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Item 7. Management’s Discussion and Analysis

2026-03-27 compared with 2025-03-31 · 150 added, 208 removed, 123 unchanged (74% of the section changed)

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This discussion contains forward-looking statements.

Refer to “Forward-Looking Statements” and “Risk Factors” herein, for a discussion of the uncertainties, risks, assumptions, and other important factors associated

with these statements.

Refer to “Forward-Looking Statements” and “Risk Factors” herein, for a discussion of the uncertainties, risks, assumptions, and other important factors associated with these statements.

The historical results presented below are not necessarily indicative of the results that may be expected for any future period.

Our MD&A discusses our results of operations for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

Our Management’s Discussion and Analysis discusses our results of operations for the year ended December 31, 2025 as compared to the year ended December 31, 2024.

For a discussion and analysis of the year ended December 31, 2024 as compared to the year ended December 31, 2023, please refer to Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on April 1, 2024.

Knightscope is dedicated to transforming public safety through AI-driven robotics, emergency communication solutions, and real-time monitoring.

Our comprehensive suite of solutions includes Autonomous Security Robots (ASRs), advanced AI-powered detection, emergency communication devices (ECDs), and the cloud-based Knightscope Security Operations Center (KSOC), providing organizations with scalable, 24/7 autonomous protection.

Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 31, 2025.

Knightscope is a security technology company providing technology-enabled security solutions through ASRs, ECDs, and real-time monitoring capabilities supported by our cloud-based KSOC and our RTX remote monitoring team.

During 2025, we continued to operate and refine this integrated platform while investing in next-generation technologies.

Total revenue increased to approximately $11.3 million in 2025 from approximately $10.8 million in 2024, driven primarily by growth in service-related revenue and ECD product sales.

However, significant supply chain constraints, particularly affecting electronic components and certain single-source suppliers within our ECD product line, resulted in extended lead times, intermittent production interruptions, higher input costs, and delivery delays that impacted revenue timing and margin performance during the year.

Recent Developments

On February 27, 2026, we completed the Event Risk Acquisition of all the issued and outstanding membership interest of Event Risk pursuant to the Event Risk Agreement.

As a result of the transaction, Event Risk became a wholly owned subsidiary of the Company.

The aggregate purchase consideration consisted of (i) a $5.0 million cash payment at closing, (ii) repayment of Event Risk’s outstanding indebtedness of $1.1 million, (iii) the issuance of 1,724,418 shares of the Company’s Class A Common Stock, (iv) $4.0 million of deferred cash payments, payable in quarterly installments beginning March 31, 2027 through December 31, 2028 and (v) any post-closing purchase price adjustments.

See Note 11 to our financial statements, which are included in Item 8 “Financial Statements and Supplementary Data” of this Annual Report for additional information on the Event Risk Acquisition and “Item 1A.

Risk Factors—Risks Related to the Event Risk Acquisition” of this Annual Report for a discussion of the associated risks.

The foregoing description does not purport to be complete and is qualified in its entirety by reference to the Event Risk Agreement filed as an exhibit to this Annual Report on Form 10-K.

Autonomous Security Robots (ASRs)

Knightscope’s ASRs deliver proactive public safety solutions for diverse environments.

Each model is purpose-deployed to enhance deterrence, situational awareness and threat detection:

● K1 Hemisphere Stationary ASR – Fixed-location presence equipped with license plate, where permitted, ideal for high-traffic areas.

● K3 Indoor Patrol ASR – Compact and quiet, designed for autonomous indoor security in offices, malls, and commercial buildings .

● K5 Outdoor Patrol ASR – A high-visibility deterrent with rugged weatherproof capabilities, ideal for patrolling large perimeters.

● K7 Multi-Terrain ASR – A future product, the K7 ASR is being designed for complex terrains such as large commercial or industrial sites and critical infrastructure.

Each mobile ASR is equipped with LiDAR, thermal imaging, high-definition cameras, and real-time AI-driven threat detection to provide comprehensive safety and security intelligence.

Knightscope Security Operations Center (KSOC)

KSOC serves as the command hub for our ASR fleet, leveraging AI-powered video analytics, automated threat detection, and 24/7 remote monitoring to enhance response times.

Key features include:

● AI-driven incident detection for loitering, trespassing, and anomalies.

● Automated reporting and analytics to optimize security planning.

● Integrated emergency communication allowing direct connection between ASRs and human security teams.

Emergency Communication Devices (ECDs) and Solutions

Knightscope is committed to providing comprehensive public safety solutions, including enhanced emergency communication capabilities.

Our solar powered K1 Blue Light Towers, Ephones and Emergency Call Boxes offer an immediate lifeline to security personnel, law enforcement, and emergency responders.

These systems are strategically deployed in universities, corporate campuses, transit stations, and other public areas to ensure rapid response in critical situations.

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 addition to our physical communication devices, our ASRs are equipped with emergency call buttons, allowing individuals to establish a direct connection with our 24/7 Security Operations Center (SOC).

This feature provides a critical communication link during emergencies, enhancing presence and responsiveness.

We continue to advance our autonomous response capabilities, enabling ASRs to navigate to specific locations, assess threats, and relay real-time information to human operators.

