# Knightscope, Inc.: Form 10-Q for the period ended Jun 30, 2024

- Company: [Knightscope, Inc.](/companies/kscp.md) (CIK 1600983)
- Form: 10-Q
- Filed: 2024-08-14
- Accepted by EDGAR: Aug 14, 2024, 21:00 ET
- Period: 2024-06-30
- Accession: 0001558370-24-012268
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1600983/000155837024012268/kscp-20240630x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1600983/000155837024012268/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $3.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $5.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-04-01 to 2024-06-30 | $3.8m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2024-01-01 to 2024-06-30 | $7.5m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-04-01 to 2024-06-30 | −$558.0k | us-gaap:GrossProfit |
| Gross profit | 6 months, 2024-01-01 to 2024-06-30 | −$2.0m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-04-01 to 2024-06-30 | $1.6m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2024-01-01 to 2024-06-30 | $3.2m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | −$6.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | −$15.0m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | −$6.3m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | −$13.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.05 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.13 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.05 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.13 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 116,863,327 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 106,099,552 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | −$12.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $4.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-06-30 | $2.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $10.7m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $24.6m | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $8.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-30 | $13.4m | us-gaap:Liabilities |
| Long-term debt | at 2024-06-30 | $3.9m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2024-06-30 | $11.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 49,924 characters.

*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 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, 2023 included in our Annual Report.*

*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, as by our other filings with the SEC, and the section titled “Cautionary Note on Forward-Looking Statements” included elsewhere herein.*

### Overview

Knightscope is an innovator in robotics and artificial intelligence (“AI”) technologies focused on public safety. Our products, made in the United States, are designed to help our clients protect the people, places, and things where we live, work, study, and visit.

Our ASR technologies promote effective perimeter security and are designed to be force multiplier for security teams seeking improved situational awareness. ASRs conduct real-time, on-site data collection and analysis in various spaces and deliver incident alerts to security professionals through the KSOC. The KSOC, with real time dashboard linked to every K5 robot and stationary K1 Hemisphere unit, enables clients to access the data for investigative and evidence collection purposes.

Our ECDs include the K1B products consisting of the K1 Blue Light Tower, K1 E-Phone, and the K1 Call Box. Tower devices are tall, highly visible and recognizable structures that are fully powered by the sun to provide emergency communication services using cellular and satellite communications. E-Phones and Call Boxes, which can be solar based or plugged in, offer a smaller footprint than the towers, but with the same reliable communication capabilities.

We sell our ASR and stationary multi-purpose security solutions under an annual subscription, machine-as-a service (MaaS) business model, which includes the ASR machine as well as maintenance, service, support, data transfer, KSOC access, charging stations, and unlimited software, firmware and select hardware upgrades.

Our KEMS platform consists of self-diagnostic, alarm monitoring software solution that provides ECD system owners daily email reports on the operational status of their system, a one-year parts warranty, and optional installation services. The cloud-based application monitors the system wide state-of-health, alerts users concerning operational issues, provides technicians real-time error detection/diagnostics, and collects/reports system performance statistics.

During the second quarter of 2024, the management team has continued to implement operational changes in furtherance of its goal of achieving the Company’s path to profitability, updated its capital structure to better align with its public company peers, and continued its discussions with The Nasdaq Stock Market (“Nasdaq”) to align on the Company’s plans for its path to compliance with Nasdaq listing standards.

### Financial Efficiency

In the second quarter of 2024, Knightscope continued implementing its previously announced roadmap to profitable growth by streamlining costs and operations across the Company. Our actions focused primarily on the K1B product line which was acquired when the Company purchased the assets of CASE Emergency Management.

Organizational Structure – the Company has streamlined management size, eliminated positions not aligned with Company goals, leveraged automation and strategically outsourced business functions that are not aligned with the Company’s core technology focused mission. Our strategic outsourcing initiative primarily addressed our services team that provided onsite support to K1B and ASR products in the field. The Company opted to align with key service and maintenance organizations with thousands of technicians better able to effectively support our clients.

Manufacturing – the Company continues to consolidate its manufacturing operations from 3 facilities across northern and southern California down to one primary facility in Mountain View, California to improve process flow, quality, purchasing efficiencies and labor flexibility.

Facilities – Knightscope also continues to evaluate footprint reduction opportunities, especially the K1B satellite locations with the expectation to further improve efficiencies and inventory management while reducing real estate costs and operating expenses.

Upgrades - in the ASR product line, management prioritized enhancing client experience by addressing quality issues and upgrading existing client machines to the latest generation K5 in lieu of shipping machines to new clients reflected in the backlog. In the six months ended June 30, 2024, we wrote off approximately $1.1 million in assets related to K5 v3 retirements.

### Increase in Authorized Shares

On April 5, 2024, we held a special meeting of stockholders (the “Special Meeting”) at which the Company’s stockholders approved an amendment (the “Amendment”) to the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of the Company’s Class A Common Stock, par value $0.001 per share from 114,000,000 to 228,000,000 shares. The Company’s board of directors previously approved the Amendment and, on April 5, 2024, the Company filed a Certificate of Amendment (the “Certificate of Amendment”) to the Amended and Restated Certificate of Incorporation (as amended, the “Certificate of Incorporation”) with the Secretary of State of the State of Delaware to effect the Amendment, which became effective upon filing with the Secretary of State.

