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

- Company: [Knightscope, Inc.](/companies/kscp.md) (CIK 1600983)
- Form: 10-Q
- Filed: 2024-11-14
- Accepted by EDGAR: Nov 14, 2024, 22:00 ET
- Period: 2024-09-30
- Accession: 0001558370-24-015747
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1600983/000155837024015747/kscp-20240930x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1600983/000155837024015747/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $2.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $8.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $3.2m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $10.7m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-07-01 to 2024-09-30 | −$700.0k | us-gaap:GrossProfit |
| Gross profit | 9 months, 2024-01-01 to 2024-09-30 | −$2.7m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-07-01 to 2024-09-30 | $1.8m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2024-01-01 to 2024-09-30 | $5.0m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$7.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$22.8m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | −$10.9m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | −$24.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$3.58 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$10.19 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$3.58 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$10.19 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 3,042,301 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 2,431,269 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | −$17.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $12.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2024-09-30 | $5.2m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $11.5m | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $24.9m | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $11.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $15.7m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $3.9m | us-gaap:LongTermDebtNoncurrent |
| Short-term borrowings | at 2024-09-30 | $2.8m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2024-09-30 | $9.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 50,143 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 updated by our other filings with the SEC, and the section titled “Cautionary Note on Forward-Looking Statements” included elsewhere herein.*

### Overview

Knightscope builds robotics and artificial intelligence (“AI”) technologies focused on public safety. Our products are manufactured in the United States and are designed to protect people and assets across various environments, including workplaces, schools, and public areas.

Our Autonomous Security Robots (“ASRs”) are designed to enhance perimeter security by acting as a force multiplier for security teams, providing improved situational awareness. The ASRs perform real-time, on-site video-audio data collection and provide incident alerts for security personnel via the Knightscope Security Operations Center (“KSOC”). The KSOC is a real-time dashboard connected to each K5 robot and K1 Hemisphere unit, allowing clients to access data for instant action or for investigative and evidence collection purposes.

Our Emergency Communication Devices (“ECDs”) include the K1 Blue Light Tower, K1 E-Phone, and K1 Call Box. These devices provide emergency communication services using cellular and satellite networks. The towers, powered by solar energy, are highly visible, while the smaller E-Phones and Call Boxes offer the same communication capabilities with a more compact footprint, with options for solar or plug-in power.

We offer our ASR and stationary security solutions under an annual subscription, Machine-as-a-Service (“MaaS”) model. This model includes the provision of the ASR unit, maintenance, support, data transfer, access to the KSOC, charging stations, and software, firmware, and hardware updates. Our ECD devices are sold to our clients either directly or through partners who also install and manage them. The ECDs also provide a recurring revenue opportunity through the Emergency Monitoring System platform.

The Knightscope Emergency Monitoring System (“KEMS”), integrated into our ECDs, includes a self-diagnostic, alarm monitoring software solution that provides system owners with daily reports on the operational status of their emergency devices. The cloud-based application monitors the overall system's health, alerts users to operational issues, provides real-time error detection and diagnostics, and generates system performance reports.

In the third quarter of 2024, the management team focused on regaining compliance with the listing standards of The Nasdaq Stock Market LLC (Nasdaq) while we continued to implement changes to deliver on the Company’s path to profitability.

### Nasdaq Listing Rules Compliance

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 Nasdaq Listing Rule 5450(a)(1) which requires that a company must maintain a minimum bid price of $1.00 per share (the “Minimum Bid Price Requirement”) and had 180 calendar days, or until April 23, 2024, to regain compliance. Effective on March 4, 2024, the Company transferred to The Nasdaq Capital Market and was afforded the remainder of the compliance period to regain 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 had not regained compliance with the Minimum Bid Price

Requirement. On April 30, 2024, the Company appealed and requested a hearing before the Nasdaq Hearings Panel (“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 June 4, 2024, the Panel granted the Company an exception until October 4, 2024, to regain compliance with the Minimum Bid Price Requirement, subject to certain milestones which included obtaining shareholder approval for a reverse stock split (“RSS”), effecting the RSS, and maintaining the Minimum Bid Price Requirement for a minimum of ten consecutive business days by October 4, 2024.

On August 16, 2024, the Company held its annual meeting of stockholders (the “Annual Meeting”). At the Annual Meeting, the stockholders of the Company approved the RSS of the Company’s Class A and its Common B Common Stock at a ratio ranging from any whole number between 1-for-5 and 1-for-50.

