UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
EXCHANGE ACT OF 1934
For the quarterly period ended
or
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
(Address of Principal Executive Offices)
(
(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.
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).
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 | ◻ | ||
☒ | 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
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading symbol | Name of Exchange on which registered |
As of May 5, 2022, there were
TABLE OF CONTENTS
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, our rolling closes of equity infusions for our financings, and the availability of future financing; |
| ● | Unpredictable events, such as the COVID-19 pandemic, 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; and |
| ● | Our ability to manage our research, development, expansion, growth and operating expenses. |
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 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, the impact of the current COVID-19 pandemic on economic conditions and 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 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 Balance Sheets
(In thousands, except share and per share data)
| March 31, |
| December 31, | |||
2022 | 2021 | |||||
ASSETS | (Unaudited) |
| (1) | |||
Current assets: |
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Cash and cash equivalents | $ | | $ | | ||
Restricted cash |
| |
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Accounts receivable (net of allowance for doubtful accounts $ |
| |
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Prepaid expenses and other current assets |
| |
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Total current assets |
| |
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Autonomous Security Robots, net |
| |
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Property, equipment and software, net |
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Operating lease right-of-use-assets |
| |
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Other assets |
| |
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Total assets | $ | | $ | |||
LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT |
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Current liabilities: |
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Accounts payable | $ | | $ | | ||
Accrued expenses |
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Deferred revenue |
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Debt obligations |
| — |
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Operating lease liabilities |
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Other current liabilities |
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Total current liabilities |
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Debt obligations |
| — |
| — | ||
Preferred stock warrant liabilities |
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Operating lease liabilities |
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Total liabilities |
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Commitments and contingencies (Note 8) |
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Preferred Stock, $ |
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Stockholders' deficit: |
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Class A common stock, $ |
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Class B common stock, $ |
| |
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Additional paid-in capital |
| |
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Accumulated deficit |
| ( |
| ( | ||
Total stockholders' deficit |
| ( |
| ( | ||
Total liabilities, preferred stock and stockholders’ deficit | $ | | $ | | ||
(1)
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
KNIGHTSCOPE, INC.
Condensed Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended March 31, | ||||||
| 2022 |
| 2021 | |||
Revenue, net | $ | | $ | | ||
Cost of revenue, net | | | ||||
Gross loss | ( | ( | ||||
Operating expenses: | ||||||
Research and development | | | ||||
Sales and marketing | | | ||||
General and administrative | | | ||||
Total operating expenses | | | ||||
Loss from operations | ( | ( | ||||
Other income (expense): | ||||||
Interest expense, net | ( | ( | ||||
Change in fair value of warrant liabilities | | — | ||||
Other (expense) income, net | ( | | ||||
Total other income (expense) | ( | ( | ||||
Net loss before income tax expense | ( | ( | ||||
Income tax expense | - | — | ||||
Net loss | ( | ( | ||||
Preferred stock dividends | - | ( | ||||
Net loss attributable to common stockholders | $ | ( | $ | ( | ||
Basic and diluted net loss per common share | ( | ( | ||||
Weighted average shares used to compute basic and diluted net loss per share | | | ||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
KNIGHTSCOPE, INC.
Condensed Statements of Stockholders’ Deficit
(In thousands, except share and per share data)
(Unaudited)
| Series m |
| Series m‑2 |
| Series m‑3 |
| Series m‑4 |
| Series S |
| Series A |
| Series B |
| Class B |
| |||||||||||||||||||||||||||||||||
Preferred | Preferred | Preferred | Preferred | Preferred | Preferred | Preferred | common | Additional | Total | ||||||||||||||||||||||||||||||||||||||||
| 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 |
| capital | Deficit | Deficit | ||||||||||||||||
Balance as of December 31, 2020 |
| | $ | | | $ | |
| | $ | |
| | $ | |
| | $ | |
| | $ | |
| | $ | |
| | $ | |
| $ | | $ | ( | $ | ( | |||||||||||
Stock based compensation |
|
|
| |
| | |||||||||||||||||||||||||||||||||||||||||||
Issuance of Series s Preferred stock, net of issuance costs | | |
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| |||||||||||||||||||||||||||||||||||||||||||||
Series m‑4 accrued dividend | |
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|
| ( | ( | ||||||||||||||||||||||||||||||||||||||||||
Net loss |
|
|
|
| ( | ( | |||||||||||||||||||||||||||||||||||||||||||
Balance as of March 31, 2021 | | $ | | | $ | | | $ | |
| | $ | |
| | $ | |
| | $ | |
| | $ | |
| | $ | |
| $ | | $ | ( | $ | ( | |||||||||||||
7
| 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 |
| | $ | | | $ | | | $ | |
| | $ | |
| | $ | |
| | $ | |
| | $ | |
| | $ | |
| | $ | |
| $ | | $ | ( |
| $ | ( | |||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock based compensation | | | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warrants exercised | | | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of debt obligations to class A common stock | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock options exercised | | | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Offering proceeds, net of issuance costs | | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share conversion to common stock | ( | ( | ( | ( | ( | ( | ( | ( | ( | ( | ( | ( | ( | ( | | | ( | ( | | | |||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share conversion costs | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of March 31, 2022 | | $ | | — | $ | — | | $ | |
| — | $ | — |
| | $ | |
| | $ | |
| | $ | |
| | $ | |
| | $ | |
| $ | | $ | ( | $ | ( | |||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
KNIGHTSCOPE, INC.
Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
Three months ended March 31, | ||||||
| 2022 |
| 2021 | |||
Cash Flows From Operating Activities |
|
|
|
| ||
Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
| ||
Depreciation and amortization |
| |
| | ||
Stock compensation expense |
| |
| | ||
Change in fair value of warrant liabilities |
| ( |
| — | ||
Accrued interest |
| |
| — | ||
Amortization of debt discount |
| |
| | ||
Changes in operating assets and liabilities: |
|
|
|
| ||
Accounts receivable |
| ( |
| ( | ||
Prepaid expenses and other current assets |
| |
| ( | ||
Other assets |
| — |
| | ||
Accounts payable |
| ( |
| | ||
Accrued expenses |
| ( |
| ( | ||
Deferred revenue |
| |
| ( | ||
Other current and noncurrent liabilities |
| |
| | ||
Net cash used in operating activities |
| ( |
| ( | ||
Cash Flows From Investing Activities |
|
|
|
| ||
Purchases and related costs incurred for Autonomous Security Robots |
| ( |
| ( | ||
Purchase of property and equipment |
| ( |
| ( | ||
Net cash used in investing activities |
| ( |
| ( | ||
Cash Flows From Financing Activities |
|
|
|
| ||
Proceeds from stock options exercised |
| |
| — | ||
Proceeds from issuance of Series S Preferred Stock, net of issuance costs |
| — |
| | ||
Offering proceeds, net of issuance costs |
| |
| — | ||
Share conversion costs | ( | — | ||||
Net cash provided by financing activities |
| |
| | ||
Net change in cash and cash equivalents |
| |
| | ||
Cash, cash equivalents and restricted cash at beginning of the period | | | ||||
Cash, cash equivalents and restricted cash at end of the period | $ | | $ | | ||
Supplemental Disclosure of Non-Cash Financing Activities |
|
|
|
| ||
Conversion of preferred stock to common stock | $ | | $ | — | ||
Conversion of debt obligations to Class A common stock | $ | | $ | — | ||
Series m-4 accrued dividend | $ | — | $ | | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
9
KNIGHTSCOPE, INC.