### Prospectus Supplement Filings

On April 8, 2024, we filed a prospectus supplement (the “April Prospectus Supplement”) to the prospectus included in the Company’s Registration Statement on Form S-3 (File No. 333-269493), which was declared effective by the SEC on February 8, 2023 under the Securities Act, relating to the issuance and sale from time to time of up to $6.4 million of shares in Class A Common Stock, subject to, and in accordance with, SEC rules, pursuant to the At The Market Offering Agreement (the “ATM Agreement”), dated February 1, 2023, between the Company and H.C. Wainwright & Co., LLC (“Wainwright”).

On June 7, 2024, we filed a prospectus supplement (the “June Prospectus Supplement”) to amend the April Prospectus Supplement to increase the issuance and sale from time to time to up to $11.7 million in shares of Class A Common Stock, subject to, and in accordance with, SEC rules.

### Preferred Stock Conversion to Common

On May 15, 2024 (the “Preferred Stock Conversion Date”), pursuant to the terms of the Certificate of Incorporation, each share of the Company’s Super Voting Preferred Stock (as defined in the Certificate of Incorporation) was automatically converted into fully-paid, non-assessable shares of Class B common stock and each share of the Company’s Ordinary Preferred Stock (as defined in the Certificate of Incorporation and, together with the Super Voting Preferred Stock, the “Preferred Stock”) was automatically converted into fully-paid, non-assessable shares of Class A Common Stock, in each case at the then effective applicable Conversion Rate (as defined in the Certificate of Incorporation), as a result of the receipt by the Company of a written request for such conversion from the holders of a majority of the voting power of the Preferred Stock then outstanding (the “Automatic Conversion”). As a result of the Automatic Conversion, there were no shares of Preferred Stock outstanding after the Preferred Stock Conversion Date. Management believes that this better aligns the Company’s capital structure with its public company peers. In addition, this change allows the Company to reflect a stockholders’ equity on its balance sheet, which positively impacts our ability to stay in compliance with Nasdaq’s continued listing requirements.

As a result of these changes, we expect 2024 to be a year of transition with fluctuations in our results of operations throughout the year. The Company believes that although the streamlining of costs and operations may negatively impact near-term results of operations, the changes will better prepare the Company for long-term financial health.

### Nasdaq Listing Rules Compliance

On April 24, 2024, the Company received a delisting determination letter (the “Delisting Determination Letter”) from the Nasdaq Listing Qualifications staff (the “Staff”) of Nasdaq indicating that the Company has not regained compliance with the requirement that the bid price for the Class A Common Stock close above $1.00 per share (the “Minimum Bid Price Requirement”). As previously disclosed, on October 26, 2023, the Company was listed on The Nasdaq Global Market and received written notice (the “Notice”) from Nasdaq indicating that the Company was no longer in compliance with the Minimum Bid Price Requirement set forth in Nasdaq Listing Rule 5450(a)(1) and had 180 calendar days, or until April 23, 2024, to regain compliance with the Minimum Bid Price Requirement. The Company transferred to The Nasdaq Capital Market effective as of March 4, 2024 and was afforded the remainder of the compliance period to regain compliance with the Minimum Bid Price Requirement.

As the Company did not regain compliance with the Minimum Bid Price Requirement by April 23, 2024, and it was determined that the Company was not eligible for another 180 calendar-day extension because it did not meet the minimum stockholders’ equity initial listing requirements for The Nasdaq Capital Market, as set forth under listing Rule 5505(b), the Company received the Delisting Determination Letter.

The Delisting Determination Letter stated that unless the Company requests a hearing before a Nasdaq Hearing Panel (“Panel”) to appeal Nasdaq’s delisting determination by May 1, 2024, trading of the Company’s Class A Common Stock will be suspended at the opening of business on May 3, 2024, and the Company’s Class A Common Stock will be delisted from The Nasdaq Capital Market.

On April 30, 2024, the Company requested a hearing before the Panel. Pursuant to Nasdaq Listing Rule 5815(a)(1)(B), the hearing request stayed the suspension of trading and delisting of the Company’s Class A Common Stock pending the conclusion of the hearing process. On May 1, 2024, the Company received a letter (the “Hearing Letter”) from the Nasdaq Listing Qualifications Hearings Staff (the “Hearings Staff”), indicating that the Hearings Staff had received the Company’s request to appeal the delisting action and that, to the extent permitted by Nasdaq Listing Rules, the delisting action referenced in the Delisting Determination Letter has been stayed, pending a final written decision by a Panel. The Hearing Letter noted that the Company was scheduled for a hearing with the Panel on June 11, 2024. On May 8, 2024, the Company submitted a questionnaire to the Staff requesting an expedited review process in lieu of the scheduled hearing. On June 4, 2024, the Panel informed the Company that it had provided the Company with a temporary exception until October 4, 2024 to regain compliance with the Minimum Bid Price Requirement, provided, among other things, that on or before August 16, 2024, the Company obtain shareholder approval for a reverse stock split at a ratio that satisfies the Minimum Bid Price Requirement. The Panel reserved the right to reconsider the terms of this exception based on any event, condition or circumstance that exists or develops that would, in the opinion of the Panel, make continued listing of the Company’s securities inadvisable or unwarranted. On July 5, 2024, the Company filed a definitive proxy statement in connection with its annual meeting of stockholders, at which, among other matters, stockholders will vote on the approval of amendments to the Company’s Certificate of Incorporation to effect a reverse stock split of each of the Company’s Class A Common Stock and Class B Common Stock, in each case at a ratio ranging from any whole number between 1-for-5 and 1-for-50 (which ratio shall be the same ratio for each class of Common Stock), as determined by the Board of Directors in its discretion, subject to the Board of Directors’ authority to abandon such amendments.

