Knightscope, Inc.: Form 10-Q for the period ended Mar 31, 2026

The following discussion of our financial condition and results of operations should be read in conjunction with the (1) unaudited condensed consolidated financial statements and the related notes thereto included elsewhere in 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, 2025 included in our 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. Forward-looking statements about our business, results of operations, cash flows, financial condition and prospects based on current expectations that involve risks, uncertainties, and assumptions, and other important factors. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K, as updated by our other filings with the SEC, and the section titled “Cautionary Note on Forward-Looking Statements” included elsewhere herein.

Overview

Knightscope, Inc. is a managed service provider building the nation's first Autonomous Security Force ("ASF") - a unified force that integrates autonomous machines, advanced software, and licensed security agents under a single managed service accountable for the security of the people, property, and places the Company protects.

The components of the ASF include Autonomous Security Robots ("ASRs"), comprising stationary and mobile platforms; Emergency Communication Devices ("ECDs"); and security services delivered by armed and unarmed licensed security agents, including executive protection, operating as Knightscope Security Force ("KSF" or "Security Force"), which was added through the acquisition of Event Risk, LLC in the three months ended March 31, 2026. These components are supported by real-time monitoring services delivered through the Company's cloud-based Knightscope Security Operations Center ("KSOC") for ASRs, Knightscope Emergency Management System ("KEMS") for ECDs, and Risk & Threat Exposure ("RTX") remote monitoring team.

The Company's solutions are designed, manufactured, and deployed in the United States and serve commercial and government clients. The Company generates revenue from a combination of subscription-based ASR services, ECD product sales and related recurring service contracts, and Security Force guarding and executive protection services.

As the acquired business has not been integrated, the CODM evaluates segment performance primarily based on revenue and gross margin and allocates resources based on consolidated operating results and liquidity considerations. The measure of segment assets is reported on the Condensed Consolidated Balance Sheets as total assets.

The Company expects the Security Force operations to become increasingly integrated within the Company’s broader service offerings and managed services platform over time.

Recent Developments

Acquisition

On February 27, 2026 (the “Closing Date”), the Company entered into a Securities Purchase Agreement with Event Risk LLC, an Indiana limited liability company (“Event Risk”), and Eric Rose, pursuant to which the Company acquired all of the issued and outstanding membership interests of Event Risk (the “Acquired Interests”) for total purchase consideration of approximately $18.0 million (the “KSF Acquisition”). In accordance with ASC 805, Business Combinations, the Company used the acquisition method of accounting for this acquisition. Goodwill of $7.7 million and a customer relationships intangible asset of $15.5 million were recorded as a result of the acquisition. The Company believes the KSF Acquisition accelerates its long-term strategy to operate a fully integrated autonomous security platform combining hardware, software, and human response into a single managed system.

Growth

The KSF Acquisition expands the Company’s growth opportunities by adding licensed security personnel and executive protection capabilities to the Company’s broader managed services platform. Management believes the acquisition supports the Company’s long-term strategy of delivering integrated security solutions that combine robotics, software, monitoring, and on-site personnel.

The addition of Security Force capabilities enables the Company to pursue a broader range of customer opportunities, including requests for proposals and quotations that require bundled security services with human presence, which were previously less accessible to the Company. Management also believes the acquisition enhances the Company’s ability to cross-sell technology products and monitoring services into security guarding engagements and expand relationships with enterprise and government customers over time.

The Company expects to increasingly go to market through a managed services model that combines autonomous systems, software, monitoring capabilities, and licensed security personnel into a more unified customer offering.

Operational Efficiency

During the past year, production schedules and gross margin performance were affected by (i) extended supplier lead times, (ii) limited availability of certain electronic components, (iii) tariff-related increases in input costs, and (iv) inventory adjustments and variability in manufacturing overhead absorption.

The Company continues to evaluate supplier diversification, procurement strategies, and production planning improvements; however, ongoing supply chain volatility and cost pressures may continue to impact production efficiency and margins.

The Company generates revenue from three primary sources: (i) subscription-based Machine-as-a-Service (“MaaS”) offerings, which include ASRs along with maintenance, support, data connectivity, KSOC access, charging infrastructure, and software and firmware updates; (ii) sales of ECD products and related recurring revenues from Knightscope Emergency Management Systems and full-service maintenance contracts; and (iii) security guarding and executive protection services.

As the Company’s technology and Security Force operations progresses, management expects to continue evaluating opportunities to streamline service delivery, improve operational coordination, and expand the Company’s managed services capabilities.