Notes to Condensed Financial Statements
(Dollars in thousands, unless otherwise stated)
(Unaudited)
NOTE 1: The Company and Summary of Significant Accounting Policies
Description of Business
Knightscope, Inc. (the “Company”), was incorporated on April 4, 2013 under the laws of the State of Delaware.
The Company designs, develops, builds, deploys, and supports advanced physical security technologies. The Knightscope solution to reducing crime combines the physical presence of its proprietary Autonomous Security Robots (“ASRs”) with real-time on-site data collection and analysis and a user interface. Two of the Company’s ASRs, the outdoor “K5” and the indoor “K3”, autonomously patrol client sites without the need for remote control to provide a visible, force multiplying, physical security presence to help protect assets, monitor changes in the environment and deter crime. They gather real-time data using a large array of sensors. The data is accessible through the Knightscope Security Operations Center (“KSOC”), an intuitive, browser-based software interface that enables security professionals and law enforcement officers to review events generated, allowing them to have their eyes, ears, and voice on the ground 24/7/365 in multiple locations at the same time.
Basis of Presentation and Liquidity
The unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and note disclosures have been condensed or omitted pursuant to such rules and regulations. The unaudited condensed financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair presentation of the period presented. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to the expected for the year ending December 31, 2022 or for other future periods. These condensed financial statements should be read in conjunction with the Company’s audited financial statements and accompanying notes for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022. The Company’s significant accounting policies are described in Note 1 to those audited financial statements.
Since its inception, the Company has incurred significant operating losses and negative cash flows from operations which is principally the result of significant research and development activities related to the development and continued improvement of the Company’s ASRs and KSOC (hardware and software).
Cash and cash equivalents on hand were $
10
Basic and Diluted Net Loss per Share
Net loss per share of common stock is computed using the two-class method required for participating securities based on their participation rights. All series of convertible preferred stock are participating securities as the holders are entitled to participate in common stock dividends with common stock on an as converted basis. Holders of Series m-4 Preferred Stock were entitled to receive cumulative dividends payable semi-annually in arrears at the rate per share of Series m-4 Preferred Stock equal to the Dividend Rate for the Series m-4 Preferred Stock, in each case subject to compliance with applicable law. Dividends to holders of Series m-4 Preferred Stock are paid in kind as a dividend of additional shares of Series m-4 Preferred Stock for each Dividend Period on the applicable Dividend Payment Date using a price per share equal to the original issue price, provided that the Company shall not issue any fractional shares of Series m-4 Preferred Stock. The holders of the Company’s preferred stock, other than m-4 preferred stock, are also entitled to noncumulative dividends prior and in preference, to our common stock and do not have a contractual obligation to share in the losses of the Company. All shares of Series m-4 Preferred Stock have converted to Class A Common Stock, leaving no outstanding balance of the Series m-4 Preferred Stock as of March 31, 2022. In accordance with the two-class method, earnings allocated to these participating securities, which include participation rights in undistributed earnings with common stock, are subtracted from net loss to determine net loss attributable to common stockholders upon their occurrence.
Basic net loss per share is computed by dividing net loss attributable to common stockholders (net adjusted for preferred stock dividends declared or accumulated) by the weighted average number of common shares outstanding during the period. All participating securities are excluded from basic weighted-average shares outstanding. In computing diluted net loss attributable to common stockholders, undistributed earnings are re-allocated to reflect the potential impact of dilutive securities. Diluted net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by diluted weighted-average shares outstanding, including potentially dilutive securities, unless anti-dilutive. Potentially dilutive securities that were excluded from the computation of diluted net loss per share consist of the following:
| March 31, |
| March 31, | |||
2022 | 2021 | |||||
Series A Preferred Stock (convertible to Class B common stock) |
| |
| | ||
Series B Preferred Stock (convertible to Class B common stock) |
| |
| | ||
Series m Preferred Stock (convertible to Class A common stock) |
| |
| | ||
Series m-2 Preferred Stock (convertible to Class B common stock) |
| |
| | ||
Series m-3 Preferred Stock (convertible to Class A common stock) |
| — |
| | ||
Series m-4 Preferred Stock (convertible to Class A common stock) |
| — |
| | ||
Series S Preferred Stock (convertible to Class A common stock) |
| |
| | ||
Warrants to purchase common stock (convertible to Class B common stock) |
| — |
| | ||
Warrants to purchase Series B (convertible to Class B common stock) |
| — |
| | ||
Warrants to purchase of Series m-1 (convertible to Class A common stock) |
| — |
| | ||
Warrants to purchase of Series m-3 (convertible to Class A common stock) |
| |
| | ||
Warrants to purchase of Series s (convertible to Class A common stock) |
| |
| | ||
Convertible Notes |
| — |
| | ||
Stock options |
| |
| | ||
Total potentially dilutive shares |
| |
| | ||
As all potentially dilutive securities are anti-dilutive as of March 31, 2022 and 2021, diluted net loss per share is the same as basic net loss per share for each period.
Comprehensive Loss
Net loss was equal to comprehensive loss for the three-month periods ended March 31, 2022 and 2021.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Specific accounts that require management estimates include, but are not limited to, estimating the useful lives of the Company’s ASRs and property and equipment, certain
11
estimates required within revenue recognition, estimating fair values of Company’s common stock, share-based awards and warrant liabilities, inclusive of any contingent assets and liabilities. Actual results could differ from those estimates and such differences may be material to the financial statements.
Recent Accounting Pronouncements Not Yet Effective
In August 2020, the Financial Accounting Standards Board “(FASB)” issued Accountin Standards Update (“ASU”) No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40). The update simplifies the accounting for convertible instruments by removing certain separation models in Subtopic 470-20. This amendment is effective for fiscal years beginning after December 15, 2023, for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, including interim periods within those fiscal years. The Company is currently in the process of evaluating the impact of adoption on its financial statements.
In September 2016, the FASB released ASU No. 2016-13, Financial Instruments – Credit Losses (“ASU 2016-03”). The amendment revises the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology, which will result in more timely recognition of losses on financial instruments, including but not limited to available-for-sale debt securities and accounts receivable. ASU 2016-03 is effective for fiscal years beginning after December 15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition. The Company is currently in the process of evaluating the impact of adoption on its financial statements.
Autonomous Security Robots, net
ASRs consist of materials, ASRs in progress and finished ASRs. ASRs in progress and finished ASRs include materials, labor and other direct and indirect costs used in their production. Finished ASRs are valued using a discrete bill of materials, which includes an allocation of labor and direct overhead based on assembly hours. Depreciation expense on ASRs is recorded using the straight-line method over their estimated expected lives, which currently ranges from
ASRs, net, consisted of the following:
| March 31, |
| December 31, | |||
2022 | 2021 | |||||
Raw materials | $ | | $ | | ||
ASRs in progress |
| |
| | ||
Finished ASRs |
| |
| | ||
| |
| | |||
Accumulated depreciation on Finished ASRs |
| ( |
| ( | ||
ASRs, net | $ | | $ | | ||
The components of the Finished ASRs, net at March 31, 2022 and December 31, 2021 are as follows:
ASRs on lease or available for lease |
| $ | | $ | | |
Demonstration ASRs |
| |
| | ||
Research and development ASRs |
| |
| | ||
Docking stations |
| |
| | ||
| |
| | |||
Less: accumulated depreciation |
| ( |
| ( | ||
Finished ASRs, net | $ | | $ | |
12
Convertible Preferred Warrant Liabilities and Common Stock Warrants
Freestanding warrants to purchase shares of the Company’s preferred stock are classified as liabilities on the balance sheets at their estimated fair value because the underlying shares of preferred stock are contingently redeemable and, therefore, may obligate the Company to transfer assets at some point in the future. The preferred stock warrants are recorded at fair value upon issuance and are subject to remeasurement to their respective estimated fair values. At the end of each reporting period, changes in the estimated fair value of the preferred stock warrants are recorded in the statements of operations. The Company will continue to adjust the liability associated with the preferred stock warrants for changes in the estimated fair value until the earlier of the exercise or expiration of the preferred stock warrants, the completion of a sale of the Company or an initial public offering (“IPO”). Upon an IPO, the preferred stock warrants will convert into warrants to purchase common stock and any liabilities recorded for the preferred stock warrants will be reclassified to additional paid-in capital and will no longer be subject to remeasurement.