As described above, on May 15, 2024, the Automatic Conversion resulted in the Company reflecting a positive stockholders’ equity on its Condensed Balance Sheet. Prior to the Automatic Conversion, the Company did not meet the minimum stockholders’ equity requirement under the Equity Standard for continued listing pursuant to Nasdaq Listing Rule 5550(b)(1) on The Nasdaq Capital Market, because the Company’s stockholders’ equity was below the required minimum of $2.5 million as of March 31, 2024 (the “Minimum Stockholders’ Equity Requirement”). Due to the Automatic Conversion, the Company satisfied the Minimum Stockholders’ Equity Requirement under the Equity Standard as of June 30, 2024.

There can be no assurance that the Company will be able to regain compliance with the Minimum Bid Price Requirement remain in compliance with the Minimum Stockholders’ Equity Requirement, or otherwise be in compliance with other applicable Nasdaq listing rules, that stockholders will approve a reverse stock split, the Company will be able to successfully implement a reverse stock, or that the Company’s appeal of the delisting determination will be successful.

### Known or Anticipated Trends

Knightscope provides monitoring services to various sectors, including corporate and college campuses, shopping centers, casinos, resorts and other public spaces where people live, work and play. We believe that as businesses and municipalities seek to enhance security, the demand for automated and efficient security solutions like those offered by Knightscope is likely to grow, driven in part by the increasing need for surveillance to combat crime and security breaches.

In 2024, pursuant to the previously announced roadmap to profitability, the Company is focused on implementing initiatives focused on optimizing operations in order to achieve profitable growth in the future. Simultaneously, the Company continues to scale its business to meet incoming demand.

Our primary goals remain meeting client demand for our technology, attracting new client orders, and working to ensure consistent performance of our products and services. Moreover, the company is investing in relationships that it believes will augment its technology with innovative solutions to enhance its offerings.

On March 13, 2024, as part of its Innovation Week, the Company announced the signing of a Memorandum of Understanding (“MoU”) to fully integrate Draganfly’s drone technology with Knightscope’s ASR technologies to provide expanded solutions to the Company’s clients. Draganfly drones are intended to equip Knightscope’s ecosystem with the ability to provide security both on the ground and from the air.

On June 3, 2024, the Company announced that it entered into a partnership with EnGoPlanet, a Houston-based innovative solar street lighting company, to jointly develop the Knightscope K1 Super Tower (“K1ST”). EnGoPlanet creates infrastructure solutions designed to collect and store energy while building sustainable and energy-independent products. The K1ST is intended to be a 20 ft. tall, solar-powered street light that incorporates a blue-light strobe, emergency communications, 360-degree ultra-HD video, Automated Gunshot Detection (“AGD”), Automated License Plate Recognition (“ALPR”), a mass-notification speaker and an interactive display designed to make sustainable infrastructure and public safety accessible to everyone.

Due to geopolitical events and various high-profile incidents of violence across the United States, we believe that safety requirements and the market for our technologies will continue to grow.

We also 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.

The Company is focused on scaling its business and on implementing strategies to decrease gross margin loss over time. We have continued our focus on controlling costs with steps that include

- decreasing expenditures for real estate leases;
- optimizing team composition and size;
- optimizing the manufacturing process through leverage of third-party manufacturers;
- reducing telecommunication service and cloud costs to further reduce our ongoing support, repair and maintenance costs; and
- transitioning our ASR and ECD production processes from a work cell environment to a more traditional assembly line process, for improved quality, efficiency, and throughput.

Our strategy is to try to keep fixed costs low while minimizing variable costs in conjunction with pursuing our overall growth objectives.

As of July 31, 2024, the Company had a total backlog of approximately $2.8 million, comprised of $1.3 million related to ASR orders and $1.5 million related to orders for ECDs.

### Results of Operations

### Comparison of the Three Months Ended June 30, 2024 and 2023

The following table sets forth selected Condensed Statements of Operations data (in thousands, other than share data) and such data as a percentage of total revenue.

| ​ ​ ​ Revenue, net | ​ ​ ​ | ​ ​ Three Months Ended June 30, 2024 ​ ​ | ​ ​ | ​ ​ % of Revenue ​ ​ | ​ ​ 2023 ​ ​ | ​ ​ | ​ ​ % of Revenue ​ ​ |
| --- | --- | ---: | --- | ---: | ---: | --- | ---: |
| Service | ​ | $1,950 | ​ | 61% | $1,825 | ​ | 51% |
| Product | ​ | ​ 1,253 | ​ | 39% | ​ 1,738 | ​ | 49% |
| Total revenue, net | ​ | ​ 3,203 | ​ | 100% | ​ 3,563 | ​ | 100% |
| Cost of revenue, net | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| Service | ​ | ​ 2,791 | ​ | 87% | ​ 2,642 | ​ | 74% |
| Product | ​ | ​ 970 | ​ | 30% | ​ 912 | ​ | 26% |
| Total cost of revenue, net | ​ | ​ 3,761 | ​ | 117% | ​ 3,554 | ​ | 100% |
| Gross profit (loss) | ​ | (558) |  | (17)% | 9 |  | 0% |
| Operating expenses: | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| Research and development | ​ | 1,637 |  | 51% | 1,482 |  | 42% |
| Sales and marketing | ​ | 1,537 |  | 48% | 1,193 |  | 33% |
| General and administrative | ​ | 2,734 |  | 85% | 3,274 |  | 92% |
| Restructuring charges | ​ | ​ 295 | ​ | 9% | ​ 5 | ​ | 0% |
| Total operating expenses | ​ | 6,203 |  | 194% | 5,954 |  | 167% |
| Loss from operations | ​ | (6,761) |  | (211)% | (5,945) |  | (167)% |
| Other income (expense): | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| Change in fair value of warrant and derivative liabilities | ​ | 681 |  | 21% | 1,193 |  | 33% |
| Change in fair value of convertible notes | ​ | — |  | —% | (43) |  | (1)% |
| Interest income (expense), net | ​ | ​ (128) | ​ | (4)% | ​ 48 | ​ | 1% |
| Other expense, net | ​ | (63) |  | (2)% | (51) |  | (1)% |
| Total other income | ​ | 490 |  | 15% | 1,147 |  | 32% |
| Net loss before income tax expense | ​ | (6,271) |  | (196)% | (4,798) |  | (135)% |
| Income tax expense | ​ | — |  | —% | — |  | —% |
| Net loss | ​ | $(6,271) |  | (196)% | $(4,798) |  | (135)% |

