Knightscope, Inc. 10-K

Item 8. Financial Statements and Supplementary Data ​ ​ 47 Table of Contents KNIGHTSCOPE, INC. INDEX TO FINANCIAL STATEMENTS ​ ​ ​ Page Reports of Independent Registered Public Accounting Firm (PCAOB ID: 207 ) F-2 Balance sheets as of December 31, 2023 and 2022 ​ F-3 Statements of Operations for the Fiscal Years Ended December 31, 2023 and 2022 ​ F-4 Statements of Preferred Stock and Stockholders’ Deficit for the Fiscal Years Ended December 31, 2023 and 2022 ​ F-5 Statements of Cash Flows for the Fiscal Years Ended December 31, 2023 and 2022 ​ F-6 Notes to Financial Statements ​ F-7 ​ ​ ​ F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Knightscope, Inc. Opinion on the Financial Statements We have audited the accompanying balance sheets of Knightscope, Inc. (a Delaware corporation) (the “Company”) as of December 31, 2023 and 2022, and the related statements of operations, preferred stock and stockholders’ deficit, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the USA. Substantial Doubt about the Company’s Ability to Continue as a Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company’s recurring losses from operations, available cash and cash used in operations raise substantial doubt about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ BPM LLP We have served as the Company’s auditor since 2020. San Jose, California April 1, 2024 ​ F-2 Table of Contents KNIGHTSCOPE, INC. BALANCE SHEETS (In thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 ASSETS ​ ​ ​ ​ ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 2,282 ​ $ 4,810 Restricted cash ​ 100 ​ — Accounts receivable, net of allowance for credit losses ​ 2,090 ​ 1,370 Inventory ​ ​ 2,320 ​ ​ 2,560 Prepaid expenses and other current assets ​ 1,421 ​ 1,349 Total current assets ​ 8,213 ​ 10,089 Autonomous Security Robots, net ​ 8,845 ​ 5,850 Property, equipment and software, net ​ 857 ​ 614 Operating lease right-of-use-assets ​ 1,458 ​ 2,012 Goodwill ​ ​ 1,922 ​ ​ 1,344 Intangible assets, net ​ ​ 1,557 ​ ​ 2,056 Other assets ​ 122 ​ 117 Total assets ​ $ 22,974 ​ $ 22,082 ​ ​ ​ ​ ​ ​ ​ LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT ​ ​ Current liabilities: ​ ​ Accounts payable ​ $ 1,858 ​ $ 2,457 Accrued expenses ​ 1,145 ​ 2,403 Deferred revenue ​ 1,741 ​ 1,711 Debt obligations ​ — ​ 2,144 Operating lease liabilities, current ​ 733 ​ 731 Other current liabilities ​ 1,469 ​ 1,063 Total current liabilities ​ 6,946 ​ 10,509 Debt obligations ​ 1,242 ​ 6,554 Preferred stock warrant liability ​ 5,976 ​ 10,011 Derivative liability ​ ​ 271 ​ ​ 1,146 Other noncurrent liabilities ​ ​ 259 ​ ​ 356 Operating lease liabilities, noncurrent ​ 711 ​ 1,309 Total liabilities ​ 15,405 ​ 29,885 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies (Note 11) ​ ​ ​ ​ ​ ​ ​ ​ ​ Preferred Stock, $ 0.001 par value; 43,405,324 shares authorized as of December 31, 2023 and 2022, 9,499,083 and 11,351,841 shares issued and outstanding at December 31, 2023 and 2022, respectively; aggregate liquidation preference of $ 35,361 and $ 37,733 as of December 31, 2023 and 2022, respectively ​ 34,203 ​ 35,783 ​ ​ ​ ​ ​ ​ ​ Stockholders’ deficit: ​ ​ Class A Common Stock, $ 0.001 par, 114,000,000 shares authorized as of December 31, 2023 and 2022, 80,188,600 and 28,029,238 shares issued and outstanding as of December 31, 2023 and 2022, respectively ​ 80 ​ 28 Class B Common Stock, $ 0.001 par, 30,000,000 shares authorized as of December 31, 2023 and 2022, 9,357,822 and 10,319,884 shares issued and outstanding as of December 31, 2023 and 2022, respectively ​ 9 ​ 10 Additional paid-in capital ​ 134,735 ​ 95,716 Accumulated deficit ​ ( 161,458 ) ​ ( 139,340 ) Total stockholders’ deficit ​ ( 26,634 ) ​ ( 43,586 ) Total liabilities, preferred stock and stockholders’ deficit ​ $ 22,974 ​ $ 22,082 ​ See accompanying Notes to Financial Statements. ​ F-3 Table of Contents KNIGHTSCOPE, INC. STATEMENTS OF OPERATIONS (In thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2023 2022 Revenue, net ​ ​ ​ ​ ​ ​ Service ​ $ 7,169 ​ $ 5,162 Product ​ ​ 5,628 ​ ​ 469 Total revenue, net ​ ​ 12,797 ​ ​ 5,631 Cost of revenue, net ​ ​ ​ ​ ​ Service ​ ​ 9,874 ​ ​ 8,804 Product ​ ​ 4,947 ​ ​ 146 Total cost of revenue, net ​ ​ 14,821 ​ ​ 8,950 Gross loss ​ ​ ( 2,024 ) ​ ​ ( 3,319 ) ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ Research and development ​ 6,351 ​ 8,449 Sales and marketing ​ 5,179 ​ 8,500 General and administrative ​ 12,585 ​ 11,700 Restructuring Charges ​ ​ 149 ​ ​ — Total operating expenses ​ 24,264 ​ 28,649 ​ ​ ​ ​ ​ ​ ​ Loss from operations ​ ( 26,288 ) ​ ( 31,968 ) ​ ​ ​ ​ ​ ​ ​ Other income: ​ ​ ​ ​ Interest expense, net ​ ( 551 ) ​ ( 9,235 ) Change in fair value of warrant and derivative liability ​ 4,910 ​ 20,857 Change in fair value of convertible note ​ ​ — ​ ​ ( 4,650 ) Other expense, net ​ ( 189 ) ​ ( 647 ) Total other income ​ 4,170 ​ 6,325 ​ ​ ​ ​ ​ ​ ​ Loss before income tax expense ​ ( 22,118 ) ​ ( 25,643 ) Income tax expense ​ — ​ — Net loss ​ $ ( 22,118 ) ​ $ ( 25,643 ) Basic and diluted net loss per share of Class A and Class B Common Stock ​ $ ( 0.34 ) ​ $ ( 0.72 ) Weighted average shares used to compute basic and diluted net loss per share ​ 65,933,820 ​ 35,551,120 ​ See accompanying Notes to Financial Statements. ​ F-4 Table of Contents KNIGHTSCOPE, INC. STATEMENTS OF PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT (In thousands except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Series m ​ Series m-1 ​ Series m-2 ​ ​ ​ ​ ​ ​ Series m-4 ​ ​ ​ ​ ​ ​ Series A ​ Series B ​ Class A ​ Class B ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Preferred ​ Preferred ​ Preferred ​ Series m-3 ​ Preferred ​ Series S ​ Preferred ​ Preferred ​ Common ​ Common ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ Stock ​ Stock ​ Stock ​ Preferred Stock ​ Stock ​ Preferred Stock ​ Stock ​ Stock ​ Stock ​ Stock ​ Additional ​ Accumulative ​ Stockholders’ ​ ​ Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Paid-in-capital Deficit Deficit ​ Balance as of January 1, 2022 ​ 4,574,917 ​ $ 11,881 ​ 186,872 ​ $ 1,319 ​ 1,251,666 ​ $ 3,755 ​ 16,757 ​ $ 46 ​ ​ — ​ $ — ​ 3,705,239 ​ $ 29,995 ​ 6,155,564 ​ $ 2,663 ​ 3,726,092 ​ $ 7,559 ​ 5,936,929 ​ $ 6 ​ 13,131,197 ​ $ 13 ​ ​ 30,745 ​ $ ( 113,697 ) ​ $ ( 82,933 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock based compensation ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 3,539 ​ ​ ​ ​ ​ 3,539 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Warrants exercised ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 156,483 ​ ​ ​ ​ ​ ​ ​ 370 ​ ​ ​ ​ ​ 370 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Conversion of debt obligations to Class A Common Stock ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 6,513,385 ​ ​ 7 ​ ​ ​ ​ ​ ​ ​ 16,004 ​ ​ ​ ​ ​ 16,011 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock options exercised ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 370,235 ​ ​ ​ ​ 25,000 ​ ​ ​ ​ ​ 551 ​ ​ ​ ​ ​ 551 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Offering proceeds, net of issuance costs ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,236,619 ​ 2 ​ ​ ​ ​ ​ ​ 19,623 ​ ​ ​ ​ ​ 19,625 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Proceeds from equity sale, net of issuance costs ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,307,950 ​ ​ 1 ​ ​ ​ ​ ​ ​ ​ 2,878 ​ ​ ​ ​ ​ 2,879 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shares issued for consulting services ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 236,567 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 653 ​ ​ ​ ​ ​ 653 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share conversion to Class A Common Stock ​ ( 2,719,589 ) ​ ​ ( 7,063 ) ​ ( 186,872 ) ​ ​ ( 1,319 ) ​ ( 1,091,666 ) ​ ​ ( 3,275 ) ​ ( 16,757 ) ​ ​ ( 46 ) ​ ​ ​ ​ ​ ​ ​ ( 990,507 ) ​ ​ ( 8,018 ) ​ ( 3,069,404 ) ​ ​ ( 1,328 ) ​ ( 190,471 ) ​ ​ ( 386 ) ​ 11,271,070 ​ ​ 12 ​ ( 2,836,313 ) ​ ​ ( 3 ) ​ ​ 21,427 ​ ​ ​ ​ ​ 21,436 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share conversion costs ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 74 ) ​ ​ ​ ​ ​ ( 74 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 25,643 ) ​ ​ ( 25,643 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of December 31, 2022 1,855,328 ​ ​ 4,818 — ​ ​ — 160,000 ​ ​ 480 — ​ ​ — ​ — ​ ​ — 2,714,732 ​ ​ 21,977 3,086,160 ​ ​ 1,335 3,535,621 ​ ​ 7,173 28,029,238 ​ ​ 28 10,319,884 ​ ​ 10 ​ ​ 95,716 ​ ​ ( 139,340 ) ​ ​ ( 43,586 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock based compensation ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2,726 ​ ​ ​ ​ ​ 2,726 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Conversion of debt obligations to Class A Common Stock ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 10,432,428 ​ ​ 11 ​ ​ ​ ​ ​ ​ ​ 8,581 ​ ​ ​ ​ ​ 8,592 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock options exercised ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 213,020 ​ ​ ​ ​ 238,000 ​ ​ ​ ​ ​ 263 ​ ​ ​ ​ ​ 263 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Proceeds from equity sale, net of issuance costs ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 38,403,353 ​ ​ 38 ​ ​ ​ ​ ​ ​ ​ 25,880 ​ ​ ​ ​ ​ 25,918 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share conversion to Class A Common Stock ​ ( 75,675 ) ​ ​ ( 197 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 72,542 ) ​ ​ ( 587 ) ​ ( 1,667,779 ) ​ ​ ( 721 ) ​ ( 36,762 ) ​ ​ ( 75 ) ​ 3,110,561 ​ ​ 3 ​ ( 1,200,062 ) ​ ​ ( 1 ) ​ ​ 1,578 ​ ​ ​ ​ ​ 1,580 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Share conversion costs ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 9 ) ​ ​ ​ ​ ​ ( 9 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ( 22,118 ) ​ ​ ( 22,118 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of December 31, 2023 ​ 1,779,653 ​ $ 4,621 ​ — ​ $ — ​ 160,000 ​ $ 480 ​ — ​ $ — ​ ​ — ​ $ — ​ 2,642,190 ​ $ 21,390 ​ 1,418,381 ​ $ 614 ​ 3,498,859 ​ $ 7,098 ​ 80,188,600 ​ $ 80 ​ 9,357,822 ​ $ 9 ​ $ 134,735 ​ $ ( 161,458 ) ​ $ ( 26,634 ) ​ ​ See accompanying Notes to Financial Statements. ​ ​ F-5 Table of Contents KNIGHTSCOPE, INC. STATEMENTS OF CASH FLOWS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ 2023 2022 Cash Flows From Operating Activities ​ ​ ​ ​ ​ ​ Net loss $ ( 22,118 ) $ ( 25,643 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ Depreciation and amortization ​ 2,364 ​ 1,710 Stock compensation expense ​ 2,726 ​ 3,539 Change in fair value of warrant and derivative liability ​ ( 4,910 ) ​ ( 20,857 ) Change in fair value of convertible note ​ — ​ 4,650 Amortization of debt discount ​ 5 ​ 8,878 Loss from damage of Autonomous Security Robots ​ 19 ​ — Common stock issued in exchange for consulting services ​ ​ 385 ​ ​ 267 Non-cash interest ​ ​ 454 ​ ​ 343 Changes in operating assets and liabilities: ​ ​ ​ ​ Accounts receivable ​ ( 720 ) ​ 181 Inventory ​ ​ 240 ​ ​ ( 41 ) Prepaid expenses and other current assets ​ ( 457 ) ​ 361 Other assets ​ ( 5 ) ​ ( 11 ) Accounts payable ​ ( 599 ) ​ 944 Accrued expenses ​ ( 1,258 ) ​ 1,213 Deferred revenue ​ ( 548 ) ​ 607 Other current and noncurrent liabilities ​ 267 ​ ( 205 ) Net cash used in operating activities ​ ( 24,155 ) ​ ( 24,064 ) ​ ​ ​ ​ ​ ​ ​ Cash Flows From Investing Activities ​ ​ Acquisition of business, net of cash acquired ​ ​ — ​ ​ ( 5,421 ) Purchase of Autonomous Security Robots ​ ( 4,665 ) ​ ( 4,399 ) Purchase of property and equipment ​ ( 457 ) ​ ( 111 ) Net cash used in investing activities ​ ( 5,122 ) ​ ( 9,931 ) ​ ​ ​ ​ ​ ​ ​ Cash Flows From Financing Activities ​ ​ Proceeds from stock options exercise ​ 263 ​ 551 Proceeds from issuance of REG A Bonds, net of issuance costs ​ 1,237 ​ — Proceeds for the issuance of convertible notes, net of issuance costs ​ — ​ 3,157 Offering proceeds, net of issuance costs ​ — ​ 19,625 Proceeds from issuance of warrants, net of issuance costs ​ — ​ 1,818 Proceeds from equity sale, net of issuance costs ​ ​ 25,918 ​ ​ 2,879 Net repayments from financing obligations ​ ​ ( 560 ) ​ ​ — Share conversion costs ​ ​ ( 9 ) ​ ​ ( 74 ) Net cash provided by financing activities ​ 26,849 ​ 27,956 Net change in cash and cash equivalents ​ ( 2,428 ) ​ ( 6,039 ) Cash, cash equivalents and restricted cash at beginning of year ​ 4,810 ​ 10,849 Cash, cash equivalents and restricted cash at end of year ​ $ 2,382 ​ $ 4,810 ​ ​ ​ ​ ​ ​ ​ Supplemental Disclosure of Non-Cash Financing and Investing Activities ​ ​ Goodwill adjustment ​ $ 578 ​ $ — Cashless exercise of warrants for preferred stock ​ $ — ​ $ 370 Conversion of preferred stock to common stock ​ $ 1,580 ​ $ 21,436 Conversion of debt obligations to Class A Common Stock ​ $ 8,592 ​ $ 16,011 Fair value of shares issued for consulting services ​ $ — ​ $ 386 Operating lease liabilities arising from obtaining right of use asset ​ $ 134 ​ $ — Holdback liability for acquisition of business included in accrued liabilities ​ $ — ​ $ 232 ​ See accompanying Notes to Financial Statements. ​ F-6 Table of Contents NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 (Dollars in thousands, unless otherwise stated) NOTE 1: The Company and Summary of Significant Accounting Policies Description of Business Knightscope, Inc., was incorporated on April 4, 2013 under the laws of the State of Delaware. Knightscope, Inc. (the “Company”) is a public safety advanced technology company that builds fully autonomous security robots and blue light emergency communications systems. The Company’s mission is to make the USA the safest country in the world by helping to protect the people, places, and assets where we live, work, study and visit. To support this mission, the Company designs, develops, manufactures, markets, deploys, and supports Autonomous Security Robots (“ASRs”), autonomous charging stations, the proprietary Knightscope Security Operations Center (“KSOC”) software user interface, Emergency Communication Devices (“ECDs” which include, its newly released Knightscope Emergency Management System (“KEMS”) platform. Basis of Presentation and Liquidity These financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Since its inception, the Company has incurred significant operating losses and negative cash flows from operations which is principally the result of scaling the business and research and development activities related to the development, continued improvement, and deployment of the Company’s ASRs (hardware and software). The financial statements of the Company have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business. Cash and cash equivalents on hand were $ 2.3 million as of December 31, 2023, compared to $ 4.8 million as of December 31, 2022. The Company has historically incurred losses and negative cashflows from operations. As of December 31, 2023, the Company also had an accumulated deficit of $ 161.5 million, working capital of $ 1.3 million and stockholders’ deficit of $ 26.6 million. The Company is dependent on additional fundraising in order to sustain its ongoing operations. Based on current operating levels, the Company will need to raise additional funds in the next twelve months by selling additional equity or incurring debt. These factors raise substantial doubt about the Company’s ability to continue as a going concern for the twelve months from the date of this report. F-7 Table of Contents In connection with its listing on the Nasdaq Global Market on January 27, 2022, the Company completed its Regulation A Offering on January 26, 2022, issuing 2,236,619 shares of Class A Common Stock and generating net proceeds of approximately $ 20.2 million. Following the Company’s listing on Nasdaq on January 27, 2022, in April 2022, Knightscope established a $ 100 million committed equity facility with B. Riley Principal Capital, LLC, enabling the Company to access capital in its discretion, as required, subject to market conditions. After the Class A Common Stock had been listed for a year, the Company filed a registration statement for up to $ 20 million for an at-the-market offering agreement on February 1, 2023 with H.C. Wainwright & Co., LLC. In August 2023, the Company filed a new prospectus supplement providing for the offering 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. This facility provides the Company with additional access to capital, as needed, subject to market conditions. On September 29, 2023, the Company filed an Offering Circular (the “Offering Circular”) for the issuance of up to $ 10.0 million in Public Safety Infrastructure Bonds pursuant to Regulation A of the Securities Act of 1933, as amended. The Offering Circular was qualified with the SEC on October 2, 2023. The Company’s projected cash flows are subject to various risks and uncertainties, and the unavailability or inadequacy of financing to meet future capital needs could force it to modify, curtail, delay, or suspend some or all aspects of its planned operations or discontinue operations completely. 