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| Part I | Financial Information | 5 |
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| Item 1. | Financial Statements | 5 |
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| | Condensed Balance Sheets as of September 30, 2024 and December 31, 2023 (Unaudited) | 5 |
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| | Condensed Statements of Operations for the three and nine months ended September 30, 2024 and 2023 (Unaudited) | 6 |
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| | Condensed Statements of Preferred Stock and Stockholders’ Equity (Deficit) for the three and nine months ended September 30, 2024 and 2023 (Unaudited) | 7 |
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| | Condensed Statements of Cash Flows for the nine months ended September 30, 2024 and 2023 (Unaudited) | 9 |
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| | Notes to Condensed Financial Statements (Unaudited) | 10 |
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| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 26 |
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| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 38 |
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| Item 4. | Controls and Procedures | 38 |
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| Part II | Other Information | 39 |
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| Item 1. | Legal Proceedings | 39 |
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| Item 1A. | Risk Factors | 39 |
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| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 39 |
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| Item 3. | Defaults Upon Senior Securities | 39 |
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| Item 4. | Mine Safety Disclosures | 39 |
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| Item 5. | Other Information | 39 |
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| Item 6. | Exhibits | 40 |
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| Signatures | | 42 |
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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 statements regarding our future operating results and financial position, including profitability, our business strategy and plans, market growth, product and service releases, the status of product development, compliance with applicable listing requirements or standards of The Nasdaq Capital Market, demand for our products and services, and our objectives for future operations, are forward-looking statements. In some cases the words “believe,” “may,” “will,” “estimate,” “potential,” “continue,” “anticipate,” “intend,” “expect,” “could,” “would,” “project,” “plan,” “target,” or the negative of these terms 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, which will require significant capital resources and years of development efforts; |
| ● | Our deployments and 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 continue as a going concern; |
| ● | Our ability to comply with all applicable listing requirements or standards of The Nasdaq Capital Market; |
| ● | 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”) and Emergency Communication Devices (“ECD”) operate, as well as the corporate policies of our clients, which may limit our ability to fully deploy our technologies in various markets; |
| ● | Our ability to raise capital; and |
| ● | 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 known and unknown risks, uncertainties, and assumptions and other important factors that could cause actual results to differ materially from those stated, including:
| ● | We have not yet generated any profits or significant revenues, anticipate that we will incur continued losses for the foreseeable future, and may never achieve profitability. |
| ● | The report of our independent registered public accounting firm expresses substantial doubt about our ability to continue as a going concern, and we may not be able to continue to operate the business if we are not successful in securing additional funding. |
| ● | We expect to experience future losses as we implement our business strategy and will need to generate significant revenues to achieve profitability, which may not occur. |
| ● | We are subject to potential fluctuations in operating results due to our sales cycle. |
| ● | If we are unable to acquire new customers, our future revenues and operating results will be harmed. Likewise, potential customer turnover in the future, or costs we incur to retain our existing customers, could materially and adversely affect our financial performance. |
| ● | We are subject to the loss of contracts, due to terminations, non-renewals or competitive re-bids, which could adversely affect our results of operations and liquidity, including our ability to secure new contracts from other customers. |
| ● | Our future operating results are difficult to predict and may be affected by a number of factors, many of which are outside of our control. |
| ● | Our financial results will fluctuate in the future, which makes them difficult to predict. |
| ● | Changes in global economic conditions, including, but not limited to, those driven by inflation and interest rates, may adversely affect customer spending and the financial health of our customers and others with whom we do business, which may adversely affect our financial condition, results of operations, and cash resources. |
| ● | Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions, could adversely affect our business, financial condition or results of operations. |
| ● | We have a limited number of deployments, and limited market acceptance of our products could harm our business. |
| ● | We cannot assure you that we will effectively manage our growth. |
| ● | Our costs may grow more quickly than our revenues, harming our business and profitability. |
| ● | Any debt arrangements that we enter into may impose significant operating and financial restrictions on us, which may prevent us from capitalizing on business opportunities. A breach of any of the restrictive covenants under such debt arrangements may cause us to be in default under our debt arrangements, and our lenders could foreclose on our assets. |
| ● | The other risks, uncertainties, and important factors described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part I, Item 2 of this Quarterly Report on Form 10-Q and “Risk Factors” in Part I, Item 1A of our most recent Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission (“the SEC”) on April 1, 2024, as amended by our Annual Report on Form 10-K/A, filed with the SEC on April 29, 2024 (together, our “Annual Report”), as updated in our other filings with 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. You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. Our forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q, and we undertake no obligation to update any of these forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q or to conform these statements to actual results or revised expectations, except as required by applicable law.
In this Quarterly Report on Form 10-Q, the words “we,” “us,” “our,” “the Company” and “Knightscope” refer to Knightscope, Inc., unless the context requires otherwise.