### Revenue, net

Total revenue, net for the three months ended June 30, 2024 decreased by approximately $0.4 million compared to the same period in the prior year due to a $0.5 million decrease in Product revenue offset by a $0.1 million increase in Service revenue. Service revenue, net for the three months ended June 30, 2024 increased approximately 7% compared to the same period in the prior year due to an increase in Service revenue related to the K1B installed base. Product revenue decreased by approximately $0.5 million or approximately 28% in the three months ended June 30, 2024 compared to the same period in the prior year, primarily due to a large one-time K1B sale in the prior-year.

### Cost of revenue, net

In the first quarter of 2024, the Company made a strategic decision to outsource its ECD field services function to third-party service and maintenance organizations with thousands of technicians better able to efficiently support our clients. We expect that this outsourcing will allow the Company to better focus on its technology and innovation while reducing costs related to non-core business functions.

Service cost of revenue, net for the three months ended June 30, 2024 increased by approximately $0.1 million to approximately $2.8 million, compared to the three months ended June 30, 2023. This was primarily due to a $0.6 million increase in third-party costs partially offset by a $0.4 million decline in headcount related expenses due to outsourcing of field services. In addition, as highlighted earlier, a high percentage of K5 v3 ASRs did not meet expected quality standards resulting in high service, maintenance and repair costs and low customer satisfaction. We discontinued the K5 v3 machines and replaced them with the improved, better performing K5 v5 machines. K5 v3 machines, totaling approximately $0.3 million were written off and recorded in service cost of revenue, net in the current year quarter and we expect this trend to continue throughout the year as we replace existing client machines. The write-down impact was offset by a $0.4 million decrease in services warranty costs and cellular fees as the Company continues to innovate around data usage and associated costs. The service cost of revenue, net includes the average service cost per unit, depreciation of the ASRs, and third-party fees. Additional costs relate to the ongoing maintenance and support of our installed base of ECDs which consists primarily of service personnel, vehicle expense, and warranty repair costs.

Product cost of revenue, net was approximately $1.0 million for the three months ended June 30, 2024 compared to approximately $0.9 million for the prior year period. The approximate $0.1 million period over period increase is primarily attributable to lower sales of ECD products.

### Gross Profit (Loss)

The revenue and cost of revenue described above resulted in a gross loss for the three months ended June 30, 2024 of approximately $0.6 million, net, compared to a gross profit of $9 thousand for the three months ended June 30, 2023. The gross loss for three months ended June 30, 2024 included a non-recurring expense of approximately $0.3 million attributed to the retirement of the K5 v3 machines.

### Research and Development

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Three Months Ended June 30, 2024 | ​ ​ ​ ​ 2023 ​ | ​ ​ ​ ​ ​ ​ $ Change | ​ ​ ​ ​ ​ ​ % Change |
| --- | --- | ---: | ---: | ---: | ---: |
| Research and development | ​ | $1,637 ​ | $1,482 ​ | $155 | 10% |
| Percentage of total revenue | ​ | 51% | 42% |  | ​ |

Research and development expenses increased by approximately $0.2 million, or approximately 10% for the three months ended June 30, 2024, as compared to the same period in the prior year. The increase is primarily due to $0.1 million in higher consulting expenses than during the same period in the prior year in addition to a $0.1 million increase in spending related to new product development.

### Sales and Marketing

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Three Months Ended June 30, 2024 | ​ ​ ​ ​ 2023 ​ | ​ ​ ​ ​ ​ ​ $ Change | ​ ​ ​ ​ ​ ​ % Change |
| --- | --- | ---: | ---: | ---: | ---: |
| Sales and marketing | **​** | $1,537 **​** | $1,193 ​ | $344 | 29% |
| Percentage of total revenue | **​** | 48% | 33% |  | ​ |

Sales and marketing expenses increased by approximately $0.3 million, or approximately 29%, for the three months ended June 30, 2024, as compared to the same period in the prior year. The increase was primarily due to $0.4 million in increased advertising costs partially offset by a $0.1 million lower allocation of amortization expense as compared to the prior year period.

### General and Administrative

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Three Months Ended June 30, 2024 | ​ ​ ​ ​ 2023 ​ | ​ ​ ​ ​ ​ ​ $ Change | ​ ​ ​ ​ ​ ​ % Change |
| --- | --- | ---: | ---: | ---: | ---: |
| General and administrative | **​** | $2,734 ​ | $3,274 **​** | $(540) | (16)% |
| Percentage of total revenue | **​** | 85% | 92% |  | ​ |

General and administrative expenses decreased by approximately $0.5 million or approximately 16% for the three months ended June 30, 2024, as compared to the same period in the prior year. The decrease was primarily related to a $0.6 million decline in payroll expenses driven by a headcount reduction in the first quarter of 2024, and a $0.3 million decrease in investor relations costs, partially offset by a $0.4 million increase in third-party professional fees, primarily in legal and finance services.