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 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. As a result, the substantial doubt about the Company’s ability to continue as a going concern has not been alleviated. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Segments The Company has one operating segment and one reportable segment as its chief operating decision maker, who is its Chief Executive Officer, reviews financial information on a basis for purposes of allocating resources and evaluating financial performance. All long-lived assets are located in the USA and substantially all revenue is attributed to sellers and buyers based in the USA. Comprehensive Loss Comprehensive loss is defined as the change in the equity of a business during a period from transactions and other events and circumstances from non-owner sources. Comprehensive loss was equal to net loss for years ended December 31, 2023 and 2022. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Specific accounts that require management estimates include, but are not limited to, estimating the useful lives of the Company’s ASRs, property and equipment and intangible assets, certain estimates required within revenue recognition, warranty and allowance for credit losses, determination of deferred tax valuation allowances, estimating fair values of the Company’s share-based awards, warrant liability, and derivative liabilities, inclusive of any contingent assets and liabilities. Actual results could differ from those estimates and such differences may be material to the financial statements. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The Company places its cash and cash equivalents in highly liquid instruments with, and in the custody of, financial institutions with high credit ratings. Restricted Cash The Company has restricted cash as collateral for the Company’s corporate credit card program. As of December 31, 2023 and 2022, the carrying value of restricted cash was $ 0.1 and $ 0 million, respectively. F-8 Table of Contents Concentrations of Credit Risk Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents, restricted cash, and accounts receivable. The Company monitors the credit exposure of its cash, cash equivalents, and restricted cash balances by reviewing the credit worthiness of the financial institutions in which it holds its cash. Such reviews may result in the Company moving its cash to banks with more solid balance sheets. Cash, cash equivalents, and restricted cash deposits with financial institutions may occasionally exceed the limits of insurance on bank deposits; however, the Company has not experienced any losses on such accounts. As of December 31, 2023 and 2022, the Company had cash, cash equivalent, and restricted cash balances exceeding Federal Deposit Insurance Corporation (“FDIC”) insured limits by $ 2.1 million and $ 4.6 million, respectively. The Company intends to monitor the stability of the financial institutions in which it keeps its liquid funds in order to mitigate against the exposure to loss of funds and delays in accessing cash. The Company extends credit to clients in the normal course of business and performs ongoing credit evaluations of its clients. Concentrations of credit risk with respect to accounts receivable exist to the full extent of amounts presented in the financial statements. The Company does not require collateral from its clients to secure accounts receivable. Accounts receivable was derived from the leasing of proprietary ASRs along with access to browser-based interface KSOC as well as the sale of ECDs. The Company reviews its receivables for collectibility based on historical loss patterns, aging of the receivables, and assessments of specific identifiable client accounts considered at risk or uncollectible and provides allowances for potential credit losses, as needed. The Company also considers any changes to the financial condition of its clients and any other external market factors that could impact the collectibility of the receivables in the determination of the allowance for credit losses. Based on these assessments, the Company recorded an immaterial allowance for credit losses on its accounts receivable as of December 31, 2023 compared to an allowance of $ 0.2 million on its accounts receivable balance as of December 31, 2022. As of December 31, 2023, the Company had one client whose accounts receivable balance, including unbilled amounts, totaled 10% or more of the Company’s total accounts receivable ( 34 %) compared with three such clients as of December 31, 2022 ( 13 %, 12 % and 12 %). For the year ended December 31, 2023, the Company had two client who individually accounted for 10% or more of the Company’s total revenue, net ( 10 %) compared with no clients accounting for 10% or more of total revenue for the year ended December 31, 2022. Inventory 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 written off. 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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 Raw materials ​ $ 2,112 ​ $ 2,032 Work in process ​ 82 ​ — Finished goods ​ 126 ​ 528 ​ ​ $ 2,320 ​ $ 2,560 ​ F-9 Table of Contents Prepaid expenses and other current assets Prepaid and other current assets is comprised of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 Prepaid inventory ​ $ 123 ​ $ 66 Prepaid expense ​ 488 ​ 901 Other receivables ​ 362 ​ — Research and development tax credit ​ 376 ​ 376 Other current assets ​ 72 ​ 6 ​ ​ $ 1,421 ​ $ 1,349 ​ Autonomous Security Robots, net (“ ASRs”) 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. 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 included in research and development expense amounted to $ 8 and $ 66 , depreciation expense of finished ASRs included in sales and marketing expense amounted to $ 15 and $ 46 , and depreciation expense included in cost of revenue, net amounted to $ 1.6 million and $ 1.4 million for the years ended December 31, 2023 and 2022, respectively. ASRs, net, consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 Raw materials ​ $ 3,841 ​ $ 2,732 ASRs in progress ​ 1,575 ​ 773 Finished ASRs ​ 12,130 ​ 10,198 ​ ​ 17,546 ​ 13,703 Accumulated depreciation on Finished ASRs ​ ( 8,701 ) ​ ( 7,853 ) ASRs, net ​ $ 8,845 ​ $ 5,850 ​ The components of the Finished ASRs, net, are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 ASRs on lease or available for lease ​ $ 10,804 ​ $ 9,002 Demonstration ASRs ​ 607 ​ ​ 622 Research and development ASRs ​ 194 ​ ​ 194 Charge boxes ​ ​ 525 ​ ​ 380 ​ ​ 12,130 ​ ​ 10,198 Less: accumulated depreciation ​ ( 8,701 ) ​ ​ ( 7,853 ) Finished ASRs, net ​ $ 3,429 ​ $ 2,345 ​ F-10 Table of Contents Property, Equipment and Software, net Property, equipment and software, net is stated at cost less accumulated depreciation and amortization and is depreciated using the straight-line method over the estimated useful lives of the assets. Computer equipment, software and furniture, fixtures and equipment are depreciated over useful lives ranging from three to five years , and leasehold improvements are depreciated over the respective lease term or useful lives, whichever is shorter. Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the balance sheets and any resulting gain or loss is reflected in the statements of operations in the period realized. Property, equipment, and software, net as of December 31, 2023 and 2022 were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ December 31 ​ ​ 2023 2022 Computer equipment ​ $ 258 ​ $ 258 Software ​ 8 ​ 8 Furniture, fixtures and equipment ​ 1,245 ​ 788 Leasehold improvements ​ 46 ​ 46 ​ ​ 1,557 ​ 1,100 Accumulated depreciation and amortization ​ ( 700 ) ​ ( 486 ) Property, equipment and software, net ​ $ 857 ​ $ 614 ​ Depreciation and amortization expense on property, equipment and software included in research and development expenses amounted to $ 27 and $ 47 , for cost of revenue, net amounted to $ 173 and $ 29 , and for sales and marketing amounted to $ 8 and $ 0 for the years ended December 31, 2023 and 2022, respectively. Depreciation and amortization expense relating to general and administrative expenses was insignificant for all periods presented. Business Acquisitions The Company performs valuations of assets acquired and liabilities assumed for acquisitions and allocates the purchase price to its respective net tangible and intangible assets, and liabilities based on their estimated fair values. Any residual purchase price is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenue and cash flows, discount rates and selection of comparable companies. During the measurement period, the Company may record certain adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. After the measurement period, which could be up to one year after the transaction date, all adjustments are recorded to the Company’s statements of operations. During the quarter ended June 30, 2023, the Company became aware of an error in the calculation of deferred revenue and goodwill associated with the CASE Emergency Systems acquisition in October of 2022. The error resulted in an understatement of acquired deferred revenue and goodwill in the amount of $ 578 . As such, the June 30, 2023 condensed balance sheet has been adjusted to increase goodwill and deferred revenue by $ 578 . Based on an analysis of Staff Accounting Bulletin 108, “Quantifying Misstatements” and Staff Accounting Bulletin 99, “Materiality,” the Company has determined that these errors were immaterial to the previously issued audited financial statements for the year ended December 31, 2022 and the unaudited condensed financial statements for the quarters ended March 31, 2023 and June 30, 2023. F-11 Table of Contents Goodwill and Acquired Intangible Assets The Company records goodwill when the consideration paid in a purchase acquisition exceeds the fair value of the net tangible assets and the identified intangible assets acquired. Goodwill is not amortized, but rather is tested for impairment. The Company performs testing for impairment of goodwill annually, at the end of the year, or as events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. The Company tests goodwill for impairment at the reporting unit level using a two-step approach. In step one, the Company determines if the fair value of the reporting unit exceeds the unit’s carrying value. If step one indicates that the fair value of the reporting unit is less than its carrying value, the Company performs step two, determining the fair value of goodwill and, if the carrying value of goodwill exceeds the implied fair value, recording an impairment charge. The Company has determined that there is a single reporting unit for the purpose of goodwill impairment tests. Since inception through December 31, 2023, the Company did not have any goodwill impairment. Acquired intangible assets consist of identifiable intangible assets, primarily developed technology, trademark and customer relationships. These intangible assets have been determined to have definite lives and are carried at cost, less accumulated amortization. The Company amortizes the intangible assets with finite lives using the straight-line method over the estimated economic lives of the assets, which is normally one to eight years . The amortization expense for developed technology is recorded in cost of revenues. The amortization expense for the trademark and customer relationships is recorded in sales and marketing expense. Impairment of Long-Lived Assets The Company assesses the impairment of long-lived assets whenever events or changes in circumstances indicate that their carrying value may not be recoverable from the estimated future cash flows expected to result from their use or eventual disposition. If estimates of future undiscounted net cash flows are insufficient to recover the carrying value of the assets, the Company will record an impairment loss in the amount by which the carrying value exceeds the fair value. If the assets are determined to be recoverable, but the useful lives are shorter than originally estimated, the Company will depreciate or amortize the net book value of the assets over the newly determined remaining useful lives. None of the Company’s ASRs, property, equipment and software or intangible assets were determined to be impaired during the year ended December 31, 2023 and 2022. Leases The Company determines if a contract is a lease or contains a lease at the inception of the contract and reassesses that conclusion if the contract is modified. All leases are assessed for classification as an operating lease or a finance lease. Operating lease right-of-use (“ROU”) assets are presented separately on the Company’s balance sheets. The Company does not have any finance lease ROU assets or liabilities. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. The Company does not obtain and control its right to use the identified asset until the lease commencement date. The Company’s lease liabilities are recognized at the applicable lease commencement date based on the present value of the lease payments required to be paid over the lease term. Because the rate implicit in the lease is not readily determinable, the Company generally uses its incremental borrowing rate to discount the lease payments to present value. The estimated incremental borrowing rate is derived from information available at the lease commencement date. The Company factors in publicly available data for instruments with similar characteristics when calculating its incremental borrowing rates. The Company’s ROU assets are also recognized at the applicable lease commencement date. The ROU asset equals the carrying amount of the related lease liability, adjusted for any lease payments made prior to lease commencement and lease incentives provided by the lessor. Variable lease payments are expensed as incurred and do not factor into the measurement of the applicable ROU asset or lease liability. The term of the Company’s leases equals the non-cancellable period of the lease, including any rent-free periods provided by the lessor, and also include options to renew or extend the lease (including by not terminating the lease) that the Company is reasonably certain to exercise. The Company establishes the term of each lease at lease commencement and reassesses that term in subsequent periods when one of the triggering events outlined in Accounting Standards Codification (“ASC”) 842, Leases (“ASC 842”) occurs. Operating lease costs for lease payments is recognized on a straight-line basis over the lease term. F-12 Table of Contents The adjustments due to the adoption of ASC 842 primarily related to the recognition of an operating lease ROU asset and corresponding operating lease liability for the Company’s leased properties. The Company’s operating lease ROU asset and liability were recognized at the adoption date of ASC 842, based on the present value of lease payments over the remaining lease term. In determining the net present value of lease payments, the Company used its borrowing rate of 12.0 % based on the information available, including remaining lease term, at the adoption date of ASC 842. As of December 31, 2023, the Company’s incremental borrowing rate for its real estate operating leases range from 5.25 % to 16 % dependent upon the weighted-average remaining lease term of 1.9 years for the Company’s leased properties. The Company’s lease contracts often include lease and non-lease components. For facility leases, the Company has elected the practical expedient offered by the standard to not separate lease from non-lease components and accounts for them as a single lease component. The Company has elected, for all classes of underlying assets, not to recognize ROU assets and lease liabilities for leases with a term of twelve months or less. Lease costs for short-term leases is recognized on a straight-line basis over the lease term. Other Current Liabilities Other current liabilities consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ 2023 ​ 2022 Sales tax ​ $ 364 ​ $ 419 Customer and vendor deposits ​ 239 ​ 50 Warranty liability ​ 406 ​ 145 Other ​ 460 ​ 449 ​ ​ $ 1,469 ​ $ 1,063 ​ Accrued Warranty The liability for estimated warranty claims is accrued at the time of sale and the expense is recorded in the statements of operations in cost of revenue, net - product. The liability is established using historical warranty claim experience. The current provision may be adjusted to take into account unusual or non-recurring events in the past or anticipated changes in future warranty claims. Adjustments to the warranty accrual are recorded if actual claim experience indicates that adjustments are necessary. Warranty reserves are reviewed to ensure critical assumptions are updated for known events that may impact the potential warranty liability. Change in the warranty liability for the years ended consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2023 2022 Balance January 1, ​ $ 145 ​ $ — Provision for warranties issued during the year ​ 675 ​ 288 Warranty services provided ​ ( 414 ) ​ ( 143 ) ​ ​ $ 406 ​ $ 145 ​ Accrued Expenses Accrued expenses consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ 2023 ​ 2022 Accrued bonuses ​ $ — ​ $ 961 Payroll and payroll taxes ​ 604 ​ 696 Legal, consulting, and financial services ​ 117 ​ 542 Credit cards ​ ​ 244 ​ ​ 188 Other ​ 180 ​ 16 ​ ​ $ 1,145 ​ $ 2,403 F-13 Table of Contents ​ Convertible Preferred Warrant Liability and Common Stock Warrants Freestanding warrants to purchase shares of the Company’s preferred stock are classified as liabilities on the balance sheets at their estimated fair value because the underlying shares of preferred stock are contingently redeemable and, therefore, may obligate the Company to transfer assets at some point in the future. The preferred stock warrants are recorded at fair value upon issuance and are subject to remeasurement to their respective estimated fair values. At the end of each reporting period, changes in the estimated fair value of the preferred stock warrants are recorded in the statements of operation. The Company will continue to adjust the liability associated with the preferred stock warrants for changes in the estimated fair value until the earlier of the exercise or expiration of the preferred stock warrants, the completion of a sale of the Company or an underwritten initial public offering (“IPO”). Upon an IPO, the preferred stock warrants will convert into warrants to purchase common stock and any liabilities recorded for the preferred stock warrants will be reclassified to additional paid-in capital and will no longer be subject to remeasurement. The Company issued common stock warrants in connection with the execution of a certain debt financing during the year ended December 31, 2015. Common stock warrants that are not considered derivative liabilities are accounted for at fair value at the date of issuance in additional paid-in capital. The fair value of these common stock warrants is determined using the Black-Scholes option pricing model. On October 10, 2022, the Company issued common stock warrants in connection with the execution of Convertible Notes (“2022 Convertible Notes”). These warrants are recorded as a derivative liability as it was determined they are not indexed to the Company’s common stock and accounted for at fair value upon issuance. The derivative liability will be marked to market each reporting period with changes in fair value recorded in change in fair value of warrant and derivative liability on the statements of operations. 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. The Company determines revenue recognition through the following steps: ● identification of the contract, or contracts, with a client; ● identification of the performance obligations in the contract; ● determination of the transaction price; ● allocation of the transaction price to the performance obligations in the contract; and ● recognition of revenue when, or as, the Company satisfies a performance obligation. F-14 Table of Contents The Company recognizes ASR subscription revenue as follows: ASR subscription revenue is generated from lease of proprietary ASRs along with access to the browser-based interface KSOC through contracts that typically have 12-month terms. These revenue arrangements adhere to lease accounting guidance and are classified as leases for revenue recognition purposes. Currently, all revenue arrangements qualify as operating leases where consideration allocated to the lease deliverables is recognized ratably over the lease term. Deferred revenue In connection with the Company’s MaaS subscription for the Company’s ASRs, the Company’s standard billing terms are annual in advance. In these situations, the Company records the invoices as deferred revenue and amortizes the subscription amount when the services are delivered, which generally is a 12-month period. In addition, the Company refers certain transactions to Dimension and Balboa Capital, whereby Dimension or Balboa Capital advances the full value of the MaaS subscription to the Company, less a processing fee. The advanced payment is recorded in deferred revenue and amortized over the term of the subscription once the ASR is delivered to the deployment site. The Company derives its revenue from the lease subscription of its proprietary ASRs along with access to its browser and mobile based software interface, KSOC. MaaS subscription agreements typically have a twelve (12)-month term. The Company also records deferred revenue from unfinished contracts for certain ECD related services. Deferred revenue includes billings in excess of revenue recognized. Revenue recognized at a point in time generally does not result in significant increases in deferred revenue. Revenue recognized over a period generally results in a majority of the increases in deferred revenue as the performance obligations are fulfilled after the billing event. Deferred revenue was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 December 31, 2022 Deferred revenue - short term ​ $ 1,741 ​ $ 1,711 Revenue recognized in the year ended related to amounts included in deferred revenue at the beginning of the period ​ $ 1,466 ​ $ 657 ​ Deferred revenue represents amounts invoiced to customers for contracts for which revenue has yet to be recognized based for subscription services to be delivered to the Company’s clients. Typically, the timing of invoicing is based on the terms of the contracts. Customer Deposits Customer deposits primarily relate to sales of ECDs to certain customers dependent upon credit worthiness. The customer deposits are recorded as current liabilities and reclassed to a contra accounts receivable account at the time that the final invoice for the sale is generated following the completion of the revenue recognition criteria. Disaggregation of revenue The Company disaggregates revenue from contracts with customers into the timing of the transfers of goods and services by product line. The following table summarizes revenue by product line and timing of recognition: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31 ​ ​ 2023 ​ 2022 ​ Point in time Over time Total Point in time Over time Total ASRs ​ $ 153 ​ $ 4,036 ​ $ 4,189 ​ $ 77 ​ $ 4,125 ​ $ 4,202 ECDs ​ ​ 8,330 ​ ​ 278 ​ 8,608 ​ ​ 1,370 ​ ​ 59 ​ 1,429 Total ​ $ 8,483 ​ $ 4,314 ​ $ 12,797 ​ $ 1,447 ​ $ 4,184 ​ $ 5,631 ​ F-15 Table of Contents Other revenue, net Other non-ASR service-related revenues such as deployment services, decals and training revenue are recognized when services are delivered. Revenue from these transactions has been immaterial for all periods presented and is included in service revenue, net. Product Revenue, net Product revenue, net includes point of sale transactions related to the ECDs, including product, shipping, and installation. Cost of revenue, net Cost of revenue, net related to services includes depreciation of the ASRs and some ECDs over their useful lives, labor and associated benefits incurred in the production and maintenance of the ASRs, data and communications fees, routine maintenance costs, shipping costs, and other direct costs incurred during assembly and deployment. ECD related cost of revenue, net also consist of all direct materials and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tool, repairs and other expenses. Shipping and Handling Costs The Company classifies certain shipping and handling costs as cost of revenue, net in the accompanying statements of operations. The amounts classified as cost of revenue, net represent shipping and handling costs associated with the deployment or returns of the ASRs directly to or from clients. Management believes that the classification of these shipping and handling costs as cost of revenue, net better reflects the cost of producing the ASRs and selling its services. Shipping and handling costs associated with the transportation of demonstration units shipped to sales personnel and clients are recorded as sales and marketing expenses. The shipping and handling costs recorded within cost of revenue, net totaled approximately $ 275 and $ 153 for the years ended December 31, 2023 and 2022, respectively. Shipping and handling costs recorded within sales and marketing was insignificant for the years ended December 31, 2023 and 2022, respectively. Stock-Based Compensation The Company accounts for stock-based compensation in accordance with ASC 718, Compensation - Stock Compensation , which requires that the estimated fair value on the date of grant be determined using the Black-Scholes option pricing model with the fair value recognized over the requisite service period of the awards, which is generally the option vesting period. The Company’s determination of the fair value of the stock-based awards on the date of grant, using the Black-Scholes option pricing model, is affected by the fair value of the Company’s common stock as well as other assumptions regarding a number of highly complex and subjective variables. These variables include but are not limited to the Company’s expected stock price volatility over the term of the awards, and actual and projected employee option exercise behaviors. Because there is insufficient historical information available to estimate the expected term of the stock-based awards, the Company adopted the simplified method of estimating the expected term of options granted by taking the average of the vesting term and the contractual term of the option. The Company recognizes forfeitures as they occur when calculating stock-based compensation for its equity awards. Research and Development Costs Research and development costs primarily consist of employee-related expenses, including salaries and benefits, share-based compensation expense, facilities costs, depreciation and other allocated expenses. Research and development costs are expensed as incurred. F-16 Table of Contents Advertising Costs Advertising costs are recorded in sales and marketing expense in the Company’s statements of operations as incurred. Advertising expense was $ 1.7 million and $ 5.1 million for the years ended December 31, 2023 and 2022, respectively. Income Taxes The Company uses the liability method of accounting for income taxes as set forth in ASC 740, Income Taxes (“ASC740”). Under the liability method, deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse. The Company measures deferred tax assets and liabilities using tax rates applicable to taxable income in effect for the years in which those tax assets are expected to be realized or settled and provides a valuation allowance against deferred tax assets when it cannot conclude that it is more likely than not that some or all deferred tax assets will be realized. The assessment requires significant judgment and is performed in each of the applicable taxing jurisdictions. Additionally, the Company assesses its uncertain tax positions and records tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances and information available at the reporting date. In accordance with ASC 740-10, for those tax positions where there is a greater than 50% likelihood that a tax benefit will be sustained, the Company’s policy is to record the largest amount of tax benefit that is more likely than not to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit will be recognized in the financial statements. Basic and Diluted Net Loss per Share Net loss per share of Class A and Class B Common Stock is computed using the two-class method required for participating securities based on their participation rights. All series of convertible preferred stock are participating securities as the holders are entitled to participate in common stock dividends with common stock on an as converted basis. Holders of Series m-4 Preferred Stock are entitled to receive cumulative dividends payable semi-annually in arrears at the rate per share of Series m-4 Preferred Stock equal to the Dividend Rate for the Series m-4 Preferred Stock, in each case subject to compliance with applicable law. Dividends to holders of Series m-4 Preferred Stock are paid in kind as a dividend of additional shares of Series m-4 Preferred Stock for each Dividend Period on the applicable Dividend Payment Date using a price per share equal to the