Knightscope Financials Reveal Huge Increase In Expenses And Incorrect Accounting

•Published Oct 02, 2017 15:42 PM

Knightscope's H1 2017 financials are out, in the midst of their ongoing crowd funding approaching $17 million.

In this note, we analyze Knightscope's H1 2017 financials, include revenue and unit growth, expenses increases, accounting issues and an exit of a key executive. Moreover, we compare Knightscope's recurring revenue growth to SaaS benchmarks, showing how their relative growth rate is challenged and presents a warning.

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Comments (16)

Undisclosed Manufacturer #1

•Oct 04, 2017

I believe Spending 1/3 of the money raised to raise more money is border line ponzi scheme, no?

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John Honovich

•Oct 05, 2017

IPVM

In reply to Undisclosed Manufacturer #1

No, a ponzi scheme is "where the operator generates returns for older investors through revenue paid by new investors, rather than from legitimate business activities or profit of financial trading." In Knightscope's case they plan to generate revenue through selling / renting robots to large organizations via their sales force and partners, not via the people investing.

Spending a lot of money to raise money might be inefficient or debatable but there's nothing ponzi-esque to it.

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(1)

Undisclosed #3

•Oct 05, 2017

IPVMU Certified

In reply to John Honovich

...there's nothing ponzi-esque to it.

Well, maybe it's just a little ponzi-esque or could evolve that way, from the skeptics point of view:

First, although Ponzis don't actually pay from legitimate earnings, they often claim they are doing exactly that.

In Knightscope's case, their ability to earn the needed revenue to generate significant, if any, returns for investors has been called into question by yourself and others.

Yet they have also had several rounds of investment, each at a higher price than the one before.

If Knightscope were to successfully IPO and stay above water for a few months/years before failing, but never having a viable business model, all the while floating new shares, its got an element of Ponzi there.

Consider that the early investors who cashed out would essentially be being paid by later investors...

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(3)

Undisclosed #2

•Oct 05, 2017

This style robot is bad. fail. retarded.

Knightscope...STOP. If I ever see your robot I'm going to place my chewing gum on it.

Now that is a purpose.

Gumtray.

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(1)

Undisclosed #3

•Oct 05, 2017

IPVMU Certified

...they will pay SeedInvest more than a million in cash and give SeedInvest ~1% of equity...While the equity is risky, that is a substantial amount of cash.

The risk is mitigated as quickly as possible through the use of their sister firm, SeedDivest ;)

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(2)

Undisclosed Manufacturer #1

•Oct 05, 2017

In reply to Undisclosed #3

I am in line with Undisclosed #3. While I don't think that Knightscope CEO intentions are to rip off people, I question their spending like john mentioned. I don't think their pitch would have went bad if they said " I would like to raise money to spend 1/3 of it raising more money, trust me, we know what we are doing". Anyways, I do admire what they are doing and if they make it not, I do respect their vision.

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(1)

Undisclosed #4

•Oct 05, 2017

The first time it happens (Carbon Motors) maybe you get a pass but when it happens twice... "if it looks like a duck and quacks like a duck it's a duck". Also the amount of money paid to CEO and wife while business is losing massive amounts of money is insane. Who gets a bonus when their robots are running into fountains and breaking down all the time and the company is losing massive amounts of cash. I think there is a lot of information that doesn't get disclosed about the company that investors should have the right to know before putting their hard earned money into the company. No board members or oversight is also a huge red flag. Who would invest in a company at this stage - 4 years into the game with these results and not demand a board to govern. This whole thing is astounding.

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(3)

Undisclosed #4

•Oct 06, 2017

Does anyone know if the SEC has actually accepted the S1A report from Knightscope? How can they not conduct a pretty extensive review of the filing with all financial audits from the start of the company being false. Can investors that are not happy with being mislead with false financial information ask for their investments back. Basically they are saying (just an example) the robot cost 60K when in fact it costs 100K to build and support... not a very good financial model. The have raised a considerable amount of money on false financial, poor audits practices and extremely poor accounting. How can the SEC let a company get away with this? Aren't they supposed to govern these things on a public offering.

Can anyone answer these questions? or have additional comments?

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(2)

Undisclosed #4

•Oct 06, 2017

What happened to officer compensation? Why wasn't that included in the filing.

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(2)

Undisclosed #5

•Oct 06, 2017

keep peeling the onion UD#4

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(1)

Undisclosed #3

•Oct 06, 2017

IPVMU Certified

In reply to Undisclosed #5

haven't we cried enough UD#5

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(1)

Undisclosed #5

•Oct 06, 2017

when lambs are being lead to the slaughter, uninterested parties such as UD4 can help us focus on the what is - not on the what investors hope it is.

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(1)

Undisclosed #4

•Oct 08, 2017

http://www.nationaldefensemagazine.org/articles/2017/9/22/homeland-security-struggling-to-fund-chem-bio-defense

Don't worry DHS Knightscope K1 will save the day on chemical and biological warfare with early threat detection.

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Mark Palka

•Oct 09, 2017

IPVMU Certified

being old fashion the real concern with Knightscope and all these other Drone companies is that the cost to deliver the product, maintain the product and monitor the product is too high and the margin is too low. In every SaaS company I see that is successful they have a much better margin. For real growth they need to deliver the product to many markets simultaneously but the big obstacle is that they have no dealer program they are the developer/manufacturer/distributor/retailer/service - with each step costing money. The winner in this space will develop a cost effective product that can be licensed or sold to dealers is every market. Just my 2 cents

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Undisclosed #4

•Oct 09, 2017

I think you're spot on!!

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Undisclosed Manufacturer #6

•Oct 10, 2017

It looks like someone in China has engineered their own version of the Security Robot: http://www.dailymail.co.uk/sciencetech/article-4966604/Robotic-POLICE-hit-streets-Beijing.html

There's also a video here: http://video.dailymail.co.uk/preview/mol/2017/10/10/6287900012545527079/636x382_MP4_6287900012545527079.mp4

The example they highlight has cameras with Facial Recognition and an "extendable electroshock arm..." There's even a version with an on-board Taser!

What's next? Sharks with Lasers?

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