Our revenues for the three months ended March 31, 2026 were $6.0 million, an increase of $3.1 million or 106% from the comparable period in the prior year. We have incurred net losses since inception. Our net loss was $10.3 million for the quarter ended March 31, 2026 and $6.9 million for the quarter ended March 31, 2025. As of March 31, 2026, we had an accumulated deficit of $237.3 million. Cash and cash equivalents on hand were $11.4 million as of March 31, 2026, compared to $20.6 million as of December 31, 2025. These factors raise substantial doubt about our ability to continue as a going concern.

As of May 8, 2026, the Company had a total backlog of approximately $0.8 million, comprised of $0.6 million related to ASR orders and $0.2 million related to orders for ECDs.

Results of Operations

Comparison of the Three Months Ended March 31, 2026 and 2025

The following table sets forth selected Condensed Consolidated Statements of Operations data and such data as a percentage of total revenue.

(in thousands, except percentages)

Revenue, net

Total revenue, net for the three months ended March 31, 2026 increased by 106%, or $3.1 million, to $6.0 million compared to $2.9 million for the same period in the prior year. The increase was driven by a $2.1 million increase in service revenue and a $1.0 million increase in product revenue.

Service revenue increased by $2.1 million, or 98%, to $4.2 million for the three months ended March 31, 2026, from $2.1 million in the prior year period. The increase was primarily driven by $2.4 million of Security Force revenue recognized following the KSF Acquisition. This increase was partially offset by lower ASR subscription revenue and a reduction in maintenance and service contracts associated with ECD deployments.

Product revenue increased by $1.0 million, or 128%, to $1.8 million for the three months ended March 31, 2026, from $0.8 million in the prior year period. The increase was primarily attributable to the fulfillment of previously delayed ECD orders that had been impacted by supply chain constraints in the second half of 2025, including extended lead times for certain electronic components and reliance on limited-source suppliers.

Cost of revenue

Total cost of revenue was $5.6 million for the three months ended March 31, 2026, an increase of $2.0 million compared to the same period in the prior year. The increase was driven by higher service costs of $1.5 million and higher product costs of $0.5 million.

Service cost of revenue increased by $1.5 million compared to the same period in 2025, primarily due to $1.8 million of contract labor associated with Security Force operations following the KSF Acquisition. This increase was partially offset by lower third-party service expenses.

Product cost of revenue increased by $0.5 million to $1.3 million for the three months ended March 31, 2026, compared to the prior year period. The increase was primarily attributable to higher material costs to support the increased production volume associated with the fulfillment of previously delayed ECD orders.

Gross Margin (Loss)

Gross margin was $0.5 million, or 8% of revenue, for the three months ended March 31, 2026, compared to a gross loss of $0.7 million, or (23%) of revenue, for the same period in the prior year. The improvement in gross margin was primarily driven by the contribution of Security Force revenues, which have a different cost structure.

Research and Development

(in thousands, except percentages)

Research and development expenses increased by approximately $2.6 million, or approximately 120% for the three months ended March 31, 2026, as compared to the same period in the prior year. The increase is primarily due to third-party engineering services as the Company continues to invest in the development of new products.

Sales, General and Administrative

(in thousands, except percentages)

Sales, general and administrative expense for the three months ended March 31, 2026 was $6.1 million, an increase of $2.1 million from the three months ended March 31, 2025. The increase was primarily driven by $0.6 million in general corporate expenses, $0.4 million in higher investor relations and advertising expenses, $0.4 million in higher professional services fees, $0.3 million general and administrative costs associated with KSF, and $0.2 million in higher rent-related costs associated with our new larger headquarters.

Other Income (expense)

(in thousands, except percentages)

Total other income (expense) for the three months ended March 31, 2026 increased slightly as compared to the same period in the prior year.

Liquidity and Capital Resources

As of March 31, 2026, we had $11.4 million of cash and cash equivalents. As of March 31, 2026, the Company also had an accumulated deficit of $237.3 million, working capital of $7.0 million, and stockholders’ equity of $34.0 million. For the quarter ended March 31, 2026, the Company had a net loss of $10.3 million and cash used in operating activities of $11.6 million. These factors raise substantial doubt about our ability to continue as a going concern. The Company will require significant additional financing to meet its planned capital and operational needs and is pursuing opportunities to obtain additional financing through equity and/or debt alternatives. There can be no assurance that the Company will be successful in acquiring additional funding at levels sufficient to fund its future operations. Management’s plans include seeking additional financing, such as issuances of equity and issuances of debt and/or convertible debt instruments. Sales of additional equity securities, convertible debt and/or warrants by the Company could result in the dilution of the interests of existing stockholders. However, there can be no assurance that financing will be available when required in sufficient amounts, on acceptable terms or at all. If the Company is unable to raise additional capital in sufficient amounts or on terms acceptable to it, 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.