original issue price, provided that the Company shall not issue any fractional shares of Series m-4 Preferred Stock. The holders of the Company’s convertible preferred stock, other than Series m-4 Preferred Stock, are also entitled to noncumulative dividends prior and in preference to common stock and do not have a contractual obligation to share in the losses of the Company. In accordance with the two-class method, earnings allocated to these participating securities, which include participation rights in undistributed earnings with common stock, are subtracted from net loss to determine net loss attributable to common stockholders upon their occurrence. F-17 Table of Contents Basic net loss per share of Class A and Class B Common Stock is computed by dividing net loss attributable to common stockholders (adjusted for preferred stock dividends declared or accumulated) by the weighted average number of shares of Class A and Class B Common Stock outstanding during the period. All participating securities are excluded from basic weighted average shares outstanding. In computing diluted net loss attributable to common stockholders, undistributed earnings are re-allocated to reflect the potential impact of dilutive securities. Diluted net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders by diluted weighted average shares outstanding, including potentially dilutive securities, unless anti-dilutive. Potentially dilutive securities that were excluded from the computation of diluted net loss per share consist of the following: ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2023 2022 Series A Preferred Stock (convertible to Class B Common Stock) 1,418,381 3,086,160 Series B Preferred Stock (convertible to Class B Common Stock) 3,498,859 3,535,621 Series m Preferred Stock (convertible to Class A Common Stock) 1,779,653 1,855,328 Series m-2 Preferred Stock (convertible to Class B Common Stock) 160,000 160,000 Series S Preferred Stock (convertible to Class A Common Stock) 2,642,190 2,714,732 Warrants to purchase common stock (convertible to Class A Common Stock) ​ 1,138,446 ​ 1,138,446 Warrants to purchase Series m-3 (convertible to Class A Common Stock) 1,432,786 1,432,786 Warrants to purchase Series s (convertible to Class A Common Stock) 2,941,814 4,441,814 Convertible Notes — 5,189,351 Stock options 10,069,394 10,081,915 Total potentially dilutive shares 25,081,523 33,636,153 ​ As all potentially dilutive securities are anti-dilutive as of December 31, 2023 and 2022, diluted net loss per share of Class A and Class B Common Stock is the same as basic net loss per share for each year. Accounting Pronouncements Adopted in 2023 In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU No. 2016-13”), which requires measurement and recognition of expected credit losses for financial assets held at the reporting date based on internal information, external information, or a combination of both relating to past events, current conditions, and reasonable and supportable forecasts. ASU No. 2016-13 replaces the existing incurred loss impairment model with a forward-looking expected credit loss model, which will result in earlier recognition of credit losses. Subsequent to the issuance of ASU No.2016-13, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815,Derivatives and Hedging, and Topic 825, Financial Instrument, ASU No. 2019-05, Financial Instruments – Credit Losses (Topic 326) Targeted Transition Relief, ASU No. 2016-13, ASU No. 2019-10 Financial Instruments-Credit Losses (Topic326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), and ASU No. 2019-11 Codification Improvements to Topic 326, Financial Instruments-Credit Losses. The subsequent ASUs do not change the core principle of the guidance in ASU No. 2016-13. Instead, these amendments are intended to clarify and improve operability of certain topics included within ASU No. 2016-13. The Company adopted this standard on January 1, 2023, using a modified retrospective approach, which requires accumulative-effect adjustment to accumulated deficit as of the beginning of the period of adoption with prior periods not restated. The adoption of ASU No. 2016-13 did not have a material impact on the Company’s financial statements. Accounting Pronouncements Not Yet Adopted In November 2023, FASB released Accounting Standards Update No. 2023-07, Segment Reporting . The amendment improves financial reporting by requiring disclosure of incremental segment information on an annual and interim basis. It is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Management does not believe the implementation of this pronouncement will have a material impact on the Company’s financial statements. F-18 Table of Contents On December 14, 2023, the FASB issued Accounting Standards Update 2023-09, Income Taxes , which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. Under the new guidance, entities must consistently categorize and provide greater disaggregation of information in the rate reconciliation. The amendment is effective for fiscal years ending after December 15, 2025. Management does not believe the implementation of this pronouncement will have a material impact on the Company’s financial statements. Management has reviewed other recently issued accounting pronouncements issued or proposed by the FASB and does not believe any of these accounting pronouncements has had or will have a material impact on the financial statements. ​ NOTE 2: Fair Value Measurement The Company determines the fair market values of its financial instruments based on the fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The following are three levels of inputs that may be used to measure fair value: ● Level 1 – Quoted prices in active markets for identical assets or liabilities. The Company considers a market to be active when transactions for the asset occur with sufficient frequency and volume to provide pricing information on an ongoing basis. ● Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. ● Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The valuation of Level 3 investments requires the use of significant management judgments or estimation. In certain cases where there is limited activity or less transparency around inputs to valuation, securities are classified as Level 3. Level 3 liabilities that are measured at fair value on a recurring basis consist of the convertible preferred stock warrant liability. The inputs used in estimating the fair value of the warrant liability are described in Note 6 - Capital Stock and Warrants . The following tables summarize, for each category of assets or liabilities carried at fair value, the respective fair value as of December 31, 2023 and 2022 and the classification by level of input within the fair value hierarchy: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Level 1 Level 2 Level 3 December 31, 2023 ​ ​ ​ ​ Assets ​ ​ ​ ​ Cash equivalents: ​ ​ ​ ​ Money market funds ​ $ 1,104 ​ $ 1,104 ​ $ — ​ $ — Liabilities ​ ​ ​ ​ Derivative liability – Class A Common Stock warrants ​ $ 271 ​ $ — ​ $ — ​ $ 271 Warrant liability – Series m-3 Preferred Stock ​ $ 284 ​ $ — ​ $ — ​ $ 284 Warrant liability – Series s Preferred Stock ​ $ 5,692 ​ $ — ​ $ — ​ $ 5,692 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Level 1 Level 2 Level 3 December 31, 2022 ​ ​ ​ ​ Assets ​ ​ ​ ​ Cash equivalents: ​ ​ ​ ​ Money market funds ​ $ 3,025 ​ $ 3,025 ​ $ — ​ $ — Liabilities ​ ​ ​ ​ Warrant liability – Series m-3 Preferred Stock ​ $ 1,282 ​ $ — ​ $ — ​ $ 1,282 Warrant liability – Series s Preferred Stock ​ $ 8,729 ​ $ — ​ $ — ​ $ 8,729 Derivative liability – Class A Common Stock warrants ​ $ 1,146 ​ $ — ​ $ — ​ $ 1,146 2022 Convertible Notes ​ $ 8,152 ​ $ — ​ $ — ​ $ 8,152 ​ F-19 Table of Contents During the years ended December 31, 2023 and 2022, there were no transfers between Level 1, Level 2, or Level 3 assets or liabilities reported at fair value on a recurring basis and the valuation techniques used did not change compared to the Company’s established practice. The following table sets forth a summary of the changes in the fair value of Company’s Level 3 warrant and derivative liability during the years ended December 31, 2023 and 2022, which were measured at fair value on a recurring basis: ​ ​ ​ ​ ​ ​ Warrant and Derivative Liability Balance as of January 1, 2022 ​ $ 30,566 Initial fair value of Class A Common Stock warrants ​ 1,818 Exercise of warrants ​ ​ ( 370 ) Revaluation of Class A Common Stock, Series B, m-3 and s Preferred Stock warrants ​ ( 20,857 ) Balance as of December 31, 2022 ​ ​ 11,157 Warrant cancellations ​ ​ ( 308 ) Revaluation of Common Stock warrants ​ ​ ( 875 ) Revaluation of Series s and Series m-3 Preferred Stock warrants ​ ​ ( 3,727 ) Balance as of December 31, 2023 ​ $ 6,247 ​ The following table sets forth a summary of the changes in the fair value of the Company’s level 3 convertible note during the year ended December 31, 2023, which were measured at fair value on a recurring basis: ​ ​ ​ ​ ​ Balance January 1, 2023 $ 8,152 Accretion of interest ​ 440 Note conversion ​ ( 8,592 ) Balance as of December 31, 2023 ​ $ — ​ ​ NOTE 3: Business Acquisition On October 14, 2022, the Company finalized an asset acquisition (“APA”) with CASE Emergency Systems, a privately held California corporation (“CASE”), pursuant to which the Company purchased and assumed from CASE substantially all the assets and certain specified liabilities of CASE’s emergency call box and communications business to complement and strengthen the Company’s growing autonomous security robot business with a comprehensive product portfolio and a broadened geographic footprint. The purchase price was $ 6.72 million, which included an unsecured, non-negotiable promissory note (see Note 5) in the amount of $ 0.56 million. The cash purchase price of $ 6.16 million was reduced by a working capital adjustment of $ 67 and was subject to an indemnification holdback of $ 0.67 million. On February 8, 2023, the Company and CASE finalized the working capital adjustment reflected as a reduction of the indemnification holdback amount to $ 0.23 million, reflected in the purchase price. The indemnification holdback was not needed to satisfy indemnification claims and was released to CASE on October 14, 2023. The following table represents the unaudited pro-forma operating results of the Company as if the CASE acquisition had been completed on January 1, 2021 (amounts in thousands). The unaudited pro-forma information makes certain adjustments to remove transaction costs and related expenses, amortize acquired intangible assets and align the Company’s debt financing with that as of the acquisition date. The unaudited pro-forma information should not be considered indicative of the results that would have occurred if the acquisition had been completed on January 1, 2022, nor is such unaudited pro-forma information necessarily indicative of future results. ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2022 (unaudited) Revenue ​ $ 12,990 Net loss ​ ( 26,185 ) ​ ​ F-20 Table of Contents NOTE 4: Goodwill and Intangible Assets, net ​ The Company recorded goodwill of $ 1.3 million during the year ended December 31, 2022 related to the CASE acquisition (Note 3) and an out of period adjustment of $ 0.6 million during the year ended December 31, 2023, bringing the total goodwill recorded pursuant to the CASE acquisition to $ 1.9 million (Note 1). Goodwill is not amortized to earnings, but instead is reviewed for impairment at least annually, absent any interim indicators of impairment. There was no impairment of goodwill during the years ended December 31, 2023 and 2022. The following table sets forth a summary of the changes in goodwill (in thousands): ​ ​ ​ ​ Balance as of January 1, 2022 ​ $ — Goodwill recorded pursuant to the CASE acquisition ​ 1,344 Balance as of December 31, 2022 ​ 1,344 Out of period adjustment ​ 578 Balance as of December 31, 2023 ​ $ 1,922 ​ The gross carrying amounts and accumulated amortization of the intangible assets with determinable lives are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ Amortization ​ Gross ​ ​ ​ ​ ​ ​ ​ ​ Period ​ carrying ​ Accumulated ​ Carrying ​ (years) amount amortization amount, net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Developed technology 5 ​ $ 990 ​ $ ( 239 ) ​ $ 751 Customer relationships 8 ​ 950 ​ ( 144 ) ​ 806 Trademark 1 ​ 230 ​ ( 230 ) ​ — Total ​ ​ ​ $ 2,170 ​ $ ( 613 ) ​ $ 1,557 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ Amortization ​ Gross ​ ​ ​ ​ ​ ​ Period ​ carrying ​ Accumulated ​ Carrying ​ ​ (years) amount amortization amount, net ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Developed technology 5 ​ $ 990 ​ $ ( 41 ) $ 949 Customer relationships 8 ​ 950 ​ ( 25 ) 925 Trademark 1 ​ 230 ​ ( 48 ) 182 Total ​ ​ ​ $ 2,170 ​ $ ( 114 ) $ 2,056 ​ Intangible assets amortization expense was recorded as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ ​ 2023 ​ 2022 Cost of revenue ​ $ 198 ​ $ 41 Sales and marketing ​ 301 ​ 73 Total intangible asset amortization ​ $ 499 ​ $ 114 ​ F-21 Table of Contents As of December 31, 2023, future intangible assets amortization expense for each of the next five years and thereafter is as follows (in thousands): ​ ​ ​ ​ ​ Year ending December 31, Amount 2024 ​ $ 317 2025 ​ 317 2026 ​ 317 2027 ​ 275 2028 ​ 118 Thereafter ​ ​ 213 Total ​ $ 1,557 ​ ​ NOTE 5: Debt Obligations Convertible Note Financing On April 30, 2019 the Company signed a Note and Warrant Purchase Agreement under the form of which the Company could issue up to $ 15 million of convertible promissory notes and warrants to purchase up to 3,000,000 shares of Series S Preferred Stock ( 20 % warrant coverage) (the “Convertible Note Financing”). Pursuant to the terms of the Convertible Note Financing, the Company became obligated, to the same group of Convertible Note Financing investors, to exchange their outstanding shares of Series m-3 Preferred Stock for the newly authorized shares of Series m-4 Preferred stock upon the closing of at least $ 1 million in aggregate principal amount of convertible promissory notes under the Convertible Note Financing. Warrants to purchase shares of Series S Preferred Stock of the Company were also issued to investors who invested in the Convertible Note Financing. The warrants to purchase shares of Series S Preferred Stock have an exercise price of $ 4.50 per share and were initially scheduled to expire on the earlier of December 31, 2021 or 18 months after the closing of the Company’s first firm commitment underwritten initial public offering of the Company’s common stock pursuant to a registration statement filed under the Securities Act. The convertible promissory notes initially had a maturity date of January 1, 2022, and provided for payment of accrued interest at a rate of 12% per annum upon the maturity date, and were generally the most senior company security (subject to limited subordination carve-outs) and provided for significant discounts upon a qualified financing or an initial public offering, and for a premium upon a change of control. On November 18, 2021, the Company agreed to amend the Note and Warrant Purchase Agreement and the convertible notes and warrants to purchase Series S Preferred Stock issued thereunder principally as follows: (i) the scheduled maturity date of the convertible notes was extended from January 1, 2022 to January 1, 2024, (ii) the