The Company issued common stock warrants in connection with the execution of a certain debt financing during the year ended December 31, 2015. Common stock warrants that are not considered derivative liabilities are accounted for at fair value at the date of issuance in additional paid-in capital. The fair value of these common stock warrants is determined using the Black-Scholes option-pricing model.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASU 718, Compensation - Stock Compensation, which requires that the estimated fair value on the date of grant be recognized over the requisite service period of the awards, which is generally the option vesting period. Stock-based awards made to nonemployees are measured and recognized based on the estimated fair value on the vesting date and are re-measured at each reporting pricing model, is affected by the fair value of the Company’s common stock as well as other assumptions regarding a number of highly complex and subjective variables. These variables include but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee option exercise behaviors. Because there is insufficient historical information available to estimate the expected term of the stock-based awards, the Company adopted the simplified method of estimating the expected term of options granted by taking the average of the vesting term and the contractual term of the option. For awards with graded vesting, the Company recognizes stock-based compensation expense over the service period using the straight-line method, based on shares ultimately expected to vest. The Company recognizes forfeitures as they occur when calculating stock-based compensation for its equity awards.
NOTE 2: Revenue and Deferred Revenue
Revenue Recognition
The Company derives its revenues primarily from lease of proprietary ASRs along with access to the browser-based interface KSOC through contracts under the lease accounting that typically have a twelve (12) month term. In addition, the Company derives non-lease revenue items such as professional services related to ASRs’ deployments, special decals and training if any, recognized when control of these services is transferred to the Clients, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.
The Company determines revenue recognition through the following steps:
| ● | identification of the contract, or contracts, with a client; |
| ● | identification of the performance obligations in the contract; |
| ● | determination of the transaction price; |
| ● | allocation of the transaction price to the performance obligations in the contract; and |
| ● | recognition of revenue when, or as, the Company satisfies a performance obligation. |
13
The Company recognizes revenue as follows:
ASR subscription revenue
ASR subscription revenue is generated from lease of proprietary ASRs along with access to the browser-based interface KSOC through contracts that typically have 12-month terms. These revenue arrangements adhere to lease accounting guidance and are classified as leases for revenue recognition purposes. Currently, all revenue arrangements qualify as operating leases where consideration allocated to the lease deliverables is recognized ratably over the lease term.
Deferred revenue
In connection with the Company’s MaaS subscription for the Company’s ASRs, the Company’s standard billing terms are annual in advance. In these situations, the Company records the invoices as deferred revenue and amortizes the subscription amount when the services are delivered, which generally is a 12-month period. In addition, the Company refers certain transactions to Dimension, whereby Dimension advances the full value of the MaaS subscription to the Company, less a processing fee. The advanced payment is recorded in deferred revenue and amortized over the term of the subscription once the ASR is delivered to the deployment site. See “Liquidity and Capital Resources”.
The Company derives its revenue from the lease subscription of its proprietary ASRs along with access to its browser and mobile based software interface, KSOC. MaaS subscription agreements typically have a twelve (12) month term.
With the adoption of ASC 606 in January 2019, the Company estimates its revenue in the periods in which the licensee uses the licensed technology. Payments are received in the subsequent period.
The following table summarizes revenue by timing of recognition:
| Three Months Ended |
| Three Months Ended | |||
| March 31, 2022 |
| March 31, 2021 | |||
Point in time | $ | | $ | | ||
Transferred over time |
| |
| | ||
$ | | $ | | |||
Deferred revenue includes billings in excess of revenue recognized. Revenue recognized at a point in time generally does not result in significant increases in deferred revenue. Revenue recognized over a period generally results in a majority of the increases in deferred revenue as the performance obligations are fulfilled after the billing event. Deferred revenue was as follows for the period ended March 31, 2022:
| March 31, 2022 | ||
Deferred revenue - short term | $ | | |
Revenue recognized in the three months ended related to amounts included in deferred revenue as of January 1, 2022 | $ | | |
Deferred revenue represents amounts invoiced to customers for contracts for which revenue has yet to be recognized based for subscription services to be delivered to the Company’s clients. Typically, the timing of invoicing is based on the terms of the contract.
Other revenue
Other non-ASR related revenue such as deployment services, decals, shipping, and training revenue is recognized when services are delivered.
14
NOTE 3: Fair Value Measurement
The Company determines the fair market values of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following are three levels of inputs that may be used to measure fair value:
| ● | Level 1 – Quoted prices in active markets for identical assets or liabilities. The Company considers a market to be active when transactions for the asset occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| ● | Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
| ● | Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The valuation of Level 3 investments requires the use of significant management judgments or estimation. |
In certain cases where there is limited activity or less transparency around inputs to valuation, securities are classified as Level 3. Level 3 liabilities that are measured at fair value on a recurring basis consist of the convertible preferred stock warrant liabilities. The inputs used in estimating the fair value of the warrant liabilities are described in Note 6 -- Capital Stock and Warrants.