Consideration for the KSF Acquisition consisted of (i) a $5.0 million cash payment at closing, (ii) repayment of Event Risk’s outstanding indebtedness of $1.1 million, (iii) the issuance of 1,724,418 shares of the Company’s Class A Common Stock, and (iv) $4.0 million of deferred cash payments, payable in quarterly installments through December 31, 2028 subject to the purchase agreement. The purchase agreement also provides for contingent future cash and equity consideration based on post-closing performance, including a 2026 earn-out, revenue-based cash payments for 2027 through 2031, and potential additional equity issuances, each subject to specified thresholds and caps. In addition, management believes the acquisition materially strengthens the Company’s liquidity profile by adding a business that is expected to be free cash flow generating and contributing to operating cash flow. The Company expects to fund its acquisition-related obligations through cash on hand, cash generated from operations and, if appropriate, additional financing. While no assurance can be given that additional financing will be available on acceptable terms, management believes the KSF Acquisition improves the Company’s path toward stronger cash generation, enhances overall capital efficiency, and supports the Company’s broader strategy to improve liquidity and capital resources over time.

At-the-Market Offering Program

On February 1, 2023, we entered into an At-the-Market Agreement with Wainwright, pursuant to which we may offer and sell from time-to-time shares of Class A Common Stock through or to Wainwright acting as sales agent or principal (the “ATM Facility”).

On April 4, 2025, we filed a new shelf registration statement on Form S-3, pursuant to which we may, from time to time in one or more offerings, offer and sell up to $100.0 million in the aggregate of Class A

Common Stock, preferred stock, debt securities, warrants and/or units, in any combination. The new shelf registration statement was declared effective on April 11, 2025. On July 18, 2025, we filed a new prospectus supplement for additional sales under the ATM Facility of up to $50.0 million of shares of Class A Common Stock. As of May 8, 2026, we have approximately $18.3 million remaining to be sold pursuant to the new prospectus supplement and the accompanying prospectus related to the ATM Facility.

During the three months ended March 31, 2026, the Company issued 2,027,993 shares of Class A Common Stock under the ATM Facility for net proceeds of approximately $9.0 million, net of brokerage and placement fees of approximately $0.2 million.

Cash Flow

The table below, for the periods indicated, provides selected cash flow information:

(in thousands)

Net Cash Used in Operating Activities

Net cash used in operating activities represents 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, sell and service ECDs, the amount and timing of accounts receivable collections, as well as the amount and timing of disbursements to our vendors.

Net cash used in operating activities was approximately $11.6 million for the three months ended March 31, 2026. Net cash used in operating activities resulted from a net loss of approximately $10.3 million and changes in working capital and non-cash charges.

Net cash used in operating activities for the three months ended March 31, 2026 increased by approximately $5.2 million as compared to the same period of the prior year. This was primarily a result of an increase in the net loss of approximately $3.4 million and changes in assets and liabilities of approximately $1.9 million.

Net Cash Used in Investing Activities

Net cash used in investing activities for the three months ended March 31, 2026 and 2025 was approximately $6.3 million and $0.4 million, respectively. 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. As discussed in Note 2, the Company paid $6.1 million (that was netted against $0.6 million of cash acquired) for the KSF Acquisition during the three months ended March 31, 2026.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was approximately $8.8 million for the three months ended March 31, 2026, an increase of approximately $0.5 million as compared to the same period of the prior year. Our financing activities for the three months ended March 31, 2026, consisted primarily of net proceeds from the issuance of Class A Common Stock under our ATM Facility with Wainwright of approximately $9.0 million, partially offset by repayments of debt obligations of $0.2 million. In the same prior year period, our financing activities consisted primarily of net proceeds resulting from our ATM Facility with Wainwright of approximately $7.4 million and the issuance of common stock and pre-funded warrants of $1.4 million, partially offset by repayments of debt obligation of $0.6 million.

Critical Accounting Estimates

Other than estimates related to the KSF Acquisition, there have been no material changes to our critical accounting estimates from what was reported in the Annual Report on Form 10-K. Please see Note 1 to our condensed consolidated financial statements elsewhere in this Quarterly Report on Form 10-Q.

As we are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide information under this item.

Limitations on Effectiveness of Controls and Procedures

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. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

On February 27, 2026, the KSF Acquisition was completed. SEC guidance permits management to omit an assessment of an acquired business’ internal control over financial reporting from management's assessment of internal control over financial reporting and disclosure controls and procedures for a period not to exceed one year from the date of the acquisition. Management has begun integrating KSF into our existing control procedures. Integration activities relating to the KSF Acquisition may lead us to modify certain controls in future periods

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures, (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our principal executive officer and principal financial officer concluded that, as of March 31, 2026, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

Other than the KSF Acquisition, there were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We will integrate the KSF operations, control processes and information systems into our systems and control environment over the one-year assessment period.

You should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our 2025 Annual Report on Form 10-K 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. The risks described in our Annual Report on Form 10-K 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.