These systems can broadcast pre-recorded messages, provide live two-way audio communication, and integrate with existing infrastructure to facilitate coordinated response efforts.

Our ASR portfolio includes:

● K1 Hemisphere

Service revenue associated with ASR deployments remained a significant component of our recurring revenue base in 2025.

The K5 platform continued to represent the majority of mobile robot deployments.

Revenue from Machine-as-a-Service (“MaaS”) subscriptions remained relatively stable year-over-year, reflecting both ongoing deployments and downtime credits associated with service-level performance.

The K7 ASR remains in development and did not contribute revenue in 2025.

Engineering resources continued to be allocated toward mechanical design refinement, sensor integration, durability testing, and software integration.

Commercial production is not expected until late 2026 or early 2027, subject to development milestones and supply chain readiness.

Each deployed ASR integrates light detection and ranging, imaging systems, and AI-based detection capabilities designed to enhance deterrence, situational awareness, and reporting.

Throughout 2025, development efforts focused on improving overall performance.

Knightscope Security Operations Center

KSOC remains the operational command platform for our deployed fleet.

● Real-time monitoring and alert review;

● AI-driven detection for defined events and anomalies;

● Incident documentation and reporting;

● Integration with emergency communication systems.

In 2025, we continued incremental enhancements to KSOC functionality, including alert prioritization improvements and workflow optimization.

Emergency Communication Devices and Solutions

Our ECD portfolio includes

● K1 Blue Light Towers

● Blue Light Emergency Phones

ECD revenue increased in 2025, particularly in product sales;

however, the segment experienced significant supply chain pressures during the year.

Global electronic component shortages, tariff-related cost increases, and extended lead times from certain suppliers - some of which are single-source for specialized components - constrained production schedules and contributed to inconsistent shipment timing.

These constraints resulted in higher bill-of-material costs and intermittent production shortfalls, which negatively impacted both revenue timing and gross margin performance.

The KEMS continues to support remote monitoring and diagnostics for deployed ECD systems.

KEMS functionality remained stable in 2025, with ongoing refinements to monitoring and reporting capabilities.

Strategic Resource Allocation in 2025

While 2025 operating performance remained primarily driven by existing ASR and ECD platforms, we allocated capital and engineering resources toward:

● Development of the K7 platform;

● Development of the next generation K1 platform;

● Evaluation and execution of strategic initiatives, including acquisitions intended to support our evolving hybrid human-and-autonomy operating model.

These investments increased research and development activity and were made with the objective of supporting long-term scalability and integration across our hardware, software, and human operations.

Operational Considerations

During 2025, production schedules and margin performance were affected by:

● Extended supplier lead times;

● Limited availability of certain electronic components;

● Tariff-related input cost increases;

● Inventory adjustments and absorption variability.

We continue to evaluate supplier diversification, procurement strategies, and production planning improvements;

however, global supply chain volatility and cost pressures may continue to impact operating performance.

We derive our revenue from two primary sources:

a) subscription based Machines-as-a-Service (MaaS) offering which includes the ASRs as well as maintenance, service, support, data transfer, KSOC access, charging stations, and unlimited software, firmware and select hardware upgrades and b) the sale of ECD products and related recurring revenues from KEMS and full-service maintenance contracts.

a) subscription MaaS offering which includes the ASRs as well as maintenance, service, support, data transfer, KSOC access, charging stations, and unlimited software, firmware and select hardware upgrades and b) the sale of ECD products and related recurring revenues from KEMS and full-service maintenance contracts.

The Company has incurred net losses since inception.

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Risk Factors—Risks Related to the Business and the Global Economy—We have not yet generated any profits, anticipate that we will incur continued losses for the foreseeable future, and may never achieve profitability .

Our strategy is to try to keep driving a decrease in our overall costs while achieving our overall growth objectives.

As of March 24, 2026, the Company had a total backlog of approximately $3.1 million, comprised of $0.6 million related to ASR orders and $2.5 million related to orders for ECDs.

2024 Developments

In 2024, the Company made strategic decisions that impacted its operations and its capital structure with the goal to establish a foundation to pursue long-term profitable growth and to simplify its corporate structure.

In the short-term, our strategic operational initiatives resulted in unfavorable impacts, including a reduction in revenue and an increase in operational costs.

However, we firmly believe they are essential investments in our future growth and market positioning and although these decisions have led to lower revenues in the near term, we remain confident in their long-term potential to enhance our competitive advantage, drive sustainable value creation, and position the company for long-term success.

Operational changes

In the first quarter of 2024, Knightscope undertook significant leadership and governance enhancements to better align the Company with its long-term strategic objectives.

We appointed a new Chief Financial Officer and appointed independent board members with extensive industry and financial expertise, strengthening oversight and strategic direction.

Additionally, throughout the year, we streamlined our management structure by reducing approximately 40% of executive and senior leadership roles, fostering greater efficiency in decision-making and operational execution.

Early in 2024, the Company discovered that quality issues plaguing our K5 ASRs in the field would cost too much to resolve and likely have a negative impact on our client experience.