The following tables summarize, for each category of assets or liabilities carried at fair value, the respective fair value as of March 31, 2022 and December 31, 2021, and the classification by level of input within the fair value hierarchy:
| Total |
| Level 1 |
| Level 2 |
| Level 3 | |||||
March 31, 2022 |
|
|
|
|
|
|
|
| ||||
Assets |
|
|
|
|
|
|
|
| ||||
Cash equivalents: |
|
|
|
|
|
|
|
| ||||
Money market funds | $ | | $ | | $ | — | $ | — | ||||
Liabilities |
|
|
|
|
|
|
|
| ||||
Warrant liability – Series m-3 Preferred Stock | $ | | $ | — | $ | — | $ | | ||||
Warrant liability – Series S Preferred Stock | $ | | $ | — | $ | — | $ | | ||||
| Total |
| Level 1 |
| Level 2 |
| Level 3 | |||||
December 31, 2021 |
|
|
|
|
|
|
|
| ||||
Assets |
|
|
|
|
|
|
|
| ||||
Cash equivalents: |
|
|
|
|
|
|
|
| ||||
Money market funds | $ | | $ | | $ | — | $ | — | ||||
Liabilities |
|
|
|
|
|
|
|
| ||||
Warrant liability – Series B Preferred Stock | $ | | $ | — | $ | — | $ | | ||||
Warrant liability – Series m-3 Preferred Stock | $ | | $ | — | $ | — | $ | | ||||
Warrant liability – Series S Preferred Stock | $ | | $ | — | $ | — | $ | | ||||
During the three-month periods ended March 31, 2022 and 2021, there were
15
The following table sets forth a summary of the changes in the fair value of Company’s Level 3 financial liabilities during the three-month periods ended March 31, 2022 and 2021, which were measured at fair value on a recurring basis:
March 31, | March 31, | |||||
Warrant liability |
| 2022 | 2021 | |||
Beginning Balance | $ | | $ | | ||
Warrants exercised |
| ( | | |||
Revaluation of Series m-3 and S Preferred Stock warrants | ( | | ||||
Ending Balance | $ | | $ | | ||
NOTE 4: Debt Obligations
Term Loan Agreement
In May 2018, the Company entered into a term loan agreement which allowed for individual term loans to be drawn in amounts totaling up to $
A warrant for
Convertible Note Financing
On April 30, 2019, the Company signed a Note and Warrant Purchase Agreement under the form of which the Company can issue up to $
On November 18, 2021, the Company agreed to amend the Note and Warrant Purchase Agreement and the convertible notes and warrants to purchase Series S Preferred Stock issued thereunder principally as follows: (i) the scheduled maturity date of the convertible notes was extended from January 1, 2022 to January 1, 2024, (ii) the interest rate of the convertible notes was reduced from
16
As of December 31, 2021, the Company had issued convertible notes in the aggregate principal amount of approximately $
All of the Company's outstanding convertible notes and accrued interest, totaling $
The amortized carrying amount of the Company’s debt obligations consists of the following:
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
Convertible notes, net of fees and discount | $ | — | $ | | ||
Total debt |
| — |
| | ||
Less: current portion of debt obligations |
| — |
| ( | ||
Non-current portion of debt obligations | $ | — | $ | — | ||
NOTE 5: Stock-Based Compensation
Equity Incentive Plans
In April 2014, the Company adopted the 2014 Equity Incentive Plan (the “2014 Plan”) allowing for the issuance of up to
The Board may grant stock options under the 2016 Plan at a price of not less than
17
Stock option activity under all of the Company’s equity incentive plans for the three-month period ended of March 31, 2022 is as follows:
|
|
|
| Weighted |
| |||||||
Weighted | Average | |||||||||||
Shares | Number of | Average | Remaining | Aggregate | ||||||||
Available for | Shares | Exercise | Contractual | Intrinsic | ||||||||
| Grant |
| Outstanding |
| Price |
| Life (Years) |
| Value(000's) | |||
Available and outstanding as of December 31, 2021 |
| |
| | $ | |
| $ | | |||
Granted |
| ( |
| |
| |
|
|
|
| ||
Exercised |
|
|
| ( |
| |
|
|
|
| ||
Forfeited |
| |
| ( |
| |
|
|
|
| ||
Available and outstanding as of March 31, 2022 |
| |
| | $ | |
| $ | | |||
Vested and exercisable as of March 31, 2022 |
| | $ | |
| $ | | |||||
The weighted average grant date fair value of options granted during the three-month period ended March 31, 2022 was $
As of March 31, 2022, the Company had unamortized stock-based compensation expense of $
The assumptions utilized for option grants during the three months ended March 31, 2022 and 2021 are as follows:
| Three months ended | ||||
March 31, | |||||
2022 | 2021 | ||||
Risk-free interest rate |
| | % | | % |
Expected dividend yield |
| — | % | — | % |
Expected volatility |
| | % | | % |
Expected term (in years) |
| ||||
A summary of stock-based compensation expense recognized in the Company’s statements of operations is as follows:
| Three months ended | ||||||
March 31, | |||||||
2022 | 2021 | ||||||
Cost of services | $ | | $ | | |||
Research and development | | | |||||
Sales and marketing | | | |||||
General and Administrative | | | |||||
Total | $ | | $ | | |||
NOTE 6: Capital Stock and Warrants
Preferred Stock
In connection with the Convertible Note Financing, later amended on November 18, 2021, William Santana Li, Chairman and Chief Executive Officer of the Company, was granted a voting proxy to vote substantially all of the shares of the Company’s Series m-4 Preferred Stock, the stock issued upon the conversion of warrants to purchase all of the shares of the Company’s Series m-3 Preferred Stock, the stock issued upon the conversion of warrants to purchase shares of the Company’s Series S Preferred Stock, and the stock issued upon conversion of the convertible promissory notes issued as part of the Convertible Note Financing, in each case to the extent that such shares are held by participants in the Convertible Note Financing (the “Voting Proxy”). The votes held by Mr. Li, as a result
18
of the Voting Proxy and related to the outstanding securities to which the Voting Proxy applies, represents approximately
The Series S Preferred Stock has a right to convert at any time into Class A common stock. The initial conversion rate was 1:1, which conversion rate will continue to be adjusted pursuant to the broad-based weighted average anti-dilution adjustment provisions provided for in the Company’s amended and restated certificate of incorporation, including without limitation as a result of the issuance of warrants to purchase Series S Preferred Stock in connection with the Convertible Note Financing referenced in the paragraph above, which may continue to have closings simultaneously with the Regulation D Offering of Series S Preferred Stock. As of December 31, 2021, the conversion rate has been adjusted to approximately
In connection with the placement of the Series m-3 Preferred Stock during the years ended December 31, 2017 and 2018, the Company issued to the purchasers warrants to purchase an aggregate of
The following tables summarize convertible preferred stock authorized and issued and outstanding as of March 31, 2022:
|
| Shares |
| Proceeds Net |
| Aggregate | ||||
Shares | Issued and | of Issuance | Liquidation | |||||||
Authorized | Outstanding | Costs | Preference | |||||||
Series A Preferred Stock |
| |
| | $ | | $ | | ||
Series B Preferred Stock |
| |
| |
| |
| | ||
Series m Preferred Stock |
| |
| |
| |
| | ||
Series m-1 Preferred Stock |
| |
| — |
| — |
| — | ||
Series m-2 Preferred Stock |
| |
| |
| |
| | ||
Series m-3 Preferred Stock |
| |
| — |
| — |
| — | ||
Series m-4 Preferred Stock |
| |
| — |
| — |
| — | ||
Series S Preferred Stock |
| |
| |
| |
| | ||
Total Preferred Stock |
| |
| | $ | | $ | | ||
Common Stock
On October 15, 2021, the Company filed an offering statement in connection with a proposed offering of up to $
Each share of Class B Common Stock is convertible into
Warrants
On April 30, 2019, the Company entered into the “Convertible Note Financing”. Pursuant to the terms of the Convertible Note Financing, the Company became obligated to exchange its outstanding shares of Series m-3 Preferred Stock for the newly authorized shares of Series m-4 Preferred stock upon the closing of at least $
19
first firm commitment underwritten initial public offering of the Company’s common stock pursuant to a registration statement filed under the Securities Act. As of March 31, 2022, the Company had issued and accrued warrants to purchase up to
Pursuant to the terms of the Convertible Note Financing, the Company became obligated to exchange certain of its outstanding shares of Series m-3 Preferred Stock for the newly authorized shares of Series m-4 Preferred Stock. On September 10, 2019, the Company issued
On July 23, 2019, the Company issued a warrant to purchase
A summary of the Company’s outstanding warrants as of March 31, 2022 is as follows:
Class of shares |
| Number of Warrants |
| Exercise Price |
| Expiration Date | ||
Series m-3 Preferred Stock |
| | $ | | December 31, 2024 | |||
Series S Preferred Stock |
| | $ | | December 31, 2024 | |||
Series S Preferred Stock |
| | $ | | July 31, 2024 |
Common Stock Reserved for Future Issuance
Shares of common stock reserved for future issuance relate to outstanding preferred stock, warrants and stock options as follows:
| March 31, | |
2022 | ||
Series A Preferred Stock |
| |
Series B Preferred Stock |
| |
Series m Preferred Stock |
| |
Series m-2 Preferred Stock |
| |
Series S Preferred Stock |
| |
Stock options to purchase common stock |
| |
Warrants outstanding for future issuance of convertible preferred stock and common stock |
| |
Stock options available for future issuance |
| |
Total shares of common stock reserved |
| |
NOTE 7: Related parties and related-party transactions
One of the Company’s vendors, Konica Minolta, Inc. (“Konica Minolta”), is a stockholder of the Company. Konica Minolta provides the Company with repair services to its ASRs. The Company paid Konica Minolta $
20
NOTE 8: Commitments and contingencies
Leases
The Company leases facilities for office space under non-cancelable operating lease agreements. The Company leases space for its corporate headquarters in Mountain View, California through August 2023.
