• Large scale dilution: shares outstanding increased by more than 50% in 3 months.
• Despite spending big on robots, the most of the revenue growth isn’t from robots sales.
• Stock price is supported by heavy promotion targeting retail investors.
  • Almost daily PRs of new contracts with no details
  • Google ads
• Knightscope stopped reporting important KPIs after Q3 2021. We believe this is an intentional effort to obscure the true economics of the business and hide poor performance. 2021, 2020, 2019, 2018
• Sales of call boxes is subsidizing the failed robot biz.
• Call boxes are a highly competitive, low-margin business.
• We believe the company has insufficient cash-on-hand to service its existing contracts and will need to raise more capital.
• From reviewing Knightscope contracts and speaking with customers, we believe Knightscope is discounting their products to boost sales.
• Sales are further boosted through expensive financing deals to help customers afford the robots.
• On top of the finance discount, when a customer defaults on their financing, Knightscope assumes 50% of the loss.
• The financing deals worsen the unit economics of the business which already has negative gross margins.
• Snuck in a Bond offering to retail of $10mln (Noteworthy they mentioned this at the very end of a prerecorded video but unheard in their earnings report)
• Knightscope’s independent auditor, BPM, included a going concern warning with their opinion.
• If Knightscope goes bankrupt, like Li’s previous company, common shareholders will get nothing because they’re liquidation rights are superseded by debt holders and 4 classes of preferred shares.
• We believe the interests of management are not aligned with other shareholders and that common shareholders bear substantially all the risk of the Company failing.
• While the company performed poorly in 2022, CEO Li and his wife were paid over $2 million by Knightscope. Li even received a substantial raise.
• Management owns a minority of shares but has virtual control of the Company through super-voting shares that get 10 votes each.
• There are numerous red flags which indicate accounting issues and lead us to question the accuracy of the Company’s financial statements.
• Knightscope disclosed material weaknesses in internal controls over financial reporting in years 2022[1][2], 2021, 2020, 2019, 2017, 2016, 2015, 2014.
• On January 26, 2023, half of the non-employee directors voluntarily resigned from the Company’s board.
• After repeated accounting challenges, Knightscope hired Mallorie Burak as CFO, who was fired from her last role for what the CEO alleged were significant material weaknesses in internal control.
• CFO Mallorie Burak is neither a licensed CPA nor a CFA.
• Knightscope changed auditors on Nov. 2 2020 while the annual audit was likely underway. The Company switched from E&Y to the less reputable firm BPM LLP.
• Knightscope’s new auditor, BPM LLP, was censured and fined $50k less than a month ago by the PCAOB. The partner in question is the same one responsible for the Knightscope audit.

Dilution Update

ATM

As per our initial report, we were confident Knightscope would have to dilute shares through its ATM agreement. And as expected they did. From July 1, 2023 to August 11, 2023, the Company sold 3,764,215 shares of Class A Common Stock.

• Knightscope claims their robots “fight crime” but in reality they’re “Roombas” with cameras.
• Knightscope is short on cash and will likely dilute shareholders to raise capital.
• Knightscope has an active $93m shelf and an ATM, from which it can issue shares.
• As of July 14, 2023, Knightscope is no longer subject to Baby Shelf Rule and can now take full advantage of the $93m shelf.
• Operations are funded through toxic dilution and crowdfunding.
• Revenue has flatlined over the past few years despite spending $10s of millions on marketing and continuing to spend big on R&D.
• Cash burn continues to increase and a there is no clear path to profitability.
• Knightscope’s founder and CEO has a track record of failed ventures and an impressive ability to raise capital, even when faced with a looming bankruptcy.
• Knightscope’s services are heavily disliked and customers aren’t satisfied with their services.

Introduction

Knightscope is a self-proclaimed American security and robotics company established in 2013 which builds Autonomous Security Robots (ASR’s). Since its establishment, it has managed to capture attention with its laughable attempts at innovation with “security” robots that resemble rejected Star Wars characters. The company parades itself as a solution for surveillance, but a closer look reveals those claims to be more smoke and mirrors than actual substance. In this report, we will dissect Knightscope’s impending dilution, highlighting its consistent lack of profitability, inability to scale, ineffective robotic technology, lack of customer satisfaction, and the threat of delisting from Nasdaq.