Management made the strategic decision to swap out all impacted ASRs with new ones at no cost to our clients.

As part of our ongoing commitment to operational excellence, we conducted a comprehensive restructuring of the Emergency Communication Division (ECD), which we acquired through the CASE acquisition in 2022.

Upon review, it became evident that legacy CASE business processes lacked modern processes, were largely manual, and led to inefficiencies, excessive costs, and financial underperformance.

We took decisive action in furtherance of our goal to achieving profitability in the long-term.

To address these challenges, we implemented a series of strategic and structural changes, including:

● Outsourcing non-core field services to specialized third-party providers to optimize resources and reduce costs.

● Relocating production from Irvine, CA, to our headquarters in Mountain View, CA, consolidating operations for improved oversight and efficiency.

● Eliminating redundant and inefficient roles, ensuring that our workforce is optimized for streamlined execution.

● Reducing real estate footprint by consolidating operations across fewer locations, enhancing cost efficiency.

● Renegotiating long-term client contracts to align pricing structures with sustainable profitability.

Focus on Innovation

Throughout the year, the Company also expanded its focus on innovation by investing in new product development and enhancing its technological capabilities.

To support these initiatives, we increased our R&D headcount and engaged specialized consultants to accelerate the development of key projects such as the K7 ASR.

We also invested in advancing our cybersecurity to ensure compliance with federal contract requirements.

These strategic investments reflect our commitment to strengthening our product portfolio, meeting evolving customer needs, and positioning the Company for success in the public safety technology industry.

We believe that these transformative measures will deliver long-term operational and financial benefits, even though they have resulted in temporary disruptions to revenue while increasing short-term costs.

We anticipate that these impacts will continue into 2025 as we complete the transition and drive further efficiencies across the entire business.

However, we believe that these strategic actions position Knightscope for stronger, more sustainable growth and profitability in the years ahead.

Capital Structure

On September 29, 2023, Knightscope filed an Offering Circular with the SEC for up to $10 million in Public Safety Infrastructure Bonds, which was qualified on October 2, 2023.

The bonds, priced at $1,000 each, are unsecured, carry a 10% annual interest rate payable on December 31st, and mature five years after issuance.

In 2023, the Company issued $1.4 million in bonds, netting approximately $1.2 million after $0.2 million in issuance costs.

Between January 1 and March 14, 2024, an additional $2.8 million in bonds were issued, netting approximately $2.6 million after $0.2 million in issuance costs.

In total, $4.3 million in bonds were issued, generating net proceeds of approximately $3.9 million after total issuance costs of approximately $0.4 million.

On April 5, 2024, during a special stockholder meeting, shareholders approved an amendment to our Certificate of Incorporation, increasing the authorized shares of Class A Common Stock from 114 million to 228 million.

This increase provides greater flexibility for corporate needs, such as financing activities, stock dividends or splits, issuing equity awards, and forming strategic partnerships.

Having additional authorized shares allows us to act on opportunities without requiring further stockholder approval.

The Board will determine the timing and terms of any future issuances based on the Company’s needs.

On May 15, 2024, in accordance with our Certificate of Incorporation, all outstanding shares of Knightscope’s preferred stock, encompassing both Super Voting and Ordinary Preferred shares, were automatically converted into Class B and Class A common stock, respectively.

This conversion was triggered by a written request from holders representing a majority of the voting power of the then-outstanding preferred stock, in accordance with the terms of the Company’s Certificate of Incorporation (the “Automatic Conversion”).

Following the Automatic Conversion, no shares of preferred stock remain outstanding.

At its Annual Meeting on August 16, 2024, Knightscope’s stockholders approved the reverse stock split (“RSS”) at a ratio between 1-for-5 and 1-for-50.

The Board of Directors subsequently approved a final RSS ratio of 1-for-50, which was implemented on September 13, 2024, with the Class A Common Stock trading on a post-split basis beginning September 16, 2024.

Shareholders at the Annual Meeting also authorized the creation of 40 million preferred shares, designated as “blank check” preferred stock, issuable in one or more series.

This authorization empowers the Board of Directors to determine the specific terms, rights, preferences, and limitations of each series of preferred stock without requiring further shareholder action.

This strategic flexibility allows the Company to respond effectively to future capital raising opportunities and other corporate needs.

In conjunction with this

authorization, shareholders also approved ancillary and conforming changes to the Company’s governing documents, including the removal of outdated information about the previously existing preferred stock, which was converted to common stock earlier this year.

In October 2022, Knightscope strategically secured financing through a private placement with Alto Opportunity Master Fund, SPC - Segregated Master Portfolio B (“Holder”).

This transaction involved the issuance of senior secured convertible notes and warrants to purchase up to 22,768 (RSS adjusted) shares of the Company’s Class A Common Stock.

These warrants included a critical price adjustment mechanism:

should Knightscope issue common stock at a price lower than the then-current warrant exercise price, that exercise price would be reduced, and the number of shares purchasable would be increased, thereby preserving the intrinsic value of the warrants.

A registration rights agreement was also executed, obligating Knightscope to register these securities with the SEC.

On August 1, 2024, Knightscope and the Holder executed an Agreement and Waiver, resulting in a significant restructuring of this financial arrangement.