Subsequently, on September 4, 2024, the Company’s Board of Directors (the “Board”) approved a RSS of both the Class A Common Stock and the Class B Common Stock at a final ratio of 1-for-50. On September 13, 2024, the Company filed a Certificate of Amendment to the Company’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) with the Secretary of State of the State of Delaware to effect the RSS, which became effective at 5:00 p.m. Eastern Time. The Class A Common Stock began trading on an as-adjusted basis on September 16, 2024.

On October 1, 2024, Knightscope received written notice from the Nasdaq Office of General Counsel informing the Company that, from September 16, 2024 to September 30, 2024, the Company’s minimum bid price had been $1.00 per share or higher and, accordingly, it had regained compliance with the bid price requirement and that the matter was now closed.

### Reverse Stock Split

On August 16, 2024, the Company held an annual meeting of stockholders (the “Annual Meeting”) at which the Company’s stockholders approved, among other items, amendments to the Certificate of Incorporation, to effect a reverse stock split of the Company’s Class A Common Stock at a ratio ranging from any whole number between 1-for-5 and 1-for-50, as determined by the Company’s Board in its discretion, subject to the Board’s authority to abandon such amendments (the “Class A Reverse Stock Split Amendment”), and effect a reverse stock split of the Company’s Class B Common Stock at a ratio ranging from any whole number between 1-for-5 and 1-for-50 (which ratio shall be the same ratio as the reverse stock split determined by the Board with respect to the Class A Common Stock), as determined by the Board in its discretion, subject to the Board’s authority to abandon such amendments (the “Class B Reverse Stock Split Amendment” and, together with the Class A Reverse Stock Split Amendment, the “Reverse Stock Split Amendment”). On September 4, 2024, the Board selected a reverse stock split of the Class A Common Stock at a final ratio of 1-for-50 and a reverse stock split of the Class B Common Stock at a final ratio of 1-for-50 and abandoned all other reverse stock split amendments at different ratios. On September 13, 2024, the Company filed a Certificate of Amendment to the Certificate of Incorporation (the “Certificate of Amendment”) with the Secretary of State of the State of Delaware to effect the Amendments. The Reverse Stock Split Amendment became effective at 5:00 p.m. Eastern Time on the date of filing of the related Certificate of Amendment.

### Capital Structure

The Company has prioritized restructuring Knightscope’s capital structure to better align with its public company peers. Below is a summary of actions taken, which we believe, set up the Company for long term success.

**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 “Share Increase Amendment”) to the 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. Our Board believes it is in the best interests of the Company and our stockholders to have additional shares available for use as our Board deems appropriate or necessary. As such, the primary purpose of the Share Increase Amendment was to provide the Company with greater flexibility with respect to managing its Class A Common Stock in connection with such corporate purposes as may, from time to time, be considered advisable by our Board. These corporate purposes could include, without limitation, (i) financing activities, including the at-the-market offering program that we commenced in February 2023, as amended in August 2023, with H.C. Wainwright & Co., LLC as sales agent; (iii) stock dividends or splits; (iv) conversions of convertible securities; (v) issuance of stock options and other equity awards pursuant to our incentive plans; and (vi) establishing strategic relationships. Having an increased number of authorized but unissued shares of Class A Common Stock allows the Company to take prompt action with respect to corporate opportunities that develop, without the delay and expense of convening a special meeting of stockholders for the purpose of approving an increase in our capitalization. Our Board will determine whether, when and on what terms the issuance of shares of Class A Common Stock may be warranted in connection with any of the foregoing purposes.

**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 was automatically converted into fully-paid, non-assessable shares of Class B common stock and each share of the Company’s Ordinary Preferred Stock (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 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, no shares of previously authorized preferred stock remain outstanding. Management believes this change helps the Company maintain compliance with Nasdaq listing rules by helping the Company 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.

On August 16, 2024, at its Annual Meeting, the Company received stockholder approval to authorize 40,000,000 shares of “blank check” preferred stock, issuable in one or more series, and (ii) implement ancillary and conforming changes in connection with the authorization of “blank check” preferred stock and to remove provisions related to the Company’s former Super Voting Preferred Stock and Ordinary Preferred Stock, which are no longer outstanding. The term “blank check” preferred stock refers to preferred stock, the creation and issuance of which is authorized in advance by a company’s stockholders and the terms, rights and features of which are determined by the Board of Directors of a company without seeking further actions or vote of the stockholders.