interest rate of the convertible notes was reduced from 12 % per annum to 3 % per annum starting on January 1, 2022, (iii) the conversion terms of the convertible notes were revised so that the convertible notes would automatically convert into Class A Common Stock upon the listing of the Company’s common stock for trading on a nationally recognized securities exchange (e.g., the New York Stock Exchange) or inter-dealer quotation system (e.g., Nasdaq), (iv) the exercise period of the warrants was extended from December 31, 2021 to December 31, 2024, commencing on January 1, 2023, and (v) the cashless exercise feature was removed from the warrants. The conversion price of the convertible notes for conversion into Class A Common Stock was not changed and remained at $ 2.50 per share and the exercise price of the warrants to purchase Series S Preferred Stock was not changed and remains at $ 4.50 per share. In connection with the listing of our Class A Common Stock on the Nasdaq Global Market on January 27, 2022, all of the outstanding convertible notes issued under the Convertible Note Financing converted to Class A Common Stock. On October 10, 2022, the Company entered into a securities purchase agreement with an accredited investor (the “Buyer”) pursuant to which the Company sold and issued to the Buyer in a private placement (i) senior secured convertible notes in an aggregate principal amount of $ 6.075 million (the “2022 Convertible Notes”), at an initial conversion price of $ 5.00 per share of the Company’s Class A Common Stock, subject to adjustment upon the occurrence of specified events described in the 2022 Convertible Notes, and (ii) warrants to purchase up to 1,138,446 shares of Class A Common Stock with an initial exercise price of $ 3.25 per share, exercisable immediately and expiring five years from the date of issuance (the “2022 Common Stock Warrants” and, together with the 2022 Convertible Notes, the “2022 Convertible Notes Offering”), for $ 5.0 million of gross proceeds. Digital Offering, LLC, acted as the placement agent for the 2022 Convertible Notes Offering and received a commission of four and half percent ( 4.50 %) of the aggregate principal amount of the 2022 Convertible Notes. F-22 Table of Contents During the year ended December 31, 2023, the Company issued 10,432,428 shares of Class A Common Stock in connection with various conversions of the 2022 Convertible Notes by the Buyer, representing an aggregate principal amount of $ 6.075 million. As of December 31, 2023, the entire outstanding principal balance of the 2022 Convertible Notes was fully retired. The 2022 Common Stock Warrants remain outstanding. The 2022 Common Stock Warrants are recorded as derivative liabilities as it was determined they were not indexed to the Company’s stock and accounted for at fair value upon issuance. The derivative liability will be marked to market each reporting period with changes in fair value recorded in changes in fair value of warrant and derivative liability on the statements of operations. Promissory Note On June 30, 2023, Knightscope CASE executed a Promissory Note Partial Payment and Extension Agreement, whereby the maturity date of the Seller’s Note (“Note”) issued on October 14, 2022 in the amount of $ 560,000 in connection with the acquisition of CASE was extended to October 6, 2023. The balance of the Note was payable in two installments with the first payment made July 10, 2023 and the final payment made on October 5, 2023. Public Safety Infrastructure Bonds The Company filed an Offering Circular dated September 29, 2023 (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 of 1933, as amended. 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. The Company issued Bonds totaling a principal amount of $ 1.4 million, in aggregate, generating net proceeds to the Company of approximately $ 1.2 million, net of issuance costs of approximately $ 0.2 million. The amortized carrying amount of the debt obligations consists of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2023 2022 Bonds, net of unamortized issuance costs of $ 194 ​ $ 1,242 ​ $ — Convertible notes, net of fees and discount ​ ​ — ​ ​ 8,152 Promissory notes ​ — ​ 546 Total debt ​ 1,242 ​ 8,698 Less: current portion of debt obligations ​ — ​ 2,144 Non-current portion of debt obligations ​ $ 1,242 ​ $ 6,554 ​ ​ ​ NOTE 6: Capital Stock and Warrants In May 2019, the Company amended and restated its Certificate of Incorporation. As of December 31, 2023, the Company was authorized to issue three classes of $ 0.001 par value stock consisting of Class A Common Stock (“Class A Common Stock”), Class B Common Stock (“Class B Common Stock”) and Preferred Stock totaling 187,405,324 shares. The total number of shares the Company has the authority to issue under each class consists of common stock designated as 114,000,000 shares of Class A Common Stock and 30,000,000 shares of Class B Common Stock, 43,405,324 shares of $ 0.001 par value Preferred Stock, with Preferred Stock designated as 8,936,015 shares of Series A Preferred Stock (“Series A Preferred Stock”), 4,707,501 shares of Series B Preferred Stock (“Series B Preferred Stock”), 6,666,666 shares of Series m Preferred Stock (“Series m Preferred Stock”), 333,334 shares of Series m-1 Preferred Stock (“Series m-1 Preferred Stock”), 1,660,756 shares of Series m-2 Preferred Stock (“Series m-2 Preferred Stock”), 3,490,658 shares of Series m-3 Preferred Stock (“Series m-3 Preferred Stock”), 13,108,333 shares of Series S Preferred Stock (“Series S Preferred Stock”) and 4,502,061 shares of Series m-4 Preferred Stock (“Series m-4 Preferred Stock”). F-23 Table of Contents Preferred Stock Other than a change of control or in a liquidation, dissolution or winding up of the Company whether voluntary or involuntary or upon the occurrence of a deemed liquidation event, the Preferred Stock is non-redeemable. As a result of the liquidation preference, the Preferred Stock was not classified as part of stockholders’ deficit in the accompanying balance sheets in accordance with ASC 480-10-S99, SEC Materials . The Company has excluded all series of Preferred Stock from being presented within stockholders’ deficit in the accompanying balance sheets due to the nature of the liquidation preferences. Effective December 23, 2016, the Company was qualified by the SEC to offer up to 6,666,666 shares of Series m Preferred Stock to accredited and non-accredited investors in an offering pursuant to Regulation A of the Securities Act of 1933, as amended (the “Securities Act”). The offering commenced in January 2017 for up to $ 20 million of the Company’s Series m Preferred Stock pursuant to Regulation A at a price of $ 3.00 per share and closed at the end of 2017. The Company received net proceeds of approximately $ 18.2 million from the sale of its Series m Preferred Stock through the Regulation A offering as well as from private placement transactions through December 31, 2017. The Company entered into Series m-3 Preferred Stock Purchase Agreements with certain purchasers pursuant to which the Company issued and sold directly to the purchasers an aggregate of 1,038,571 and 410,972 shares of the Company’s Series m-3 Preferred Stock in December 2017 and year ended 2018, respectively, par value $ 0.001 per share, at a price of $ 3.50 per share. The Company received net proceeds of approximately $ 3.6 million and $ 1.4 million in December 2017 and the year ended 2018, respectively. In January and February 2018, the Company converted 1,327,423 shares of Series m Preferred Stock into shares of Series m-2 Preferred Stock at a 1 : 1 conversion ratio. In January 2018, the Company issued 333,333 shares of Series m-2 Preferred Stock, par value $ 0.001 per share, at a price of $ 3.00 per share. On July 11, 2018, the Company commenced an offering of up to $ 50 million of its Series S Preferred Stock pursuant to Regulation D and Regulation S to raise additional capital for operations (the “Regulation D Offering”). The Company is offering to sell up to 6,250,000 shares of Series S Preferred Stock, which are convertible into shares of Class A Common Stock, at a price of $ 8.00 per share. As of December 31, 2019, the Company has raised approximately $ 3.8 million through the Regulation D Offering, of which $ 1 million was received during year ended December 31, 2019. Issuance costs related to Regulation D Offering were $ 3 million as of December 31, 2019. On May 21, 2019, the Company filed an offering statement in connection with a proposed offering of up to $ 50 million of its Series S Preferred Stock pursuant to Regulation A of the Securities Act, to raise additional capital for operations (the “2019 Regulation A Offering”). The offering statement was qualified by the Securities and Exchange Commission on July 22, 2019 and the Company commenced the 2019 Regulation A Offering shortly thereafter. Consistent with prior financings by the Company, the 2019 Regulation A Offering was conducted as a continuous offering pursuant to Rule 251(d)(3) of Regulation A, meaning that while the offering of securities is continuous, active sales of securities may happen sporadically over the term of the offering. For clarity, the 2019 Regulation A Offering was conducted simultaneously with the Regulation D Offering for aggregate proceeds of $ 50 million. As of December 31, 2021, the Company has raised $ 44.6 million from the 2019 Regulation A Offering, offset by $ 4.6 million issuance costs. In June 2019, the Company issued to investors in the Convertible Note Financing, 1,432,786 shares of its Series m-4 Preferred Stock in exchange for 1,432,786 shares of its shares of Series m-3 Preferred Stock. The Series m-4 Preferred Stock has a senior liquidation preference to all other Preferred Stock and Common Stock of the Company, has an accruing payment in kind dividend of 12 %, in the form of m-4 Preferred shares, and has certain other preferential rights, including voting rights. Due to higher seniority and different terms of Series m-4 Preferred Stock compared to Series m-3 Preferred Stock, this exchange resulted in an increase in fair value of Series m-4 Preferred Stock exchanged from Series m-3 Preferred Stock of $ 0.9 million that was recorded as interest expense on the exchange date. F-24 Table of Contents On June 15, 2020, the Company filed an offering statement in connection with a proposed offering of up to $ 25 million of its Series S Preferred Stock pursuant to Regulation A of the Securities Act, to raise additional capital for operations (the “2020 Regulation A Offering”). The offering statement was qualified by the Commission on October 21, 2020 and the Company commenced the 2020 Regulation A Offering shortly thereafter. Consistent with prior financings by the Company, the 2020 Regulation A Offering was conducted as a continuous offering pursuant to Rule 251(d)(3) of Regulation A, meaning that while the offering of securities is continuous, active sales of securities may happen sporadically over the term of the offering. For clarity, the 2020 Regulation A Offering was conducted simultaneously with the Regulation D Offering for aggregate proceeds of $ 50 million. As of December 31, 2020, the Company had raised approximately $ 2.5 million from the 2020 Regulation A Offering. The 2020 Regulation A Offering terminated on April 21, 2021. All classes of preferred stock have a par value of $ 0.001 per share. The following tables summarize convertible preferred stock authorized and issued and outstanding as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Proceeds Net ​ Aggregate ​ ​ ​ ​ Shares ​ of Issuance ​ Liquidation ​ ​ Shares ​ Issued and ​ Costs ​ Preference ​ Authorized Outstanding (in thousands) (in thousands) Series A Preferred Stock 8,936,015 1,413,381 ​ $ 614 ​ $ 1,267 Series B Preferred Stock 4,707,501 3,498,859 ​ 7,098 ​ 7,138 Series m Preferred Stock 6,666,666 1,779,653 ​ 4,621 ​ 5,339 Series m-1 Preferred Stock 333,334 — ​ — ​ — Series m-2 Preferred Stock 1,660,756 160,000 ​ 480 ​ 480 Series m-3 Preferred Stock 3,490,658 — ​ — ​ — Series m-4 Preferred Stock 4,502,061 — ​ — ​ — Series S Preferred Stock 13,108,333 2,642,190 ​ 21,390 ​ 21,137 ​ 43,405,324 9,499,083 ​ $ 34,203 ​ $ 35,361 ​ Conversion Rights Each share of Series A Preferred Stock, Series B Preferred Stock and Series m-2 Preferred Stock (collectively known as “Super Voting Preferred Stock”) is convertible at the option of the holder at any time after the date of issuance of those shares into fully paid non-assessable shares of Class B Common Stock at the then-applicable conversion rate. Each share of Series m, Series m-1, Series m-3, Series m-4 and Series S Preferred Stock (collectively known as “Ordinary Preferred Stock”) is convertible at the option of the holder at any time after the date of issuance of such shares into fully paid non-assessable shares of Class A Common Stock at the then-applicable conversion rate. Both Super Voting Preferred Stock and Ordinary Preferred Stock will be automatically converted into fully paid non-assessable shares of Class A Common Stock (i) immediately prior to an IPO, or (ii) upon receipt by the Company of a written request for such conversion from the holders of a majority of the preferred stock then outstanding and voting as a single class on an as-converted basis other than the Series m-4 Preferred Stock then outstanding, or (iii) with respect to the Series m-4 Preferred Stock, upon the receipt by the Company of a written request for such conversion from the holders of a majority of the Series m-4 Preferred Stock then outstanding. The stock will convert in the same manner as a voluntary conversion. Voting Rights Super Voting Preferred stockholders vote on an as converted to Class B Common Stock basis and Class B Common Stock are entitled to ten votes for each share of Class B Common Stock held. Ordinary Preferred stockholders are entitled to one vote for each share of Class A Common Stock held. Class A and Class B Common stockholders vote together as one class on all matters. The holders of the preferred stock, the Class A Common Stock and Class B Common Stock vote together and not as separate classes. Holders of Preferred Stock are entitled to vote on all matters submitted to a vote of the stockholders, including the election of directors, as a single class with the holders of common stock. F-25 Table of Contents William Santana Li, the Chief Executive Officer and sole director of the Company, holds the Voting Proxy to vote substantially all of the shares of the Company’s Series m-4 Preferred Stock, and the stock issued upon the conversion of warrants to purchase all of the shares of the Company’s Series m-3 Preferred Stock and upon the conversion of warrants to purchase shares of the Company’s Series S Preferred Stock, and the stock issuable upon conversion of the convertible promissory notes issued as part of the Convertible Note Financing, in each case to the extent that such shares are held by participants in the Convertible Note Financing. Dividends Rights In any calendar year, the holders of outstanding shares of Preferred Stock are entitled to receive dividends, when, as and if declared by the Board of Directors, out of any assets at the time legally available therefor, at the dividend rate specified for such shares of Preferred Stock payable in preference and priority to any declaration or payment of any distribution on Common Stock of the