The outstanding 2022 Warrants were cancelled in exchange for a new Senior Secured Promissory Note with a principal amount of $3.0 million, due on July 1, 2025.

This note is structured for repayment in two tranches:

$2.5 million will be repaid in 11 equal monthly installments commencing September 1, 2024, and the remaining $500,000 is due on the earlier of October 15, 2024, or the date upon which Knightscope completes a funding transaction.

A change of control provision allows the Holder to demand full repayment upon the public announcement of such an event, continuing for 30 days after its completion.

While the August 2024 Note does not bear interest, a default will trigger a 10% per annum interest rate on the outstanding principal until the default is cured or the note is paid in full.

As of December 31, 2024, the outstanding principal balance on this note is approximately $1.4 million.

On November 21, 2024, Knightscope announced the pricing of a public offering of Class A Common Stock and pre-funded warrants, projected to generate gross proceeds of approximately $12.1 million.

The offering, conducted under an effective shelf registration statement previously filed with the SEC, closed on November 25, 2024.

The offering comprised the sale of 393,659 shares of Class A Common Stock and pre-funded warrants to purchase 816,341 shares of Class A Common Stock, at a public offering price of $10.00 per share and $9.999 per pre-funded warrant, respectively, before underwriting discounts and commissions.

The pre-funded warrants were immediately exercisable at a nominal price of $0.001 per share and remained exercisable until fully utilized.

As of February 11, 2025, the pre-funded warrants were fully exercised.

The offering was managed by Titan Partners Group LLC, a division of American Capital Partners, LLC who were also issued underwriter warrants, exercisable commencing 180 days after the agreement date and continuing for a period of five years, to purchase 36,300 shares of Class A Common Stock.

These underwriter warrants are exercisable at the price of $18.29 per share.

Critical Accounting Estimates

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The preparation of these financial statements requires us to make estimates, assumptions and judgments that can have significant impact on the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of assets and liabilities at the date of our financial statements.

For the Company, these estimates include, but are not limited to:

deriving the useful lives of ASRs, determination of the cost of ASRs, assessing assets for impairment, accounts receivable – estimated credit losses, determination of deferred tax valuation allowances, the valuation of convertible preferred stock warrants, estimating fair values of the Company’s share-based awards, and derivative liabilities.

Actual results could differ from those estimates.

These estimates include, but are not limited to:

deriving the useful lives of ASRs, determination of the cost of ASRs, assessing assets for impairment, accounts receivable – estimated credit losses, determination of deferred tax valuation allowances and estimating fair values of the Company’s share-based awards.

We base our estimates, assumptions and judgments on historical experience and various other factors that we believe to be reasonable under the circumstances.

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Please see Note 1 to our financial statements, which are included in Item 8 “Financial Statements and Supplementary Data” of this Annual Report.

Revenue Recognition

ASR related revenues

The Company derives its revenues from lease of proprietary ASRs along with access to the browser-based interface KSOC through contracts under the lease accounting that typically have a twelve (12)-month term.

In addition, the Company derives non-lease revenue items such as professional services related to ASRs’ deployments, special decals, shipping costs and training if any, recognized when control of these services is transferred to the clients, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services.

ECD related revenues

The Company also derives revenues from sales of its ECDs and related services, such as installation, maintenance, and upgrades.

Revenue is recognized when clients sign full or partial certificate of completion, at which point, Knightscope can generate an invoice for its products and services.

Clients also have the option to sign up for ongoing preventative and maintenance agreements.

The maintenance revenue is recognized in the period the service is performed and the Company has determined that term of the contracts has been fulfilled.

Installation or upgrades revenue are recognized upon completion of the project/contracts.

In certain cases, deferred revenue is recognized to account for unfinished contracts.

Inventory, principally purchased components, is stated at the lower of cost or net realizable value.

Cost is determined using an average cost, which approximates actual cost on a first-in, first-out basis.

Inventory in excess of salable amounts and inventory which is considered obsolete based upon changes in existing technology is fully expensed to the cost of revenue service line item in our Statement of Operations.

Inventory in excess of salable amounts and inventory which is considered obsolete based upon changes in existing technology is fully expensed to the cost of revenue, net product line item in our Statements of Operations.

At the point of loss recognition, a new lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in the new cost basis.

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ASRs consist of materials, ASRs in progress and finished ASRs.

ASRs in progress and finished ASRs include materials, labor and other direct and indirect costs used in their production.

ASRs in progress and finished ASRs include materials, labor and other direct and indirect costs used in their manufacturing.

Finished ASRs are valued using a discrete bill of materials, which includes an allocation of labor and direct overhead based on assembly hours.

Depreciation expense on ASRs is recorded using the straight-line method over their estimated expected lives, which currently ranges from 3 to 5 years.

Depreciation expense of finished ASRs is included in research and development expense, sales and marketing expense, and cost of revenue, net on the Company’s Statements of Operations.

Depreciation expense on finished ASRs was $2.0 million and $1.6 million for the years ended December 31, 2024 and 2023, respectively.