**Extinguishment of Warrants with Anti-Dilution Features -** 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 22,768 shares of the Company’s Class A 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 Common Stock (a “Stock Issuance”) at any price per share of 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. 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 of 1933, as amended, and the rules and regulations thereunder. Capitalized terms not defined herein have the meaning assigned to them in the 2022 Purchase Agreement.

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 cancellation of 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 lines of credit). Upon the occurrence of a Change of Control (as defined in the August 2024 Note), the Holder may, at its option, require the Company to repay the Note in full, starting from the public announcement of such a Change of Control until 30 days after its completion. The August 2024 Note does not bear interest under normal circumstances; however, if an Event of Default occurs (as defined in the August 2024 Note), the outstanding principal will automatically bear interest at a rate of 10% per annum until the default is resolved or the Note is paid in full. As of November 13, 2024, approximately $1.8 million of the note is remaining.

### Financial Efficiency

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 – we exited two long-term leases;
- optimizing team composition and size – we increased the size of the sales team to drive growth;
- 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
- continuing to streamline our ASR and ECD production processes towards a more traditional assembly line workflow for improved quality, efficiency, and throughput.

In the third quarter of 2024, Knightscope continued to streamline operations of the ECD product line which was acquired when the Company purchased the assets of CASE Emergency Management. Although the disruptions from restructuring changes we made in the first half of this year continue to impact operations, we are beginning to see benefits, primarily as we work closely with our third-party partners to streamline field services for our ECD clients.

Additionally, we believe our efforts to improve the ASR K5 v5 are showing promise as we see increased customer retention and a resulting increase in install base. The Company plans to invest in what management believes will be revenue-generating activities such as expansion of the sales team, developing channel partnerships and updating its website to attract new leads.

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

As of October 31, 2024, the Company had a total backlog of approximately $2.9 million, comprised of $2.4 million related to orders for ECDs and $0.5 million related to ASR orders.

### Results of Operations

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

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

| ​ ​ ​ Revenue, net | ​ ​ ​ | ​ ​ Three Months Ended September 30, 2024 ​ ​ | ​ ​ | ​ ​ % of Revenue ​ ​ | ​ ​ 2023 ​ ​ | ​ ​ | ​ ​ % of Revenue ​ ​ |
| --- | --- | ---: | --- | ---: | ---: | --- | ---: |
| Service | ​ | $1,861 | ​ | 73% | $1,915 | ​ | 58% |
| Product | ​ | ​ 674 | ​ | 27% | ​ 1,409 | ​ | 42% |
| Total revenue, net | ​ | ​ 2,535 | ​ | 100% | ​ 3,324 | ​ | 100% |
| Cost of revenue, net | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| Service | ​ | ​ 2,382 | ​ | 94% | ​ 2,488 | ​ | 75% |
| Product | ​ | ​ 853 | ​ | 34% | ​ 786 | ​ | 24% |
| Total cost of revenue, net | ​ | ​ 3,235 | ​ | 128% | ​ 3,274 | ​ | 98% |
| Gross profit (loss) | ​ | (700) |  | (28)% | 50 |  | 2% |
| Operating expenses: | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| Research and development | ​ | 1,770 |  | 70% | 1,903 |  | 57% |
| Sales and marketing | ​ | 1,000 |  | 39% | 1,395 |  | 42% |
| General and administrative | ​ | 4,238 |  | 167% | 3,235 |  | 97% |
| Restructuring charges | ​ | ​ 33 | ​ | 1% | ​ — | ​ | —% |
| Total operating expenses | ​ | 7,041 |  | 278% | 6,533 |  | 197% |
| Loss from operations | ​ | (7,741) |  | (305)% | (6,483) |  | (195)% |
| Other income (expense): | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| Change in fair value of warrant and derivative liabilities | ​ | (2,966) |  | (117)% | (1,800) |  | (54)% |
| Interest income (expense), net | ​ | ​ (130) | ​ | (5)% | ​ (8) | ​ | (0)% |
| Other income (expense), net | ​ | (67) |  | (3)% | (51) |  | (2)% |
| Total other income (expense) | ​ | (3,163) |  | (125)% | (1,859) |  | (56)% |
| Net loss before income tax expense | ​ | (10,904) |  | (430)% | (8,342) |  | (251)% |
| Income tax expense | ​ | — |  | —% | — |  | —% |
| Net loss | ​ | $(10,904) |  | (430)% | $(8,342) |  | (251)% |

### Revenue, net

Total revenue, net for the three months ended September 30, 2024 decreased by approximately $0.8 million compared to the same period in the prior year due to a $0.7 million decrease in product revenue and $0.1 million decrease in Service revenue. Product revenue decreased by approximately $0.7 million or approximately 52% in the three months ended September 30, 2024 compared to the same period in the prior year, primarily due to lower sales of ECD products which were impacted by the Company’s decision to move production from Irvine, CA to its headquarters location in Mountain View, CA. As a result, there were significant disruptions in our ability to build and deliver units to customers. The Company expects some disruptions to continue in the near future as it evaluates opportunities to optimize production and operations, which may include seeking a new, larger facility. Service revenue, net for the three months ended September 30, 2024 remained relatively flat compared to the same period 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 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. However, we also expect that the short-term impact of these significant changes will result in higher costs and a decline in gross margin yield.

Total cost of revenue, net of $3.2 million for the three months ended September 30, 2024 remained relatively flat compared to the same period in the prior year primarily due to $0.2 million in reduced headcount and $0.1 million of reduced cellular costs, partially offset by $0.4 million higher costs related to third party field services.

Service cost of revenue, net for the three months ended September 30, 2024 decreased by approximately $0.1 million to approximately $2.4 million, compared to the three months ended September 30, 2023. This was primarily due to a $0.2 million decline in headcount related expenses due to outsourcing of field services partially offset by a $0.4 million increase in third-party costs. Additionally, there was a $0.1 million decrease in 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 $0.9 million for the three months ended September 30, 2024 compared to approximately $0.8 million for the prior year period.

### Gross Profit (Loss)

The revenue and cost of revenue described above resulted in a gross loss for the three months ended September 30, 2024 of approximately $0.7 million, net, compared to a gross profit of $0.1 million for the three months ended September 30, 2023.

### Research and Development

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Three Months Ended September 30, 2024 | ​ ​ ​ ​ 2023 ​ | ​ ​ ​ ​ ​ ​ $ Change | ​ ​ ​ ​ ​ ​ % Change |
| --- | --- | ---: | ---: | ---: | ---: |
| Research and development | ​ | $1,770 ​ | $1,903 ​ | $(133) | (7)% |
| Percentage of total revenue | ​ | 70% | 57% |  | ​ |

Research and development expenses decreased by approximately $0.1 million, or approximately 7% for the three months ended September 30, 2024, as compared to the same period in the prior year. The decrease is primarily due to $0.3 million lower compensation and material expenses partially offset by $0.2 million in higher consulting fees.

### Sales and Marketing

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Three Months Ended September 30, 2024 | ​ ​ ​ ​ 2023 ​ | ​ ​ ​ ​ ​ ​ $ Change | ​ ​ ​ ​ ​ ​ % Change |
| --- | --- | ---: | ---: | ---: | ---: |
| Sales and marketing | **​** | $1,000 **​** | $1,395 ​ | $(395) | (28)% |
| Percentage of total revenue | **​** | 39% | 42% |  | ​ |

Sales and marketing expenses decreased by approximately $0.4 million, or approximately 28%, for the three months ended September 30, 2024, as compared to the same period in the prior year. The decrease was primarily due to $0.3 million in lower advertising and promotional costs and $0.1 million lower expenses related to compensation and allocation of amortization expense compared to the same period in the prior year.

### General and Administrative

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Three Months Ended September 30, 2024 | ​ ​ ​ ​ 2023 ​ | ​ ​ ​ ​ ​ ​ $ Change | ​ ​ ​ ​ ​ ​ % Change |
| --- | --- | ---: | ---: | ---: | ---: |
| General and administrative | **​** | $4,238 ​ | $3,235 **​** | $1,003 | 31% |
| Percentage of total revenue | **​** | 167% | 97% |  | ​ |

General and administrative expenses increased by approximately $1.0 million or approximately 31% for the three months ended September 30, 2024, as compared to the same period in the prior year. The increase was primarily related to a $0.9 million increase in investor relations costs and $0.7 million increase in third-party professional fees, primarily legal and finance services. These increases were partially offset by a decline in payroll expenses of $0.5 million and decline of $0.1 in stock compensation expense driven by a headcount reduction in the first quarter of 2024.