### Restructuring Charges

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Three Months Ended June 30, 2024 | ​ ​ ​ ​ ​ 2023 | ​ ​ ​ ​ ​ ​ $ Change | ​ ​ ​ ​ ​ ​ ​ % Change |
| --- | --- | ---: | ---: | ---: | ---: |
| Restructuring Charges | ​ | $295 ​ | $5 ​ | $290 | 5,800% |
| Percentage of total revenue | ​ | 9% | 0% |  | ​ |

Restructuring charges were approximately $0.3 million for the three-month period ended June 30, 2024 compared to approximately $5 thousand for the same period in the prior year. The increase was primarily driven by $0.2 million in severance charges from a restructuring in the second quarter of 2024 and $0.1 million in fees incurred to move production of K1B towers from Irvine, California to our headquarters facility in Mountain View, California.

### Other Income (expense)

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Three Months Ended June 30 2024 | ​ | ​ ​ 2023 | ​ ​ ​ | ​ ​ ​ ​ ​ ​ $ Change | ​ ​ ​ | ​ ​ ​ ​ % Change |
| --- | --- | ---: | --- | ---: | --- | --- | --- | ---: |
| Change in fair value of warrant and derivative liability | **​** | $681 | **​** | $1,193 | **​** | $(512) |  | (43)% |
| Change in fair value of convertible note | **​** | — | ​ | (43) | ​ | ​ 43 |  | 100% |
| Interest income (expense), net | ​ | ​ (128) | ​ | ​ 48 | ​ | ​ (176) | ​ | (367)% |
| Other expense, net | ​ | ​ (63) | ​ | ​ (51) | ​ | ​ (12) | ​ | (24)% |
| Total other income | ​ | $490 | ​ | $1,147 | ​ | $(657) | ​ | (57)% |

Total other income decreased by approximately $0.7 million, or 57% for the three months ended June 30, 2024 as compared to the same period in the prior year, resulting in other income, net of approximately $0.5 million for the three months ended June 30, 2024 compared to total other income, net of approximately $1.1 million for the same period in the prior year. Interest expense decreased by $0.2 million due to a lower debt balance in the current year period as compared to the same period in the prior year. The decrease in the fair value of warrant and derivative liabilities for the three-months ended June 30, 2024 was approximately $0.5 million less than in the same period in the prior year.

### Comparison of the Six Months Ended June 30, 2024 and 2023

The following table sets forth selected Condensed Statements of Operations data (in thousands, other than share data) and such data as a percentage of total revenue.

| ​ ​ ​ Revenue, net | ​ ​ ​ | ​ ​ Six months ended June 30, 2024 ​ ​ | ​ ​ | ​ ​ % of Revenue ​ ​ | ​ ​ 2023 ​ ​ | ​ ​ | ​ ​ % of Revenue ​ ​ |
| --- | --- | ---: | --- | ---: | ---: | --- | ---: |
| Service | ​ | $3,641 | ​ | 67% | $3,573 | ​ | 55% |
| Product | ​ | ​ 1,816 | ​ | 33% | ​ 2,887 | ​ | 45% |
| Total revenue, net | ​ | ​ 5,457 | ​ | 100% | ​ 6,460 | ​ | 100% |
| Cost of revenue, net | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| Service | ​ | ​ 5,874 | ​ | 108% | ​ 4,884 | ​ | 76% |
| Product | ​ | ​ 1,586 | ​ | 29% | ​ 1,780 | ​ | 28% |
| Total cost of revenue, net | ​ | ​ 7,460 | ​ | 137% | ​ 6,664 | ​ | 103% |
| Gross loss | ​ | (2,003) |  | (37)% | (204) |  | (3)% |
| Operating Expenses: | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| Research and development | ​ | 3,206 |  | 59% | 2,879 |  | 45% |
| Sales and marketing | ​ | 3,043 |  | 56% | 2,321 |  | 36% |
| General and administrative | ​ | 6,375 |  | 117% | 6,913 |  | 107% |
| Restructuring charges | ​ | ​ 414 | ​ | 8% | ​ 149 | ​ | 2% |
| Total operating expenses | ​ | 13,038 |  | 239% | 12,262 |  | 190% |
| Loss from operations | ​ | (15,041) |  | (276)% | (12,466) |  | (193)% |
| Other income (expense): | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| Change in fair value of warrant and derivative liabilities | ​ | 1,451 |  | 27% | 5,815 |  | 90% |
| Interest income (expense), net | ​ | ​ (193) | ​ | (4)% | ​ (454) | ​ | (7)% |
| Other expense, net | ​ | (80) |  | (1)% | (137) |  | (2)% |
| Total other income | ​ | 1,178 |  | 22% | 5,224 |  | 81% |
| Net loss before income tax expense | ​ | (13,863) |  | (254)% | (7,242) |  | (112)% |
| Income tax expense | ​ | — |  | —% | — |  | —% |
| Net loss | ​ | $(13,863) |  | (254)% | $(7,242) |  | (112)% |

### Revenue, net

Service revenue, net, comprised of ASR MaaS agreements and ECD maintenance agreements increased for the six months ended June 30, 2024 by approximately $0.1 million or approximately 2% compared to the same period in the prior year due to a $0.2 million increase in ECD related services partially offset by a $0.1 million decline in the ASR services. ASR services were impacted by the Company’s decision to replace ASR K5 v3 machines with K5 v5 machines due to quality and reliability of the older version.