ASRs, net, consisted of the following (in thousands):

Raw materials

ASRs in progress

Finished ASRs

Accumulated depreciation on Finished ASRs

The components of the Finished ASRs, net at December 31, 2024 and 2023 are as follows (in thousands):

ASRs on lease or available for lease

Demonstration ASRs

Research and development ASRs

accumulated depreciation

Finished ASRs, net

Depreciation expense of finished ASRs is included in research and development expense, sales, general and administrative expense, and cost of revenue, net on the Company’s Statements of Operations.

Depreciation expense on

finished ASRs was $2.0 million for each of the years ended December 31, 2025 and 2024.

ASRs, net, were $7.7 million and $8.8 million as of December 31, 2025 and 2024, respectively.

Impairment of Long-Lived Assets

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Year Ended December 31,

(in thousands, except percentages)

Total revenue, net

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Research and development

Sales and marketing

General and administrative

Sales, general and administrative

Restructuring charges

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Change in fair value of warrant and derivative liabilities

Interest income (expense), net

Interest expense, net

Other income (expense), net

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Income tax expense

Total revenue, net, of $10.8 million for the year ended December 31, 2024 decreased by $2.0 million compared to the year ended December 31, 2023, primarily in Product revenue due to the company’s decision to restructure its ECD product line, which resulted in significant business disruption as the Company outsourced field services, eliminated positions and consolidated its ECD operations from Irvine, CA to Mountain View, CA.

The decrease in Product revenue was partially offset by an increase in Service revenue.

Service revenue, net, which includes revenue generated through MaaS agreements for our ASRs and maintenance and support contracts for our portfolio of ECDs, increased by approximately $0.3 million, or approximately 4%, to $7.5 million, for the year ended December 31, 2024, from $7.2 million for the year ended December 31, 2023.

The increase was driven by an increase in the ASR installed base, lower downtime credits and higher revenue from ECD maintenance and support contracts.

Product revenue, net, was $3.3 million for the year ended December 31, 2024, a decrease of $2.3 million or 41% from prior year, primarily from decreased sales of ECDs due to disruptions in production and operations caused by restructuring initiatives.

Total revenue, net, of $11.3 million for the year ended December 31, 2025 increased by $0.5 million or 5% compared to the year ended December 31, 2024.

Service revenue, net, which includes revenue generated through MaaS agreements for our ASRs and maintenance and support contracts for our portfolio of ECDs, increased by $0.5 million, or 7%, to $8.0 million, for the year ended December 31, 2025, from $7.5 million for the year ended December 31, 2024.

The increase was driven primarily by higher maintenance and service contracts associated with ECD deployments and higher ASR subscription revenue.

Product revenue, net, was $3.4 million for the year ended December 31, 2025, an increase of 1% compared to the year ended December 31, 2024.

Although ECD product sales increased year-over-year, supply chain disruptions during 2025, including extended lead times for certain electronic components and reliance on certain limited-source suppliers, resulted in production constraints and delayed shipments that impacted revenue timing.

While total revenue increased, growth was constrained by global supply chain disruptions, electronic component shortages, tariff-related cost increases, and inconsistent production scheduling.

Cost of revenue, net

Total cost of revenue, net of $14.5 million for the year ended December 31, 2024 declined by $0.3 million or 2% compared to the year ended December 31, 2023 as $1.8 million higher Service cost of revenue was offset by $2.1 million year-over-year decline in Product cost of revenue during the same period.

Service cost of revenue, net, representing the cost of supporting ASR MaaS and maintenance and support agreements related to ECD installations, for the year ended December 31, 2024, was approximately $11.6 million, as compared to approximately $9.9 million for

the year ended December 31, 2023, representing an increase of approximately $1.8 million, or 18%.

This was driven by $1.6 million in higher third-party service costs due to outsourcing our field services, $1.2 million in higher scrap costs primarily related to our ASR hot-swap program, and $0.4 million in increased depreciation and amortization expenses;

partially offset by a $0.8 million decrease in headcount expense, $0.4 million lower cellular and other software costs, and $0.2 million savings in rent, utilities and vehicle maintenance expenses compared to the same period in the prior year.

Product cost of revenue, net of approximately $2.9 million and $4.9 million for the years ended December 31, 2024 and 2023, respectively, decreased by $2.1 million or 42% primarily due to $1.8 million in lower volume of sales and $0.4 million in lower warranty costs, which were partially offset by $0.1 million in higher third-party installation fees.

Gross loss for the year ended December 31, 2024 was approximately $3.7 million, as compared to $2.0 million for the year ended December 31, 2023, representing a year-over-year increase of approximately $1.7 million.

Total cost of revenue, net of $16.1 million for the year ended December 31, 2025 increased by $1.6 million or 11% compared to the year ended December 31, 2024 as a result of $0.7 million higher service cost of revenue, net and by $0.9 million higher product cost of revenue, net during the same period.

Service cost of revenue, net, representing the cost of supporting ASR MaaS deployments and maintenance and support agreements related to ECD installations, for the year ended December 31, 2025 increased by $0.7 million, or 6% to $12.3 million, as compared to $11.6 million for the year ended December 31, 2024.

