 million (24%), primarily due to $1.0 million lower investor relations fees and $0.3 million lower third-party professional fees[147] Liquidity and Capital Resources Liquidity Position (in thousands) | Metric | March 31, 2025 | December 31, 2024 | | :----------------------------- | :------------- | :---------------- | | Cash and cash equivalents | $12,661 | $11,124 | | Total stockholders' equity | $18,163 | $15,781 | | Working capital | $9,559 | $6,834 | - Despite increased cash and equity, the company's ability to continue as a going concern is in substantial doubt due to historical losses and dependence on additional financing, which may dilute existing stockholders[150] - In Q1 2025, the company generated approximately $7.4 million in net proceeds from its at-the-market (ATM) offering program and $1.7 million in gross proceeds from a registered direct offering[153][154] Critical Accounting Estimates - There have been no material changes to the company's critical accounting estimates from what was reported in the Annual Report on Form 10-K[162] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Knightscope is exempt from providing quantitative and qualitative disclosures about market risk - The company is not required to provide information under this item as it is a smaller reporting company[163] Item 4. Controls and Procedures Management concluded that Knightscope's disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2025[165] - There were no material changes in internal control over financial reporting during the three months ended March 31, 2025[166] PART II — OTHER INFORMATION Item 1. Legal Proceedings Knightscope is not currently a party to any material legal proceedings and is unaware of any pending or threatened litigation that could materially affect its business - The company is not presently a party to any material litigation and is unaware of any pending or threatened litigation that could materially adversely affect its business or financial condition[169] Item 1A. Risk Factors There have been no material changes to the risk factors previously discussed in the company's 2024 Annual Report on Form 10-K - No material changes in risk factors were reported compared to the 2024 Annual Report on Form 10-K[170] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or use of proceeds were reported for the period - No unregistered sales of equity securities or use of proceeds were reported[171] Item 3. Defaults Upon Senior Securities This item is not applicable to the company - This item is not applicable to the company[172] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable to the company[173] Item 5. Other Information No disclosures in lieu of Form 8-K, material changes to director nominee procedures, or insider trading arrangement adoptions/terminations were reported during Q1 2025 - No disclosures in lieu of Form 8-K, material changes to director nominee procedures, or insider trading arrangement adoptions/terminations were reported during Q1 2025[174] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, operational agreements, and regulatory certifications - The exhibits include corporate governance documents (Certificate of Incorporation amendments, Bylaws), operational agreements (Sublease, Consent to Subletting), and regulatory certifications (CEO/CFO certifications, XBRL documents)[175] Signatures Report Signatures The Quarterly Report on Form 10-Q was duly signed on May 14, 2025, by William Santana Li and Apoorv Dwivedi - The report was signed on May 14, 2025, by William Santana Li, Chairman, Chief Executive Officer and President, and Apoorv Dwivedi, Executive Vice President and Chief Financial Officer and Secretary[179][180]