Product revenue, primarily composed of the ECD line of products, decreased by approximately $1.1 million or approximately 37% in the six months ended June 30, 2024 compared to the same period in the prior year, primarily due to a decline in product installations. In addition, the structural changes implemented during the first quarter of 2024 and the resulting disruption also led to a period-over-period decline in installations across the ECD products.

### Cost of revenue, net

Service cost of revenue, net for the six months ended June 30, 2024 increased by approximately $1.0 million to approximately $5.9 million, compared to the six months ended June 30, 2023, primarily due to write-offs related to K5 v3 machines. A high percentage of K5 v3 ASRs did not meet expected quality standards resulting in high service, maintenance and repair costs and low customer satisfaction. During the first quarter of 2024, we decided to discontinue the K5 v3 machines and replace them with the improved, better performing K5 v5 machines. K5 v3 machines, totaling approximately $1.1 million were written off and recorded in service cost of revenue, net in the current year period and we expect this trend to continue throughout the year as we replace existing client machines. In addition, the Company made the decision to outsource its ECD field services function to third-party service and maintenance organizations with thousands of technicians better able to efficiently support our clients. As a result of this change, we saw a $0.8 million increase in third-party fees year-over-year. We expect that this outsourcing will allow the Company to better focus on its technology and innovation while reducing costs related to non-core business functions. Higher costs were partially offset by $0.4 million reduction in headcount costs, a $0.2 million decline in cellular fees, a $0.1 million decline in cost of materials due to lower Service revenue and a $0.1 million decline in software related expenses. The service cost of revenue, net is primarily related to the average service cost per unit, depreciation of the ASRs, and third-party fees. Additional costs relate to the ongoing maintenance and support of our installed base of ECDs which consists primarily of service personnel, vehicle expense, and warranty repair costs.

Product cost of revenue, net was approximately $1.6 million for the six months ended June 30, 2024 compared to approximately $1.8 million for the same period in the prior year. The approximate $0.2 million period over period decrease is primarily attributable to lower sales of ECD products.

### Gross Loss

The revenue and cost of revenue described above resulted in a gross loss for the six months ended June 30, 2024 of approximately $2.0 million, net, compared to a gross loss of approximately $0.2 million, net, for the six months ended June 30, 2023. The gross loss for six months ended June 30, 2024 included a non-recurring expense of approximately $1.1 million attributed to the retirement of the K5 v3 machines.

### Research and Development

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Six Months Ended June 30, 2024 | ​ ​ ​ ​ 2023 ​ | ​ ​ ​ ​ ​ ​ $ Change | ​ ​ ​ ​ ​ ​ % Change |
| --- | --- | ---: | ---: | ---: | ---: |
| Research and development | ​ | $3,206 ​ | $2,879 ​ | $327 | 11% |
| Percentage of total revenue | ​ | 59% | 45% |  | ​ |

Research and development expenses increased by approximately $0.3 million, or 11% for the six months ended June 30, 2024, as compared to the same period in the prior year. The increase is primarily due to higher headcount than in the same period in the prior year which were lower following a workforce reduction in January 2023.

### Sales and Marketing

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Six Months Ended June 30, 2024 | ​ ​ ​ ​ 2023 ​ | ​ ​ ​ ​ ​ ​ $ Change | ​ ​ ​ ​ ​ ​ % Change |
| --- | --- | ---: | ---: | ---: | ---: |
| Sales and marketing | **​** | $3,043 **​** | $2,321 ​ | $722 | 31% |
| Percentage of total revenue | **​** | 56% | 36% |  | ​ |

Sales and marketing expenses increased by approximately $0.7 million, or approximately 31%, for the six months ended June 30, 2024, as compared to the same period in the prior year. The increase was primarily due to increased advertising costs related to the marketing of our Public Safety Infrastructure Bond Offering that closed in March 2024.

### General and Administrative

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Six Months Ended June 30, 2024 | ​ ​ ​ ​ 2023 ​ | ​ ​ ​ ​ ​ ​ $ Change | ​ ​ ​ ​ ​ ​ % Change |
| --- | --- | ---: | ---: | ---: | ---: |
| General and administrative | **​** | $6,375 ​ | $6,913 **​** | $(538) | (8)% |
| Percentage of total revenue | **​** | 117% | 107% |  | ​ |

General and administrative expenses decreased by approximately $0.5 million or approximately 8% in the six months ended June 30, 2024, as compared to the same period in the prior year. This was primarily driven by a $1.0 million reduction in compensation expense and a $0.2 million reduction in corporate insurance fees, partially offset by an increase in investor relations expenses of approximately $0.4 million, a $0.2 million increase in third-party professional fees, and higher miscellaneous costs of approximately $0.1 million.

### Restructuring Charges

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Six Months Ended June 30, 2024 | ​ ​ ​ ​ ​ 2023 | ​ ​ ​ ​ ​ ​ $ Change | ​ ​ ​ ​ ​ ​ ​ % Change |
| --- | --- | ---: | ---: | ---: | ---: |
| Restructuring Charges | ​ | $414 ​ | $149 ​ | $265 | 178% |
| Percentage of total revenue | ​ | 8% | 2% |  | ​ |

Restructuring charges were approximately $0.4 million for the six month period ended June 30, 2024 compared to approximately $0.1 million for the same period in the prior year. These charges are related to the Company’s strategic decision to outsource its field services team and to consolidate product production in one location.