As of March 31, 2022 and 2021, the components of leases and lease costs are as follows:
March 31, 2022 | December 31, 2021 | |||||
Operating leases |
|
| ||||
Operating lease right-of-use assets | $ | | $ | | ||
Operating lease liabilities, current portion | $ | | $ | | ||
Operating lease liabilities, non-current portion | | | ||||
Total operating lease liabilities | $ | | $ | | ||
Operating lease costs | $ | | $ | | ||
As of March 31, 2022, future minimum operating lease payments for each of the next three years and thereafter is as follows:
Years ending December 31, |
| Amount | |
2022 (remaining) | $ | | |
2023 |
| | |
Total future minimum lease payments |
| | |
Less - Interest |
| ( | |
Present value of lease liabilities | $ | | |
Weighted average remaining lease term is
Legal Matters
The Company may be subject to pending legal proceedings and regulatory actions in the ordinary course of business; however, no such claims have been identified as of March 31, 2022 that would have a material adverse effect on the Company’s financial position, results of operations or cash flows.
The Company from time to time enters into contracts that contingently require the Company to indemnify parties against third party claims. These contracts primarily relate to: (i) arrangements with Clients which generally include certain provisions for indemnifying Clients against liabilities if the services infringe a third party’s intellectual property rights, (ii) the Regulation A Issuer Agreement where the Company may be required to indemnify the placement agent for any loss, damage, expense or liability incurred by the other party in any claim arising out of a material breach (or alleged breach) as a result of any potential violation of any law or regulation, or any third party claim arising out of any investment or potential investment in the offering, and (iii) agreements with the Company’s officers and directors, under which the Company may be required to indemnify such persons from certain liabilities arising out of such persons’ relationships with the Company. The Company has not incurred any material costs as a result of such obligations and has not accrued any liabilities related to such obligations in the financial statements as of March 31, 2022 and December 31, 2021.
21
Sales Tax Contingencies
The Company has historically not collected state sales tax on the sale of its “MaaS” product offering but has paid sales tax and use tax on all purchases of raw materials and in conjunction with the Financing Arrangement of the Company’s ASRs with Farnam. The Company’s MaaS product offering may be subject to sales tax in certain jurisdictions. If a taxing authority were to successfully assert that the Company has not properly collected sales or other transaction taxes, or if sales or other transaction tax laws or the interpretation thereof were to change, and the Company was unable to enforce the terms of their contracts with Clients that give the right to reimbursement for the assessed sales taxes, tax liabilities in amounts that could be material may be incurred. Based on the Company’s assessment, the Company has recorded a use tax liability of $
NOTE 9: Subsequent Events
On April 4, 2022 (as amended on April 11, 2022), the Company entered into a Common Stock Purchase Agreement in connection with a committed equity facility that provides Knightscope with the right, without obligation, to sell and issue up to $
22
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with the (1) unaudited condensed financial statements and the related notes thereto included elsewhere in of this report, and (2) the audited financial statements and the related notes thereto and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2021 included in our 2021 Annual Report on Form 10-K.
The historical results presented below are not necessarily indicative of the results that may be expected for any future period.
Overview
Knightscope, Inc. was founded in Mountain View, California in April 2013 and has since developed revolutionary Autonomous Security Robots (“ASR”) with real-time on-site data collection and analysis and an interface, primarily through funding from both strategic and private investors. Knightscope currently offers three products: (1) the K5 ASR (“K5”) for outdoor usage, (2) the K3 ASR (“K3”) for indoor usage, and (3) the K1 ASR (“K1”) for stationary usage indoors or outdoors. The Company also provides access to the Knightscope Security Operations Center (“KSOC”) to all its clients, a proprietary, browser-based interface that allows clients real-time data access. The Company works continuously to improve and upgrade the ASR and KSOC, and their precise specifications may change over time.
The Company operates on a Machine-as-a-Service (“MaaS”) business model. The Company’s standard subscription term is twelve months and includes the ASR rental as well as maintenance, service, support, data transfer, KSOC access docking stations and unlimited software, firmware and select hardware upgrades. In 2021, the Company added “Knightscope+” remote monitoring services as an optional service that can be bundled into its MaaS subscriptions, primarily for clients that operate without a fully staffed 24/7 Security Operation Center (“SOC”).
Our current primary focus is on the deployment and marketing of our core technologies. We continue to receive client orders for K1, K3 and K5 ASRs, and production of machines is expected to continue out of our corporate headquarters in Mountain View, California.
Critical Accounting Estimates
The discussion and analysis of our financial condition and results of operations is based upon our accompanying financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial statements requires us to make estimates, assumptions and judgments that can have significant impact on the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of assets and liabilities at the date of our financial statements. For the Company, these estimates include, but are not limited to: deriving the useful lives of ASRs, determination of the cost of ASRs, assessing assets for impairment, and the valuation of convertible preferred stock warrants and stock options. Actual results could differ from those estimates. We base our estimates, assumptions and judgments on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On a regular basis, we evaluate our estimates, assumptions and judgments and make changes accordingly.
Known or Anticipated Trends
Our primary goal remains meeting client demands for additional orders of our technology, attracting new client orders, and ensuring consistent performance in the field. The Company is focused on scaling its business to meet incoming orders. Increasing demand through various marketing efforts, including our nationwide Robot Roadshow and media coverage, has driven and continues to drive an increase in orders and client inquiries.
Sales trends for the three months ended March 31, 2022 showed demand across all of Knightscope’s product service lines. The sales pipeline continues to grow and is strong, though similar to many business-to-business transactions, the enterprise sales cycle is lengthy. Although we have executed contracts in less than 30 days, notionally these negotiations can range up to several years, taking into account the client’s budget, finance, legal, cyber security, human resources, facilities and other reviews. The sales process for this brand-new technology requires significant streamlining and improvements, and we are taking steps to ensure our sales processes are robust, repeatable, and can enable our products to move through the sales pipeline quicker.
23
During the first quarter of 2022, both limited resources, including supply chain delays, increased minimum order requirements of raw materials and components, cash on-hand, as well as the COVID-19 pandemic had a negative impact on the Company’s performance. Additionally, a portion of clients hardest hit by COVID-19 restrictions have had to terminate or place their service on hold due to budget constraints, and numerous others have had to delay deployments due to accessibility to their premises resulting from continued uncertainty regarding state and local guidelines related to granting facility access. However, the Company has continued to sign on new clients during the pandemic and, with the recent influx of new capital in January 2022, has begun to fund and build inventory, as well as recruit additional employees, which we believe will partially offset the negative impact on our performance.