This was driven by $0.4 million in higher third-party outsourced field service costs, $0.2 million in higher consulting fees, $0.4 million in higher headcount related costs, $0.1 million increased supplies and materials expenses, partially offset by $0.3 million in lower scrap costs and $0.2 million lower communication and cellular costs.

Product cost of revenue, net of $3.8 million and $2.9 million for the years ended December 31, 2025 and 2024, respectively, increased by $0.9 million or 32% primarily due to $1.4 million in higher material costs, partially offset by $0.2 million in decreased headcount related expenses, $0.2 million in lessor rent and utilities expense, and $0.1 million in lower scrap costs.

Gross loss for the year ended December 31, 2025 was $4.8 million, as compared to $3.7 million for the year ended December 31, 2024, representing a year-over-year increase of approximately $1.1 million.

As discussed above, this was primarily the result of higher material costs, consulting costs and headcount related costs.

Research and development

(in thousands, except percentages)

Research and development

Percentage of total revenue

Research and development (“R&D”) expense for the year ended December 31, 2024 was approximately $7.1 million, or 65% of revenue, compared to R&D expense of $6.4 million, or 50% of revenue, for the year ended December 31, 2023.

The year-over-year increase was due to the Company’s continued investment in the development of new products and in cybersecurity capabilities in support of federal contracts through the use of third-party engineering firms which drove an increase of $0.5 million in professional fees and approximately $0.5 million in increased headcount expense partially offset by $0.3 million in general cost savings.

Sales and marketing

Percentage of total revenue

Sales and marketing expense for the year ended December 31, 2024 was approximately $5.1 million and remained relatively flat compared to sales and marketing expense of $5.2 million, for the year ended December 31, 2023.

General and administrative

Research and development (“R&D”) expense for the year ended December 31, 2025 was $12.5 million, or 110% of revenue, compared to R&D expense of $7.1 million, or 65% of revenue, for the year ended December 31, 2024.

The year-over-year increase was due to the Company’s continued investment in new product development through the use of third-party engineering firms which drove an increase of $4.1 million in consulting fees, $0.3 million in supplies and materials, and $0.7 million in increased headcount related expenses and $0.3 million in other general costs.

Sales, general and administrative

(in thousands, except percentages)

Sales, general and administrative

Percentage of total revenue

General and administrative (“G&A”) expense for the year ended December 31, 2024 was approximately $13.3 million, compared to G&A expense of approximately $12.6 million, for the year ended December 31, 2023.

The increase was primarily driven by an increase of approximately $1.2 million in investor relations expense and $1.1 million in higher professional services fees, partially offset by $1.7 million compensation expense savings due to lower headcount.

Sales, general and administrative expense for the year ended December 31, 2025 was $16.6 million, a decrease of $1.8 million from the year ended December 31, 2024.

The decrease was primarily driven by $2.8 million in lower investor relations and advertising expenses, and $1.2 million in lower professional services fees, partially offset by a $1.4 million increase in compensation expenses largely due to increased headcount in our sales and marketing teams and a $0.8 million increase in rent related costs associated with our new larger headquarters.

Restructuring charges

(in thousands, except percentages)

Restructuring Charges

Percentage of total revenue

We incurred restructuring charges for the year ended December 31, 2024, of $0.5 million as a result of operational changes made to the ECD portfolio.

These changes, primarily driven by our decision to exit our production facilities in Irvine, CA and consolidate all operations in Mountain View, CA, included costs related to headcount reduction across production and field services, lease termination, and other relocation, consolidation and exit costs.

In 2024, we incurred restructuring charges as a result of operational changes made to the ECD portfolio.

These changes, primarily driven by our decision to consolidate all operations at our headquarters, included costs related to headcount reduction across manufacturing and field services, lease termination, and other relocation, consolidation and exit costs.

Other income (expense)

(in thousands, except percentages)

Change in fair value of warrant and derivative liabilities

Interest income (expense), net

Interest expense, net

Other income (expense), net

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Change in fair value of warrant and derivative liability

The change in the fair value of warrant and derivative liability for the year ended December 31, 2024 resulting in other income (expense) of approximately ($1.5) million compared to other income of approximately $4.9 million for the year ended December 31, 2023.

The change in the fair value of the warrant and derivative liability is attributable to the extinguishment of warrants with Alto Opportunity Master Fund, SPC - Segregated Master Portfolio B which occurred on August 1, 2024.

Interest income (expense), net

Interest income (expense), net for the year ended December 31, 2024 was approximately ($0.4) million, compared to interest income (expense), net of approximately ($0.6) million for the year ended December 31, 2023.

The decrease in interest income (expense), net resulted from paying off the convertible notes in 2023, partially offset by interest and issuance costs on the Bonds that were issued in 2023 and 2024.

The change in the fair value of warrant and derivative liability is attributable to the change in stock prices.

Due to the extinguishment of warrants with Alto Opportunity Master Fund, SPC - Segregated Master Portfolio B which occurred on August 1, 2024 this liability was zero at December 31, 2024.

There was no such expense for the year ended December 31, 2025.

Interest expense, net

Interest expense, net for the year ended December 31, 2025 was $39 thousand, compared to interest expense, net of $0.4 million for the year ended December 31, 2024.

