Knightscope, Inc. Commitments Disclosure
NOTE 9: 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:
| December 31, 2024 |
| December 31, 2023 | |||
Operating leases |
|
| ||||
Operating lease right-of-use assets | $ | 407 | $ | 1,458 | ||
Operating lease liabilities, current portion | $ | 412 | $ | 733 | ||
Operating lease liabilities, non-current portion |
| — |
| 711 | ||
Total operating lease liabilities | $ | 412 | $ | 1,444 | ||
Operating lease costs | $ | 989 | $ | 1,027 | ||
As of December 31, 2024, future minimum operating lease payments for the year is as follows:
Years ending December 31, | Amount | ||
2025 | $ | 428 | |
Total future minimum lease payments |
| 428 | |
Less – Interest |
| (16) | |
Present value of lease liabilities | $ | 412 | |
Weighted average remaining lease term is 0.7 years. The weighted average discount rate of 12.81% ranges from 5.75% to 15.0% dependent upon the assets underlying the operating lease and its term.
Rent expense totaled $1.0 million and $1.0 million for the years ended December 31, 2024 and 2023, respectively, included in the Company’s statements of operations. There were two month to month lease agreements for the year ended December 31, 2024. 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.
Purchase Commitments
The Company executed a purchase agreement on September 13, 2024, in order to secure the acquisition of essential to ASR production. This agreement stipulates monthly purchases of $40 thousand commencing in January 2025 and concluding in August 2026, culminating in a total expenditure of $0.8 million.
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, 2024 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, 2024 and 2023.
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, 2024 and 2023, 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.
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.