Due to numerous geopolitical events, new safety requirements resulting from the COVID-19 pandemic, as well as various high-profile incidents of violence across the United States, we believe that the market for our technologies will continue to grow. At the same time, we expect that competing products may be introduced in the near future, creating pressure on us to improve on our production methods, cost, quality and product features.
Results of Operations
Comparison of the Three Months Ended March 31, 2022 and 2021
The following table sets forth selected statements of operations data (in thousands, other than share data) and such data as a percentage of total revenues.
Three months ended March 31, | ||||||||||
| 2022 |
| % |
| 2021 |
| % | |||
Revenue, net | $ | 944 | 100 | $ | 866 | 100 | ||||
Cost of revenue, net |
| 1,493 | 158 |
| 1,183 | 137 | ||||
Gross loss |
| (549) | (58) |
| (317) | (37) | ||||
Research & development |
| 1,838 | 195 |
| 1,127 | 130 | ||||
Sales & marketing |
| 3,490 | 370 |
| 3,069 | 354 | ||||
General & administrative |
| 2,326 | 246 |
| 544 | 63 | ||||
Total operating expenses |
| 7,654 | 811 |
| 4,740 | 547 | ||||
Loss from operations |
| (8,203) | (869) |
| (5,057) | (584) | ||||
Interest expense, net |
| (8,911) | (944) |
| (540) | (62) | ||||
Change in fair value of warrant liabilities |
| 7,522 | 797 |
| — | 0 | ||||
Other income (expense), net |
| (5) | (1) |
| 20 | 2 | ||||
Total other income (expense) |
| (1,394) | (148) |
| (520) | (60) | ||||
Net loss before income tax |
| (9,597) | (1,017) |
| (5,577) | (644) | ||||
Income tax expense |
| — | — |
| — | — | ||||
Net loss | (9,597) | (1,017) | $ | (5,577) | (644) | |||||
Revenue, net
Revenue, net for the three months ended March 31, 2022 increased approximately $0.1 million versus revenue, net for the same period in 2021. Despite the impact of COVID-19, which affected our existing client base, causing some contracts to be placed on hold or postponed during 2021, coupled with supply chain constraints, recently exacerbated by the conflict in Ukraine, causing delays in our ability to deploy ASRs during the first quarter of 2022, the Company was able to offset some of that financial impact with the addition of new clients later in 2021 and through March 31, 2022. As of May 2, 2022, the Company has a backlog of orders to deploy 29 ASRs, representing an aggregate annual subscription value of approximately $1.6 million.
Cost of revenue, net
Cost of revenue, net for the three months ended March 31, 2022 increased by approximately $0.3 million to $1.5 million, compared to the three months ended March 31, 2021, primarily due to an increase in personnel costs related to increased headcount of approximately $0.1 million and increased costs attributed to production, shipping and service of the ASRs. The cost of revenue, net is primarily related to the average service cost per machine and stock-based compensation.
24
Gross Loss
The revenue and cost of services described above resulted in a gross loss for the three months ended March 31, 2022 of approximately $0.5 million compared to $0.3 million for the three months ended March 31, 2021.
As our business scales and becomes more streamlined, management expects gross loss to decrease once a critical mass of deployed ASRs has been achieved. We are focusing our resources on growing the business to be able to generate both a gross profit and overall net income. We are continually evaluating and taking a number of near-term actions to facilitate this result, and expect that as the Company matures, we should obtain expertise, economies of scale and efficiency that would increase revenue and reduce costs over the medium to long-term. For example, we continued to refine our sales strategy in 2021, which is expected to increase and enhance our revenue streams. Our ASR materials sourcing, production, assembly and manufacturing are expected to become more efficient over time, and the costs associated with these processes reduced as we grow. However, with global supply chain constraints resulting from the COVID-19 pandemic and the conflict in Ukraine, the Company experienced increased minimum order requirements and lead times for certain components used in our products during 2021and throughout the first quarter of 2022. The Company expects this to continue throughout 2022 and into 2023. As operations scale, we believe we will be in a better position to negotiate volume-based pricing terms with suppliers as well as optimize our designs for design-for-assembly and design-for-service. We are also focused on controlling general overhead costs, such as expenditures for real estate leases and optimizing team composition and size. We believe that with the building of new internal tools, the Company will be able to streamline procedures and manage deployments more efficiently, alleviating the need for a dramatic increase in headcount. Additionally, new service cost reduction initiatives are underway to further reduce our ongoing operating costs. Our overall strategy is to try to keep our fixed costs as low as possible while achieving our overall growth objectives.
Research and Development
Three Months Ended |
|
|
| |||||||||
March 31, |
| |||||||||||
| 2022 |
| 2021 |
| $ Change |
| % Change |
| ||||
Research and development | $ | 1,838 | $ | 1,127 | $ | 711 |
| 63 | % | |||
Percentage of total revenue |
| 195 | % |
| 130 | % |
|
|
|
| ||
Research and development expenses increased by $0.7 million, or 63%, for the three months ended March 31, 2022 as compared to the respective period of the prior year. The increase is primarily due to personnel related costs and increased headcount focused on technology advancements and new product development, including but not limited to, the K1 Hemisphere and K5 5th generation ASR as well as increased investment in our Federal Risk and Authorization Management Program (“FedRamp”) certification efforts during the first quarter of 2022 compared to the same period during the prior year. The Federal Government adopted the Cloud First Policy, which requires all cloud service providers that hold federal data to be FedRamp certified. FedRamp compliance will enable federal agencies to do business with Knightscope.
Sales and Marketing
Three Months Ended |
|
|
| |||||||||
March 31, |
| |||||||||||
| 2022 |
| 2021 |
| $ Change |
| % Change |
| ||||
Sales and marketing | $ | 3,490 | $ | 3,069 | $ | 421 |
| 14 | % | |||
Percentage of total revenue |
| 370 | % |
| 354 | % |
|
|
|
| ||
Sales and marketing expenses increased by $0.4 million, or 14%, for the three months ended March 31, 2022 as compared to the respective period of the prior year. The increase was primarily due to increased investment in building our sales force, a significant increase in commercial advertising expenses designed to increase public awareness of the Company and its products to potential customers and investors, and personnel related costs in 2022 compared to the respective period of the prior year.
25
General and Administrative
Three Months Ended |
|
|
| |||||||||
March 31, |
| |||||||||||
| 2022 |
| 2021 |
| $ Change |
| % Change |
| ||||
General and administrative | $ | 2,326 | $ | 544 | $ | 1,782 |
| 328 | % | |||
Percentage of total revenue |
| 246 | % |
| 34 | % |
|
|
|
| ||
General and administrative expenses increased by approximately $1.8 million, or approximately 328%, for the three months ended March 31, 2022 as compared to the respective period of the prior year. The increase was primarily driven by an increase in legal, corporate, and financial service expenses related to the Company’s public listing in January 2022 as well as increased personnel related costs.
Other Income/(Expense), Net
Three Months Ended |
|
|
| |||||||||
March 31 |
| |||||||||||
| 2022 |
| 2021 |
| $ Change |
| % Change |
| ||||
Interest expense, net | $ | (8,911) | $ | (540) | $ | (8,371) |
| (1,550) | % | |||
Change in fair value of warrant liability |
| 7,522 |
| — |
| 7,522 |
| — | ||||
Other income (expense), net |
| (5) |
| 20 |
| (25) |
| (125) | % | |||
Total other income (expense) | $ | (1,394) | $ | (520) | $ | (874) |
| (168) | % | |||
Total other expense increased by approximately $0.9 million, or 168%, for the three months ended March 31, 2022 as compared to the respective period of the prior year. The increase is primarily due to the write off of the debt discount related to the conversion of convertible notes on January 5, 2022 which was recorded as interest expense, offset by change in fair value of warrant liability.