Company in such calendar year. Except the PIK dividends described below, the right to receive dividends on shares of Preferred Stock is not cumulative, and no right to dividends shall accrue to holders of Preferred Stock by reason of the fact that dividends on said shares are not declared or paid. Holders of Series m-4 Preferred Stock are entitled to receive cumulative dividends payable semi-annually in arrears with respect to each dividend period ending on and including the last calendar day of each six-month period ending March 31 and September 30, respectively at an annual rate of $ 0.42 per share in the form of Series m-4 Preferred Stock (“PIK Dividends). The Company has no obligation to pay any dividends other than the PIK Dividends to the holders of Series m-4 Preferred Stock, except when, as and if declared by the Board of Directors out of any assets at the time legally available therefor or as otherwise specifically provided in its amended and restated certificate of incorporation. No distribution will be made with respect to the other series of Preferred Stock or Common Stock until all declared or accrued but unpaid dividends on the Series m-4 Preferred Stock have been paid or set aside for payment to the Series m-4 Preferred Stockholders. No distributions shall be made with respect to the Series B Preferred Stock, the Series m Preferred Stock, the Series m-1 Preferred Stock, the Series m-2 Preferred Stock, Series A Preferred Stock or Series m-3 Preferred Stock unless dividends on the Series S Preferred Stock have been declared in accordance with the preferences stated in the amended and restated certificate of incorporation and all declared dividends on the Series S Preferred Stock have been paid or set aside for payment to the Series S Preferred Stockholders. No distributions shall be made with respect to the Series A Preferred Stock or Series m-3 Preferred Stock unless dividends on the Series B Preferred Stock, the Series m Preferred Stock, the Series m-1 Preferred Stock and the Series m-2 Preferred Stock have been declared in accordance with the preferences stated in the amended and restated certificate of incorporation and all declared dividends on the Series B Preferred Stock, the Series m Preferred Stock, the Series m-1 Preferred Stock and the Series m-2 Preferred Stock have been paid or set aside for payment to the Series B Preferred Stockholders, the Series m Preferred Stockholders, the Series m-1 Preferred Stockholders and the Series m-2 Preferred Stockholders, as applicable. No distributions shall be made with respect to the Series m-3 Preferred Stock unless dividends on the Series A Preferred Stock have been declared in accordance with the preferences stated in the amended and restated certificate of incorporation and all declared dividends on the Series A Preferred Stock have been paid or set aside for payment to the Series A Preferred Stockholders. No distributions shall be made with respect to the Common Stock unless dividends on the Series m-3 Preferred Stock have been declared in accordance with the preferences stated in the amended and restated certificate of incorporation and all declared dividends on the Series m-3 Preferred Stock have been paid or set aside for payment to the Series m-3 Preferred Stockholders. The Company has never declared or paid cash dividends on any of its capital stock and currently does not anticipate paying any cash dividends after this offering or in the foreseeable future. F-26 Table of Contents Right to receive Liquidation Distributions In the event of any Liquidation Event, as defined in the Company’s amended and restated certificate of incorporation (which includes the liquidation, dissolution, merger, acquisition or winding up of the Company), the holders of the Series m-4 Preferred Stock are entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of the other series of Preferred Stock or Common Stock by reason of their ownership of such stock, an amount per share for each share of Series m-4 Preferred Stock held by them equal to the greater of (A): the sum of (i) the Liquidation Preference specified for such share of Series m-4 Preferred Stock, and (ii) all accrued but unpaid PIK Dividends (if any) on such share of Series m-4 Preferred Stock, whether or not declared, or (B) the consideration that such Holder would receive in the Liquidation Event if all shares of Series m-4 Preferred Stock were converted to Class A Common Stock immediately prior to such Liquidation Event, or (C) such lesser amount as may be approved by the holders of the majority of the outstanding shares of Series m-4 Preferred Stock, where for purposes of (B) such Holder is deemed to hold, in addition to each of its shares of Series m-4 Preferred Stock, any additional shares of Series m-4 Preferred Stock that constitute all accrued but unpaid PIK Dividends, whether or not declared. If upon the Liquidation Event, the assets of the Company legally available for distribution to the holders of the Series m-4 Preferred Stock are insufficient to permit the payment to such holders of the full amounts specified in our amended and restated certificate of incorporation, then the entire assets of the Company legally available for distribution shall be distributed with equal priority and pro rata among the holders of the Series m-4 Preferred Stock in proportion to the full amounts they would otherwise be entitled to receive. The Series m-4 Preferred Stock has a $ 7.00 per share liquidation preference, which is 2x its original issue price. The holders of the Series S Preferred Stock are entitled to receive, after distributions to Series m-4 Preferred stockholders and prior and in preference to any distribution of any of the assets of the Company to the holders of the Series A Preferred Stock, Series B Preferred Stock, Series m Preferred Stock, Series m-1 Preferred Stock, Series m-2 Preferred Stock, Series m-3 Preferred Stock or Common Stock by reason of their ownership of such stock, an amount per share for each share of Series S Preferred Stock held by them equal to the greater of (A): the sum of (i) $ 8.00 per share of Series S Preferred Stock, and (ii) all declared but unpaid dividends (if any) on such share of Series S Preferred Stock, or (B) the amount such Holder would receive if all shares of Series S Preferred Stock were converted to Common Stock immediately prior to such Liquidation Event, or (C) such lesser amount as may be approved by the holders of the majority of the outstanding shares of Series S Preferred Stock. If upon the Liquidation Event, the assets of the Company legally available for distribution to the holders of the Series S Preferred Stock are insufficient to permit the payment to such holders of the full amounts specified in our amended and restated certificate of incorporation, then the entire assets of the Company legally available for distribution shall be distributed with equal priority and pro rata among the holders of the Series S Preferred Stock in proportion to the full amounts they would otherwise be entitled to receive. The holders of the Series B Preferred Stock, the Series m Preferred Stock, the Series m-1 Preferred Stock and the Series m-2 Preferred Stock shall be entitled to receive, after distributions to Series m-4 and Series S Preferred stockholders and prior and in preference to any distribution of any of the assets of the Company to the holders of the Series A Preferred Stock, Series m-3 Preferred Stock or Common Stock by reason of their ownership of such stock, an amount per share for each share of Series B Preferred Stock, the Series m Preferred Stock, the Series m-1 Preferred Stock and the Series m-2 Preferred Stock held by them equal to the greater of (A): the sum of (i) $ 2.0401 per share of Series B Preferred Stock, $ 3.00 per share of Series m Preferred Stock, $ 3.00 per share of Series m-1 Preferred Stock or $ 3.00 per share of Series m-2 Preferred Stock, as applicable, and (ii) all declared but unpaid dividends (if any) on such share of Series B Preferred Stock, Series m Preferred Stock, Series m-1 Preferred Stock or Series m-2 Preferred Stock, as applicable, or (B) the amount such Holder would receive if all shares of the applicable series of Preferred Stock were converted to Common Stock immediately prior to such Liquidation Event, or (C) such lesser amount as may be approved by the holders of the majority of the outstanding shares of Series B Preferred Stock, Series m Preferred Stock, Series m-1 Preferred Stock and Series m-2 Preferred Stock, voting together as a single class. If upon the Liquidation Event, the assets of the Company legally available for distribution to the holders of the Series B Preferred Stock, the Series m Preferred Stock, the Series m-1 Preferred Stock and the Series m-2 Preferred Stock are insufficient to permit the payment to such holders of the full amounts specified in our amended and restated certificate of incorporation, then the entire assets of the Company legally available for distribution shall be distributed with equal priority and pro rata among the holders of the Series B Preferred Stock, the Series m Preferred Stock, the Series m-1 Preferred Stock and the Series m-2 Preferred Stock in proportion to the full amounts they would otherwise be entitled to receive. F-27 Table of Contents The holders of Series A Preferred Stock are entitled to receive, after distributions to Series m-4, Series S, Series B, Series m, Series m-1 and Series m-2 Preferred Stock and prior and in preference to any distribution of any of the assets of the Company to the holders of Common Stock or Series m-3 Preferred Stock by reason of their ownership of such stock, an amount per share for each share of Series A Preferred Stock held by them equal to the greater of: (A) the sum of (i) $ 0.8932 per share of Series A Preferred Stock and (ii) all declared but unpaid dividends (if any) on such share of Series A Preferred Stock, or (B) the amount such Holder would receive if all shares of Series A Preferred Stock were converted to Common Stock immediately prior to such Liquidation Event, or (C) such lesser amount as may be approved by the holders of the majority of the outstanding shares of Series A Preferred Stock. If upon a Liquidation Event, the assets of the Company legally available for distribution to the holders of the Series A Preferred Stock are insufficient to permit the payment to such holders of the full amounts specified in our amended and restated certificate of incorporation, then the entire assets of the Company legally available for distribution shall be distributed with equal priority and pro rata among the holders of the Series A Preferred Stock in proportion to the full amounts they would otherwise be entitled to receive. The holders of Series m-3 Preferred Stock are entitled to receive, after distributions to Series m-4, Series S, Series B, Series m, Series m-1 and Series m-2, and Series A Preferred Stock and prior and in preference to any distribution of any of the assets of the Company to the holders of Common Stock by reason of their ownership of such stock, an amount per share for each share of Series m-3 Preferred Stock held by them equal to the greater of (A): the sum of (i) the $ 3.50 per share of Series m-3 Preferred Stock and (ii) all declared but unpaid dividends (if any) on such share of Series m-3 Preferred Stock, or (B) the amount such Holder would receive if all shares of Series m-3 Preferred Stock were converted to Common Stock immediately prior to such Liquidation Event, or (C) such lesser amount as may be approved by the holders of the majority of the outstanding shares of Series m-3 Preferred Stock. If upon a Liquidation Event, the assets of the Company legally available for distribution to the holders of the Series m-3 Preferred Stock are insufficient to permit the payment to such holders of the full amounts specified in our amended and restated certificate of incorporation, then the entire assets of the Corporation legally available for distribution shall be distributed with equal priority and pro rata among the holders of the Series m-3 Preferred Stock in proportion to the full amounts they would otherwise be entitled to receive. After payment of all liquidation preferences to the holders of the Preferred Stock, as outlined below, all remaining assets of the Company legally available for distribution shall be distributed pro rata to the holders of the common stock, without any participation in such liquidation by the Preferred Stock. Our amended and restated certificate of incorporation explicitly requires that before any shares of Preferred Stock are converted into common stock, the relevant holder’s right to liquidation preference be surrendered, in order to prevent treatment of shares as both Preferred Stock and common stock for the purpose of distributions of assets upon a Liquidation Event. Common Stock Each share of Class B Common Stock is convertible into one fully paid and non-assessable share of Class A Common Stock at the option of the holder at any time. Each share of Class B Common Stock will automatically convert into one fully paid and non-assessable share of Class A Common Stock upon the sale, assignment, transfer or disposition of the share or any interest in the share. Standstill Agreements On August 14, 2023, the Company entered into a Standstill Agreement (the “August Standstill Agreement”) with a holder of 7,000,000 shares of Class B Common Stock. Under the terms of the August Standstill Agreement the holder agreed not to exercise his right to convert his Class B Common Stock to Class A Common Stock until after 2024 Annual Meeting of Stockholders of the Company. On November 27, 2023, the Company entered into a Standstill Agreement (the “November Standstill Agreement”) with a holder of 2,000,000 shares of Class B Common Stock. Under the terms of the November Standstill Agreement the holder agreed not to exercise his right to convert his Class B Common Stock to Class A Common Stock until the 2024 Annual Meeting of Stockholders of the Company. On December 26, 2023, the Company entered into a Standstill Agreement (the “First December Standstill Agreement”) with a holder of a warrant to purchase up to 346,000 shares of Series m-3 Preferred Stock. Under the terms of the First December Standstill Agreement the warrant holder agreed not to convert any of the shares of Series m-3 Preferred Stock issuable under the warrants upon exercise thereof into Class A Common Stock, until the 2024 Annual Meeting of Stockholders of the Company. The First December Standstill Agreement provides that in the event that the stockholders of the Company do not approve at the 2024 annual meeting of stockholders an amendment to the Company’s certificate of incorporation that increases the available authorized shares of Class A Common Stock, then the conversion standstill period shall be extended until such time as the stockholders duly approve an amendment to the Company’s certificate of incorporation that increases the available authorized shares of Class A Common Stock. On February 23, 2024, the Company F-28 Table of Contents filed a definitive proxy statement with the SEC in connection with a special meeting of stockholders to be held on April 5, 2024 to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of our Class A Common Stock from 114,000,000 to 228,000,000 . On December 27, 2023, the Company entered into a Standstill Agreement (the “Second December Standstill Agreement”) with a holder of a warrant to purchase up to 835,787 shares of Series m-3 Preferred Stock. Under the terms of the Second December Standstill Agreement the warrant holder agreed not to convert any of the shares of Series m-3 Preferred Stock issuable under the warrants upon exercise thereof into Class A Common Stock, until the 2024 Annual Meeting of Stockholders of the Company. The Second December Standstill Agreement provides that in the event that the stockholders of the Company do not approve at the 2024 meeting of stockholders an amendment to the Company’s certificate of incorporation that increases the available authorized shares of Class A Common Stock, then the conversion standstill period shall be extended until such time as the stockholders duly approve an amendment to the Company’s certificate of incorporation that increases the available authorized shares of Class A Common Stock. On December 27, 2023, the Company entered into a Standstill Agreement (the “Third December Standstill Agreement”) with a holder of warrants to purchase up to 250,999 shares of Series m-3 Preferred Stock and 2,942,714 shares of Series S Preferred Stock. Under the terms of the Third December Standstill Agreement the warrant holder agreed not to convert any of the shares of Series m-3 or Series S Preferred Stock issuable under the warrants upon exercise thereof into Class A Common Stock, until the 2024 Annual Meeting of Stockholders of the Company. The Second December Standstill Agreement provides that in the event that the stockholders of the Company do not approve at the 2024 meeting of stockholders an amendment to the Company’s certificate of incorporation that increases the available authorized shares of Class A Common Stock, then the conversion standstill period shall be extended until such time as the stockholders duly approve an amendment to the Company’s certificate of incorporation that increases the available authorized shares of Class A Common Stock. Warrants On January 16, 2018, March 16, 2018, and June 20, 2018, the Company issued warrants in connection with the Company’s Series m-3 financing to purchase an aggregate of 394,215 shares of the Company’s Series m-3 Preferred Stock. The warrants have an exercise price of $ 4.00 per share and expire on the earlier of: a) two years from the date of the warrant; b) the acquisition of the Company by another entity by means of any transaction or series of transactions to which the Company is a party or sale, lease or disposition of all or substantially all of the assets of the Company, or c) immediately prior to the closing of an initial public offering pursuant to an effective registration statement filed under the Securities Act covering the offering and sale of the Company’s common stock. The warrants issued qualify as liability instruments as the warrants are exercisable into Series m-3 Preferred Stock which are redeemable upon a change of control or any liquidation or winding up of the Company whether voluntary or involuntary. The warrants have been classified as a noncurrent liability on the Company’s balance sheets and were recorded as a component of the issuance costs related to the Series m-3 Preferred Stock. The Series m-3 warrant is valued at market at the end of every reporting period until the warrant is exercised or expires with the change in fair value being recorded in other income (expense) on the Company’s statements of operations. The expiration date of the Series m-3 warrants have been extended to December 31 2024. On April 30, 2019, the Company entered into the “Convertible Note Financing”. Pursuant to the terms of the Convertible Note Financing, the Company became obligated to exchange its outstanding shares of Series m-3 Preferred Stock for the newly authorized shares of Series m-4 Preferred stock upon the closing of at least $ 1 million in aggregate principal amount of convertible promissory notes under the Convertible Note Financing. Warrants to purchase shares of Series S Preferred Stock of the Company were also issued to investors who invested in the Convertible Note Financing. The warrants to purchase shares of Series S Preferred Stock have an exercise price of $ 4.50 per share and were initially scheduled to expire on the earlier of December 31, 2021, or 18 months after the closing of the Company’s first firm commitment underwritten initial public offering of the Company’s common stock pursuant to a registration statement filed under the Securities Act. As of December 31, 2021, the Company had issued and accrued warrants to purchase up to 2,941,814 shares of Series S Preferred Stock. These warrants issued qualify as liability instruments as the warrants are exercisable into Series S Preferred Stock which are redeemable upon a change of control or any liquidation or winding up of the Company whether voluntary or involuntary. The warrants have been classified as a current liability on the Company’s balance sheets and were recorded as a component of the issuance costs related to Convertible Note. The Series S warrants are valued at market at the end of every reporting period until the warrants are exercised or expire with the change in fair value being recorded in other income (expense) on the Company’s statements of operations. F-29 Table of Contents On November 18, 2021, the Company agreed to amend the Note and Warrant Purchase Agreement for the Convertible Note Financing and the convertible notes and warrants to purchase Series S Preferred Stock issued thereunder principally as follows: (i) the scheduled maturity date of the convertible notes was extended from January 1, 2022 to January 1, 2024, (ii) the interest rate of the convertible notes was reduced from 12 % per annum to 3 % per annum starting on January 1, 2022, (iii) the conversion terms of the convertible notes were revised so that the convertible notes would automatically convert into Class A Common Stock upon the listing of the Company’s common stock for trading on a nationally recognized securities exchange (e.g., the New York Stock Exchange) or inter-dealer quotation system (e.g., Nasdaq), (iv) the exercise period of the warrants was extended from December 31, 2021 to December 31, 2024, commencing on January 1, 2023, and (v) the cashless exercise feature was removed from the warrants. The conversion price of the convertible notes for conversion into Class A Common Stock was not changed and remained at $ 2.50 per share and the exercise price of the warrants to purchase Series S Preferred Stock was not changed and remains at $ 4.50 per share. On July 23, 2019, the Company issued a warrant to purchase 1,500,000 shares of its Series S Preferred Stock, par value $ 0.001 per share (the “Warrant”), to Proud Productions LLC (“Proud”) pursuant to the terms of a Distribution Assignment and Warrant Purchase Agreement, dated as of July 22, 2019 (the “Purchase Agreement”). The warrants were exercisable at $ 8.00 per share beginning July 24, 2021 and expiring on July 31, 2024. On April 7, 2023, the Company entered into an Amendment and Cancellation Agreement whereby these warrants were cancelled in exchange for an extension of the expiration date for warrants to purchase 1,432,786 shares of Series m-3 Preferred Stock and 2,941,814 shares of Series S Preferred Stock to the earlier of December 31, 2027 or eighteen ( 18 ) months after the closing of the Company’s first firm commitment underwritten initial public offering of the Company’s common stock pursuant to a registration statement filed under the Securities Act of 1933, as amended. On October 10, 2022, the Company entered into a securities purchase agreement with an accredited investor, pursuant to which the Company issued and sold to the investor (i) the 2022 Convertible Notes (see Note 5) in an aggregate principal amount of $ 6.075 million, at an initial conversion price of $ 5.00 per share of the Company’s Class A Common Stock, and (ii) warrants to purchase up to 1,138,446 shares of Class A Common Stock with an initial exercise price of $ 3.25 per share. A summary of the Company’s outstanding warrants as of December 31, 2023, is as follows: ​ ​ ​ ​ ​ ​ ​ ​ Class of shares Number of warrants Exercise price Expiration date Class A Common Stock 1,138,446 ​ $ 3.2500 ​ October 13, 2027 Series m-3 Preferred Stock 1,432,786 ​ $ 4.0000 ​ December 31, 2027 Series S Preferred Stock 2,941,814 ​ $ 4.5000 ​ December 31, 2027 ​ Common Stock Reserved for Future Issuance Shares of common stock reserved for future issuance relate to outstanding preferred stock, warrants, stock options, and the 2022 Convertible Notes were as follows: ​ ​ ​ ​ ​ December 31, ​ ​ 2023 Series A Preferred Stock (convertible to Class B Common Stock) 1,418,381 Series B Preferred Stock (convertible to Class B Common Stock) 3,498,859 Series m Preferred Stock (convertible to Class A Common Stock) 1,779,653 Series m-2 Preferred Stock (convertible to Class B Common Stock) 160,000 Series S Preferred Stock (convertible to Class A Common Stock) 2,642,190 Stock options to purchase common stock 10,069,394 Warrants outstanding for future issuance of convertible preferred stock and common stock 5,513,046 Stock options available for future issuance 99,363 Total shares of common stock reserved 25,180,886 ​ F-30 Table of Contents At-the-Market Offering Program In February 2023, the Company commenced an at-the-market offering program with H.C. Wainwright & Co., LLC, as sales agent, in connection with which the Company filed a prospectus supplement filed on February 9, 2023 (the “February Prospectus Supplement”), allowing the Company 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 prospectus supplement provided that in no event would the Company sell any securities in a public primary offering with a value exceeding one-third of its non-affiliated public float in any 12-month period unless its non-affiliated public float subsequently rose to $75.0 million or more. On August 18, 2023, after the Company’s non-affiliated public float subsequently rose to an amount greater than $75.0 million, the Company 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. For the year ended December 31, 2023, the Company issued 25,734,332 shares of Class A Common Stock under the at-the-market offering program for net proceeds of approximately $ 16.4 million, net of brokerage and placement fees of approximately $ 0.6 million pursuant to the February Prospectus Supplement, and 11,817,912 shares of Class A Common Stock under the at-the-market offering program for net proceeds of approximately $ 8.2 million, net of brokerage and placement fees of approximately $ 0.3 million pursuant to the August Prospectus Supplement. ​ ​ NOTE 7: Stock-Based Compensation Equity Incentive Plans In April 2014, the Board of Directors adopted the 2014 Equity Incentive Plan (the “2014 Plan”) allowing for the issuance of up to 2,000,000 shares of common stock through grants of options, stock appreciation rights, restricted stock or restricted stock units. In December 2016, the 2014 Plan was terminated, and the Company’s Board of Directors adopted a new equity incentive plan defined as the 2016 Equity Incentive Plan (the “2016 Plan”) in which the remaining 1,936,014 shares available for issuance under the 2014 Plan at that time were transferred to the Company’s 2016 Plan. Awards outstanding under the 2014 Plan at the time of the 2014 Plan’s termination will continue to be governed by their existing terms. The shares underlying any awards that are forfeited, canceled, repurchased or are otherwise terminated by the Company under the 2014 Plan will be added back to the shares of common stock available for issuance under the Company’s 2016 Plan. The 2016 Plan provides for the granting of stock awards such as incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock or restricted stock units to employees, directors and outside consultants as determined by the Board of Directors. On June 23, 2022, following approval by the Board of Directors, the Company’s stockholders adopted the 2022 Equity Incentive Plan (the “2022 Plan”) allowing for the issuance of up to 5,000,000 shares of Class A Common Stock through grants of options, stock appreciation rights, restricted stock awards, restricted stock units, performance awards, and other stock or cash-based awards. In connection with the adoption of the 2022 Plan, shares previously available for issuance under the 2016 Plan became available for issuance under the 2022 Plan. The number of shares authorized under the 2022 Plan will be increased each January 1 st , beginning January 1, 2023 and ending on (and including) January 1, 2032, by an amount equal to the lesser of (a) 5 % of our outstanding Class A Common Stock and Class B Common Stock outstanding on December 31 st of the immediately preceding calendar year (rounded up to the nearest whole share) and (b) a number of shares determined by the committee. Shares subject to awards (including under the 2016 Plan and the 2014 Plan) that lapse, expire, terminate, or are canceled prior to the issuance of the underlying shares or that are subsequently forfeited to or otherwise reacquired by us will be added back to the shares of common stock available for issuance under the 2022 Plan. F-31 Table of Contents The Board of Directors may grant stock options under the 2022 Plan at a price of not less than 100 % of the fair market value of the Company’s common stock on the date the option is granted. The option exercise price generally may not be less than the underlying stock’s fair market value at the date of grant and generally have a term of ten years . Incentive stock options granted to employees who, on the date of grant, own stock representing more than 10 % of the voting power of all of the Company’s classes of stock, are granted at an exercise price of not less than 110 % of the fair market value of the Company’s common stock. The maximum term of incentive stock options granted to employees who, on the date of grant, own stock having more than 10 % of the voting power of all the Company’s classes of stock, may not exceed five years . The Board of Directors also determines the terms and conditions of awards, including the vesting schedule and any forfeiture provisions. Options granted under the 2022 Plan may vest upon the passage of time, generally four years , or upon the attainment of certain performance criteria established by the Board of Directors. The Company may from time-to-time grant options to purchase common stock to nonemployees for advisory and consulting services. At each measurement date, the Company will remeasure the fair value of these stock options using the Black-Scholes option pricing model and recognize the expense ratably over the vesting period of each stock option award. Stock options comprise all of the awards granted since the Plan’s inception. Stock option activity under all of the Company’s equity incentive plans as of December 31, 2023 is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ Average ​ ​ ​ ​ ​ Shares ​ Number of ​ Average ​ Remaining ​ Aggregate ​ ​ Available for ​ Shares ​ Exercise ​ Contractual ​ Intrinsic ​ ​ Grant ​ Outstanding ​ Price ​ Life (Years)’ ​ Value (000’s) Outstanding as of January 1, 2022 216,003 8,799,415 ​ $ 3.07 8.12 $ 60,924 2022 Equity incentive plan ​ 5,000,000 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Granted ( 2,272,299 ) 2,272,299 ​ 3.26 ​ ​ ​ Exercised ​ — ​ ( 395,235 ) ​ ​ 1.39 ​ ​ ​ ​ ​ Forfeited 582,898 ( 582,898 ) ​ 4.31 ​ ​ ​ Expired ​ 11,666 ​ ( 11,666 ) ​ ​ 2.34 ​ ​ ​ ​ ​ Outstanding as of December 31, 2022 3,538,268 10,081,915 ​ $ 3.11 7.61 ​ $ 4,099 2022 Equity incentive plan increase ​ 1,917,456 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Granted ( 2,190,299 ) 2,190,299 ​ 1.01 ​ ​ ​ Exercised — ( 451,020 ) ​ 0.58 ​ ​ ​ Forfeited 1,751,800 ( 1,751,800 ) ​ 3.42 ​ ​ ​ Expired ​ — ​ — ​ ​ ​ ​ ​ ​ ​ ​ 2022 Equity incentive plan decrease ​ ( 4,917,862 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding as of December 31, 2023 99,363 10,069,394 ​ $ 2.72 7.14 ​ $ 141 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Vested and exercisable as of December 31, 2023 ​ ​ 6,717,063 ​ $ 2.34 6.4 ​ $ 134 ​ The aggregate intrinsic value in the table above represents the total intrinsic value based on the Company’s closing stock price of $ 0.60 as of December 31, 2023, which would have been received by the option holders had all option holders exercised their options as of that date. The total intrinsic value of options exercised during the years ended December 31, 2023 and 2022 was $ 0.2 million and $ 1.2 million, respectively. The fair value of stock options that vested during the years ended December 31, 2023 and 2022 was $ 3.4 million and $ 3.1 million, respectively. As of December 31, 2023, the Company had unamortized stock-based compensation expense of $ 12.5 million that will be recognized over the average remaining vesting term of options of 1.82 years. F-32 Table of Contents The determination of the fair value of options granted during the years ended December 31, 2023 and 2022 is computed using the Black-Scholes option pricing model with the following weighted-average assumptions: ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ ​ 2023 2022 Risk-free interest rate 4.00 % 7.33 % Expected dividend yield — % — % Expected volatility 54.39 % 54.60 % Expected term (in years) 5.76 5.97 ​ ​ The weighted average grant date fair value of options granted during the years ended December 31, 2023 and 2022 was $ 0.55 and $ 1.76 per share, respectively. ​ Option pricing models require the input of various subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. The expected stock price volatility is based on the analysis of volatilities of the Company’s selected public peer group over a period commensurate with the expected term of the options. The expected term of the employee stock options represents the weighted-average period the stock options are expected to remain outstanding and is based on the contractual terms, the vesting period and the expected remaining term of the outstanding options. The risk-free interest rate is based on the U.S. Treasury interest rates whose term in consistent with the expected life of the stock options. No dividend yield is included as the Company has not issued any dividends and do not anticipate issuing any dividends in the future. ​ A summary of stock-based compensation expense recognized in the Company’s statements of operations is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2023 2022 Cost of revenue, net ​ $ 358 ​ $ 348 Research and development ​ 397 ​ 1,058 Sales and marketing ​ 221 ​ 235 General and Administrative ​ 1,750 ​ 1,898 Total ​ $ 2,726 ​ $ 3,539 ​ ​ ​ NOTE 8: Employee Benefit Plan The Company administers a 401(K) retirement plan (the “401(K) Plan”) in which all employees are eligible to participate. Each eligible employee may elect to contribute to the 401(K) Plan. During the years ended December 31, 2023 and 2022, the Company has made no matching contributions. F-33 Table of Contents NOTE 9: Income Taxes The Company has incurred cumulative U.S. net operating losses since inception. Income tax expense consisted of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 Current: ​ ​ Federal ​ $ — ​ $ — State ​ — ​ — Total current expense ​ — ​ — ​ ​ ​ ​ ​ ​ ​ Deferred: ​ ​ Federal ​ — ​ — State ​ — ​ — Total deferred expense ​ — ​ — Total income tax expense ​ $ — ​ $ — ​ Reconciliation between the effective tax rate on income from continuing operations and the statutory tax rate of 21 % is as follows: ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 Provision at statutory rate 21.0 % 21.0 % Stock-based compensation ​ ( 2.0 ) ​ ( 1.9 ) ​ Convertible notes ( 0.4 ) ( 7.5 ) ​ Fair value adjustment 4.7 13.1 ​ Change in valuation allowance ( 24.6 ) ( 26.3 ) ​ Research and development credits ​ 1.6 ​ 1.6 ​ Other ( 0.3 ) — ​ Effective tax rate 0.0 % 0.0 % ​ Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table presents the significant components of the Company’s deferred tax assets and liabilities for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) ​ 2023 2022 Deferred tax assets: ​ ​ Net operating loss carryforwards ​ $ 34,157 ​ $ 28,218 Research and development credit carryforwards ​ 2,599 ​ 2,006 Accruals and other ​ 717 ​ 798 Lease liability ​ ​ 388 ​ ​ 650 Property, equipment and software ​ 93 ​ 165 Amortization ​ 198 ​ 189 Capitalized research and experimental expenses ​ ​ 2,218 ​ ​ 1,191 Other ​ 11 ​ 11 Total deferred tax assets ​ 40,381 ​ 33,228 Valuation allowance ​ ( 39,989 ) ​ ( 32,702 ) Deferred tax assets recognized ​ 392 ​ 526 Deferred tax liabilities: ​ ​ ​ ​ ​ ​ Right of use asset ​ ​ ( 392 ) ​ ​ ( 526 ) Total deferred tax liabilities ​ ( 392 ) ​ ( 526 ) Net deferred taxes ​ $ — ​ $ — ​ F-34 Table of Contents The Company considers all available evidence, both positive and negative, including historical levels of taxable income, expectations and risks associated with estimates of future taxable income, and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. As of December 31, 2023 and 2022, based on the Company’s analysis of all available evidence, both positive and negative, it was considered more likely than not that the Company’s deferred tax assets would not be realized and, as a result, the Company recorded a full valuation allowance for its deferred tax assets. The valuation allowance increased $ 7.3 million and $ 8.7 million during the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, the Company had U.S. federal net operating loss carryforwards amounts of approximately $ 128.0 million of which $ 23.3 million begin to expire in 2033 and $ 104.7 million can be carried over indefinitely. As of December 31, 2023, the Company had federal research and development tax credits of approximately $ 1.7 million which begin to expire in 2033. As of December 31, 2023, the Company had state net operating loss carryforwards amounts of approximately $ 102.5 million which begin to expire in 2024. As of December 31, 2023, the Company had state research and development tax credits of approximately $ 1.5 million, which do not expire. Utilization of the federal and state net operating loss and federal and state research and development tax credit carryforwards may be subject to annual limitations due to the ownership percentage change provisions of the Internal Revenue Code Section 382 and similar state provisions. The annual limitations may result in the inability to fully offset future annual taxable income and could result in the expiration of the net operating loss carry forwards before utilization. The Company accounts for uncertainty in income taxes in accordance with ASC 740. Tax positions are evaluated in a two-step process, whereby the Company first determines whether it is more likely than not that a tax position will be sustained upon examination by tax authorities, including resolutions of any related appeals or litigation processes, based on technical merit. If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to recognized in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) 2023 2022 Unrecognized tax benefits as of the beginning of the year ​ $ 430 ​ $ 313 Increases related to prior year tax provisions ​ 12 ​ 28 Decrease related to prior year tax provisions ​ — ​ — Increase related to current year tax provisions ​ 102 ​ 89 Statute lapse ​ — ​ — Unrecognized tax benefits as of the end of the year ​ $ 544 ​ $ 430 ​ The Company’s unrecognized tax benefits as of December 31, 2023 relate entirely to research and development credits. The total amount of unrecognized tax benefits at December 31, 2023 is $ 0.5 million. If recognized, none of the unrecognized tax benefits would impact the effective tax rate because of the valuation allowance. The Company’s policy is to recognize interest and penalties to income taxes as components of interest expense and other expense, respectively. The Company did not accrue interest or penalties related to unrecognized tax benefits as of December 31, 2023. The Company does not anticipate any significant change within twelve months of this reporting date. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. Due to the Company’s net operating loss carryforwards, all tax years since inception remain subject to examination by all taxing authorities. The Company is not currently under audit in any major tax jurisdiction. NOTE 10: Related parties and related-party transactions One of the Company’s vendors, Konica Minolta, Inc. (“Konica Minolta”), is a stockholder of the Company. Konica Minolta provides the Company with repair services to its ASRs. The Company has paid to Konica Minolta approximately $ 0.4 million and $ 0.4 million in service fees for the years ended December 31, 2023 and 2022, respectively. The Company had payables of $ 84 and $ 117 owed to Konica Minolta as of December 31, 2023 and 2022, respectively. The Company paid $ 180 and $ 38 for rent for the years ended December 31, 2023 and 2022, respectively, for a building owned by Sebastian Gutierrez, Senior VP Public Safety Infrastructure Development. F-35 Table of Contents NOTE 11: Commitments and contingencies Leases The Company leases facilities for office space under non-cancelable operating lease agreements. The Company leases space for its corporate headquarters in Mountain View, California through August 2025. The components of leases and lease costs are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ Operating leases December 31, December 31, ​ 2023 2022 Operating lease right-of-use assets ​ $ 1,458 ​ $ 2,012 ​ ​ ​ ​ ​ ​ ​ Operating lease liabilities, current portion ​ $ 733 ​ $ 731 Operating lease liabilities, non-current portion ​ 711 ​ 1,309 Total operating lease liabilities ​ $ 1,444 ​ $ 2,040 ​ ​ ​ ​ ​ ​ ​ Operating lease costs ​ $ 1,027 ​ $ 906 ​ As of December 31, 2023, future minimum operating lease payments for each of the next two years is as follows (in thousands): ​ ​ ​ ​ Year ending December 31, ​ Amount 2024 ​ $ 856 2025 ​ ​ 675 2026 ​ ​ 73 Total future minimum lease payments ​ 1,604 Less – Interest ​ ( 160 ) Present value of lease liabilities ​ $ 1,444 ​ Weighted average remaining lease term is 1.9 years. The weighted average discount rate of 11.58 % ranges from 5.25 % to 16.0 % dependent upon the assets underlying the operating lease and its term. ​ Rent expense totaled $ 1.0 million and $ 0.9 million for the years ended December 31, 2023 and 2022, respectively, included in the Company’s statements of operations. There were three month to month lease agreements and one lease agreement with a lease term of less than 12 months for the year ended December 31, 2023. There were no lease agreements of less than 12 months for the year ended December 31, 2022. Legal Matters The Company may be subject to pending legal proceedings and regulatory actions in the ordinary course of business; however, no such claims have been identified as of December 31, 2023 that are expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows. The Company from time to time enters into contracts that contingently require the Company to indemnify parties against third party claims. These contracts primarily relate to: (i) arrangements with clients which generally include certain provisions for indemnifying clients against liabilities if the services infringe a third party’s intellectual property rights, (ii) the Regulation A Issuer Agreement where the Company may be required to indemnify the placement agent for any loss, damage, expense or liability incurred by the other party in any claim arising out of a material breach (or alleged breach) as a result of any potential violation of any law or regulation, or any third party claim arising out of any investment or potential investment in the offering, and (iii) agreements with the Company’s officers and directors, under which the Company may be required to indemnify such persons from certain liabilities arising out of such persons’ relationships with the Company. The Company has not incurred any material costs as a result of such obligations and has not accrued any liabilities related to such obligations in the financial statements as of December 31, 2023 and 2022. F-36 Table of Contents Sales Tax Contingencies The Company has historically not collected state sales tax on the sale of its MaaS product offering but has paid sales tax in conjunction with the Financing Arrangement of the Company’s ASRs with Farnam and use tax on all purchases of raw materials. The Company’s MaaS product offering may be subject to sales tax in certain jurisdictions. If a taxing authority were to successfully assert that the Company has not properly collected sales or other transaction taxes, or if sales or other transaction tax laws or the interpretation thereof were to change, and the Company was unable to enforce the terms of their contracts with clients that give the right to reimbursement for the assessed sales taxes, tax liabilities in amounts that could be material may be incurred. Based on the Company’s assessment, the Company has recorded a use tax liability of approximately $ 0.4 million as of December 31, 2023 and 2022, which has been included in other current liabilities on the accompanying balance sheets. The Company continues to analyze possible sales tax exposure but does not currently believe that any individual claim or aggregate claims that might arise will ultimately have a material effect on its results of operations, financial position or cash flows. NOTE 12: Subsequent Events On February 23, 2024, the Company filed a definitive proxy statement with the SEC in connection with a special meeting of stockholders to be held on April 5, 2024 to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation to increase the number of authorized shares of our Class A Common Stock from 114,000,000 to 228,000,000 . The Company issued Public Safety Infrastructure Bonds (see Note 5) with a total principal amount of approximately $ 2.8 million, in aggregate, generating net proceeds to the Company of approximately $ 2.6 million, net of issuance costs of approximately $ 0.2 million and from January 1, 2024 until the Bond issuance was closed on March 14, 2024. Overall, we issued Bonds totaling a principal amount of approximately $ 4.2 million, in aggregate, generating net proceeds to the Company of approximately $ 3.8 million, net of issuance costs of approximately $ 0.4 million during the offering. From January 1, 2024 through March 26, 2024 the Company issued 13,074,738 shares of Class A Common Stock under the at-the-market offering program for net proceeds of approximately $ 6.9 million, net of brokerage and placement fees of approximately $ 0.3 million pursuant to the August Prospectus Supplement. See Note 6. ​ ​ F-37 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.