### Restructuring Charges

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Three Months Ended September 30, 2024 | ​ ​ ​ ​ ​ 2023 | ​ ​ ​ ​ ​ ​ $ Change | ​ ​ ​ ​ ​ ​ ​ % Change |
| --- | --- | ---: | ---: | ---: | ---: |
| Restructuring Charges | ​ | $33 ​ | $— ​ | $33 | 100% |
| Percentage of total revenue | ​ | 1% | —% |  | ​ |

Restructuring charges were approximately $33 thousand for the three month period ended September 30, 2024 compared to none for the same period in the prior year.

### Other Income (expense)

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Three Months Ended September 30 2024 | ​ | ​ ​ 2023 | ​ ​ ​ | ​ ​ ​ ​ ​ ​ $ Change | ​ ​ ​ | ​ ​ ​ ​ % Change |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Change in fair value of warrant and derivative liability | **​** | $(2,966) | **​** | $(1,800) | **​** | $(1,166) |  | (65)% |
| Interest income (expense), net | ​ | ​ (130) | ​ | ​ (8) | ​ | ​ (122) | ​ | (1,525)% |
| Other income (expense), net | ​ | ​ (67) | ​ | ​ (51) | ​ | ​ (16) | ​ | (31)% |
| Total other income (expense) | ​ | $(3,163) | ​ | $(1,859) | ​ | $(1,304) | ​ | (70)% |

Total other income (expense) decreased by approximately $1.3 million, or 70% for the three months ended September 30, 2024 as compared to the same period in the prior year, resulting in other income (expense), net of approximately $3.2 million for the three months ended September 30, 2024 compared to total other income (expense), net of approximately $1.9 million for the same period in the prior year. Interest expense increased by $0.1 million due to a higher interest-bearing debt balance in the current year period as compared to the same period in the prior year. The increase in the fair value of warrant and derivative liabilities for the three months ended September 30, 2024 was approximately $1.2 million more than in the same period in the prior year. We recorded $22 thousand in lease termination costs in the third quarter of fiscal 2024, resulting from the early termination of two long-term lease arrangements.

### Comparison of the Nine Months Ended September 30, 2024 and 2023

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

| ​ ​ ​ Revenue, net | ​ ​ ​ | ​ ​ Nine Months Ended September 30, 2024 ​ ​ | ​ ​ | ​ ​ % of Revenue ​ ​ | ​ ​ 2023 ​ ​ | ​ ​ | ​ ​ % of Revenue ​ ​ |
| --- | --- | ---: | --- | ---: | ---: | --- | ---: |
| Service | ​ | $5,502 | ​ | 69% | $5,488 | ​ | 56% |
| Product | ​ | ​ 2,490 | ​ | 31% | ​ 4,296 | ​ | 44% |
| Total revenue, net | ​ | ​ 7,992 | ​ | 100% | ​ 9,784 | ​ | 100% |
| Cost of revenue, net | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| Service | ​ | ​ 8,256 | ​ | 103% | ​ 7,020 | ​ | 72% |
| Product | ​ | ​ 2,439 | ​ | 31% | ​ 2,918 | ​ | 30% |
| Total cost of revenue, net | ​ | ​ 10,695 | ​ | 134% | ​ 9,938 | ​ | 102% |
| Gross loss | ​ | (2,703) |  | (34)% | (154) |  | (2)% |
| Operating Expenses: | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| Research and development | ​ | 4,976 |  | 62% | 4,782 |  | 49% |
| Sales and marketing | ​ | 4,043 |  | 51% | 3,716 |  | 38% |
| General and administrative | ​ | 10,613 |  | 133% | 10,148 |  | 104% |
| Restructuring charges | ​ | ​ 447 | ​ | 6% | ​ 149 | ​ | 2% |
| Total operating expenses | ​ | 20,079 |  | 251% | 18,795 |  | 192% |
| Loss from operations | ​ | (22,782) |  | (285)% | (18,949) |  | (194)% |
| Other income (expense): | ​ | ​ ​ | ​ | ​ ​ | ​ ​ | ​ | ​ ​ |
| Change in fair value of warrant and derivative liabilities | ​ | (1,515) |  | (19)% | 4,015 |  | 41% |
| Interest income (expense), net | ​ | ​ (323) | ​ | (4)% | ​ (462) | ​ | (5)% |
| Other income (expense), net | ​ | (147) |  | (2)% | (188) |  | (2)% |
| Total other income (expense) | ​ | (1,985) |  | (25)% | 3,365 |  | 34% |
| Net loss before income tax expense | ​ | (24,767) |  | (310)% | (15,584) |  | (159)% |
| Income tax expense | ​ | — |  | —% | — |  | —% |
| Net loss | ​ | $(24,767) |  | (310)% | $(15,584) |  | (159)% |

### Revenue, net

Total revenue, net for the nine months ended September 30, 2024 of approximately $8.0 million was a decrease of approximately $1.8 million or 18% as compared to the same period in the prior year. The decrease was due to lower production and installation of the ECD products as the Company has been restructuring the formerly CASE Emergency Management business it acquired in 2022.

Service revenue, net, comprised of ASR MaaS agreements and ECD maintenance agreements remained relatively flat for the nine months ended September 30, 2024 compared to the same period in the prior year. 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 $1.8 million or approximately 42% in the nine months ended September 30, 2024 compared to the same period in the prior year, primarily due to a decline in product production and 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 nine months ended September 30, 2024 increased by approximately $1.2 million to approximately $8.3 million, compared to the nine months ended September 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 technicians better able to efficiently support our clients. As a result of this change, we saw a $1.2 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 a $0.4 million reduction in headcount costs, a $0.2 million decline in cellular fees 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 $2.4 million for the nine months ended September 30, 2024 compared to approximately $2.9 million for the same period in the prior year. The approximate $0.5 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 nine months ended September 30, 2024 of approximately $2.7 million, net, compared to a gross loss of approximately $0.2 million, net, for the nine months ended September 30, 2023. The gross loss for the nine months ended September 30, 2024 included a non-recurring expense of approximately $1.1 million attributed to the retirement of the K5 v3 machines.

### Research and Development

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Nine Months Ended September 30, 2024 | ​ ​ ​ ​ 2023 ​ | ​ ​ ​ ​ ​ ​ $ Change | ​ ​ ​ ​ ​ ​ % Change |
| --- | --- | ---: | ---: | ---: | ---: |
| Research and development | ​ | $4,976 ​ | $4,782 ​ | $194 | 4% |
| Percentage of total revenue | ​ | 62% | 49% |  | ​ |

Research and development expenses increased by approximately $0.2 million, or 4% for the nine months ended September 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

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Nine Months Ended September 30, 2024 | ​ ​ ​ ​ 2023 ​ | ​ ​ ​ ​ ​ ​ $ Change | ​ ​ ​ ​ ​ ​ % Change |
| --- | --- | ---: | ---: | ---: | ---: |
| Sales and marketing | **​** | $4,043 **​** | $3,716 ​ | $327 | 9% |
| Percentage of total revenue | **​** | 51% | 38% |  | ​ |

Sales and marketing expenses increased by approximately $0.3 million, or approximately 9%, for the nine months ended September 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

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Nine Months Ended September 30, 2024 | ​ ​ ​ ​ 2023 ​ | ​ ​ ​ ​ ​ ​ $ Change | ​ ​ ​ ​ ​ ​ % Change |
| --- | --- | ---: | ---: | ---: | ---: |
| General and administrative | **​** | $10,613 ​ | $10,148 **​** | $465 | 5% |
| Percentage of total revenue | **​** | 133% | 104% |  | ​ |

General and administrative expenses increased by approximately $0.5 million or approximately 5% in the nine months ended September 30, 2024, as compared to the same period in the prior year. This was primarily driven by a $1.2 million increase in investor relations costs, partially offset by a reduction in payroll expense of $0.9 million, reduction in stock compensation expense of $0.6 million, and a $0.2 million reduction in corporate insurance fees. Third-party professional fees, primarily legal and finance, increased nearly $1.1 million, partially offset by a reduction in consulting fees of $0.2 million.