Liquidity and Capital Resources
As of March 31, 2022, and December 31, 2021, we had $21.1 million and $10.7 million, respectively, of cash and cash equivalents. As of March 31, 2022, the Company also had an accumulated deficit of approximately $123.3 million, working capital of $19.7 million and stockholders’ deficit of $38.7 million. On April 20, 2021, the Company entered into a Referral Agreement with Dimension Funding, LC (“Dimension”), whereby the Company can generate up to $10 million of immediate cash flow by referring its clients to Dimension for financing of their annual fees over the MaaS subscription term. This agreement enables the Company to quickly offset the up-front costs associated with building and deploying ASR’s by accelerating collection of its accounts receivable. In January 2022, the Company terminated its offering under Regulation A, raising net proceeds of $19.5 million. In addition, in April 2022, the Company announced the execution of a stock purchase agreement in connection with a committed equity facility that provides Knightscope with the right, without obligation, to sell and issue up to $100 million of its Class A Common Stock over a period of 24 months to B. Riley at Knightscope’s discretion, subject to certain limitations and conditions. The Company has projected operating losses and negative cash flows of approximately $1.5 million per month for the next several months. As of the date of this report, the Company has sufficient working capital to fund at least twelve months of operations. There can be no assurance that the Company will be successful in acquiring additional funding at levels sufficient to fund its future operations beyond this period. If the Company is unable to raise additional capital in sufficient amounts or on terms acceptable to it, or at all, the Company may have to significantly reduce its operations, delay, scale back or discontinue the development of one or more of its platforms or discontinue operations completely.
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Cash Flow
The table below, for the periods indicated, provides selected cash flow information:
Three Months Ended | ||||||
March 31, | ||||||
| 2022 |
| 2021 | |||
Net cash used in operating activities | $ | (8,352) | $ | (5,758) | ||
Net cash used in investing activities |
| (805) |
| (387) | ||
Net cash provided by financing activities |
| 19,503 |
| 6,423 | ||
Net increase in cash and cash equivalents | $ | 10,346 | $ | 278 | ||
Net Cash Used in Operating Activities
Net cash used in operating activities is influenced by the amount of cash we invest in personnel, marketing, and infrastructure to support the anticipated growth of our business, the number of clients to whom we lease our ASRs, the amount and timing of accounts receivable collections, inventory procurement, as well as the amount and timing of disbursements to our vendors.
Net cash used in operating activities was approximately $8.4 million for the three months ended March 31, 2022. Net cash used in operating activities resulted from a net loss of $9.6 million, partially offset by changes in working capital and non-cash charges.
Net cash used in operating activities for the three months ended March 31, 2022 increased by approximately $2.6 million as compared to the respective period of the prior year. The increase was primarily a result of an increase in the net loss of $4.0 million due to operating activities and the Company’s public listing in January 2022, an increase in the fair value of warrants of $7.5 million, and changes in working capital of $0.1 million, partially offset by an increase in debt discount amortization of $8.5 million and an increase in stock compensation expense of $0.5 million.
Net Cash Used in Investing Activities
Our primary investing activities have consisted of capital expenditures and investment in ASRs. As our business grows, we expect our capital expenditures to continue to increase.
Net cash used in investing activities for the three months ended March 31, 2022 was approximately $0.8 million compared to $0.4 million in the respective period last year, or $0.4 million higher. The increase was primarily a result of higher investment in ASRs.
Net Cash Provided by Financing Activities
Net cash provided by financing activities was approximately $19.5 million for the three months ended March 31, 2022, an increase of approximately $13.1 million as compared to the respective period of the prior year. Our financing activities for the three months ended March 31, 2022, consisted primarily of net proceeds resulting from issuing stock in connection with the Company’s 2021 Regulation A Offering that terminated on January 26, 2022, immediately prior to the Company’s listing on Nasdaq on January 27, 2022.
Series S Preferred Regulation A Offering
On September 15, 2020, the Company filed an offering statement in connection with a proposed offering of up to $25 million of its Series S Preferred Stock pursuant to Regulation A of the Securities Act, to raise additional capital for operations (the “2020 Regulation A Offering”). The 2020 Regulation A Offering terminated on April 21, 2021. As of March 31, 2022, the Company issued 2,107,330 shares of Series S Preferred Stock and raised gross proceeds of approximately $21.1 million from the 2020 Regulation A Offering offset by $2.3 million in issuance costs.
Class A Common Stock Regulation A Offering
On October 15, 2021, the Company filed an offering statement in connection with a proposed offering of up to $40 million for its Class A Common Stock pursuant to Regulation A of the Securities Act, to raise additional capital for operations (the “2021 Regulation A
27
Offering”). The offering statement was qualified by the SEC on November 29, 2021, and the Company commenced the 2021 Regulation A Offering shortly thereafter, and terminated on January 26, 2022. Gross proceeds generated through this offering was $22.4 million.
Convertible Promissory Notes and Series S Preferred Stock Warrants, and the Related Conversion of Certain Series m-3 Preferred Stock into Series m-4 Preferred Stock
On April 30, 2019 the Company signed a Note and Warrant Purchase Agreement under the form of which the Company can issue up to $15 million of convertible promissory notes and warrants to purchase up to 3,000,000 shares of Series S Preferred Stock (the “Convertible Note Financing”). Pursuant to the terms of the Convertible Note Financing, the Company became obligated to exchange certain of its outstanding shares of Series m-3 Preferred Stock for the newly authorized shares of Series m-4 Preferred Stock upon the closing of at least $1 million in aggregate principal amount of convertible promissory notes under the Convertible Note Financing. On September 10, 2019, the Company issued, to the same group of Convertible Note Financing investors, 1,432,786 shares of its Series m-4 Preferred Stock in exchange for 1,432,786 shares of its shares of Series m-3 Preferred Stock held by such investors. The Series m-4 Preferred Stock has a senior liquidation preference to all other Preferred Stock and Common Stock of the Company, has an accruing payment in kind dividend in the form of Series m-4 Preferred Stock of 12%, and has certain other preferential rights, including voting rights, as further explained in the Company’s amended and restated certificate of incorporation. Exchange of Series m-3 Preferred Stock for Series m-4 Preferred Stock was inclusive of inducement expenses of $0.9 million (see Note 4 to the audited financial statements for details). The convertible promissory notes had a maturity date of January 1, 2022, provide for interest at a rate of 12% per annum payable upon the maturity date, are generally the most senior company security (subject to limited subordination carve-outs) and provide for significant discounts upon a qualified financing or an initial public offering, and for a premium upon a change of control. As of March 31, 2022, the Company had issued convertible notes in the aggregate principal amount of approximately $14.7 million (out of $15 million), all of which have converted during the quarter ended March 31, 2022. Warrants for the purchase of up to 2,941,814 shares of Series S Preferred Stock were also issued and accrued for, respectively, to the same convertible note holders. The warrants have an exercise price of $4.50 per share and expire on the earlier of December 31, 2024 or 18 months after the closing of the Company’s first firm commitment underwritten initial public offering of the Company’s common stock pursuant to a registration statement filed under the Securities Act (the “IPO”).
On November 18, 2021, the Company agreed to amend the Note and Warrant Purchase Agreement and the convertible notes and warrants to purchase Series S Preferred Stock issued thereunder principally as follows: (i) the scheduled maturity date of the convertible notes was extended from January 1, 2022 to January 1, 2024, (ii) the interest rate of the convertible notes was reduced from 12% per annum to 3% per annum starting on January 1, 2022, (iii) the conversion terms of the convertible notes were revised so that the convertible notes will automatically convert into Class A Common Stock upon the listing of the Company's common stock for trading on a nationally recognized securities exchange (e.g., the New York Stock Exchange) or inter-dealer quotation system (e.g., Nasdaq), (iv) the exercise period of the warrants was extended from December 31, 2021 to December 31, 2024 and will commence on January 1, 2023, and (v) the cashless exercise feature was removed from the warrants. The conversion price of the convertible notes for conversion into Class A Common Stock was not changed and remains at $2.50 per share and the exercise price of the warrants to purchase Series S Preferred Stock was not changed and remains at $4.50 per share.
In connection with the Convertible Note Financing, William Santana Li, the Chief Executive Officer and director of the Company, was granted a voting proxy to vote substantially all of the shares of the Company’s Series m-4 Preferred Stock, the stock issued upon the conversion of warrants to purchase all of the shares of the Company’s Series m-3 Preferred Stock, the stock issued upon the conversion of warrants to purchase shares of the Company’s Series S Preferred Stock, and the stock issued upon conversion of the convertible promissory notes issued as part of the Convertible Note Financing, in each case to the extent that such shares are held by participants in the Convertible Note Financing (the “Voting Proxy”). The votes held by Mr. Li, as a result of the Voting Proxy and related to the outstanding securities to which the Voting Proxy applies, represents approximately 1.2% of the Company’s aggregate voting power as of March 31, 2022.
The Series S Preferred Stock has a right to convert at any time into Class A Common Stock. The initial conversion rate was 1:1, which conversion rate will continue to be adjusted pursuant to the broad-based weighted average anti-dilution adjustment provisions provided for in the Company’s amended and restated certificate of incorporation, including without limitation as a result of the issuance of warrants to purchase Series S Preferred Stock in connection with the Convertible Note Financing referenced in the paragraph above, which may continue to have closings simultaneously with the Regulation D Offering of Series S Preferred Stock. As of March 31, 2022, the conversion rate has been adjusted to approximately 1.1069 shares of Class A Common Stock for every 1 share of Series S Preferred Stock, and remains subject to further adjustment. In addition, as of March 31, 2022, the conversion rate has been adjusted to
28
approximately 1.0187 shares of Class A Common Stock for every 1 share of Series m, m-1, and m-2 Preferred Stock, and remains subject to further adjustment.
In connection with the placement of the Series m-3 Preferred Stock during the year ended December 31, 2018, the Company issued to the purchasers warrants to purchase an aggregate of 410,972 shares of Series m-3 Preferred Stock, of which 16,757 shares expired on June 1, 2020. These warrants have an exercise price of $4.00 per share. In connection with the exchange of the Company’s Series m-3 Preferred Stock into Series m-4 Preferred Stock, the term of these warrants was extended such that the warrants would expire on the earlier of December 31, 2021, or 18 months after the closing of the Company’s first firm commitment underwritten initial public offering of the Company’s common stock pursuant to a registration statement filed under the Securities Act.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide this information.
Item 4. Controls and Procedures
As required by Rule 13a-15 under the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2022. Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures. Based upon their evaluation of these disclosure controls and procedures, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective as of March 31, 2022 due to a material weakness in our internal control over financial reporting as described below.
Material Weakness in Internal Control Over Financial Reporting
In connection with the audit of our financial statements for the year ended December 31, 2021, we and our independent registered public accounting firm identified a material weakness in our internal control over financial reporting. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses related to certain corporate finance and accounting oversight functions specifically related to the need for technical accounting and SEC expertise, which was primarily the result of the accounting for the preferred stock warrant liability, evaluation of the features of the convertible notes payable and other equity accounting items, due to lack of sufficient accounting and finance resources throughout 2021. Commencing in the quarter ended December 31, 2020, the Company hired a full-time, in-house accounting team, including a chief financial officer (“CFO”), who has the requisite U.S. GAAP and SEC Commission reporting expertise, to transition the Company from private to publicly listed. To fully address this material weakness and to continue our implementation of new controls and procedures to address this material weakness in 2022, the Company intends to augment its accounting team with additional technical accounting professionals.
Evaluation of Changes in Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Internal control over financial reporting is a process designed by, or under the supervision of, our president (our principal executive officer and our principal accounting officer and principal financial officer), to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of our company are being made only in accordance with authorizations of
29
management and directors of our company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not provide absolute assurance that a misstatement of our financial statements would be prevented or detected.
Further, the evaluation of the effectiveness of internal control over financial reporting was made as of a specific date, and continued effectiveness in future periods is subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
As noted above, the Company intends to augment its in-house accounting team and continues to address the controls related to the material weakness, including corporate finance and accounting oversight functions. Except for these continued actions, there were no changes in our internal control over financial reporting during the quarter ended March 31, 2022 that have materially affected, or reasonably likely to materially affect, our internal control over financial reporting.
30
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
We may be subject to litigation from time to time in the ordinary course of business. We are not currently party to any legal proceedings that we believe would reasonably have a material adverse impact on its business, financial results, and cash flows.
Item 1A. Risk Factors
You should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, which could materially affect our business, financial condition, cash flows or future results. There have been no material changes in our risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2021. The risks described in our Annual Report on Form 10-K for the year ended December 31, 2021 are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
Exhibit No. | Description |
101.INS† | XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH† | XBRL Taxonomy Extension Schema Document |
101.CAL† | XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF† | XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB† | XBRL Taxonomy Extension Label Linkbase Document |
101.PRE† | XBRL Taxonomy Extension Presentation Linkbase Document |
104† | Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101) |
† Filed herewith.
+ Furnished herewith.
* | Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company hereby undertakes to supplementally furnish copies of any omitted schedules to the Securities and Exchange Commission upon request. |
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto, duly authorized.
Date: May 16, 2022
KNIGHTSCOPE, INC. | ||
By: | /s/ William Santana Li | |
Name: | William Santana Li | |
Title: | Chairman and Chief Executive Officer | |
(Principal Executive Officer) | ||
By: | /s/ Mallorie Burak | |
Name: | Mallorie Burak | |
Title: | Executive Vice President, Chief Financial Officer | |
(Principal Financial Officer) | ||
33
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, William Santana Li, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Knightscope, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: May 16, 2022 | By: | /s/ William Santana Li | |
| | Name: | William Santana Li |
| | Title: | Chief Executive Officer |
| | | (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Mallorie Burak, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Knightscope, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c. | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d. | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: May 16, 2022 | By: | /s/ Mallorie Burak | |
| | Name: | Mallorie Burak |
| | Title: | EVP, Chief Financial Officer |
| | | (Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Knightscope, Inc. (the “Company”) hereby certifies, to the best of my knowledge, that:
(i) | the accompanying Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended March 31, 2022 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934; and |
(ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: May 16, 2022 | By: | /s/ William Santana Li | |
| | Name: | William Santana Li |
| | Title: | Chief Executive Officer |
| | | (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Knightscope, Inc. (the “Company”) hereby certifies, to the best of my knowledge, that:
(i) | the accompanying Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended March 31, 2022 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934; and |
(ii) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: May 16, 2022 | By: | /s/ Mallorie Burak | |
| | Name: | Mallorie Burak |
| | Title: | EVP, Chief Financial Officer |
| | | (Principal Financial Officer) |