### Other Income (expense)

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Six Months Ended June 30 2024 | ​ | ​ ​ 2023 | ​ ​ ​ | ​ ​ ​ ​ ​ ​ $ Change | ​ ​ ​ | ​ ​ ​ ​ % Change |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Change in fair value of warrant and derivative liabilities | **​** | $1,451 | **​** | $5,815 | **​** | $(4,364) |  | (75)% |
| Interest income (expense), net | ​ | ​ (193) | ​ | ​ (454) | ​ | ​ 261 | ​ | 57% |
| Other expense, net | ​ | ​ (80) | ​ | ​ (137) | ​ | ​ 57 | ​ | 42% |
| Total other income | ​ | $1,178 | ​ | $5,224 | ​ | $(4,046) | ​ | (77)% |

Total other income decreased by approximately $4.0 million, or 77% for the six months ended June 30, 2024 as compared to the same period in the prior year, resulting in other income, net of approximately $1.2 million for the six months ended June 30, 2024 compared to total other income, net of approximately $5.2 million for the same period in the prior year. Interest expense decreased by $0.3 million due to a lower debt balance in the current year period as compared to the same period in the prior year. The decrease in the fair value of warrant and derivative liabilities for the six months ended June 30, 2024 was approximately $4.4 million less than in the same period in the prior year.

### Liquidity and Capital Resources

As of June 30, 2024, and December 31, 2023, we had $2.6 million and $2.3 million, respectively, of cash and cash equivalents. As of June 30, 2024, the Company had paid-in capital of $186.4 million, partially offset by an accumulated deficit of approximately $175.3 million, working capital of approximately $1.8 million and total stockholders’ equity of approximately $11.2 million. These factors raise substantial doubt about our ability to continue as a going concern. 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. 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. 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.

### At-the-Market Offering Program

In February 2023, we commenced an at-the-market offering program with H.C. Wainwright & Co., LLC (“Wainwright”), as sales agent, in connection with which we filed a prospectus supplement filed on February 9, 2023 (the “February Prospectus Supplement”), allowing us to offer and sell from time to time of up to $20.0 million in shares of Class A Common Stock, subject to, and in accordance with, SEC rules. Pursuant to General Instruction I.B.6 of Form S-3, the February Prospectus Supplement provided that in no event would we sell any securities in a public primary offering with a value exceeding one-third of our non-affiliated public float in any 12-month period unless our non-affiliated public float subsequently rose to $75.0 million or more.

On August 18, 2023, after our non-affiliated public float subsequently rose to an amount greater than $75.0 million, we filed a new prospectus supplement (the “August Prospectus Supplement”) providing for the offer and sale from time to time of up to $25.0 million in shares of Class A Common Stock subject to, and in accordance with, SEC rules.

On April 8, 2024, we filed the April Prospectus Supplement, relating to the issuance and sale from time to time of up to $6.4 million in shares of Class A Common Stock, subject to, and in accordance with, SEC rules.

On June 7, 2024, we filed the June Prospectus Supplement to amend the April Prospectus Supplement to increase the issuance and sale from time to time to up to $11.66 million of shares of Class A Common Stock, subject to, and in accordance with, SEC rules. In the event that our public float increases or decreases, we may sell securities in public primary offerings on Form S-3 with a value up to one-third of our public float, in each case calculated pursuant to General Instruction I.B.6 and subject to the terms of the ATM Agreement. In the event that our public float increases above $75.0 million, we will no longer be subject to the limits in General Instruction I.B.6 of Form S-3.

During the six months ended June 30, 2024, we issued 28,202,234 shares of Class A Common Stock under the at-the-market offering program for net proceeds of approximately $12.1 million, net of brokerage and placement fees of approximately $0.5 million. From July 1, 2024 to August 9, 2024, we sold 19,240,793 shares of Class A Common Stock, generating approximately $4.7 million of proceeds, net of commissions and other issuance costs. As of August 10, 2024, we had remaining capacity to issue up to approximately $4.8 million of Class A Common Stock under the at-the-market offering program.

### Senior Secured Promissory Note

On October 10, 2022, the Company entered into a Securities Purchase Agreement (the “2022 Purchase Agreement”) with Alto Opportunity Master Fund, SPC - Segregated Master Portfolio B (the “Holder”), pursuant to which the Company issued and sold to the Holder in a private placement (i) senior secured convertible notes (the “2022 Notes”), and (ii) warrants (the “2022 Warrants”) to purchase up to 1,138,446 shares of the Company’s Class A Common Stock, par value $0.001 (the “Common Stock”). The 2022 Warrants included an adjustment mechanism, whereby the exercise price and number of shares issuable upon the exercise of the 2022 Warrants (the “Warrant Exercise Price”) were subject to adjustment from time to time, such that immediately after an issuance of shares of Class A Common Stock (a “Stock Issuance”) at any price per share of Class A Common Stock that was lower than the then in effect Warrant Exercise Price (the “Reset Price”), the Warrant Exercise Price would be reduced to equal the Reset Price, and number of shares issuable upon the exercise of the 2022 Warrants would be increased to the number necessary to maintain the value of the 2022 Warrants immediately prior to such Stock Issuance (the “Explosion”). In connection with the entry into the 2022 Purchase Agreement, the Company and the Holder also entered into a registration rights agreement (the “2022 Registration Rights Agreement”), pursuant to which the Company agreed to provide the Holder with certain registration rights under the Securities Act.