The decrease in interest expense, net was due to increased interest received from interest bearing cash accounts offsetting interest expense from our debt obligations.

Other income (expense), net

Other income (expense), net for the year ended December 31, 2024 was approximately ($0.1) million, as compared to other income (expense), net of ($0.2) million for the year ended December 31, 2023 mainly attributable to the Referral Agreement with Dimension Funding LLC.

Other income, net for the year ended December 31, 2025 was approximately $0.1 million, as compared to other expense, net of $0.1 million for the year ended December 31, 2024 mainly attributable to reduced third party accounts receivable collection fees.

Liquidity and Capital Resources

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As of December 31, 2025, the Company also had an accumulated deficit of $227.0 million, working capital of $19.8 million, and stockholders’ equity of $27.8 million.

For the year ended December 31, 2025, the Company had a net loss of $33.8 million and cash used in operating activities of $30.3 million.

These factors raise substantial doubt about our ability to continue as a going concern.

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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.

We executed a purchase agreement on September 13, 2024 in order to secure the acquisition of raw materials essential to ASR production.

This agreement stipulates monthly purchases of $40,000 commencing in January 2025 and concluding in August 2026, culminating in a total expenditure of $0.8 million .

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.

The Company executed a purchase agreement on September 13, 2024, which was modified in September 2025, in order to secure the acquisition of raw materials essential to ASR manufacturing.

This modified agreement stipulates a total expenditure of $0.6 million before December 31, 2026.

In the year ended December 31, 2025, the Company made payments totaling $0.2 million pursuant to this commitment.

Consideration for the Event Risk Acquisition on February 27, 2026 consisted of (i) a $5.0 million cash payment at closing, (ii) repayment of Event Risk’s outstanding indebtedness of $1.1 million, (iii) the issuance of 1,724,418 shares of the

Company’s Class A common stock, and (iv) $4.0 million of deferred cash payments, payable in quarterly installments through December 31, 2028 subject to the purchase agreement.

The purchase agreement also provides for contingent future cash and equity consideration based on post-closing performance, including a 2026 earn-out, revenue-based cash payments for 2027 through 2031, and potential additional equity issuances, each subject to specified thresholds and caps.

In addition, management believes the acquisition materially strengthens the Company’s liquidity profile by adding a business that is expected to be free cash flow generating and contributive to operating cash flow.

The Company expects to fund its acquisition-related obligations through cash on hand, cash generated from operations and, if appropriate, additional financing.

While no assurance can be given that additional financing will be available on acceptable terms, management believes the Event Risk acquisition improves the Company’s path toward stronger cash generation, enhances overall capital efficiency, and supports the Company’s broader strategy to improve liquidity and capital resources over time.

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

(in thousands)

Net cash used in operating activities

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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, sell and service ECDs, the amount and timing of accounts receivable collections, as well as the amount and timing of disbursements to our vendors.

Net cash used in operating activities for the year ended December 31, 2024 decreased by $1.7 million to $22.5 million, compared to $24.2 million for the year ended December 31, 2023.

The change in fair value of warrant and derivative liabilities accounted for a decrease in cash used in operating activities of $6.4 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023.

Changes in operating assets and liabilities, net of $5.3 million, also contributed to the decrease in cash used in operating activities for the year ended December 31, 2024 compared to the prior year.

These decreases were partially offset by an increase in net loss of $9.6 million, a decrease in stock compensation expense of $1.0 million and an increase in the loss on disposal of ASR of $1.2 million in 2024 compared to the prior year.

Net cash used in operating activities for the year ended December 31, 2025 increased by $7.9 million to $30.3 million, compared to $22.5 million for the year ended December 31, 2024.

The change in fair value of warrant and derivative liabilities accounted for an increase in cash used in operating activities of $1.5 million for the year ended December 31, 2025 as compared to the year ended December 31, 2024.

Changes in operating assets and liabilities, net of $3.7 million, also contributed to the increase in cash used in operating activities for the year ended December 31, 2025 compared to the prior year.

In addition, an increase in net loss of $2.1 million, a decrease in stock compensation expense of $0.2 million and a decrease in the loss on disposal of ASR of $0.2 million in 2025 contributed to this increase in cash used in operating activities.

Net Cash Used in Investing Activities

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Net cash used in investing activities for the year ended December 31, 2025 was $2.5 million compared to $3.2 million for the year ended December 31, 2024, a decrease of $0.7 million.

The decrease was primarily a result of lower investments in ASRs and equipment of $1.5 million.

The decrease was primarily a result of lower investments in ASRs of $1.2 million, partially offset by $0.6 million in additional purchases of property and equipment in 2025 for the new, larger headquarters.

Net Cash Provided by Financing Activities

Net cash provided by financing activities was approximately $34.5 million for the year ended December 31, 2024, an increase of approximately $7.6 million as compared to the prior year.

Our financing activities for the year ended December 31, 2024, consisted primarily of the issuance and sale of shares of Class A Common Stock pursuant to our at-the-market offering program for net proceeds of approximately $22.7 million, net proceeds from issuance of common stock and pre-funded warrants of approximately $10.8 million and net proceeds from the issuance of Regulation A bonds of approximately $2.6 million, partially offset by a $1.6 million repayment of debt obligations.