### Restructuring Charges

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ ​ Nine Months Ended September 30, 2024 | ​ ​ ​ ​ ​ 2023 | ​ ​ ​ ​ ​ ​ $ Change | ​ ​ ​ ​ ​ ​ ​ % Change |
| --- | --- | ---: | ---: | ---: | ---: |
| Restructuring Charges | ​ | $447 ​ | $149 ​ | $298 | 200% |
| Percentage of total revenue | ​ | 6% | 2% |  | ​ |

Restructuring charges were approximately $0.4 million for the nine month period ended September 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)

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Nine Months Ended September 30 2024 | ​ | ​ ​ 2023 | ​ ​ ​ | ​ ​ ​ ​ ​ ​ $ Change | ​ ​ ​ | ​ ​ ​ ​ % Change |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Change in fair value of warrant and derivative liabilities | **​** | $(1,515) | **​** | $4,015 | **​** | $(5,530) |  | (138)% |
| Interest income (expense), net | ​ | ​ (323) | ​ | ​ (462) | ​ | ​ 139 | ​ | 30% |
| Other income (expense), net | ​ | ​ (147) | ​ | ​ (188) | ​ | ​ 41 | ​ | 22% |
| Total other income (expense) | ​ | $(1,985) | ​ | $3,365 | ​ | $(5,350) | ​ | (159)% |

Total other income (expense) decreased by approximately $5.4 million, or 159% for the nine months ended September 30, 2024 as compared to the same period in the prior year, resulting in other income (expense), net of approximately ($2.0) million for the nine months ended September 30, 2024 compared to total other income, net of approximately $3.4 million for the same period in the prior year. Interest expense decreased by $0.1 million due to a lower debt balance in the current year period as compared to the same period in the prior year. The increase in the fair value of warrant and derivative liabilities for the nine months ended September 30, 2024 was approximately $5.5 million more than in the same period in the prior year.

### Liquidity and Capital Resources

As of September 30, 2024, and December 31, 2023, we had $5.2 million and $2.3 million, respectively, of cash and cash equivalents. As of September 30, 2024, the Company had paid-in capital of $195.5 million, partially offset by an accumulated deficit of approximately $186.2 million, working capital of approximately $0.0 million and total stockholders’ equity of approximately $9.3 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.

On October 11, 2024, the Company filed a prospectus supplement (the “October Prospectus Supplement”) to amend the June Prospectus Supplement to increase the issuance and sale from time to time to up to $1.347 million in shares of Class A Common Stock subject to, and in accordance with, SEC rules.

During the nine months ended September 30, 2024, we issued 1,470,537 shares of Class A Common Stock under the at-the-market offering program for net proceeds of approximately $20.4 million, net of brokerage and placement fees of approximately $0.8 million. From October 1, 2024 to November 13, 2024, we sold 245,882 shares of Class A Common Stock, generating approximately $2.3 million of proceeds, net of commissions and other issuance costs.

### August 2024 Note

As noted above, 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. 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 cancellation of 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.

As of November 13, 2024, approximately $1.8 million of the August 2024 Note is outstanding.

### 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 $2.8 million, in aggregate, generating net proceeds us of approximately $2.6 million, net of issuance costs of approximately $0.2 million, during the nine months ended September 30, 2024.

### Cash Flow

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

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Nine Months Ended September 30, 2024 | ​ | ​ ​ 2023 |
| --- | --- | ---: | --- | ---: |
| Net cash used in operating activities | ​ | $(17,377) | ​ | $(18,158) |
| Net cash used in investing activities | ​ | (2,480) | ​ | (3,583) |
| Net cash provided by financing activities | ​ | 22,776 | ​ | 21,642 |
| Net increase in cash, cash equivalents and restricted cash | ​ | $2,919 | ​ | $(99) |

### 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 $17.4 million for the nine months ended September 30, 2024. Net cash used in operating activities resulted from a net loss of approximately $24.8 million and changes in working capital and non-cash charges.

Net cash used in operating activities for the nine months ended September 30, 2024 decreased by approximately $0.8 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 $9.2 million, changes in assets and liabilities of approximately $4.4 million, a decrease in accrued interest of approximately $0.2 million, a decrease in common stock issued in exchange for consulting services of $0.4 million, a decrease in stock based compensation of approximately

$0.7 million partially offset by a decrease in the change in fair value of warrant and derivative liabilities of approximately $5.5 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 nine months ended September 30, 2024 and 2023 was approximately $2.5 and $3.6 million, respectively.

### Net Cash Provided by Financing Activities

Net cash provided by financing activities was approximately $22.8 million for the nine months ended September 30, 2024, an increase of approximately $1.1 million as compared to the same period of the prior year. Our financing activities for the nine months ended September 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, 1,538 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 September 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 September 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 Nov 14, 2024.
Source: SEC EDGAR, the filing index for accession 0001558370-24-015747. Last ingested by Listed: Oct 24, 2026, 15:07 ET. No prices; not investment advice.