On August 1, 2024 (the “Issuance Date”), the Company and the Holder entered into an Agreement and Waiver (the “Waiver”), pursuant to which, on the Issuance Date, the Company issued to the Holder a Senior Secured Promissory Note due on July 1, 2025, in an aggregate amount equal to $3.0 million (the “Principal”) in exchange for the Holder’s 2022 Warrants (the “August 2024 Note”). The Company has agreed to pay the Principal in two separate installments: the first installment in an amount equal to $2,500,000 payable in 11 equal consecutive monthly installments beginning on September 1, 2024, and the second installment in an amount equal to $500,000 payable on the earlier of (x) October 15, 2024, and (y) upon any issuance by the Company or any of its subsidiaries of Common Stock or Common Stock equivalents for cash consideration, indebtedness or a combination of units thereof (other than pursuant to a customary at-the-market offering program and equity line of credits). Upon the occurrence of a Change of Control (as defined in the August 2024 Note), the Holder may, at its option, exercisable at any time commencing on the public announcement of such Change of Control until the 30th day after the consummation thereof, require the Company to repay the August 2024 Note in full. The August 2024 Note shall not bear interest; provided, however, upon the occurrence and during the continuance of an Event of Default (as defined in the August 2024 Note), the outstanding principal amount of the Principal shall, automatically upon the occurrence and during the continuance of such Event of Default, bear interest at a rate equal to ten percent of the amount payable per annum until such date that the Event of Default is cured or the August 2024 Note is paid in full.

Additionally, pursuant to the Waiver, the Holder agreed that the Company’s obligations under the 2022 Notes, the 2022 Purchase Agreement, the 2022 Registration Rights Agreement, the 2022 Warrants, and the other Transaction Documents (as defined in the 2022 Purchase Agreement) have been satisfied in full and such documents are terminated, except that the Company shall continue to comply with and perform Section 4.10 of the 2022 Purchase Agreement and Section 6 of the 2022 Registration Rights Agreement, in each case which provide for indemnification, and which in each case survive and shall remain in full force and effect.

The Waiver and August 2024 Note contain various representations and warranties, affirmative and negative covenants, financial covenants, events of default and other provisions and obligations.

In connection with the entry into the Waiver and the August 2024 Note, on the Issuance Date, the Company and the Holder entered into a security agreement (the “Security Agreement”), pursuant to which the Company granted to the Holder a security interest in substantially all current and future properties, assets, and rights of the Company.

### Public Safety Infrastructure Bonds

On September 29, 2023, we filed an Offering Circular on Form 1-A/A (File No. 024-12314) (the “Offering Circular”) for the issuance of up to $10.0 million in Public Safety Infrastructure Bonds (the “Bonds”) pursuant to Regulation A of the Securities Act. The Offering Circular was qualified with the SEC on October 2, 2023. The price per Bond is $1,000. The Bonds are unsecured, bearing interest at 10% per annum, payable annually on December 31 each year, starting on December 31, 2024, with the Bonds maturing on the fifth anniversary of the initial issuance. We issued Bonds with a total principal amount of approximately $4.3 million, in aggregate, generating net proceeds us of approximately $3.9 million, net of issuance costs of approximately $0.4 million, during the six months ended June 30, 2024.

### Cash Flow

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

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Six Months Ended June 30, 2024 | ​ | ​ ​ 2023 |
| --- | --- | ---: | --- | ---: |
| Net cash used in operating activities | ​ | $(12,642) | ​ | $(11,215) |
| Net cash used in investing activities | ​ | (1,763) | ​ | (2,147) |
| Net cash provided by financing activities | ​ | 14,749 | ​ | 14,494 |
| Net increase in cash, cash equivalents and restricted cash | ​ | $344 | ​ | $1,132 |

### 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 $12.6 million for the six months ended June 30, 2024. Net cash used in operating activities resulted from a net loss of approximately $13.9 million and changes in working capital and non-cash charges.

Net cash used in operating activities for the six months ended June 30, 2024 increased by approximately $1.4 million as compared to the same period of the prior year. The increase was primarily a result of an increase in the net loss of approximately $6.6 million, changes in assets and liabilities of approximately $0.7 million, a decrease in accrued interest of approximately $0.3 million, a decrease in common stock issued in exchange for consulting services of $0.3 million, a decrease in stock based compensation of approximately $0.6 million partially offset by a decrease in the change in fair value of warrant and derivative liabilities of approximately $4.4 million, a decrease in depreciation and amortization of $0.1 million and a loss on disposal of ASRs and related inventory of approximately $1.1 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 six months ended June 30, 2024 and June 30, 2023 was approximately $1.8 and $2.1 million, respectively.

### Net Cash Provided by Financing Activities

Net cash provided by financing activities was approximately $14.8 million for the six months ended June 30, 2024, an increase of approximately $0.3 million as compared to the same period of the prior year. Our financing activities for the six months ended June 30, 2024, consisted primarily of net proceeds from the issuance of Class A Common Stock under our at-the-market offering program with Wainwright and issuance of Regulation A bonds. In the prior year period our financing activities consisted primarily of net proceeds resulting from our at-the-market agreement with Wainwright.

### Critical Accounting Estimates

There have been no material changes to our critical accounting estimates from what was reported in the Annual Report. Please see Note 1 to our condensed financial statements elsewhere in this Quarterly Report on Form 10-Q.

## Market risk

As filed, 143 characters.

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.

## Controls and procedures

As filed, 1,528 characters.

#### 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.

#### 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 June 30, 2024, our disclosure controls and procedures were effective at the reasonable assurance level.

#### Changes in Internal Control over Financial Reporting

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 June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 580 characters.

You should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report 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 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.

Filed Aug 14, 2024.
Source: SEC EDGAR, the filing index for accession 0001558370-24-012268. Last ingested by Listed: Oct 24, 2026, 15:07 ET. No prices; not investment advice.