Our financing activities for the year ended December 31, 2023, consisted primarily of the issuance and sale of shares of Class A Common Stock for net proceeds of approximately $25.9 million, net proceeds from the issuance of Regulation A bonds of approximately $1.2 million, and Class A Common Stock issued as a result of option exercises of approximately $0.3 million, partially offset by a note repayment of approximately $0.6 million.

Net cash provided by financing activities was $42.2 million for the year ended December 31, 2025, an increase of $7.7 million as compared to the prior year.

Our financing activities for the year ended December 31, 2025, consisted primarily of the issuance and sale of shares of Class A Common Stock pursuant to our at-the-market offering program for net proceeds of $42.8 million, net proceeds from our direct registration offering of $1.4 million, partially offset by a $2.1 million repayment of debt obligations.

Our financing activities for the year ended December 31, 2024, consisted primarily of the issuance and

sale of shares of Class A Common Stock for net proceeds of $22.7 million, net proceeds for the issuance of common stock and pre-funded warrants sold for cash of $10.8 million and net proceeds from the issuance of Regulation A bonds of $2.6 million, partially offset by a note repayment of $1.6 million.

At-the-Market Offering Program

In February 2023, we commenced an at-the-market offering program with H.C.

Wainwright & Co., LLC, 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, our 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.

On November 14, 2024, after our non-affiliated public float subsequently rose to an amount greater than $75.0 million, we filed a new prospectus supplement (the “November 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, in addition to the shares of Class A common stock previously sold, subject to, and in accordance with, SEC rules .

For the year ended December 31, 2024, we issued 1,716,419 shares of Class A Common Stock under the at-the-market offering program for net proceeds of approximately $22.7 million, net of brokerage and placement fees of approximately $0.9 million.

On February 1, 2023, we entered into an At-the-Market Agreement with H.C.

Wainwright & Co., LLC (“Wainwright”), pursuant to which we may offer and sell from time-to-time shares of Class A Common Stock through or to Wainwright acting as sales agent or principal (the “ATM Facility”).

On April 4, 2025, we filed a new shelf registration statement on Form S-3, pursuant to which we may, from time to time in one or more offerings, offer and sell up to $100.0 million in the aggregate of Class A common stock, preferred stock, debt securities, warrants and/or units, in any combination.

The new shelf registration statement was declared effective on April 11, 2025.

On July 18, 2025, we filed a new prospectus supplement for additional sales under the ATM Facility of up to $50.0 million of shares of Class A Common Stock.

As of March 25, 2026, we have approximately $21.7 million remaining to be sold pursuant to the new prospectus supplement and the accompanying prospectus related to the ATM Facility.

During the year ended December 31, 2025, the Company issued 6,877,113 shares of Class A Common Stock under the ATM offering program for net proceeds of approximately $42.8 million, net of brokerage and placement fees of approximately $1.2 million.

November 2024 Public Offering

On November 21, 2024, Knightscope announced the pricing of a public offering of Class A Common Stock and pre-funded warrants, projected to generate gross proceeds of approximately $12.1 million.

The offering, conducted under an effective shelf registration statement previously filed with the SEC, closed on November 25, 2024.

The pre-funded warrants were immediately exercisable at a nominal price of $0.001 per share and remained exercisable until fully utilized.

As of February 11, 2025,

the pre-funded warrants were fully exercised.

On November 25, 2024, the Company closed the public offering of its Class A Common Stock and pre-funded warrants for total gross proceeds of $12.1 million.

The offering was conducted under an effective shelf registration statement previously filed with the SEC and was comprised of the sale of 393,659 shares of Class A Common Stock and pre-funded warrants to purchase 816,341 shares of Class A Common Stock, at a public offering price of $10.00 per share and $9.999 per pre-funded warrant, respectively, before underwriting discounts and commissions.

The pre-funded warrants were immediately exercisable at a nominal price of $0.001 per share and as of February 11, 2025, the pre-funded warrants were fully exercised.

These underwriter warrants are exercisable at a price of $18.29 per share.

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.

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

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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).

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.

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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 March 31, 2025, approximately $0.9 million of the note is outstanding.

Share Increase Amendment

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.

As of June 30, 2025, this note was paid in full.

Public Safety Infrastructure Bonds

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Overall, we issued Bonds totaling a principal amount of approximately $4.3 million, in aggregate, generating net proceeds to the Company of approximately $3.9 million, net of issuance costs of approximately $0.4 million during the life of the offering.

Contractual Obligations and Commitments

As of December 31, 2025, the Company had approximately $4.6 million in future minimum operating lease commitments, primarily related to its corporate headquarters lease in Sunnyvale, California, which extends through June 2030.

The Company expects to fund these commitments through cash on hand and operating cash flows.

See Note 9 "Commitments and Contingencies" of the notes to our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for more information.

Recent Accounting Pronouncements

See Note 1 "The Company and Summary of Significant Accounting Policies" of the notes to our financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted, if applicable.

Quantitative and Qualitative Disclosures About Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis