Serve Robotics (NYSE: SERV) ramps spending, deepens loss as cash tops $235M
Serve Robotics Inc. reported sharp growth in early-stage operations for the quarter ended June 30, 2026, with revenue of $3,238 thousand, up from $642 thousand a year earlier, driven by fleet and software services. Six‑month revenue reached $6,222 thousand.
Heavy investment continues: total operating expenses were $57,286 thousand in the quarter, leading to a net loss of $64,127 thousand, and a six‑month net loss of $113,131 thousand. As of June 30, 2026, liquidity comprised $79.1 million of cash and cash equivalents and $156.3 million of short‑term marketable securities, or $235.4 million in total. The company completed acquisitions of Diligent Robotics ($25.7 million), Vebu ($3.7 million), and earlier Vayu Robotics ($39.5 million) to expand healthcare, kitchen and AI autonomy capabilities. Management acknowledges ongoing losses but expects existing liquidity to fund operations for at least twelve months while it may seek additional equity or debt financing, which could dilute stockholders.
Positive
- None.
Negative
- None.
Key Figures
Revenue Q2 2026: $3,238 thousand
Net loss H1 2026: $113,131 thousand
Liquidity: $235.4 million
+5 more
8 metrics
Revenue Q2 2026
$3,238 thousand
Revenues for the three months ended June 30, 2026
Net loss H1 2026
$113,131 thousand
Net loss for the six months ended June 30, 2026
Liquidity
$235.4 million
Cash and cash equivalents and short-term marketable securities as of June 30, 2026
Operating expenses Q2 2026
$57,286 thousand
Total operating expenses for the three months ended June 30, 2026
Shares outstanding
86,496,060 shares
Common stock outstanding as of June 30, 2026
Remaining performance obligation
$6,137 thousand
Current and noncurrent remaining performance obligation as of June 30, 2026
Vayu purchase consideration
$39,511 thousand
Total purchase price for the Vayu Robotics acquisition
Intangible assets, net
$34,505 thousand
Net carrying value of intangible assets as of June 30, 2026
Key Terms
going concern, at-the-market public offerings, relief from royalty method, developed technology, +2 more
6 terms
going concern financial
"expects it will be able to fund its operations for at least the next twelve months from the issuance of these unaudited condensed consolidated financial statements"
Going concern is the accounting assumption that a company will keep operating and meeting its obligations for the foreseeable future. The phrase matters most when a company or its auditors disclose substantial doubt about it, a formal warning that the business may not have enough resources to continue without raising money, restructuring, or selling assets. That language in a filing or press release signals elevated financial risk.
at-the-market public offerings financial
"Issuance of common stock pursuant to at-the-market public offerings, net of offering costs"
relief from royalty method financial
"The estimated fair value of the developed technology was determined using the relief from royalty method under the income-based approach"
developed technology financial
"Intangible assets consist of developed technology, customer relationships, and trade names"
contingent consideration financial
"contingent consideration is classified as a liability or as equity on the basis of the definitions of a financial liability and an equity instrument"
Contingent consideration is an additional payment agreed when one company buys another that will be paid later only if specific future targets are met, such as revenue, profit, or regulatory milestones. It matters to investors because it shifts risk between buyer and seller and affects the acquiring company's future cash flow and reported value — like promising a bonus after results are proven.
remaining performance obligation financial
"Remaining performance obligation represents contracted revenue that has not yet been recognized"
Remaining performance obligation is the amount of work or services a company still needs to deliver to a customer under a contract. It matters because it shows how much revenue the company can expect to earn in the future from that contract, helping investors understand the company's ongoing business and growth potential.
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FAQ
How much revenue did Serve Robotics (SERV) generate in Q2 2026?
Serve Robotics generated $3,238 thousand in revenue in Q2 2026, up from $642 thousand in Q2 2025. Growth came from both fleet services ($2,305 thousand) and software services ($933 thousand) as the company scaled its delivery and software offerings.
What was Serve Robotics (SERV) net loss for the first half of 2026?
Serve Robotics reported a net loss of $113,131 thousand for the six months ended June 30, 2026, compared with $34,068 thousand a year earlier. The wider loss reflects increased R&D, general and administrative, operations, and sales and marketing expenses as the business scales.
What is Serve Robotics (SERV) current cash and investment position?
As of June 30, 2026, Serve Robotics held $235.4 million in cash, cash equivalents and short‑term marketable securities. This included $79.1 million of cash and cash equivalents and $156.3 million of short‑term marketable securities, forming its primary liquidity source for near‑term operations.
Did Serve Robotics (SERV) complete any acquisitions in 2025–2026?
Yes. Serve Robotics completed the Diligent Robotics acquisition for $25,707 thousand and the Vebu acquisition for $3,677 thousand in 2026, and previously acquired Vayu Robotics for $39,511 thousand in 2025, adding healthcare, kitchen and AI navigation capabilities.
What does Serve Robotics (SERV) say about its ability to continue as a going concern?
Serve Robotics states it expects to fund operations for at least twelve months from June 30, 2026 using existing cash and securities. Management also notes it may seek additional equity or debt financing, and that such capital raises could dilute existing stockholders.
How concentrated is Serve Robotics (SERV) revenue among major customers?
In Q2 2026, Customer A represented 11% of revenue and Customer B 22%; in Q2 2025, Customer A and Customer C represented 31% and 39%, respectively. This concentration highlights reliance on a limited number of significant customers for revenue and receivables.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
For the Quarterly Period Ended June 30, 2026
Or
For the transition period from _________ to __________
COMMISSION FILE NUMBER 001-42023
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive offices) (Zip code) | (Registrant’s telephone number, including area code) | |||||||
| (Former name, former address and former fiscal year, if changed since last report) | ||
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||||||||||||
The | ||||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | o | Accelerated filer | o | ||||||||
| x | Smaller reporting company | ||||||||||
| Emerging growth company | |||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o No x
As of August 4, 2026, the registrant had 86,707,507 shares of its common stock, par value $0.0001 per share, outstanding.
Table of Contents
SERVE ROBOTICS INC.
TABLE OF CONTENTS
| Page # | ||||||||
PART I - FINANCIAL INFORMATION | ||||||||
Item 1. | Financial Statements (Unaudited) | |||||||
Condensed Consolidated Balance Sheets | 2 | |||||||
Condensed Consolidated Statements of Operations and Comprehensive Loss | 3 | |||||||
Condensed Consolidated Statements of Changes in Stockholders’ Equity | 4 | |||||||
Condensed Consolidated Statements of Cash Flows | 5 | |||||||
Notes to Unaudited Condensed Consolidated Financial Statements | 6 | |||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 38 | ||||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 46 | ||||||
Item 4. | Controls and Procedures | 46 | ||||||
PART II - OTHER INFORMATION | ||||||||
Item 1. | Legal Proceedings | 48 | ||||||
Item 1A. | Risk Factors | 48 | ||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 79 | ||||||
Item 3. | Defaults Upon Senior Securities | 79 | ||||||
Item 4. | Mine Safety Disclosures | 79 | ||||||
Item 5. | Other Information | 79 | ||||||
Item 6. | Exhibits | 29 | ||||||
Signatures | 81 | |||||||
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “intend,” “seek,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” “might,” “forecast,” “continue,” or the negative of those terms, and similar expressions and comparable terminology intended to reference future periods. Forward-looking statements include, but are not limited to, statements about:
•our status as an early-stage company with minimal revenue, a history of losses, and a limited operating history, which may make it difficult to evaluate the future of our business and prospects;
•our ability to execute our business strategy to expand our addressable market and effectively manage our growth;
•our use of artificial intelligence (“AI”) and machine learning technologies, which introduces new risks and uncertainties related to accuracy, bias, intellectual property, and regulatory scrutiny;
•our ability to expand and sustain our international business;
•our ability to commercialize our products at a large scale efficiently and effectively;
•our substantial reliance on relationships with suppliers and service providers for the parts and components in our robots, as well as for the manufacture of our robots;
•our ability to attract and retain highly qualified personnel, including engineers, robotics experts, and machine learning specialists;
•the requirement for significant capital to fund our operations and growth, and the risk that financing may not be available when needed or on acceptable terms;
•our robots’ reliance on sophisticated software technology that incorporates third-party components and networks to operate;
•our ability to adapt to evolving technology or customer demands in a timely and cost-effective manner;
•potential defects, glitches, or malfunctions in our products that could compromise performance, lead to injury or property damage, and result in product recalls or product liability claims;
•safety incidents arising from human supervision, connectivity issues, third-party software, or automation that could cause injury, trigger recalls, or result in uninsured product liability and warranty claims;
•misuse of our delivery robots and related technology;
•accessibility concerns or failure to comply with disability access laws may result in claims, operational restrictions, or reputational harm;
•the inability of our supply chain to deliver certain key electrical components, such as semiconductors;
•unfavorable changes in interest rates, foreign currency exchange rates, and inflationary pressures that may increase our operating costs;
•our dependence on discretionary spending patterns in the areas in which we operate and in the economy at large;
•competition in an industry subject to rapid technological change, where competitors may have or attain more resources and greater market recognition than we do;
•important assumptions about the market demand, pricing, adoption rates, and sales cycle for our current and future products and services being inaccurate;
•our ability to protect, maintain, and enforce our intellectual property rights;
•potential claims of infringement of third-party intellectual property rights;
•the unproven nature of our video and LiDAR licensing model and our ability to generate recurring revenue at expected levels;
•security breaches and other disruptions that could compromise our proprietary information and expose us to liability;
•cybersecurity risks to our operational systems, security systems, infrastructure, integrated software in our products, and data processed by us or third-party vendors;
•evolving laws, regulations, standards, policies, and contractual obligations related to privacy and data security, including the California Consumer Privacy Act (“CCPA”), the Illinois Biometric Information Privacy Act (“BIPA”), the General Data Protection Regulation (“GDPR”), and the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”);
•our internal use of AI, generative AI, and machine learning tools that may expose us to heightened cybersecurity risks;
•unfavorable changes in interest rates, foreign currency exchange rates, and inflationary pressures that may increase our operating costs;
•our dependence on discretionary spending patterns in the areas in which we operate and in the economy at large;
•competition in an industry subject to rapid technological change, where competitors may have or attain more resources and greater market recognition than we do;
•important assumptions about the market demand, pricing, adoption rates, and sales cycle for our current and future products and services being inaccurate;
•tariffs imposed by the United States and other countries, as well as changing trade relations, regional and international conflicts, and political conditions;
•the use of emerging technologies like AI, machine learning, and generative AI requiring us to navigate an uncertain legal and regulatory landscape;
•evolving privacy, data protection, and AI regulation that may restrict our ability to collect, process, and license video and LiDAR datasets;
•the evolving regulations around personal delivery devices, which could materially impact our business and growth prospects in new markets;
•compliance with complex laws and regulations in multiple jurisdictions, including product safety, data privacy, healthcare, and environmental regulations;
•the market price and trading volume of our common stock may be volatile and could decline significantly;
•our obligation to develop and maintain proper and effective internal control over financial reporting, and the presence of material weaknesses that increase the risk of material misstatement of our consolidated financial statements; and
•other risks and uncertainties, including those listed in our Annual Report on Form 10-K for the year ended December 31, 2025, including the factors described in the section entitled “Part I, Item 1A. Risk Factors,” as supplemented by those risks and uncertainties listed in this Quarterly Report on Form 10-Q, including the factors described in the section entitled “Part II, Item 1A. Risk Factors.”
Actual events or results may differ from those expressed in forward-looking statements. As such, you should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this
Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, operating results, prospects, strategy, and financial needs. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, assumptions, and other factors described in the section entitled “Part I, Item 1A. Risk Factors” and elsewhere in our Annual Report on Form 10-K for the year ended December 31, 2025, as supplemented by the risks, uncertainties, assumptions, and other factors described in the section entitled “Part II, Item 1A. Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a highly competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that such information provides a reasonable basis for these statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q speak only as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information, actual results, revised expectations, or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements.
ii
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
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SERVE ROBOTICS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts and per share data)
(Unaudited)
| June 30, 2026 | December 31, 2025 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Short-term marketable securities | |||||||||||
| Accounts receivable, net | |||||||||||
| Prepaid expenses | |||||||||||
| Other receivables | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Long-term marketable securities | |||||||||||
| Property and equipment, net | |||||||||||
| Intangible assets, net | |||||||||||
| Goodwill | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Other non-current assets | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued liabilities | |||||||||||
| Deferred revenue | |||||||||||
| Operating lease liabilities, current | |||||||||||
| Total current liabilities | |||||||||||
| Operating lease liabilities, non-current | |||||||||||
| Deferred tax liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 12) | |||||||||||
| Stockholders’ equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated other comprehensive income (loss) | ( | ||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
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SERVE ROBOTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share amounts and per share data)
(Unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Revenues | $ | $ | $ | $ | |||||||||||||||||||
| Cost of revenues | |||||||||||||||||||||||
| Gross loss | ( | ( | ( | ( | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Operations | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Loss from operations | ( | ( | ( | ( | |||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Interest expense | ( | ||||||||||||||||||||||
| Realized loss on foreign currency translation | ( | ( | |||||||||||||||||||||
| Realized loss on investments | ( | ||||||||||||||||||||||
| Other income | |||||||||||||||||||||||
| Other expenses | ( | ( | |||||||||||||||||||||
| Net loss before income taxes | ( | ( | ( | ( | |||||||||||||||||||
| Benefit from income taxes | ( | ( | |||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Unrealized gain (loss) on foreign currency translation | ( | ( | |||||||||||||||||||||
| Unrealized gain (loss) on investments | ( | ( | ( | ||||||||||||||||||||
| Other comprehensive income (loss), before tax | ( | ||||||||||||||||||||||
| Income tax expense related to items of other comprehensive income | |||||||||||||||||||||||
| Other comprehensive income (loss), net of tax | ( | ||||||||||||||||||||||
| Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Weighted average common shares outstanding - basic and diluted | |||||||||||||||||||||||
| Net loss per common share - basic and diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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SERVE ROBOTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands, except share amounts and per share data)
(Unaudited)
| Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income | Accumulated Deficit | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balances at December 31, 2024 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Issuance of common stock in registered direct offering, net of offering costs | — | — | |||||||||||||||||||||||||||||||||
| Short-swing profit disgorgement | — | — | — | — | |||||||||||||||||||||||||||||||
| Vested restricted stock units | — | * | — | — | — | — | |||||||||||||||||||||||||||||
| Exercise of warrants | — | * | — | — | |||||||||||||||||||||||||||||||
| Exercise of options | — | * | — | — | |||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Balances at March 31, 2025 | ( | ||||||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to at-the-market public offerings, net of offering costs | — | * | — | — | |||||||||||||||||||||||||||||||
| Vested restricted stock units | — | * | — | — | — | — | |||||||||||||||||||||||||||||
| Exercise of warrants | — | * | ( | — | — | ( | |||||||||||||||||||||||||||||
| Exercise of options | — | * | — | — | |||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Balances at June 30, 2025 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balances at December 31, 2025 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Issuance of common stock pursuant to at-the-market public offerings, net of offering costs | — | * | — | — | |||||||||||||||||||||||||||||||
| Acquisitions | — | * | — | — | |||||||||||||||||||||||||||||||
| Vested restricted stock units | — | * | — | — | — | — | |||||||||||||||||||||||||||||
| Exercise of options | — | — | — | ||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | * | — | — | ||||||||||||||||||||||||||||||
| Other comprehensive loss | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Balances at March 31, 2026 | ( | ( | |||||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to at-the-market public offerings, net of offering costs | — | — | |||||||||||||||||||||||||||||||||
| Vested restricted stock units | — | — | — | ||||||||||||||||||||||||||||||||
| Exercise of options | — | * | ( | — | — | ( | |||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||
| Balances at June 30, 2026 | $ | $ | $ | ( | $ | ( | $ | ||||||||||||||||||||||||||||
*The change in common stock is less than $1,000
The accompanying notes are an integral part of these condensed consolidated financial statements.
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SERVE ROBOTICS INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Six Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Stock-based compensation | |||||||||||
| Depreciation | |||||||||||
| Amortization | |||||||||||
| Deferred income taxes | ( | ||||||||||
| Accretion of discount on available-for-sale securities | ( | ( | |||||||||
| Changes in operating assets and liabilities, net of effects of businesses acquired: | |||||||||||
| Accounts receivable, net | ( | ( | |||||||||
| Prepaid expenses | ( | ( | |||||||||
| Other receivables | ( | ( | |||||||||
| Other current assets | ( | ||||||||||
| Accounts payable | ( | ( | |||||||||
| Accrued liabilities | |||||||||||
| Deferred revenue | ( | ||||||||||
| Operating lease liabilities | ( | ||||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Cash flows from investing activities: | |||||||||||
| Proceeds from maturities and sales of marketable securities | |||||||||||
| Purchases of marketable securities | ( | ( | |||||||||
| Acquisitions, net of cash acquired | ( | ( | |||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Proceeds from tariff refunds | |||||||||||
| Security deposits | ( | ( | |||||||||
| Capitalized software implementation costs | ( | ||||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of common stock pursuant to at-the-market public offerings, net of offering costs | |||||||||||
| Proceeds from exercise of options | |||||||||||
| Proceeds from issuance of common stock in registered direct offering, net of offering costs | |||||||||||
| Proceeds from exercise of warrants | |||||||||||
| Repayments of financing lease liability | ( | ||||||||||
| Proceeds from short-swing profit disgorgement | |||||||||||
| Payments of deferred offering costs | ( | ||||||||||
| Net cash provided by financing activities | |||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ( | |||||||||
| Net change in cash and cash equivalents | ( | ( | |||||||||
| Cash and cash equivalents at beginning of period | |||||||||||
| Cash and cash equivalents at end of period | $ | $ | |||||||||
| Supplemental disclosure of cash flow information: | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Cash paid for income taxes | $ | $ | |||||||||
| Supplemental disclosure of non-cash investing and financing activities: | |||||||||||
| Non-cash consideration for acquisitions | $ | $ | |||||||||
| Operating lease right-of-use assets obtained for lease obligations | $ | $ | |||||||||
Purchases of property and equipment, accrued but not paid | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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SERVE ROBOTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND BUSINESS
Serve Operating Co. (formerly known as Serve Robotics Inc.) was incorporated in Delaware in January 2021 and is a direct wholly-owned subsidiary of Serve Robotics Inc. Serve Operating Co. holds all material assets and conducts all material business activities and operations of Serve Robotics Inc. All references to “Serve,” the “Company,” “we,” “our,” “us” or similar terms refer to Serve Robotics Inc. together with its wholly-owned subsidiaries.
In June 2026, the Company changed its corporate headquarters from 730 Broadway, Redwood City, California 94063 to 1360 Bayport Avenue, San Carlos, California 94070 (the “Address Change”). There was no material impact on the Company’s operations, financial position, or results of operations as a result of the Address Change.
Serve designs, develops, and operates low-emission robotics systems that navigate and perform work in complex, human-centered environments. Serve has developed an advanced platform that combines proprietary hardware, artificial intelligence, computer vision, and cloud-based fleet management software to enable safe, reliable, and scalable autonomous operations across multiple outdoor and indoor physical domains.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the SEC applicable to interim period financial statements and do not include all of the information and disclosures required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the financial position and the results of operations for the periods presented.
Liquidity and Going Concern
As of June 30, 2026, our principal sources of liquidity were cash and cash equivalents and short-term marketable securities of $235.4 million, which consisted of unrestricted cash and cash equivalents on hand of $79.1 million and $156.3 million in short-term marketable securities. The Company has incurred recurring losses each year since its inception and continues to forecast operating and investing cash outflows.
Our projections of future cash needs and cash flows may differ from historical results. If current cash on hand, cash equivalents, and cash that may be used or generated from our business operations are insufficient to continue to operate our business, we will implement a plan to reduce operating and investing cash flows through reducing planned capital expenditures and planned operating expenses. Future business acquisitions will be evaluated based on whether resulting cash outflows will enable us to operate our business to be able to continue as a going concern.
Based on these plans, the Company expects it will be able to fund its operations for at least the next twelve months from the issuance of these unaudited condensed consolidated financial statements. The Company’s unaudited condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business.
We have and may continue to seek to obtain working capital during our fiscal year 2026 or thereafter through sales of our equity securities or convertible debt or through public or private debt facilities from various financial institutions where possible, though the availability of such funding, and applicable terms, will be dependent on prevailing market conditions.
If we identify sources for additional funding, such as the sale of additional equity securities or convertible debt, this will result in dilution to our stockholders. We can give no assurance that we will generate sufficient cash flows in the future to
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satisfy our liquidity requirements or sustain future operations in the longer-term, or that other sources of funding, such as sales of equity or debt, would be available or would be approved by our securityholders, if needed, on favorable terms or at all. If we fail to obtain additional working capital as and when needed, such failure could have a material adverse impact on our business, results of operations and financial condition. Furthermore, such lack of funds may inhibit our ability to respond to competitive pressures or unanticipated capital needs, or may force us to reduce operating expenses, which would significantly harm the business and development of operations.
Use of Estimates
The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, (i) valuation of acquired intangible assets and goodwill, (ii) impairment of long-lived assets and goodwill, (iii) estimated useful lives of amortizable long-lived assets, (iv) fair values of investments and other financial instruments, (v) the incremental borrowing rate applied in lease accounting, (vi) allocation of depreciation, amortization, and wireless network connectivity expenses to cost of revenue, (vii) valuation of stock-based compensation, and (viii) fair value of contingent consideration. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.
Significant Accounting Policies
Other than the accounting policies as disclosed in this Quarterly Report on Form 10-Q, there have been no material changes to our significant accounting policies disclosed in Note 2. Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2025.
Concentrations of Credit Risk
Financial instruments, consisting principally of cash and cash equivalents, are potentially subject to credit risk concentration. The Company generally maintains balances in various operating accounts at financial institutions that management believes to be creditworthy, in amounts that may exceed federally insured limits. The Company has not experienced any losses related to its cash and cash equivalents and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
A significant portion of our revenue is concentrated with a limited number of customers. The following table represents the concentration of revenue for all customers that accounted for more than 10% of our revenues:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Customer A sales as a percentage of total revenues | % | % | % | % | |||||||||||||||||||
| Customer B sales as a percentage of total revenues | % | N/A | % | N/A | |||||||||||||||||||
| Customer C sales as a percentage of total revenues | N/A | % | N/A | % | |||||||||||||||||||
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A significant portion of our accounts receivable is concentrated with a limited number of customers. The following table represents the concentration of accounts receivable for all customers that account for more than 10% of our total accounts receivable as of June 30, 2026 and December 31, 2025:
| June 30, 2026 | December 31, 2025 | ||||||||||
| Customer A receivables as a percentage of total accounts receivable | % | % | |||||||||
| Customer B receivables as a percentage of total accounts receivable | N/A | N/A | |||||||||
| Customer C receivables as a percentage of total accounts receivable | N/A | N/A | |||||||||
| Customer D receivables as a percentage of total accounts receivable | N/A | % | |||||||||
| Customer E receivables as a percentage of total accounts receivable | % | % | |||||||||
| Customer F receivables as a percentage of total accounts receivable | % | N/A | |||||||||
Business Combinations
The Company accounts for business combinations using the acquisition method of accounting, which requires, among other things, allocation of the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed at their estimated fair values on the acquisition date. The excess of the fair value of purchase consideration over the values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair value of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to the valuation of intangible assets. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, not to exceed one year from the date of acquisition, the Company may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill if new information is obtained related to facts and circumstances that existed as of the acquisition date. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are reflected in the unaudited condensed consolidated statements of operations and comprehensive loss.
Acquisition-related costs are costs that the Company incurs to effect a business combination, such as advisory, legal, accounting, valuation, and consulting fees. These costs are expensed as incurred. The Company recognized $0.4 million and $2.2 million of acquisition costs during the three and six months ended June 30, 2026, respectively. There was an immaterial
Contingent consideration is classified as a liability or as equity on the basis of the definitions of a financial liability and an equity instrument. The Company recognizes the fair value of any contingent consideration that is transferred to the seller in a business combination on the date at which control of the acquiree is obtained. Equity-classified contingent consideration related to acquisitions is measured at fair value upon acquisition of the acquiree and is recorded in permanent equity. Equity-classified contingent consideration is not revalued at each reporting period. Liability-classified contingent consideration related to acquisitions is measured at fair value upon acquisition of the acquiree and is recorded as a liability based on the expected dates of payment. Liability-classified contingent consideration is revalued each reporting period.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation expense is recognized using the straight-line method over the following estimated useful lives:
| Category | Estimated Useful Life | ||||
| Robot Assets | |||||
| Tooling | |||||
| Office Equipment | |||||
| Furniture and Fixtures | |||||
| Leasehold Improvements | Shorter of remaining lease term or estimated useful life for leasehold improvements | ||||
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Intangible Assets, Net
Intangible assets result from acquisitions. The accounting for acquisitions requires significant estimates and judgments based on assumptions that are believed to be reasonable. Intangible assets consist of developed technology, customer relationships, and trade names. Intangible assets are recorded at fair value as of the date of acquisition and amortized using a method consistent with the pattern of benefit, which is typically on a straight-line basis over their estimated useful lives, generally 4 to 25 years. The Company reviews identifiable definite-lived intangible assets for impairment under the long-lived asset model described under “Impairment of Long-Lived Assets” as disclosed in Note 2. Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2025.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation (“ASC 718”). The Company measures all stock-based awards granted to employees, directors and non-employee consultants based on the fair value on the date of the grant and recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. For awards with service-based vesting conditions, the Company records the expense using the straight-line method. For awards with performance-based vesting conditions, the Company records the expense if and when the Company concludes that it is probable that the performance condition will be achieved.
The Company classifies stock-based compensation expense in its unaudited condensed consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. We estimate the volatility of common stock on the date of grant based on the weighted-average historical stock price volatility of our own shares or comparable publicly traded companies in our industry group. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield reflects the Company’s history of not paying cash dividends on common stock and its expectation that it will not pay cash dividends in the foreseeable future. Forfeitures are recognized as incurred. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards.
For awards with performance-based vesting conditions, compensation expense is recognized on a straight-line basis over the requisite service period. The fair value of each performance-based award granted is estimated on the date of grant. For performance-based awards with vesting conditions that impact the determination of fair value, the Company uses a Monte Carlo simulation option pricing model. This model requires the input of subjective assumptions, including expected stock price volatility, expected term, risk-free interest rate, dividend yield and the probability and timing of achieving the applicable performance conditions, as applicable. The Company estimates expected volatility based on the historical volatility of its common stock. The risk-free interest rate is based on U.S. Treasury yields with maturities consistent with the expected term of the awards. The Company assumes no expected dividend yield because it has not historically paid, and does not currently expect to pay, dividends on its common stock.
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Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). The Company derives its revenue from fleet services and software services. Revenue is measured based on the consideration the Company expects to be entitled to receive in exchange for transferring promised goods or services to customers, as determined by the terms of the applicable contract. The Company recognizes revenue when it satisfies its performance obligations by transferring control of the promised goods or services to the customer. When a contract contains multiple distinct performance obligations, the Company allocates the transaction price to each performance obligation based on its relative standalone selling price. As a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component when, at contract inception, the period between payment by the customer and the transfer of the related goods or services is expected to be one year or less.
Fleet services revenue is generated from the Company’s robot fleet completing delivery services and branding services. For delivery services, the determination that a performance obligation has been satisfied depends on the environment in which the service is provided. For outdoor delivery services, each delivery order is considered a new contract with the delivery of the specified good representing the single performance obligation. Accordingly, the Company satisfies its performance obligation when the delivery is complete, which is the point in time control of the delivered product transfers to the customer. For indoor delivery services, autonomous robot solutions are provided to customers as a stand ready obligation. Under this model, the Company retains ownership and control of its robots, which are available for the customer’s continuous use within their facilities over the contracted period of time. Under this model, the customer is provided with a bundle of integrated goods and services, including deployment of the autonomous robot, access to the proprietary software necessary for the robot functionality, implementation services, ongoing support and maintenance throughout the contracted term and autonomous robot deliveries. The bundle of integrated service offerings is considered a single performance obligation and recognized over time. As the customer is receiving and benefiting from these services simultaneously, revenue is recognized over time. The Company’s performance obligation on branding services is to continually promote a brand over the duration of the contractual term, which is typically less than one year. The Company primarily recognizes branding revenue in the amount that it has the right to invoice as branding services are rendered.
Software services revenue is generated from licensing software to customers, and delivering engineering and development projects. The Company recognizes revenue on its software services over time based on the contract term. The Company determines measurable performance obligations, which are assessed on a contract by contract basis. The Company develops certain measures to estimate the progress of the performance obligation at each reporting period end.
Cost of Revenue
Cost of revenue consists of direct labor, depreciation of robot assets, amortization of developed technology, network and other direct costs related to data, software, and services required for the robots to operate as intended.
For the outdoor delivery fleet, the Company allocates a portion of depreciation expense and network costs recognized during each period based on the percentage of the fleet available for delivery to cost of revenue. Fully depreciated assets are excluded from the calculation of utilization. For the indoor delivery fleet, the Company records robot depreciation expense, amortization expense related to the developed technology, and network and software licensing costs recognized during each period for all billable robots in each period. A billable robot is defined as a robot that is deployed at the customer location and available for customer use at any time.
Direct labor costs are allocated to cost of revenue based on departments or resources with direct contract involvement. Each contract is assessed to determine which personnel will be directly involved in delivery of performance obligations. Direct labor typically includes roles in fleet management, hardware operations, and software engineering.
Net Loss per Share
Net earnings or loss per share is computed by dividing net income or loss by the weighted-average number of common shares outstanding during the period, excluding shares subject to redemption or forfeiture. The Company presents basic and diluted net earnings or loss per share. Diluted net earnings or loss per share reflect the weighted average number of shares issued and outstanding during the period, adjusted for potentially dilutive securities outstanding. Potentially dilutive
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Potentially dilutive items outstanding are as follows:
| As of June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
Unvested restricted stock units | |||||||||||
| Common stock warrants | |||||||||||
| Contingently issuable shares | |||||||||||
| Stock options | |||||||||||
Unvested restricted stock awards subject to recourse and nonrecourse loans | |||||||||||
| Total potentially dilutive shares | |||||||||||
Recent Accounting Pronouncements
Changes to GAAP are established by the Financial Accounting Standards Board (“FASB”), in the form of Accounting Standards Updates (“ASUs”), to the FASB’s Accounting Standards Codification (“ASC”). The Company will adopt these changes according to the various timetables the FASB specifies. There were no recently adopted accounting standards which had a material impact on the Company’s consolidated financial position, results of operations, changes in stockholders’ equity and cash flows.
Recent Accounting Pronouncements Adopted
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740) - Improvements to Income Tax Disclosures,” which requires greater disaggregation of income tax disclosures related to the income tax reconciliation and income taxes paid. The amendments improve the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. The new standard is effective for annual periods beginning after December 15, 2024. We prospectively adopted ASU 2023-09 as of December 31, 2025. The additional required disclosures did not have a material impact on our consolidated financial statements.
Recent Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, “Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” which requires the disaggregation of certain expenses in the notes of the financial statements to provide enhanced transparency into the expense captions presented on the face of the statements of operations. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, and may be applied either prospectively or retrospectively. Early adoption is permitted. The adoption will require certain additional disclosure in the notes to the Company’s consolidated financial statements.
In May 2025, the FASB issued ASU 2025-03, “Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity,” which provides updates to the guidance for identifying the “accounting acquirer” in business combinations involving Variable Interest Entities. ASU 2025-03 is effective for annual periods beginning after December 15, 2026. The Company is evaluating the impact of this standard, but it does not expect the standard to have an impact on its financial statements and related disclosures.
In July 2025, the FASB issued ASU 2025-05, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets,” which provides a practical expedient for entities to estimate expected credit losses on current accounts receivable and current contract assets arising from revenue transactions accounted for under ASC 606. ASU 2025-05 is effective for the Company for annual periods beginning after December 15,
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2025, and interim periods within those annual periods. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements and disclosures.
In September 2025, the FASB issued ASU 2025-06, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software,” which removes all references to prescriptive and sequential software development stages and establishes new criteria for the capitalization of internal-use software costs. ASU 2025-06 is effective for annual periods beginning after December 15, 2027, and interim periods within annual periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated financial statements and disclosures.
3. REVENUE
Disaggregated Revenue Information
All revenue recognized during the periods presented was attributable to the Company’s core business operations, which are conducted through its single operating segment. Revenue is generated from the Company’s operations in the United States.
The following table presents our revenues disaggregated by service type. This level of disaggregation takes into consideration how the nature, amount, timing, and uncertainty of revenue and cash flows are affected by economic factors (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Fleet services | $ | $ | $ | $ | |||||||||||||||||||
| Software services | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | |||||||||||||||||||
Fleet Services
The Company derives revenue from its fleet of autonomous robots by offering delivery services and branding services. Delivery services revenue is derived from outdoor delivery services through partnerships with platforms to fulfill orders and indoor delivery services through partnerships with healthcare organizations to assist healthcare workers with transporting items through healthcare facilities. Branding services revenue is derived from fees paid by customers for the display of their company’s branding on Serve robots and/or by reserving robots for appearances at marketing opportunities.
Software Services
Software services revenue is derived from licensing software to customers, and engineering and development projects. Software licensing generates revenue from fees paid by customers for access to the Company’s proprietary software platforms and/or hosting services. Engineering and development project revenue is derived from partnerships for the development of software solutions utilizing the internally developed technology platform.
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Deferred Revenue
The Company records deferred revenues when cash payments are received or due in advance of the Company satisfying its performance obligations. The changes in the balances of deferred revenue were as follows (in thousands):
| Six Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Balance at beginning of period | $ | $ | |||||||||
| Additions | |||||||||||
| Increases due to acquisitions | |||||||||||
| Revenue recognized | ( | ( | |||||||||
| Balance at end of period | $ | $ | |||||||||
As of June 30, 2026, all of the deferred revenue is classified as current on the unaudited condensed consolidated balance sheet and expected to be recognized within the next twelve months.
Remaining Performance Obligation
Remaining performance obligation represents contracted revenue that has not yet been recognized, including unearned revenue and unbilled amounts that will be recognized as revenue in future periods. Remaining performance obligation is influenced by several factors, including seasonality, the timing of renewals, average contract terms and acquisitions. Remaining performance obligation is subject to future economic risks, including bankruptcies, regulatory changes and other market factors.
We have applied the practical expedients not to present unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise accounted for under the series guidance, and (iii) contracts for which we recognize revenue at the amount which it has the right to invoice for services performed.
Remaining performance obligation consisted of the following (in thousands):
| June 30, 2026 | December 31, 2025 | ||||||||||
| Current | $ | $ | |||||||||
| Noncurrent | |||||||||||
| Total | $ | $ | |||||||||
The majority of the Company’s noncurrent remaining performance obligation is expected to be recognized in the next 13 42
4. ACQUISITIONS
Fiscal 2026 Acquisitions
Vebu, Inc. Acquisition
On February 17, 2026 (the “Vebu Closing Date”), the Company completed its acquisition of Vebu, Inc. (“Vebu”), which specializes in developing advanced automation solutions and robotic systems that streamline food preparation and kitchen workflows across the food supply chain. Pursuant to the Agreement and Plan of Merger, dated February 5, 2026, by and among Serve, Vebu and Serve Kitchen Robotics Inc., a Delaware corporation and direct wholly-owned subsidiary of the Company, and James Buckly Jordan, an individual, solely in his capacity as the representative of the indemnifying securityholders (the “Vebu Merger Agreement”), the Company acquired all of the issued and outstanding equity of Vebu (the “Vebu Acquisition”).
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Pursuant to the terms of the Vebu Merger Agreement, the aggregate consideration paid by the Company to the Vebu stockholders at the closing of the Vebu Acquisition had an aggregate value of $3.7 million of cash, common stock, and earnout contingent consideration. The consideration includes $2.3 million paid in cash to satisfy the net debt adjustment and a potential earnout which may be earned upon the achievement of certain milestones set forth in the Vebu Merger Agreement. After giving effect to such adjustments as set forth in the Vebu Merger Agreement, the Company issued 147,445 shares of the Company’s common stock to the Vebu stockholders.
In addition, as set forth in the Vebu Merger Agreement, Vebu stockholders may be entitled to receive additional earnout consideration consisting of a number of shares of the Company’s common stock equal to 33 % of the net proceeds generated during the earnout period, divided by the volume-weighted average price of the Company’s common stock over the earnout period (the “Earnout Consideration”). The Earnout Consideration is classified as a liability in accordance with ASC 480 because the Company is obligated to issue a variable number of shares. As of June 30, 2026, the fair value of the contingent consideration was deemed to be $5.0 thousand. The contingent consideration liability will be recognized at the point that the earnout is deemed probable. At the time it is recorded, it will be classified in the consolidated balance sheets based on the expected timing of settlement. Refer to Note 6. Fair Value Measurements for information regarding the subsequent measurement of the contingent consideration liability at fair value.
The total preliminary fair value of consideration paid in connection with the acquisition of Vebu consisted of the following:
| Shares | Per Share | Total Consideration (in thousands) | |||||||||||||||
| Cash consideration paid for outstanding shares of Vebu common and preferred stock | $ | ||||||||||||||||
| Company common shares issuable to Vebu preferred stockholders | $ | ||||||||||||||||
| Fair value of contingent consideration issuable to Vebu preferred stockholders | |||||||||||||||||
| Total purchase price consideration | $ | ||||||||||||||||
At the closing, each outstanding share of Vebu common stock and preferred stock was automatically cancelled and converted into the right to receive shares of the Company’s common stock (including any escrow releases and earnout consideration), as set forth in the Vebu Merger Agreement. Each restricted stock unit held by a continuing employee immediately prior to the closing was assumed and converted by the Company into a Company RSU on a 1 :1 basis and on substantially identical terms and conditions. The Company assumed 500,000 restricted stock units held by continuing employees of Vebu.
The Company allocated the fair value of the purchase price consideration to the tangible assets acquired and liabilities assumed, based on estimated fair values. The excess purchase price over those fair values is recorded as goodwill. The Company’s valuation assumptions of acquired assets and assumed liabilities require significant estimates with respect to intangible assets. The acquired company’s intangible asset is comprised of developed technology. The estimated fair value of the developed technology was determined using the relief from royalty method under the income-based approach. This method estimates the fair value of the subject intangible asset based on the present value of royalty payments that would be paid if the subject intangible asset was not owned but accessed through a license agreement.
The preliminary goodwill of $2.0 million arising from the acquisition is attributed to the expected synergies, including innovation synergies, and other benefits expected to be generated. Substantially all of the goodwill recognized is not expected to be deductible for tax purposes.
Certain data necessary to complete the purchase price allocation remains preliminary. The Company expects to complete the purchase price allocation within 12 months of the Vebu Closing Date, at which time the purchase price allocation set forth herein may be revised. Any such revisions or changes may be material. The Company utilized widely accepted income-based, market-based, and cost-based valuation approaches to perform the preliminary purchase price allocation.
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The Company’s preliminary allocation of the purchase price, based on the estimated fair value of the assets acquired and liabilities assumed as of the Vebu Closing Date, is as follows (in thousands):
| February 17, 2026 | |||||
| Total purchase price consideration | $ | ||||
| Assets acquired: | |||||
| Cash and cash equivalents | |||||
| Accounts receivable | |||||
| Prepaid expenses | |||||
| Property and equipment | |||||
| Intangible assets | |||||
| Operating lease right-of-use assets | |||||
| Other assets | |||||
| Total identified assets acquired | |||||
| Liabilities assumed: | |||||
| Accounts payable | ( | ||||
| Accrued liabilities | ( | ||||
| Operating lease liabilities | ( | ||||
| Total identified liabilities | ( | ||||
| Fair value of identifiable assets, net of identifiable liabilities assumed | $ | ||||
| Goodwill | $ | ||||
The following table sets forth the preliminary components of intangible assets acquired (in thousands) and their estimated useful life as of the date of acquisition (in years):
| Weighted Average Useful Life | February 17, 2026 | ||||||||||
| Developed technology | $ | ||||||||||
The Company recorded $0.2 million and $0.6 million of acquisition related costs in the three and six months ended June 30, 2026, respectively, representing professional fees and other direct acquisition costs. These costs are recorded within general and administrative expense in our unaudited condensed consolidated statements of operations and comprehensive loss.
Diligent Robotics, Inc. Acquisition
On January 27, 2026 (the “Diligent Closing Date”), the Company completed its acquisition of Diligent Robotics, Inc. (“Diligent”), a provider of AI-powered robot assistants for the healthcare industry. Pursuant to the Agreement and Plan of Merger, dated January 19, 2026, by and among the Company, Delight Merger Sub, Inc., a Delaware corporation and direct wholly-owned subsidiary of the Company, Diligent, and Andrea Thomaz, an individual, solely in her capacity as the representative of the indemnifying securityholders (the “Diligent Merger Agreement”), the Company acquired all of the issued and outstanding equity of Diligent (the “Diligent Acquisition”).
Pursuant to the terms of the Diligent Merger Agreement, the aggregate consideration paid by the Company to the Diligent stockholders at the closing of the Diligent Acquisition had an aggregate fair value of $25.7 million of cash, common stock, and earnout contingent consideration. After giving effect to the adjustments as set forth in the Diligent Merger Agreement, the Company issued 197,472 shares of the Company’s common stock to the Diligent stockholders with a fair value of $2.5
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million based on the Company’s closing stock price as of the date of acquisition. In addition, up to 366,332 shares of the Company’s common stock may be issued in the future upon achievement of certain milestones set forth in the Diligent Merger Agreement, of which 274,749 shares relate to the contingent consideration included in the consideration transferred. The remaining 91,583 shares of the Company’s common stock to be issued upon achievement of certain future milestones as set forth in the Diligent Merger Agreement are attributed to certain employees and subject to a continuous service-condition. Refer to Note 10. Stockholders’ Equity and Stock-Based Compensation for additional information regarding the earnout consideration arrangements.
The total preliminary fair value of consideration paid in connection with the acquisition of Diligent consisted of the following:
| Shares | Per Share | Total Consideration (in thousands) | |||||||||||||||
| Cash consideration paid | $ | ||||||||||||||||
Fair value of Serve’s common shares issuable to Diligent stockholders (including escrow amounts) | $ | ||||||||||||||||
| Fair value of contingent earnout consideration | $ | ||||||||||||||||
| Total purchase price consideration | $ | ||||||||||||||||
At the closing, each outstanding share of Diligent common stock, all Diligent options, and all Diligent warrants were automatically cancelled for no consideration and each outstanding share of Diligent preferred stock was automatically cancelled and converted into the right to receive shares of the Company’s common stock, including any escrow releases and earnout consideration, as set forth in the Diligent Merger Agreement. Each Diligent restricted stock unit held by a continuing employee immediately prior to the closing was assumed and converted into a restricted stock unit on a 1 :1 basis and on substantially identical terms and conditions. The Company assumed 1,319,151 restricted stock units held by continuing employees of Diligent.
The Company allocated the fair value of the purchase price consideration to the tangible and intangible assets acquired and liabilities assumed, based on estimated fair values. The excess purchase price over those fair values is recorded as goodwill. The Company’s valuation assumptions of acquired assets and assumed liabilities require significant estimates with respect to intangible assets. The acquired company’s intangible assets are comprised of developed technology and trade name. The estimated fair values of the developed technology and trade name were determined using the relief from royalty method under the income-based approach. This method estimates the fair value of the intangible asset based on the present value of royalty payments that would be paid if the subject intangible asset was not owned but paid to a third-party for the use of the asset.
The preliminary goodwill of $10.4 million arising from the acquisition is attributed to the expected synergies, including innovation synergies, synergies related to the assembled workforce, and other benefits expected to be generated. Substantially all of the goodwill recognized is not expected to be deductible for tax purposes.
Certain data necessary to complete the purchase price allocation remains preliminary. The Company expects to complete the purchase price allocation within 12 months of the Diligent Closing Date, at which time the purchase price allocation set forth herein may be revised. Any such revisions or changes may be material. The Company utilized widely accepted income-based, market-based, and cost-based valuation approaches to perform the preliminary purchase price allocation.
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The Company’s preliminary allocation of the purchase price, based on the estimated fair value of the assets acquired and liabilities assumed as of the Diligent Closing Date, is as follows (in thousands):
| January 27, 2026 | |||||
| Total purchase price consideration | $ | ||||
| Assets acquired: | |||||
| Cash and cash equivalents | |||||
| Accounts receivable | |||||
| Prepaid expenses | |||||
| Property and equipment | |||||
| Intangible assets | |||||
| Capitalized software | |||||
| Other assets | |||||
| Total identified assets acquired | |||||
| Liabilities assumed: | |||||
| Accounts payable | ( | ||||
| Accrued liabilities | ( | ||||
| Deferred revenue | ( | ||||
| Deferred tax liability | ( | ||||
| Other liabilities | ( | ||||
| Total identified liabilities | ( | ||||
| Fair value of identifiable assets, net of identifiable liabilities assumed | $ | ||||
| Goodwill | $ | ||||
The following table sets forth the preliminary components of intangible assets acquired (in thousands) and their estimated useful life as of the date of acquisition (in years):
| Intangible Assets | Weighted Average Useful Life | January 27, 2026 | ||||||||||||
| Developed technology | $ | |||||||||||||
| Trade names | ||||||||||||||
| Total fair value of intangible assets | $ | |||||||||||||
The Company recorded $0.2 million and $1.4 million of acquisition related costs in the three and six months ended June 30, 2026, respectively, representing professional fees and other direct acquisition costs. These costs are recorded
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within general and administrative expense in our unaudited condensed consolidated statements of operations and comprehensive loss.
The amounts of revenue and loss from Diligent included in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss from January 27, 2026 to the period ended June 30, 2026 were $2.9 million and $14.0 million, respectively.
Pro forma results (unaudited)
The following pro forma information assumes the Diligent Acquisition occurred as of the beginning of the year immediately preceding the transaction. The pro forma information contains the actual operating results of the Company combined with the results of Diligent prior to acquisition dates, adjusted to reflect the pro forma impact of the acquisitions occurring as of January 1, 2025. The pro forma adjustments primarily consist of $2.0 million to remove interest expense recorded on debt paid off at close and adjustments for a total $3.3 million in transaction costs incurred. This pro forma presentation does not include any impact of transaction synergies.
The following table presents the unaudited pro forma consolidated revenue and net loss for the combined company as a result of the Diligent Acquisition (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Revenues | $ | $ | $ | $ | |||||||||||||||||||
| Net Loss | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the Diligent Acquisition been consummated as of January 1, 2025.
Fiscal 2025 Acquisitions
Vayu Acquisition
On August 14, 2025 (the “Vayu Closing Date”), the Company entered into an Agreement and Plan of Merger by and among the Company, Valencia Merger Sub I Inc., a Delaware corporation and the Company’s direct wholly-owned subsidiary (“Valencia Merger Sub I”), Valencia Merger Sub II LLC, a Delaware limited liability company and the Company’s direct wholly-owned subsidiary (“Valencia Merger Sub II”), Vayu Robotics, Inc. (“Vayu”) and certain of Vayu’s securityholders (the “Vayu Merger Agreement”).
Pursuant to the Vayu Merger Agreement, on August 15, 2025, (i) Valencia Merger Sub I merged with and into Vayu, with Vayu surviving as a direct wholly-owned subsidiary of the Company and (ii) Vayu subsequently merged with and into Valencia Merger Sub II, with Valencia Merger Sub II surviving the merger. In connection with the closing of the transactions contemplated by the Vayu Merger Agreement, the Company acquired all of the issued and outstanding equity of Vayu, which was accounted for under the acquisition method of accounting. Vayu is a pioneer in urban robot navigation using large-scale AI models, and the Company’s acquisition of Vayu supports the adoption of advanced AI-driven autonomy by integrating Vayu’s foundation model technology and simulation capabilities.
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The total fair value of consideration paid in connection with the acquisition of Vayu consisted of the following:
| Shares | Per Share | Total Consideration (in thousands) | |||||||||||||||
| Cash paid for outstanding shares of Vayu common and preferred stock | $ | ||||||||||||||||
| Net working capital adjustment | |||||||||||||||||
| Company common shares issuable to Vayu common and preferred stockholders | $ | ||||||||||||||||
| Company warrants issued to Vayu SAFE holder, Khosla Ventures | $ | ||||||||||||||||
| Replacement equity awards attributable to pre-combination service | |||||||||||||||||
| Total purchase price consideration | $ | ||||||||||||||||
The Company allocated the fair value of the purchase price consideration to the tangible assets acquired and liabilities assumed, based on estimated fair values. The excess purchase price over those fair values is recorded as goodwill. The Company’s valuation assumptions of acquired assets and assumed liabilities require significant estimates with respect to intangible assets. The acquired company’s intangible assets are comprised of developed technology. The estimated fair value of the developed technology was determined using the cost method, which estimates the value of an asset based on the current cost to replace or reproduce it, adjusted for physical deterioration, functional obsolescence, and economic factors. This method reflects the amount a market participant would need to invest to create an asset of comparable utility, considering current technology and development costs.
The total purchase consideration was approximately $
In connection with the Vayu Merger Agreement, the Company granted performance-based RSUs (“PRSUs”). 880,001 PRSUs were granted to certain employees and 560,000 PRSUs were granted to certain shareholders. All PRSUs will vest or commence vesting upon achievement of a specified operational target (the “Milestone”) by December 31, 2026 (the “Milestone Date”). In addition, the PRSUs are subject to a continuous service condition.
Certain data necessary to complete the purchase price allocation remains preliminary. The Company expects to complete the purchase price allocation within 12 months of the Vayu Closing Date, at which time the purchase price allocation set forth herein may be revised. The Company does not expect these revisions to be material. The Company utilized widely accepted income-based, market-based, and cost-based valuation approaches to perform the preliminary purchase price allocation.
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The Company’s preliminary allocation of the purchase price, based on the estimated fair value of the assets acquired and liabilities assumed as of the Vayu Closing Date, is as follows (in thousands):
| August 15, 2025 | |||||
| Total purchase price consideration | $ | ||||
| Assets acquired: | |||||
| Cash and cash equivalents | |||||
| Other current assets | |||||
| Intangible assets | |||||
| Total identifiable assets acquired | |||||
| Liabilities assumed: | |||||
| Accounts payable | ( | ||||
| Other current liabilities | ( | ||||
| Deferred tax liability | ( | ||||
| Total identifiable liabilities assumed | ( | ||||
| Fair value of identifiable assets, net of identifiable liabilities assumed | $ | ||||
| Goodwill | $ | ||||
The following table sets forth the preliminary components of intangible assets acquired (in thousands) and their estimated useful life as of the date of acquisition (in years):
| Weighted Average Useful Life | August 15, 2025 | ||||||||||
| Developed technology | $ | ||||||||||
The Company recorded zero and $0.2 million of acquisition related costs in the three and six months ended June 30, 2026, respectively, representing professional fees and other direct acquisition costs. These costs are recorded within general and administrative expense in our unaudited condensed consolidated statements of operations and comprehensive loss.
Voysys AB Acquisition
On April 1, 2025 (the “Voysys Closing Date”), the Company acquired from Phantom Auto Inc., a Delaware corporation (“Phantom”) (i) all of the issued and outstanding equity of Voysys AB, a limited liability company duly incorporated and organized under the laws of Sweden (“Voysys”) and (ii) certain intellectual property, including registered patents, of Phantom. The acquisition was accounted for under the acquisition method of accounting. Voysys is a Swedish pioneer in ultra-low latency video streaming, connectivity, and teleoperation technology. The Company’s acquisition of Voysys enhances Serve’s technology stack to support its rapidly growing fleet of autonomous delivery robots.
The Company allocated the fair value of the purchase price consideration to the tangible assets, liabilities, and intangible assets acquired, based on their estimated fair values. The excess of the purchase price over those fair values is recorded as goodwill. The Company’s valuation assumptions of acquired assets and assumed liabilities require significant estimates, particularly for intangible assets. The acquired company’s intangible assets consist of customer relationships, trade name, and developed technology. The estimated fair value of customer relationships, trade name, and developed technology were determined using the multi-period excess earnings method and the relief from royalty method. Both methods require forward-looking estimates that are discounted to determine the fair value of the intangible asset using a risk-adjusted discount rate that is reflective of the level of risk associated with future estimates associated with the asset group, which could be affected by future economic and market conditions. The estimated fair value of the developed technology is also dependent on the selection of the royalty rate used in the valuation method.
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The total purchase consideration was approximately $
The Company’s allocation of the purchase price, based on the estimated fair value of the assets acquired and liabilities assumed as of the Voysys Closing Date, is as follows (in thousands):
| April 1, 2025 | |||||
| Cash consideration paid | $ | ||||
| Escrow amount | |||||
| Purchase price | |||||
| Assets acquired: | |||||
| Cash and cash equivalents | |||||
| Other current assets | |||||
| Other assets | |||||
| Intangible assets, net | |||||
Total identifiable assets acquired | |||||
| Liabilities assumed: | |||||
| Current liabilities | ( | ||||
| Total identifiable liabilities assumed | ( | ||||
| Fair value of identifiable assets, net of identifiable liabilities assumed | $ | ||||
| Goodwill | $ | ||||
The following table sets forth the components of intangible assets acquired (in thousands) and their estimated useful life as of the date of acquisition (in years):
| Intangible Assets | Weighted Average Useful Life | April 1, 2025 | ||||||||||||
| Developed technology | $ | |||||||||||||
| Customer relationships | ||||||||||||||
| Trade names | ||||||||||||||
| Total fair value of intangible assets | $ | |||||||||||||
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5. GOODWILL AND INTANGIBLE ASSETS, NET
Goodwill represents the excess of the cost over the net tangible and identifiable intangible assets of acquired businesses.
The changes in the carrying amount of goodwill during the six months ended June 30, 2026 were as follows (in thousands):
| Total | |||||
| Balance as of December 31, 2025 | $ | ||||
Acquisitions | |||||
| Balance as of June 30, 2026 | $ | ||||
Identifiable intangible assets acquired in business combinations are recorded based upon fair value at the date of acquisition. Carrying values are adjusted to reflect the impacts of foreign currency.
Intangible assets, net consisted of the following as of June 30, 2026 (in thousands):
| Weighted-Average Remaining Useful Life (in years) | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | ||||||||||||||||||||
Developed technology | $ | $ | $ | ||||||||||||||||||||
Customer relationships | |||||||||||||||||||||||
Trade names | |||||||||||||||||||||||
| Balance as of June 30, 2026 | $ | $ | $ | ||||||||||||||||||||
Developed technology intangible assets are being amortized over 5 to 15 years. Customer relationships are being amortized over 25 years. Trade name intangible assets are being amortized over 4 to 10 years.
The Company recorded amortization expense associated with intangible assets of $2.0 million and $3.8 million for the three and six months ended June 30, 2026, respectively. An insignificant amount of amortization expense associated with intangible assets was recognized during the three and six months ended June 30, 2025.
The estimated future amortization expense of intangible assets as of June 30, 2026 is as follows (in thousands):
Year Ending December 31, | Amortization Expense | ||||
| Remainder of 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
Thereafter | |||||
Total estimated future amortization expense | $ | ||||
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6. FAIR VALUE MEASUREMENTS
Assets Measured at Fair Value on a Recurring Basis
The following tables set forth the Company’s cash equivalents and marketable securities that were measured at fair value on a recurring basis by level within the fair value hierarchy as of June 30, 2026 and December 31, 2025 (in thousands):
| Fair Value Measurements as of June 30, 2026: | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
Cash equivalents | |||||||||||||||||||||||
Money market funds | $ | $ | $ | $ | |||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||
| Short-term marketable securities | |||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||
Commercial paper | |||||||||||||||||||||||
| Corporate notes/bonds | |||||||||||||||||||||||
| U.S. Government agencies | |||||||||||||||||||||||
U.S. Treasury securities | |||||||||||||||||||||||
| Long-term marketable securities | |||||||||||||||||||||||
| Corporate notes/bonds | |||||||||||||||||||||||
| U.S. Government agencies | |||||||||||||||||||||||
| Total fair value of assets | $ | $ | $ | $ | |||||||||||||||||||
| Fair Value Measurements as of December 31, 2025: | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
Cash equivalents | |||||||||||||||||||||||
Money market funds | $ | $ | $ | $ | |||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||
| Short-term marketable securities | |||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||
Commercial paper | |||||||||||||||||||||||
| Corporate notes/bonds | |||||||||||||||||||||||
| U.S. Government agencies | |||||||||||||||||||||||
U.S. Treasury securities | |||||||||||||||||||||||
| Long-term marketable securities | |||||||||||||||||||||||
| Corporate notes/bonds | |||||||||||||||||||||||
| U.S. Government agencies | |||||||||||||||||||||||
| Total fair value of assets | $ | $ | $ | $ | |||||||||||||||||||
The fair value of the Company’s Level 1 financial instruments is based on quoted market prices for identical instruments in active markets. The fair value of the Company’s Level 2 fixed income securities is obtained from independent pricing services, which may use quoted market prices for identical or comparable instruments in less active markets or model driven valuations using observable market data or inputs corroborated by observable market data.
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Liabilities Measured at Fair Value on a Recurring Basis
As discussed in Note 4. Acquisitions, the Company entered into a contingent consideration arrangement in connection with its acquisition of Vebu, in which the Company will make additional payments to the Vebu stockholders based on achievement of certain milestones. In addition, the Company awarded a certain employee with a compensation arrangement in which the employee is eligible to receive a variable number of shares based on specified performance metrics. Both arrangements are liability-classified arrangements and are accounted for in accordance with ASC 480.
The fair value of the liability classified arrangements are determined using a Monte Carlo simulation which uses Level 3 unobservable inputs. These liability-classified arrangements are carried at fair value which is estimated by applying a probability-based model utilizing inputs based on timing of achievement that were unobservable in the market. Actual results may differ from the projected results and could have a significant impact on the estimated fair value of the contingent consideration. Changes in fair value are recorded in other income in the unaudited condensed consolidated statements of operations and comprehensive loss.
The most significant unobservable inputs used to determine the fair value of the liability-classified contingent considerations relate to the revenue growth rate (3.0 %), discount rate (28.0 %) and the market price of risk adjustment (4.0 %). As of June 30, 2026, the fair value of the Company’s Level 3 liabilities was immaterial.
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7. MARKETABLE SECURITIES
The following tables summarize the cost or amortized cost, gross unrealized gain, gross unrealized loss, and fair value of the Company’s cash equivalents and marketable securities as of June 30, 2026 and December 31, 2025 (in thousands):
| June 30, 2026 | |||||||||||||||||||||||
| Cost or Amortized Cost | Unrealized | Estimated Fair Value | |||||||||||||||||||||
| Gains | Losses | ||||||||||||||||||||||
Cash equivalents | |||||||||||||||||||||||
Money market funds | $ | $ | $ | $ | |||||||||||||||||||
| Commercial paper | ( | ||||||||||||||||||||||
| Corporate bonds | ( | ||||||||||||||||||||||
| Short-term marketable securities | |||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||
Commercial paper | ( | ||||||||||||||||||||||
| Corporate notes/bonds | ( | ||||||||||||||||||||||
| U.S. Government agencies | |||||||||||||||||||||||
U.S. Treasury securities | |||||||||||||||||||||||
| Long-term marketable securities | |||||||||||||||||||||||
| Corporate notes/bonds | |||||||||||||||||||||||
| U.S. Government agencies | |||||||||||||||||||||||
Total | $ | $ | $ | ( | $ | ||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
| Cost or Amortized Cost | Unrealized | Estimated Fair Value | |||||||||||||||||||||
| Gains | Losses | ||||||||||||||||||||||
Cash equivalents | |||||||||||||||||||||||
Money market funds | $ | $ | $ | $ | |||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||
| Short-term marketable securities | |||||||||||||||||||||||
| Certificates of deposit | |||||||||||||||||||||||
Commercial paper | |||||||||||||||||||||||
| Corporate notes/bonds | |||||||||||||||||||||||
| U.S. Government agencies | |||||||||||||||||||||||
U.S. Treasury securities | |||||||||||||||||||||||
| Long-term marketable securities | |||||||||||||||||||||||
| Corporate notes/bonds | ( | ||||||||||||||||||||||
| U.S. Government agencies | ( | ||||||||||||||||||||||
Total | $ | $ | $ | ( | $ | ||||||||||||||||||
For marketable securities with unrealized loss positions, the Company does not intend to sell these securities, and it is more likely than not that the Company will hold these securities until maturity or a recovery of the cost basis. No
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8. PROPERTY AND EQUIPMENT, NET
The following is a summary of property and equipment, net (in thousands):
| June 30, 2026 | December 31, 2025 | ||||||||||
| Robot assets | $ | $ | |||||||||
| Construction in progress | |||||||||||
| Tooling | |||||||||||
| Office equipment | |||||||||||
| Furniture and fixtures | |||||||||||
| Leasehold improvement | |||||||||||
| Total | |||||||||||
| Less: accumulated depreciation | ( | ( | |||||||||
| Property and equipment, net | $ | $ | |||||||||
The Company recorded depreciation expense of $3.7 million and $0.8 million for the three months ended June 30, 2026 and 2025, respectively. The Company recorded depreciation expense of $7.1 million and $1.3 million for the six months ended June 30, 2026 and 2025, respectively.
As of June 30, 2026, property and equipment included a $4.4 million reduction related to tariff refunds recognized during the period as a result of the U.S. Supreme Court ruling under the International Emergency Economic Powers Act (“IEEPA”). As of June 30, 2026, $3.6 million is reflected in robot assets and the remaining $0.8 million is reflected in construction in progress. Refer to Note 12. Commitments and Contingencies for further information.
9. LEASES
Operating Leases – Right of Use Asset and Liability
The Company leases its facilities, which include office and warehouse space, under non-cancelable lease agreements with terms expiring between August 2026 and September 2031. The Company also has leases for cargo vans with terms expiring between November 2026 and March 2028. Certain of these arrangements have free rent, escalating rent payment provisions, lease renewal options, and tenant allowances. Under such arrangements, the Company recognizes an ROU asset and lease liability on the unaudited condensed consolidated balance sheets. Lease costs are recognized on a straight-line basis over the non-cancelable lease term.
The components of lease costs related to the Company’s operating leases are classified in the unaudited condensed consolidated statements of operations and comprehensive loss as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Operations | $ | $ | $ | $ | |||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Total lease costs | $ | $ | $ | $ | |||||||||||||||||||
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The components of lease costs were as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Operating lease costs | $ | $ | $ | $ | |||||||||||||||||||
| Variable lease costs | |||||||||||||||||||||||
| Short-term lease costs | |||||||||||||||||||||||
| Total lease costs | $ | $ | $ | $ | |||||||||||||||||||
Supplemental cash flow information related to leases is as follows (in thousands):
| Six Months Ended June 30, | |||||||||||
| 2026 | 2025 | ||||||||||
| Operating cash flows paid for operating leases | $ | $ | |||||||||
| Right-of-use assets obtained in exchange for operating lease obligations | $ | $ | |||||||||
Supplemental balance sheet information related to leases is as follows:
| June 30, 2026 | December 31, 2025 | ||||||||||
| Weighted-average remaining lease term (in years) | |||||||||||
| Weighted-average discount rate | % | % | |||||||||
The maturities of lease liabilities as of June 30, 2026, are as follows (in thousands):
| Remainder of 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
Thereafter | |||||
| Total undiscounted future cash flows | |||||
| Less: imputed interest | ( | ||||
| Total operating lease liabilities | $ | ||||
As of June 30, 2026, the Company had no additional operating lease commitments for non-cancelable leases that had not yet commenced.
Finance Lease – Failed Sales-Leaseback
In November 2022, the Company entered into a lease agreement with Farnam Capital for its robot assets. As per ASC 842-40-25-1, the transaction was considered a failed sales-leaseback and therefore the lease was accounted for as a financing agreement. In April 2025, the Company exercised the option to purchase the assets at the end of the lease for $2.2 million. There was no outstanding liability at June 30, 2026.
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10. STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION
Common Stock
Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are not entitled to receive dividends, unless declared by the Company’s board of directors.
As of June 30, 2026, the Company is authorized to issue 10,000,000 shares of preferred stock, par value $0.0001 per share, and 300,000,000 shares of common stock, par value $0.0001 per share.
Dividend Rights
Subject to applicable law and the rights and preferences, if any, of any holders of any outstanding series of preferred stock, the holders of our common stock are entitled to receive dividends if our Board, in its discretion, determines to issue dividends and then only at the times and in the amounts that our Board may determine, payable either in cash, in property or in shares of capital stock.
Common Stock Transactions
On February 17, 2026, the Company entered into the Vebu Merger Agreement, pursuant to which the Company issued 147,445 shares of its common stock in initial upfront consideration. The Company also issued 500,000 shares of common stock to certain employees. As of June 30, 2026, 637,945 of the total 647,445 shares of common stock contemplated in the Vebu Merger Agreement have been issued and are outstanding.
On January 27, 2026, the Company entered into the Diligent Merger Agreement, pursuant to which the Company issued 197,472 shares of its common stock in initial upfront consideration. Additionally, the Company granted a future earnout consisting of up to 366,332 shares of common stock, contingent on the achievement of certain performance milestones. The Company also issued 1,319,151 shares of common stock to certain employees. As of June 30, 2026, 1,440,893 of the total 1,882,955 shares of common stock contemplated in the Diligent Merger Agreement have been issued and are outstanding.
On October 10, 2025, the Company entered into a securities purchase agreement with certain institutional investors pursuant to which the Company agreed to issue and sell, in a registered direct offering an aggregate of 6,250,000 shares of the Company’s common stock, $0.0001 par value per share at a price of $16.00 per share (the “October Registered Direct Offering”). The gross proceeds to the Company from the October Registered Direct Offering were approximately $100 million, before deducting the placement agents’ fees and other offering expenses payable by the Company.
On August 15, 2025, the Company entered into the Vayu Merger Agreement, pursuant to which the Company issued 1,494,906 shares of its common stock in initial upfront consideration. Additionally, the Company granted a future earnout consisting of up to 560,000 shares of common stock, subject to the achievement of certain performance milestones. The Company also issued warrants to purchase 4,000,000 shares of common stock, with an exercise price of $10.36 per share (which amount is equal to the 10 -day volume-weighted average price of the Company’s common stock prior to the closing of the transaction), to a certain Vayu securityholder. As of June 30, 2026, 1,494,906 of the 7,558,314 shares of deal consideration have been issued and are outstanding.
On January 7, 2025, the Company entered into a securities purchase agreement with a certain institutional investor pursuant to which the Company agreed to issue and sell, in a registered direct offering an aggregate of 4,210,525 shares of the Company’s common stock at a price of $19.00 per share (the “January Registered Direct Offering”). The gross proceeds to the Company from the January Registered Direct Offering were approximately $80 million, before deducting the placement agents’ fees and other offering expenses payable by the Company.
Equity Compensation Plans
Vebu 2026 Equity Incentive Plan
In connection with the Company’s acquisition of Vebu, the Company assumed certain equity awards that had been issued pursuant to the Vebu 2026 Equity Incentive Plan (the “2026 Vebu Plan”). In accordance with the Vebu Merger Agreement, the 2026 Vebu Plan was adopted and approved, and stockholder approval was obtained, prior to the closing of the
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acquisition. Prior to the closing, Vebu granted restricted stock units (“Vebu RSUs”) covering an equivalent of an aggregate of 500,000 shares of the Company’s common stock to certain individuals who were expected to become continuing employees of the Company, pursuant to forms of award agreement reasonably approved by the Company. The Vebu RSUs were only effective for those individuals who accepted their awards by timely executing and returning the applicable award agreement prior to the closing date and who became continuing employees.
Immediately following the issuance of the Vebu RSUs and the closing of the acquisition, the 2026 Vebu Plan was terminated in accordance with the Vebu Merger Agreement, and no further awards will be granted under the 2026 Vebu Plan. The 2026 Vebu Plan permitted the grant of incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, and stock bonus awards. Subject to adjustments as set forth in the 2026 Vebu Plan, the maximum aggregate number of shares of the Company’s common stock that could have been issued under the 2026 Vebu Plan did not exceed 500,000 shares. Any shares subject to awards under the 2026 Vebu Plan that expired, were forfeited, or became unexercisable without having been exercised in full, or were surrendered pursuant to an exchange program, would have continued to be available for issuance under the plan prior to its termination. After the termination of the 2026 Vebu Plan, no further awards may be granted under the plan, and any shares underlying awards that are forfeited or canceled will not become available for future issuance.
Diligent 2026 Equity Incentive Plan
In connection with the Company’s acquisition of Diligent, the Company assumed certain equity awards that had been issued pursuant to the Diligent 2026 Equity Incentive Plan (the “2026 Diligent Plan”). In accordance with the Diligent Merger Agreement, the 2026 Diligent Plan was adopted and approved, and stockholder approval was obtained, prior to the closing of the acquisition. Prior to the closing, Diligent granted restricted stock units (“Diligent RSUs”) covering an equivalent of an aggregate of 1,319,151 shares of the Company’s common stock to certain individuals who were expected to become continuing employees of the Company, pursuant to forms of award agreement reasonably approved by the Company. The Diligent RSUs were only effective for those individuals who accepted their awards by timely executing and returning the applicable award agreement prior to the closing date and who became continuing employees.
Immediately following the issuance of the Diligent RSUs and the closing of the acquisition, the 2026 Diligent Plan was terminated in accordance with the Diligent Merger Agreement, and no further awards will be granted under the 2026 Diligent Plan. The 2026 Diligent Plan permitted the grant of incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, and stock bonus awards. Subject to adjustments as set forth in the 2026 Diligent Plan, the maximum aggregate number of shares of the Company’s common stock that could have been issued under the 2026 Diligent Plan did not exceed 1,319,179 shares. Any shares subject to awards under the 2026 Diligent Plan that expired, were forfeited, or became unexercisable without having been exercised in full, or were surrendered pursuant to an exchange program, would have continued to be available for issuance under the plan prior to its termination. After the termination of the 2026 Diligent Plan, no further awards may be granted under the plan, and any shares underlying awards that are forfeited or canceled will not become available for future issuance.
Vayu 2025 Equity Incentive Plan
In connection with the Company’s acquisition of Vayu, the Company assumed certain equity awards that had been issued pursuant to the Vayu 2025 Equity Incentive Plan (the “2025 Vayu Plan”). In accordance with the Vayu Merger Agreement, the 2025 Vayu Plan was adopted and approved, and stockholder approval was obtained, prior to the closing of the acquisition. Prior to the closing, Vayu granted restricted stock units (“Vayu RSUs”) covering an equivalent of an aggregate of 1,373,971 shares of the Company’s common stock to certain individuals who were expected to become continuing employees of the Company, pursuant to forms of award agreement reasonably approved by the Company. The Vayu RSUs were only effective for those individuals who accepted their awards by timely executing and returning the applicable award agreement prior to the closing date and who became continuing employees.
Immediately following the issuance of the Vayu RSUs and the closing of the acquisition, the 2025 Vayu Plan was terminated in accordance with the Vayu Merger Agreement, and no further awards will be granted under the 2025 Vayu Plan. The 2025 Vayu Plan permitted the grant of incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, and stock bonus awards. Subject to adjustments as set forth in the 2025 Vayu Plan, the maximum aggregate number of shares of the Company’s common stock that could have been issued under the 2025 Vayu Plan did not exceed 1,400,000 shares. Any shares subject to awards under the 2025 Vayu Plan that expired, were forfeited, or became unexercisable without having been exercised in full, or were surrendered pursuant to an exchange program, would have continued to be available for issuance under the plan prior to its termination. After the
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termination of the 2025 Vayu Plan, no further awards may be granted under the plan, and any shares underlying awards that are forfeited or canceled will not become available for future issuance.
2023 Equity Incentive Plan
The Company’s 2023 Equity Incentive Plan (the “2023 Plan”) permits the grant of incentive stock options, nonstatutory stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”) and stock bonus awards (all such types of awards, collectively, “stock awards”).
The shares may be authorized, but unissued, or reacquired common stock. Furthermore, subject to adjustments as set forth in the 2023 Plan, in no event shall the maximum aggregate number of shares that may be issued under the 2023 Plan pursuant to Incentive Stock Options exceed the number set forth above plus, to the extent allowable under Section 422 of the Code and the regulations promulgated thereunder, any shares that again become available for issuance pursuant to the 2023 Plan.
The number of shares available for issuance under the 2023 Plan may, at the discretion of our Board or a committee thereof, which committee will be constituted to satisfy applicable laws (“Plan Administrator”), be increased on October 1st of each fiscal year beginning with the 2023 fiscal year until the 2023 Plan terminates, in each case, in an amount equal to the lesser of (i) 4 % of the shares of the Company’s common stock issued and outstanding on the last day of the immediately preceding month on a fully-diluted and as-converted basis and (ii) such other number of shares as determined by our Board.
Subject to adjustments as set forth in the 2023 Plan, the maximum aggregate number of shares of common stock that may be issued under the 2023 Plan will not exceed 7,487,029 shares. In June 2025, the 2023 Plan was amended, and the number of shares authorized under the 2023 Plan was increased by 2,280,000 additional shares. In October 2025, the number of shares authorized under the 2023 Plan was increased by 3,289,146 additional shares, pursuant to the evergreen provisions under the 2023 Plan. As of June 30, 2026, there were a total of 1,534,968 shares available to be issued under the 2023 Plan.
To the extent stock awards or shares issued under Serve’s 2021 Equity Incentive Plan (“2021 Plan”) that were assumed by the Company (“Existing Plan Awards”) are exercised in full or are surrendered pursuant to an exchange program (as defined in the 2023 Plan), the unissued shares that were subject thereto will continue to be available under the 2023 Plan for issuance pursuant to future stock awards. In addition, any shares that are retained by us upon exercise of a stock award or Existing Plan Award in order to satisfy the exercise or purchase price for such stock award or Existing Plan Award or any withholding taxes due with respect to such stock award or Existing Plan Award will be treated as not issued and will continue to be available under the 2023 Plan for issuance pursuant to future stock awards. Shares issued under the 2023 Plan or an Existing Plan Award and later forfeited to us due to the failure to vest or repurchased by us at the original purchase price paid to us for the shares (including without limitation upon forfeiture to or repurchase by us in connection with a participant ceasing to be a service provider) will again be available for future grant under the 2023 Plan. To the extent a stock award under the 2023 Plan or Existing Plan Award is paid out in cash rather than shares, such cash payment will not result in reducing the number of shares available for issuance under the 2023 Plan.
Vayu 2022 Equity Incentive Plan
In connection with the Company’s acquisition of Vayu, the Company assumed the Vayu 2022 Equity Incentive Plan (the “2022 Vayu Plan”) including the options outstanding immediately prior to the acquisition and the number of shares that remain available for issuance pursuant to the 2022 Vayu Plan, as adjusted by the exchange ratio for which such shares are exchangeable pursuant to the Vayu Merger Agreement. The 2022 Vayu Plan permits the grant of incentive stock options, nonstatutory stock options, SARs, restricted stock, RSUs, and stock bonus awards.
Subject to adjustments as set forth in the 2022 Vayu Plan, the maximum aggregate number of shares of the Company’s common stock that may be issued under the 2022 Vayu Plan may not exceed 5,344,275 shares. Subject to adjustments as set forth in the 2022 Vayu Plan, the maximum aggregate number of shares that may be issued under the 2022 Vayu Plan pursuant to incentive stock options may not exceed the number set forth above plus, to the extent allowable under Section 422 of the Internal Revenue Code and the regulations promulgated thereunder, any shares that again become available for issuance pursuant to the 2022 Vayu Plan. As of June 30, 2026, there were approximately 94,566 shares available to be issued under the 2022 Vayu Plan.
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To the extent a stock award under the 2022 Vayu Plan should expire or be forfeited or become unexercisable for any reason without having been exercised in full, or is surrendered pursuant to an exchange program, the unissued shares that were subject thereto will continue to be available under the 2022 Vayu Plan for issuance pursuant to future stock awards. In addition, any shares that are retained by the Company upon exercise of a stock award in order to satisfy the exercise or purchase price for such stock award or any withholding taxes due with respect to such stock award will be treated as not issued and will continue to be available under the 2022 Vayu Plan for issuance pursuant to future stock awards. Shares issued under the 2022 Vayu Plan and later forfeited to the Company due to the failure to vest or repurchased by the Company at the original purchase price paid to the Company for the shares (including, without limitation, upon forfeiture to or repurchase by the Company in connection with a participant ceasing to be a service provider) will be available for future grant under the 2022 Vayu Plan. To the extent a stock award under the 2022 Vayu Plan is paid out in cash rather than shares, such cash payment will not result in reducing the number of shares available for issuance under the 2022 Vayu Plan.
The 2022 Vayu Plan is administered by the Company’s board of directors or a committee thereof (the “2022 Vayu Plan Administrator”). The 2022 Vayu Plan Administrator has the authority to determine the terms and conditions of stock awards granted under the 2022 Vayu Plan, including the recipients, type of award, number of shares subject to each award, exercise or purchase price, vesting schedule, and other terms and conditions. Stock awards may be granted to employees, directors, and independent contractors of the Company and its affiliates. The 2022 Vayu Plan also provides for adjustments in the event of certain corporate transactions, such as stock splits, mergers, or other changes in capitalization, and includes customary provisions regarding the administration, amendment, and termination of the plan.
Restricted Stock Awards (RSAs)
The following table summarizes activity related to the Company’s restricted stock awards for the six months ended June 30, 2026:
| Restricted Stock Awards | |||||||||||
| Number of Shares | Weighted Average Grant Date Fair Value | ||||||||||
| Nonvested as of December 31, 2025 | $ | ||||||||||
| Granted | |||||||||||
Vested | ( | ||||||||||
| Forfeited | ( | ||||||||||
| Nonvested as of June 30, 2026 | $ | ||||||||||
During 2023, the Company issued shares of restricted common stock for recourse notes. The shares were issued with a corresponding note receivable, a recourse loan that was collateralized by the underlying shares. As of June 30, 2026 and December 31, 2025, there were 40,143 and 46,833 shares of common stock issued, respectively, that are subject to the non-recourse notes and deemed not outstanding.
Restricted Stock Units (RSUs)
The following table summarizes activity related to the Company’s RSUs for the six months ended June 30, 2026:
| Restricted Stock Units | |||||||||||
| Number of Shares | Weighted Average Grant Date Fair Value | ||||||||||
| Nonvested as of December 31, 2025 | $ | ||||||||||
| Granted | |||||||||||
Vested | ( | ||||||||||
| Forfeited | ( | ||||||||||
| Nonvested as of June 30, 2026 | $ | ||||||||||
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During the six months ended June 30, 2026, the Company granted 3,608,010 RSUs with vesting periods ranging 1 month to 4 years.
In connection with the transactions contemplated by the Vayu Merger Agreement (the “Vayu Acquisition”), in August 2025, the Company granted 493,970 RSUs to certain employees as a retention equity award (the “Vayu Retention RSUs”). The Vayu Retention RSUs vest over 4 years from the date of the consummation of the Vayu Acquisition with 25 % of the Vayu Retention RSUs vesting on the first anniversary of the grant date.
In connection with the transactions contemplated by the Diligent Merger Agreement (the “Diligent Acquisition”), in January 2026, the Company granted 1,319,151 RSUs to certain employees as a retention equity award (the “Diligent Retention RSUs”). The Diligent Retention RSUs vest over 4 years from the date of the consummation of the Diligent Acquisition with 25 % of the Diligent Retention RSUs vesting on the first anniversary of the grant date.
In connection with the transactions contemplated by the Vebu Merger Agreement (the “Vebu Acquisition”), in February 2026, the Company granted 500,000 RSUs to certain employees as a retention equity award (the “Vebu Retention RSUs”). The Vebu Retention RSUs vest over 4 years from the date of the consummation of the Vebu Acquisition with 25 % of the Vebu Retention RSUs vesting on the first anniversary of the grant date.
During the six months ended June 30, 2026, the Company repurchased no shares of common stock.
Performance-Based Restricted Stock Units
The following table summarizes activity related to the Company’s performance-based restricted stock units (“PRSU”) for the six months ended June 30, 2026:
| Number of Shares | Weighted Average Grant Date Fair Value | ||||||||||
| Nonvested as of December 31, 2025 | $ | ||||||||||
| Granted | |||||||||||
| Vested | |||||||||||
| Forfeited | ( | ||||||||||
| Nonvested as of June 30, 2026 | $ | ||||||||||
June PRSUs (June 2026)
On June 17, 2026, the Company granted 2,000 PRSUs to an employee of the Company (“June PRSUs”) from the 2023 plan. The June PRSUs shall vest upon satisfaction of a performance-based vesting condition, which shall be satisfied upon the achievement of certain milestones. At the point the conditions of the June PRSUs are deemed to have been achieved, 100 % of the PRSUs will vest immediately. The total grant date fair value of the June PRSUs was $13.4 thousand, which was determined based on the Company’s stock price on date of grant. As of June 30, 2026, the Company considers the achievement of the June PRSUs milestone to be probable. As such, the Company will recognize the related compensation cost over the requisite service period. As of June 30, 2026, all shares of the June PRSUs were unvested and outstanding.
March PRSUs (March 2026)
On March 23, 2026, the Company granted 100,000 PRSUs to an employee of the Company (“March PRSUs”) from the 2023 Plan. The March PRSUs shall vest upon satisfaction of both (i) a service-based vesting condition and (ii) a performance-based vesting condition. The service-based vesting condition shall be satisfied based on the employee’s continued employment. The performance-based vesting condition shall be satisfied upon the achievement of certain milestones. At the point the conditions of the March PRSUs are deemed to have been achieved, 25 % of the total March PRSUs will vest immediately, and 1/30th of the remaining shares will vest on the same day of each month thereafter for 30 months, subject to the employee’s continued employment. The total grant date fair value of the March PRSUs was $0.9 million, which was determined based on the Company’s stock price on date of grant. As of June 30, 2026, the Company considers the achievement of the March PRSUs milestone to be probable. As such, the Company will recognize the related
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compensation cost over the requisite service period. As of June 30, 2026, all shares of the March PRSUs were unvested and outstanding.
Vayu PRSUs
On August 15, 2025, the Company granted 1,440,001 shares contemplated by the Vayu Acquisition, of which the Company granted 880,001 PRSUs to employees (“Vayu PRSUs”). The remaining 560,000 shares were granted to nonemployees. The Vayu PRSUs will vest or commence vesting upon achievement of certain milestones as defined per the Vayu Merger Agreement. In addition, the Vayu PRSUs may also be subject to a continuous service condition. At the point the milestones have been deemed to be achieved (the “Milestone Date”), approximately 66 % of the Vayu PRSUs will vest immediately, and the remaining 34 % will vest over 2.5 years following the Milestone Date. The total grant date fair value of the Vayu PRSUs was $8.5 million, which was determined based on the Company’s stock price on date of grant. As of June 30, 2026, the Company considers the achievement of the Vayu PRSUs milestone to be probable. As such, the Company will recognize the related compensation cost over the requisite service period. As of June 30, 2026, all shares of the Vayu PRSUs were unvested and outstanding.
Stock Options
The following table summarizes activity related to the Company’s stock options for the six months ended June 30, 2026:
| Options | Weighted Average Exercise Price | Intrinsic Value (in thousands) | |||||||||||||||
| Outstanding as of December 31, 2025 | $ | $ | |||||||||||||||
| Granted | |||||||||||||||||
| Exercised | ( | ||||||||||||||||
| Forfeited | ( | ||||||||||||||||
| Outstanding as of June 30, 2026 | $ | $ | |||||||||||||||
| Exercisable as of June 30, 2026 | $ | $ | |||||||||||||||
| Exercisable and expected to vest at June 30, 2026 | $ | $ | |||||||||||||||
Refer to Note 4. Acquisitions for information regarding the valuation of options granted during the year ended December 31, 2025 as part of the Vayu acquisition.
Nonemployee Share-based Awards
On January 27, 2026, the Company granted 366,332 awards contemplated by the Diligent Acquisition to nonemployee shareholders (“Diligent Nonemployee Awards”). Of this total, 274,749 awards will vest or commence vesting upon achievement of certain performance-based milestones as defined per the Diligent Merger Agreement (“Diligent Nonemployee Performance-based Awards”). At the point the milestones have been deemed to be achieved (the “Milestone Date”), approximately all of the Diligent Nonemployee Performance-based Awards will vest immediately. The total grant date fair value of the Diligent Nonemployee Performance-based Awards was $3.1 million, which was determined using the Monte Carlo simulation option pricing model. The Diligent Nonemployee Performance-based Awards were included in the consideration transferred as part of the Diligent Acquisition. As such, settlement of the equity-classified contingent consideration will be accounted for within equity. As of June 30, 2026, the Company considers the achievement of the Diligent Nonemployee Performance-based Awards milestone to be probable. The remaining 91,583 awards granted to nonemployee shareholders of the Company will be earned upon satisfaction of a service-based condition achieved eighteen months following the closing of the Diligent Acquisition (“Diligent Nonemployee Service-based Awards”). The fair value of the Diligent Nonemployee Service-based Awards at date of grant was determined to be $1.2 million and will be recognized as stock-based compensation expense over the requisite service period. All Diligent Nonemployee Service-based Award shares will vest immediately upon satisfaction of the service-based condition. As of June 30, 2026, all Diligent Nonemployee Awards were unvested and outstanding.
On August 15, 2025, the Company granted 560,000 shares contemplated by the Vayu Acquisition to nonemployee shareholders. The vesting terms of these shares are consistent with the Vayu PRSUs. The total grant date fair value was
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$5.4 million, which was determined based on the Company’s stock price on date of grant. As of June 30, 2026, the Company considers the achievement of the milestone to be probable. As such, the Company will recognize the related compensation cost over the requisite service period. As of June 30, 2026, all shares were unvested and outstanding.
Stock-based Compensation Expense
The Company recorded stock-based compensation expense for both employees and nonemployees of $14.7 million and $4.4 million for the three months ended June 30, 2026 and 2025, respectively. The Company recorded stock-based compensation expense for both employees and nonemployees of $22.0 million and $8.3 million for the six months ended June 30, 2026 and 2025, respectively. Stock-based compensation expense for employees is classified based on the cost center to which the award holder belongs. Stock-based compensation expense for nonemployees is classified as general and administrative expense. The Company recorded stock-based compensation expense in the unaudited condensed consolidated statements of operations and comprehensive loss as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| General and administrative | $ | $ | $ | $ | |||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Operations | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | |||||||||||||||||||
During the three months ended June 30, 2026 and 2025, the Company recorded stock-based compensation expense related to vesting of RSUs and RSAs of $14.7 million and $4.0 million, respectively. During the six months ended June 30, 2026 and 2025, the Company recorded stock-based compensation expense related to vesting of RSUs and RSAs of $22.0 million and $7.9 million, respectively.
As of June 30, 2026, there was $92.3 million of unamortized compensation costs related to unvested RSUs, which is expected to be recognized over a weighted-average period of approximately 2.8 years. As of June 30, 2026, there was an immaterial amount of unamortized compensation costs related to unvested RSAs, which is expected to be recognized over a weighted-average period of approximately 0.1 years.
During the three and six months ended June 30, 2026 and 2025, the Company recorded an immaterial amount of stock-based compensation expense for stock options. As of June 30, 2026, there was an immaterial amount of total unamortized compensation cost related to unvested stock option awards, which is expected to be recognized over a weighted average period of 0.6 years.
Warrants
The following is a summary of warrants as of June 30, 2026:
| Warrants | Weighted Average Exercise Price | ||||||||||
| Outstanding as of December 31, 2025 | $ | ||||||||||
| Granted | |||||||||||
| Exercised | |||||||||||
| Forfeited | |||||||||||
| Outstanding as of June 30, 2026 | $ | ||||||||||
| Exercisable as of June 30, 2026 | $ | ||||||||||
The weighted-average remaining term of the warrants outstanding was 4.8 years as of June 30, 2026.
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KV Warrants
In accordance with the terms of the Vayu Merger Agreement, upon the closing of the transaction, the Company issued 4,000,000 warrants to a certain Vayu securityholder (the “KV Warrants”). Each KV Warrant entitles the holder to purchase one share of the Company’s common stock, subject to adjustment thereunder, at an exercise price of $10.36 per share (which amount is equal to the 10 -day volume-weighted average price of the common stock prior to the closing of the transaction). The KV Warrants contain customary terms and are exercisable at any time on or after August 15, 2025, and terminate on August 15, 2031. The KV Warrants were issued pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act.
At-the-Market Offerings
2026 Sales Agreement
On May 11, 2026, the Company entered into a Sales Agreement (the “2026 Sales Agreement”) with Evercore Group L.L.C., Guggenheim Securities, LLC, Oppenheimer & Co. Inc., Northland Securities, Inc. and Wedbush Securities Inc. (collectively, the “2026 ATM Agents”) under which the Company may offer and sell, from time to time in its sole discretion, shares of the Company’s common stock with aggregate gross sales proceeds of up to $150.0 million through an “at the market” equity offering program. Under the 2026 Sales Agreement, the Company will set the parameters for the sale of shares. Subject to the terms and conditions of the 2026 Sales Agreement, the 2026 ATM Agents may sell the shares by methods deemed to be an “at the market” offering as defined in Rule 415 promulgated under the Securities Act. The 2026 Sales Agreement provides that the Company will pay the 2026 ATM Agents a commission of up to 3 % of the gross proceeds of any shares of common stock sold through the 2026 ATM Agents under the 2026 Sales Agreement.
As of June 30, 2026, the Company has sold 8,540,900 shares of the Company’s common stock under the 2026 Sales Agreement at a weighted-average price of $9.08 per share and raised $77.6 million of gross proceeds. After deducting approximately $2.3 million of commissions and offering costs incurred by the Company, the net proceeds from sales of the Company’s common stock were $75.2 million as of June 30, 2026. As of June 30, 2026, the Company had approximately $72.4 million of remaining capacity to sell the Company’s common stock under the 2026 Sales Agreement.
2025 Distribution Agreement
On March 6, 2025, the Company entered into a Controlled Equity OfferingSM Agreement (the “2025 Distribution Agreement”) with Cantor Fitzgerald & Co., Wedbush Securities Inc., Northland Securities, Inc., Ladenburg Thalmann & Co. Inc. and Seaport Global Securities LLC (collectively, the “2025 ATM Agents”) under which the Company may offer and sell, from time to time in its sole discretion, shares of the Company’s common stock with aggregate gross sales proceeds of up to $150 million through an “at the market” equity offering program. Under the 2025 Distribution Agreement, the Company will set the parameters for the sale of shares. Subject to the terms and conditions of the 2025 Distribution Agreement, the 2025 ATM Agents may sell the shares by methods deemed to be an “at the market” offering as defined in Rule 415 promulgated under the Securities Act. The 2025 Distribution Agreement provides that the Company will pay the 2025 ATM Agents a commission of up to 3 % of the gross proceeds of any shares of common stock sold through the 2025 ATM Agents under the 2025 Distribution Agreement.
During the six months ended June 30, 2026, the Company sold 1,217,000 shares of the Company’s common stock under the 2025 Distribution Agreement at a weighted-average price of $8.21 per share and raised $10.0 million of gross proceeds. After deducting approximately $0.3 million of commissions and offering costs incurred by the Company during the six months ended June 30, 2026, the net proceeds from sales of the Company’s common stock under the 2025 Distribution Agreement were $9.7 million during the six months ended June 30, 2026. Inception to date, as of June 30, 2026, the Company has sold a total of 7,716,935 shares of the Company’s common stock under the 2025 Distribution Agreement at a weighted-average price of $11.82 per share and raised $91.2 million of gross proceeds. After deducting approximately $2.7 million of commissions and offering costs incurred by the Company, the net proceeds from sales of the Company’s common stock were $88.5 million as of June 30, 2026. On May 6, 2026 the Company terminated the 2025 Distribution Agreement.
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11. INCOME TAXES
For interim financial reporting, the Company estimates its annual effective tax rate based on the projected income for its entire fiscal year and records a provision or benefit for income taxes on a quarterly basis based on the estimated annual effective income tax rate, adjusted for any discrete tax items.
The Company recorded income tax benefit of $36.2 thousand for the three months ended June 30, 2026 compared to zero expense for the three months ended June 30, 2025. Income tax expense for the three months ended June 30, 2026 was favorably impacted by $36.2 thousand of net discrete tax benefit, primarily related to the release of uncertain tax benefits offset by return to provision expense related to income tax returns filed in Canada. Income tax expense for the three months ended June 30, 2025 was entirely attributable to an increase in the valuation allowance of deferred tax assets with no tax expense arising from the estimated annual effective tax rate.
The Company recorded income tax benefit of $0.7 million for the six months ended June 30, 2026 compared to zero expense for the six months ended June 30, 2025. Income tax expense for the six months ended June 30, 2026 was favorably impacted by $0.7 million of net discrete tax benefit, primarily related to the release of prior year valuation allowance amounts. The release was driven by the acquisition of net deferred liabilities of Diligent. Income tax expense for the six months ended June 30, 2025 was entirely attributable to an increase in the valuation allowance of deferred tax assets with no tax expense arising from the estimated annual effective tax rate.
The Company periodically evaluates its valuation allowance requirements as facts and circumstances change and may adjust its deferred tax asset valuation allowances accordingly. It is reasonably possible that the Company will either add to or reverse a portion of its existing deferred tax asset valuation allowances in the future. Such changes in the deferred tax asset valuation allowances will be reflected in the current operations through the Company’s effective income tax rate.
As of June 30, 2026, there have been no material changes in unrecognized tax benefits from those disclosed in the Company’s most recent audited financial statements as of December 31, 2025. The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes in its unaudited condensed consolidated statements of operations and comprehensive loss.
The Company regularly assesses the likelihood of an adverse outcome resulting from examinations to determine the adequacy of its tax reserves. As of June 30, 2026, the Company believes that it is more likely than not that the tax positions it has taken will be sustained upon the resolution of its audits resulting in no material impact on its consolidated financial position and the results of operations and cash flows. However, the final determination with respect to any tax audits, and any related litigation, could be materially different from the Company’s estimates and/or from its historical income tax provisions and income tax liabilities and could have a material effect on operating results and/or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, and/or interest assessments related to income tax examinations.
12. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
From time to time, the Company is a party to litigation and subject to claims incidental to its business. Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of ongoing matters will not have a material adverse effect on its business. Regardless of the outcome, litigation can have an adverse impact on the Company because of judgment, defense and settlement costs, diversion of management resources, and other factors. At each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable, requiring recognition of a loss accrual, or whether the potential loss is reasonably possible, requiring potential disclosure. Legal fees are expensed as incurred.
In December 2024, a class action complaint was filed in the Superior Court of California, County of Los Angeles, alleging that the Company violated the California Labor Code, among other claims. In December 2025, the Company agreed with the plaintiff to settle for the amount of $375.0 thousand. As a result, the Company recorded a total of $408.8 thousand in legal settlement expense, of which $375.0 thousand was recorded for the settlement with the plaintiff and the remaining $33.8 thousand was recorded for the related payroll tax expense as a result of the settlement payment. The legal settlement expense is presented in accrued liabilities on the unaudited condensed consolidated balance sheet as of June 30, 2026.
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Tariffs
On February 20, 2026, the U.S. Supreme Court issued a ruling invalidating certain tariffs previously imposed under IEEPA. As a result of this ruling, the Company is eligible for a refund of tariffs previously paid on imported goods. The Company has recognized amounts that were realized or realizable as of June 30, 2026 within the financial results. During the six months ended June 30, 2026, the Company recognized $4.6 million of refunds related to the IEEPA tariffs. Because the related tariffs were originally capitalized as part of the cost of raw materials, the refund was recorded as a reduction of $3.6 million to robot assets and a reduction of $0.8 million to construction in progress within property and equipment on the unaudited condensed consolidated balance sheets. Any interest received in connection with tariff refunds was recognized as interest income in the unaudited condensed consolidated statements of operations and comprehensive loss. During the six months ended June 30, 2026, the Company recognized $0.2 million of interest income related to the tariff refunds.
We continue to monitor these developments and their potential impact on our results of operations. Further, we will continue to monitor changes to the import and export policies of the U.S. and other countries that could impact our financial position, results of operations and cash flows.
13. SEGMENT INFORMATION
Based on the applicable criteria under the accounting standard, including quantitative thresholds, the Company has identified one
Operating segments are defined as components of an enterprise for which separate financial information is available for evaluation by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance. The Company has identified our Chief Executive Officer as the chief operating decision maker. The CODM assesses performance for the Segment and decides how to allocate resources based on net loss. The CODM uses net loss in deciding how to allocate capital within the Segment, and as a measurement to monitor budget versus actual results. The CODM also uses net loss in assessing performance of the Segment and in establishing management’s compensation.
The Segment derives revenue from customers by providing (i) services via the Company’s robot fleet, including indoor and outdoor delivery services, branding and experiential services, and (ii) access to software developed for the robot fleet, including certain autonomous capabilities. The majority of the Segment’s revenue is derived from robot delivery services and the Segment’s long-term partnerships with food delivery platforms. The Segment’s operations are primarily based in the United States and Canada, and it manages its business activities on a consolidated basis. The Segment derives all revenue from its United States operations. The Segment’s assets are primarily based in the United States. Assets based in foreign countries are not material to the operations of the Segment. The services provided by the robot fleet are offered and deployed in a similar manner across all jurisdictions in which the Company operates.
The accounting policies of the Segment are the same as those described in the summary of significant accounting policies. The measure of segment assets is reported on the unaudited condensed consolidated balance sheets as total consolidated assets. The Segment does not have intra-entity sales or transfers. Financial information for the Segment is consistent with the financial information presented in these unaudited condensed consolidated financial statements. In addition to the expenses presented on the Company’s unaudited condensed consolidated statements of operations and comprehensive loss, the CODM considers stock-based compensation expense as a significant expense within net loss. Refer to Note 10. Stockholders’ Equity and Stock-Based Compensation for additional information about the Segment’s stock-based compensation expense, which is consistent with the Company’s consolidated stock-based compensation expense. Additional descriptions of the components of the financial information found throughout these unaudited condensed consolidated financial statements are consistent with the information for the Segment, including the concentration of credit risk.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes included in Part I, Item 1. “Financial Statements,” of this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Please also see the sections titled “Special Note Regarding Forward-Looking Statements” for a discussion of forward-looking statements and Part II, Item 1A. “Risk Factors” for a discussion of factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis and elsewhere in this Quarterly Report on Form 10-Q.
Overview
We are engaged in developing and operating autonomous robotic systems designed to navigate and perform work in complex, human-centered environments. Serve has developed an advanced platform that combines proprietary hardware, artificial intelligence, computer vision, and cloud-based fleet management software to enable safe, reliable, and scalable autonomous operations across multiple physical domains. We design, engineer, deploy, and operate low-emission robotic systems built on this platform.
Serve operates autonomy systems across multiple domains spanning both outdoor and indoor environments. Our sidewalk delivery operations provide autonomous last-mile delivery services for restaurant and retail partners, while our healthcare operations, enabled through the acquisition of Diligent Robotics in 2026, deploy robots in hospital settings to support clinical staff through logistics and workflow automation.
Serve is shaping the future of physical AI in real world environments. We are expanding our platform into adjacent markets, customer segments, and operating environments where autonomous mobility can address labor constraints, improve service levels, and reduce emissions. We intend to leverage our core autonomy stack, fleet management infrastructure, and operational expertise to support additional use cases across both outdoor and indoor settings.
Financial Highlights
For the three months ended June 30, 2026 and 2025, we generated revenues of $3.2 million and $0.6 million, respectively, and reported net losses of $64.1 million and $20.9 million, respectively. For the six months ended June 30, 2026 and 2025, we generated revenues of $6.2 million and $1.1 million, respectively, and reported net losses of $113.1 million and $34.1 million, respectively.
As noted in our unaudited condensed consolidated financial statements, as of June 30, 2026, we had an accumulated deficit of $322.0 million.
Recent Developments
Acquisition of Vebu, Inc.
On February 17, 2026, the Company acquired all of the issued and outstanding equity of Vebu, which was accounted for under the acquisition method of accounting. Refer to the “Liquidity and Capital Resources” section for discussion of the purchase price and the acquisition’s impact on the Company’s liquidity.
Acquisition of Diligent Robotics, Inc.
On January 27, 2026, the Company acquired all of the issued and outstanding equity of Diligent, which was accounted for under the acquisition method of accounting. Refer to the “Liquidity and Capital Resources” section for discussion of the purchase price and the acquisition’s impact on the Company’s liquidity.
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Outlook and Challenges Facing Our Business
There are a number of factors that affect our business which include, among others:
Overall Demand for Last-Mile Delivery and Hospital-Based Automation
Our potential for growth depends significantly on continued demand for last-mile delivery of food and other items on our partner platforms and for automation solutions from our hospital customers. The demand for last-mile delivery can fluctuate based on various market cycles, weather and local community health conditions, as well as evolving competitive dynamics. The demand for hospital-based automation solutions can fluctuate based on budget cycles, staffing levels, operational priorities, and broader healthcare industry conditions.
Our largest stream of projected revenue comes from maximizing utilization of our outdoor delivery robot fleet to perform deliveries on our partner platforms. Matching algorithms on these platforms as well as the extent of their merchant and end-customer participation in robotic delivery directly impacts the utilization rate of our robots, both of which can be challenging to predict. Our ability to gain additional partners and to generate revenue with such additional partners is dependent on numerous factors, including, among others, the partner’s consumer base and desire to use robotic delivery, along with normal-course onboarding for new partners. These uncertainties make demand difficult to forecast for us and our partners.
Our healthcare-related revenue depends on the continued utilization of robots within hospital workflows. The extent to which hospitals are able to support, operate, and scale robotic deployments directly impacts utilization rates, all of which can be challenging to predict. In addition, hospitals may face limitations in infrastructure, staffing, or internal support required to sustain robotic fleets. These uncertainties make demand difficult to forecast for us and our customers.
Customer Concentration
A significant portion of our revenue is concentrated with a limited number of customers. The following table represents the concentration of revenue for all customers that accounted for more than 10% of our revenues:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| Customer A sales as a percentage of total revenues | 11 | % | 31 | % | 12 | % | 29 | % | |||||||||||||||
| Customer B sales as a percentage of total revenues | 22 | % | N/A | 17 | % | N/A | |||||||||||||||||
| Customer C sales as a percentage of total revenues | N/A | 39 | % | N/A | 46 | % | |||||||||||||||||
A significant portion of our accounts receivable is concentrated with a limited number of customers. The following table represents the concentration of accounts receivable for all customers that account for more than 10% of our total accounts receivable as of June 30, 2026 and December 31, 2025:
| June 30, 2026 | December 31, 2025 | ||||||||||
| Customer A receivables as a percentage of total accounts receivable | 11 | % | 11 | % | |||||||
| Customer B receivables as a percentage of total accounts receivable | N/A | N/A | |||||||||
| Customer C receivables as a percentage of total accounts receivable | N/A | N/A | |||||||||
| Customer D receivables as a percentage of total accounts receivable | N/A | 18 | % | ||||||||
| Customer E receivables as a percentage of total accounts receivable | 14 | % | 30 | % | |||||||
| Customer F receivables as a percentage of total accounts receivable | 13 | % | N/A | ||||||||
There are inherent risks whenever a large percentage of total revenues and accounts receivable are concentrated with a limited number of customers. The loss of any or all of these customers could have a negative impact on our planned operations.
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Inflation and Market Considerations; Availability of Materials, Labor & Services
We consider most on-demand purchases as discretionary spending for consumers, and we are therefore susceptible to changes in discretionary spending patterns and economic slowdowns in the geographic areas in which merchants on our partners’ platforms operate and in the economy at large. Discretionary consumer spending can be impacted by general economic conditions, unemployment, consumer debt, inflation, gasoline prices, interest rates, consumer confidence and other macroeconomic factors. Inflation can lead to increased cost of material and labor for restaurants and merchants who may in turn raise prices on the items they sell and result in a reduction in demand for those items. To the extent inflation reduces economic activity and consumer demand for items we deliver, it could negatively impact our financial results. Continued uncertainty in or a worsening of the economy, generally or in a number of our markets, and consumers’ reactions to these trends could adversely affect our business and cause us to, among other things, reduce the number and frequency of new market openings or cease operations in existing markets. However, inflation can also serve as a tailwind that may accelerate the adoption of automated robotic last-mile delivery, as labor becomes more expensive and drives up the cost of delivery by humans.
Intellectual Property
We rely on patented and non-patented proprietary information relating to product development, manufacturing capabilities, and other core competencies of our business. Protection of intellectual property is critical. Therefore, steps such as additional patent applications, confidentiality, and non-disclosure agreements, as well as other security measures are important. While we believe we have a strong patent portfolio and there is, to our knowledge, no actual or threatened litigation against us for patent-related matters, litigation or threatened litigation is a common method to enforce or protect intellectual property rights. Such action may be initiated by or against us and would require significant management time and expense.
Supply Chain Constraints
We cannot be sure whether global supply chain shortages will affect our future robot build plans. In order to mitigate supply chain risks, we may need to incur higher costs to secure available inventory and place non-cancelable purchase commitments with our suppliers, which could introduce inventory risk if our forecasts and assumptions prove inaccurate. Higher costs of components would affect our cash runway and delays in the manufacturing of our robots would push out our revenue forecasts.
Governmental and Regulatory Conditions
Our potential for growth depends on continued permission and acceptance by local governments and municipalities where our robots perform deliveries. Changes in regulations such as the imposition of a cap on the number of robots or technical requirements such as robot size and weight restrictions or limitations on autonomy within a certain geographic area could reduce or limit our ability to generate revenues or impact our unit economics in those markets.
Components of Results of Operations
Revenue
Our revenue consists of fleet services, which includes revenue generated from delivery services, branding services, and data monetization; and software services, which includes revenue generated from licensing software to customers, and engineering and development projects.
Cost of Revenue
Cost of revenue consists primarily of allocation of personnel time related to revenue activities, allocations of depreciation on robot assets used for revenue producing activities, allocation of amortization expense of developed technology, allocations of network costs, and costs related to data, software and similar costs that allow the robots to function as intended and for the Company to communicate with its robots while in service.
Research and Development Expenses
Research and development expenses primarily consist of costs incurred by research and development functions. These costs are expensed as incurred.
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General and Administrative Expenses
General and administrative expenses primarily consist of costs incurred by general and administrative functions, including executive management and administrative functions, including finance and accounting, legal and human resources.
Operations Expenses
Operations expenses primarily consist of costs incurred by field operations functions.
Sales and Marketing Expenses
Sales and marketing expenses primarily consist of costs incurred by sales and marketing functions.
Other Income (Expense)
Other income (expense) primarily includes the following items:
•Interest income, which consists primarily of interest earned on our cash and cash equivalents and marketable securities.
•Interest expense, which consists of stated rates of interest on financing instruments, fees incurred related to financing instruments or accretion of debt discounts.
•Realized gain (loss) on foreign currency translation, which consists primarily of remeasurement of transactions and monetary assets and liabilities denominated in currencies other than the functional currency at the end of the period.
•Realized gain (loss) from the sale or maturity of marketable securities.
•Other income.
•Other expenses.
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Results of Operations
Comparison of Results of Operations for the three months ended June 30, 2026 and 2025
The following table summarizes our operating results as reflected in our unaudited condensed consolidated statements of operations and comprehensive loss during the three months ended June 30, 2026 and 2025, respectively, and provides information regarding the dollar and percentage increase (or decrease) during such periods (in thousands).
| Three Months Ended June 30, | |||||||||||||||||||||||
| 2026 | 2025 | Change | Change % | ||||||||||||||||||||
| Revenues | $ | 3,238 | $ | 642 | $ | 2,596 | 404 | % | |||||||||||||||
| Cost of revenues | 12,017 | 3,501 | 8,516 | 243 | % | ||||||||||||||||||
| Gross loss | (8,779) | (2,859) | (5,920) | 207 | % | ||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | 20,279 | 9,120 | 11,159 | 122 | % | ||||||||||||||||||
| General and administrative | 24,844 | 8,078 | 16,766 | 208 | % | ||||||||||||||||||
| Operations | 7,862 | 2,124 | 5,738 | 270 | % | ||||||||||||||||||
| Sales and marketing | 4,301 | 463 | 3,838 | 829 | % | ||||||||||||||||||
| Total operating expenses | 57,286 | 19,785 | 37,501 | 190 | % | ||||||||||||||||||
| Loss from operations | (66,065) | (22,644) | (43,421) | 192 | % | ||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest income | 1,927 | 1,794 | 133 | 7 | % | ||||||||||||||||||
| Realized loss on foreign currency translation | (4) | — | (4) | 100 | % | ||||||||||||||||||
| Other income | 3 | — | 3 | 100 | % | ||||||||||||||||||
| Other expenses | (24) | — | (24) | 100 | % | ||||||||||||||||||
| Net loss before income taxes | (64,163) | (20,850) | (43,313) | 208 | % | ||||||||||||||||||
| Benefit from income taxes | (36) | — | (36) | 100 | % | ||||||||||||||||||
| Net loss | $ | (64,127) | $ | (20,850) | $ | (43,277) | 208 | % | |||||||||||||||
Revenues increased by $2.6 million, or 404%, to $3.2 million, for the three months ended June 30, 2026, compared with $0.6 million for the same period in 2025. This increase was primarily driven by a $2.0 million increase in fleet services revenue due to overall expansion and diversification of the robot fleet and partnerships. The remaining increase of $0.6 million was attributable to an increase in software services revenue.
Cost of revenues increased by $8.5 million to $12.0 million for the three months ended June 30, 2026, compared with $3.5 million for the same period in 2025, due primarily to the integration of recent acquisitions and expansion of the outdoor robot fleet.
Research and development expense increased by $11.2 million to $20.3 million for the three months ended June 30, 2026, compared with $9.1 million for the same period in 2025, due primarily to an increase in personnel-related costs and stock-based compensation expense.
General and administrative expense increased by $16.8 million to $24.8 million for the three months ended June 30, 2026, compared with $8.1 million for the same period in 2025, due primarily to an increase in personnel-related costs, including stock-based compensation expense, as well as higher amortization expense associated with acquired intangible assets.
Operations expense increased by $5.7 million to $7.9 million for the three months ended June 30, 2026, compared with $2.1 million for the same period in 2025. The increase was primarily attributable to an increase in personnel-related costs and higher depreciation expense associated with the expansion of our robot fleet.
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Sales and marketing expenses increased by $3.8 million to $4.3 million for the three months ended June 30, 2026, compared with $0.5 million for the same period in 2025. This increase was primarily due to an increase in personnel-related costs.
Other income (expense) increased by $0.1 million to $1.9 million for the three months ended June 30, 2026, compared with $1.8 million for the same period in 2025. This increase was primarily due to an increase in interest income as a result of interest earned from cash on hand and marketable securities.
Comparison of Results of Operations for the six months ended June 30, 2026 and 2025
The following table summarizes our operating results as reflected in our unaudited condensed consolidated statements of operations and comprehensive loss during the six months ended June 30, 2026 and 2025, respectively, and provides information regarding the dollar and percentage increase (or decrease) during such periods (in thousands).
| Six Months Ended June 30, | |||||||||||||||||||||||
| 2026 | 2025 | Change | Change % | ||||||||||||||||||||
| Revenues | $ | 6,222 | $ | 1,082 | $ | 5,140 | 475 | % | |||||||||||||||
| Cost of revenues | 24,002 | 5,410 | 18,592 | 344 | % | ||||||||||||||||||
| Gross loss | (17,780) | (4,328) | (13,452) | 311 | % | ||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | 39,316 | 16,000 | 23,316 | 146 | % | ||||||||||||||||||
| General and administrative | 39,760 | 12,828 | 26,932 | 210 | % | ||||||||||||||||||
| Operations | 14,817 | 3,793 | 11,024 | 291 | % | ||||||||||||||||||
| Sales and marketing | 6,174 | 702 | 5,472 | 779 | % | ||||||||||||||||||
| Total operating expenses | 100,067 | 33,323 | 66,744 | 200 | % | ||||||||||||||||||
| Loss from operations | (117,847) | (37,651) | (80,196) | 213 | % | ||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest income | 4,033 | 3,586 | 447 | 12 | % | ||||||||||||||||||
| Interest expense | — | (3) | 3 | (100) | % | ||||||||||||||||||
| Realized loss on foreign currency translation | (14) | — | (14) | 100 | % | ||||||||||||||||||
| Realized loss on investments | (1) | — | (1) | 100 | % | ||||||||||||||||||
| Other income | 38 | — | 38 | 100 | % | ||||||||||||||||||
| Other expenses | (24) | — | (24) | 100 | % | ||||||||||||||||||
| Net loss before income taxes | (113,815) | (34,068) | (79,747) | 234 | % | ||||||||||||||||||
| Benefit from income taxes | (684) | — | (684) | 100 | % | ||||||||||||||||||
| Net loss | $ | (113,131) | $ | (34,068) | $ | (79,063) | 232 | % | |||||||||||||||
Revenues increased by $5.1 million, or 475%, to $6.2 million, for the six months ended June 30, 2026, compared with $1.1 million for the same period in 2025. This increase was primarily driven by a $3.7 million increase in fleet services revenue due to overall expansion and diversification of the robot fleet and partnerships. The remaining increase of $1.4 million was attributable to an increase in software services revenue.
Cost of revenues increased by $18.6 million to $24.0 million for the six months ended June 30, 2026, compared with $5.4 million for the same period in 2025, due primarily to the integration of recent acquisitions and expansion of the outdoor robot fleet.
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Research and development expense increased by $23.3 million to $39.3 million for the six months ended June 30, 2026, compared with $16.0 million for the same period in 2025, due primarily to an increase in personnel-related costs, including an increase in stock-based compensation expense, as well as increased software costs due to network usage.
General and administrative expense increased by $26.9 million to $39.8 million for the six months ended June 30, 2026, compared with $12.8 million for the same period in 2025, due primarily to an increase in personnel-related costs, including stock-based compensation expense, as well as higher amortization expense associated with acquired intangible assets and increased professional fees largely related to acquisition activities.
Operations expense increased by $11.0 million to $14.8 million for the six months ended June 30, 2026, compared with $3.8 million for the same period in 2025. The increase was primarily attributable to an increase in personnel-related costs, higher depreciation expense associated with the expansion of our robot fleet, and increased facility costs related to our entry into new markets.
Sales and marketing expenses increased by $5.5 million to $6.2 million for the six months ended June 30, 2026, compared with $0.7 million for the same period in 2025. This increase was primarily due to an increase in personnel-related costs.
Other income (expense) increased by $0.4 million to $4.0 million for the six months ended June 30, 2026, compared with $3.6 million for the same period in 2025. This increase was primarily due to an increase in interest income as a result of interest earned from cash on hand and marketable securities.
Key Metrics
We regularly review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. The following metrics are inclusive of the outdoor and indoor robot fleet.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||||||||
Daily Active Robots | 792 | 160 | 811 | 116 | |||||||||||||||||||
Daily Supply Hours | 9,809 | 1,723 | 10,051 | 1,189 | |||||||||||||||||||
Daily Active Robots. We define daily active robots as the average number of robots performing daily deliveries during the period. This metric is reflective of the total robot fleet, including both indoor and outdoor robots. Daily active robots reflect our operation team’s capacity to have active robots in the field performing delivery services or generating branding revenues. We closely monitor and strive to efficiently increase our daily active robots as we improve our autonomy and resultant human-to-robot ratios and increase the number of partners on our platform.
Daily Supply Hours. We define daily supply hours as the average number of hours our robots are available to perform daily deliveries during the period. Supply hours represent the aggregate number of robot hours per day during which we can utilize our robots for delivery, inclusive of both indoor and outdoor deliveries. Supply hours increase as we add active robots and increase the operating window of those robots in a day. We closely monitor and strive to efficiently increase our fleet’s daily supply hours.
Liquidity and Capital Resources
As of June 30, 2026, our principal sources of liquidity were cash and cash equivalents, and marketable securities of $240.4 million, which consisted of $79.1 million in cash and cash equivalents, $156.3 million in short-term marketable securities, and $5.0 million in long-term marketable securities. Cash and cash equivalents consisted of cash on deposit with banks as well as an institutional money market account. Marketable securities consisted of commercial paper, corporate bonds, U.S. government agency securities and U.S. Treasury securities.
We have generated significant operating losses from our operations as reflected in our accumulated deficit of $322.0 million as of June 30, 2026. We have historically funded our operations from issuance of equity and debt securities. To execute on our strategic initiatives to continue to grow our business, we may incur operating losses and generate negative cash flows from operations in the future, and as a result, we may require additional capital resources. We believe our
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existing cash and cash equivalents and marketable securities will be sufficient to meet our working capital and capital expenditures needs for at least the next 12 months.
Our future capital expenditures will depend on many factors, including, but not limited to our growth, our ability to attract and retain customers, the continuing market acceptance of our offerings, the time and extent of spending to support our efforts to develop our platform, the expansion of sales and marketing activities, and the timing and extent of spending for policy initiatives. Further, we may in the future enter into arrangements to acquire or invest in businesses, products, services, and technologies. We may be required to seek additional equity or debt financing. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, financial condition, and results of operations could be adversely affected.
The following table shows a summary of our cash flows for the periods (in thousands):
| Six Months Ended June 30, | |||||||||||||||||
| 2026 | 2025 | Change | |||||||||||||||
| Net cash (used in) provided by: | |||||||||||||||||
| Operating activities | $ | (84,738) | $ | (25,426) | $ | (59,312) | |||||||||||
| Investing activities | (27,714) | (81,934) | 54,220 | ||||||||||||||
| Financing activities | 85,326 | 100,795 | (15,469) | ||||||||||||||
| Increase (decrease) in cash and cash equivalents | $ | (27,126) | $ | (6,565) | $ | (20,561) | |||||||||||
Operating Activities
Net cash used in operating activities was $84.7 million and $25.4 million for the six months ended June 30, 2026 and 2025, respectively. The increase of $59.3 million primarily consisted of an increased net loss of $79.1 million, adjusted for certain non-cash items, which primarily includes an increase of $13.8 million of non-cash stock-based compensation expense and an increase of $11.5 million of depreciation and amortization expense. These increases were offset by a decrease of change in operating assets and liabilities of $4.4 million.
Investing Activities
Net cash used in investing activities was $27.7 million and $81.9 million for the six months ended June 30, 2026 and 2025, respectively. The decrease of $54.2 million was primarily due to an increase in acquisition activity of $15.8 million, offset by an increase in net proceeds from marketable securities of $59.0 million.
Financing Activities
Net cash provided by financing activities was $85.3 million and $100.8 million for the six months ended June 30, 2026 and 2025, respectively. The decrease of $15.5 million primarily consisted of a decrease of $11.4 million in proceeds from exercises of warrants and a decrease of $4.4 million in proceeds from the issuance of the Company’s common stock during the period.
Off-Balance Sheet Transactions
During the periods presented, we did not have, and we do not currently have, off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities, to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes.
Critical Accounting Estimates
There have been no material changes in our critical accounting policies from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.
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Emerging Growth Company and Smaller Reporting Company Status
We are an “emerging growth company,” as defined in the JOBS Act. The JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This provision allows an emerging growth company to either early adopt or delay the adoption of some accounting standards until those standards would otherwise apply to private companies. We have elected to use the extended transition period under the JOBS Act until the earlier of the date on which we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
We are also a “smaller reporting company,” as defined in Item 10(f) of Regulation S-K, and we will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates equals or exceeds $250 million as of the prior June 30, or (2) our annual revenues equaled or exceeded $100 million during such completed fiscal year or the market value of our common stock held by non-affiliates equals or exceeds $700 million as of the prior June 30.
If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K. Similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company, as defined in Rule 12b-2 under the Exchange Act, for this reporting period and are not required to provide the information required under this item.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Under the supervision of and with the participation of our management, including our principal executive officer and our principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2026, the end of the period covered by this Quarterly Report on Form 10-Q. The term “disclosure controls and procedures,” as set forth in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.
Based upon our evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective because of the material weaknesses in our internal control over financial reporting described below.
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Material Weaknesses in Internal Control Over Financial Reporting
Management has identified the following material weaknesses in the Company’s internal control over financial reporting that exist as of June 30, 2026. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
•The Company did not design and maintain an effective control environment as our size has prevented us from being able to employ sufficient resources. This material weakness contributed to the following additional material weaknesses.
•The Company did not design and maintain effective controls to verify appropriate segregation of duties.
•The Company did not design and maintain effective controls related to substantially all accounts and disclosures. Specifically, the Company did not design and maintain comprehensive and formalized accounting and financial reporting policies and procedures that detail the information needed for our financial reporting process, including a robust review process by which management monitors for technical accounting requirements.
•The Company did not design and maintain effective controls over information technology (IT) general controls over information systems that are relevant to the preparation of the Company’s financial statements. Specifically, the Company did not design and maintain: (i) user access controls to ensure appropriate segregation of duties and to adequately restrict user and privileged access to appropriate personnel; (ii) program change management controls to ensure that program and data changes are identified, tested, authorized and implemented appropriately, (iii) computer operations controls to ensure that processing and transfer of data, and data backups and recovery are monitored; and (iv) program development controls to ensure that new software development is tested, authorized and implemented appropriately.
These material weaknesses did not result in material errors during the interim and annual periods reported herein. Additionally, these material weaknesses could result in a misstatement of substantially all account balances or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
Status of Remediation Plan
In response to the identification of the material weaknesses, our management team has established and is executing a remediation plan designed to address these material weaknesses. We are currently undertaking and evaluating a number of steps to remediate the underlying causes of these material weaknesses, including:
•Hired additional qualified personnel to address critical skill gaps and provide enhanced leadership to our finance and accounting functions.
•Implemented an enterprise resource planning system, which is expected to enhance our ability to maintain appropriate segregation of duties, provide a workflow to systemically support the evidence of transaction review and approval, enhance the design of IT general controls and provide relevant training to personnel.
•Engaged a third party to advise us on design and implementation controls for key business processes, policies and systems to support financial close and reporting procedures and technical accounting matters.
•Initiated a segregation of duties assessment review identifying key conflicts and design of mitigating controls.
The Company is committed to remediating the material weaknesses and the actions the Company is taking are subject to ongoing senior management review, as well as oversight from the Company’s audit committee. The Company will not be able to fully remediate these material weaknesses until these steps have been completed and operate effectively for a sufficient period of time. The Company may also identify additional measures that may be required to remediate the material weaknesses in the Company’s internal control over financial reporting, necessitating further action.
Changes in Internal Control over Financial Reporting
During the quarter ended June 30, 2026, there have been no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no pending, threatened or actual material legal proceedings to which the Company or any of its subsidiaries is a party.
ITEM 1A. RISK FACTORS
Investment in our stock involves a high degree of risk. You should consider carefully the risks described below, together with other information in this Quarterly Report on Form 10-Q and our other filings with the SEC, before making investment decisions regarding our stock. If any of the following risks and uncertainties, or if any other risks and uncertainties, actually occurs, our business, financial condition, or operating results could differ materially from the plans, projections, and other forward-looking statements included in Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q and in our other public filings. In addition, if any of the following risks and uncertainties, or if any other risks and uncertainties, actually occurs, our business, financial condition, or operating results could be harmed substantially, which could cause the market price of our stock to decline, perhaps significantly. Moreover, the risks described below are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also affect our business, operating results, prospects or financial condition.
Summary Risk Factors
Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows, and prospects. These risks are discussed more fully below and include, but are not limited to, risks related to:
Risks Related to Our Business and Operations
•our status as an early-stage company with minimal revenue, a history of losses, and a limited operating history, which may make it difficult to evaluate the future of our business and prospects;
•our ability to execute our business strategy to expand our addressable market and effectively manage our growth;
•our use of AI and machine learning technologies, which introduces new risks and uncertainties related to accuracy, bias, intellectual property, and regulatory scrutiny;
•our ability to expand and sustain our international business;
•our ability to commercialize our products at a large scale efficiently and effectively;
•our substantial reliance on relationships with suppliers and service providers for the parts and components in our robots, as well as for the manufacture of our robots;
•our ability to attract and retain highly qualified personnel, including engineers, robotics experts, and machine learning specialists; and
•the requirement for significant capital to fund our operations and growth, and the risk that financing may not be available when needed or on acceptable terms.
Risks Related to Our Products and Technology
•our robots’ reliance on sophisticated software technology that incorporates third-party components and networks to operate;
•our ability to adapt to evolving technology or customer demands in a timely and cost-effective manner;
•potential defects, glitches, or malfunctions in our products that could compromise performance, lead to injury or property damage, and result in product recalls or product liability claims;
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•safety incidents arising from human supervision, connectivity issues, third-party software, or automation that could cause injury, trigger recalls, or result in uninsured product liability and warranty claims;
•misuse of our delivery robots and related technology;
•accessibility concerns or failure to comply with disability access laws may result in claims, operational restrictions, or reputational harm; and
•the inability of our supply chain to deliver certain key electrical components, such as semiconductors.
Risks Related to Intellectual Property
•our ability to protect, maintain, and enforce our intellectual property rights;
•potential claims of infringement of third-party intellectual property rights; and
•the unproven nature of our video and LiDAR licensing model and our ability to generate recurring revenue at expected levels.
Risks Related to Cybersecurity and Privacy
•security breaches and other disruptions that could compromise our proprietary information and expose us to liability;
•cybersecurity risks to our operational systems, security systems, infrastructure, integrated software in our products, and data processed by us or third-party vendors;
•evolving laws, regulations, standards, policies, and contractual obligations related to privacy and data security, including the CCPA, BIPA, GDPR, and HIPAA; and
•our internal use of AI, generative AI, and machine learning tools that may expose us to heightened cybersecurity risks.
Risks Related to Our Industry and External Environment
•unfavorable changes in interest rates, foreign currency exchange rates, and inflationary pressures that may increase our operating costs;
•our dependence on discretionary spending patterns in the areas in which we operate and in the economy at large;
•competition in an industry subject to rapid technological change, where competitors may have or attain more resources and greater market recognition than we do; and
•important assumptions about the market demand, pricing, adoption rates, and sales cycle for our current and future products and services being inaccurate.
Risks Related to Our Regulatory Environment
•tariffs imposed by the United States and other countries, as well as changing trade relations, regional and international conflicts, and political conditions;
•the use of emerging technologies like AI, machine learning, and generative AI requiring us to navigate an uncertain legal and regulatory landscape;
•evolving privacy, data protection, and AI regulation that may restrict our ability to collect, process, and license video and LiDAR datasets;
•the evolving regulations around personal delivery devices, which could materially impact our business and growth prospects in new markets; and
•compliance with complex laws and regulations in multiple jurisdictions, including product safety, data privacy, healthcare, and environmental regulations.
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Risks Related to Ownership of Our Common Stock
•the market price and trading volume of our common stock may be volatile and could decline significantly; and
•our obligation to develop and maintain proper and effective internal control over financial reporting, and the presence of material weaknesses that increase the risk of material misstatement of our consolidated financial statements.
Risks Related to Our Business and Operations
We are an early-stage company with minimal revenue, a history of losses, and a limited operating history, which may make it difficult to evaluate the future of our business and prospects, and we cannot assure you that we will be able to operate profitably.
We are an early-stage company. We were formed and commenced operations in January 2021. We face all the risks faced by newer companies, including significant competition from existing and emerging competitors, some of which are established and have better access to capital. In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays, and other known and unknown factors. We will need to transition from an early-stage company to a company capable of supporting larger scale commercial activities. If we are not successful in such a transition, our business, results, and financial condition will be harmed.
We have a limited operating history, which may make it difficult to evaluate the future of our business and prospects. Any evaluation of our business and our prospects must be considered in light of the uncertainties, delays, difficulties and expenses commonly experienced by companies at this stage, which generally include unanticipated problems and additional costs relating to the development and testing of products, product approval or clearance, regulatory compliance, production, product introduction and marketing, and competition.
We have not been profitable to date, and we expect operating losses for the near future. During the years ended December 31, 2025 and 2024, we generated revenue of $2.7 million and $1.8 million, respectively, and incurred a net loss of $101.4 million and $39.2 million, respectively. Our losses are driven mainly by our investments in research and development costs, and there can be no assurance that we will not continue to incur net losses in the future. We may not succeed in expanding our customer base and product offerings and even if we do, may never generate revenue that is significant enough to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Furthermore, we may not be able to control overhead expenses even if our operations successfully expand. Our failure to become and remain profitable would depress our value and could impair our ability to raise capital, expand our business, diversify our product offerings, or even continue our operations.
As a company with a limited operating history, it is difficult to accurately forecast our revenues and operating results, and these could fluctuate in the future due to a number of factors. These factors may include adverse changes in companies’ interests in our robotic and branding services, companies’ available dollars to invest in our services, general economic conditions, our ability to market our company to other companies, headcount and other operating costs, and general industry and regulatory conditions and requirements. Our operating results may fluctuate from year to year due to the factors listed above and others not listed, which may make it difficult to evaluate the future of our business and prospects. At times, these fluctuations may be significant and could impact our ability to operate our business. There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability.
If we fail to execute our business strategy to expand our addressable market and effectively manage our growth, we may not be able to design, develop, manufacture, market and launch new generations of our robotic systems successfully, which could negatively impact our long-term growth prospects.
We intend to invest significantly in order to expand our business. Any failure to manage our growth effectively could materially and adversely affect our business, prospects, financial condition and results of operations. We expect our expansion to include:
•expanding our management, engineering, and product teams;
•identifying and recruiting individuals with the appropriate relevant experience;
•launching commercialization of new products and services;
•forecasting production and revenue;
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•entering into relationships with one or more third-party design for manufacturing partners and third-party contract manufacturers and/or expanding our internal manufacturing capabilities;
•controlling expenses and investments in anticipation of expanded operations;
•carrying out acquisitions and entering into collaborations, in-licensing arrangements, joint ventures, strategic alliances or partnerships;
•expanding and enhancing internal information technology, safety, and security systems;
•conducting demonstrations;
•expanding into new markets and geographies;
•expanding our ODD into new environments;
•entering into new agreements with suppliers, manufacturers and service providers; and
•implementing and enhancing administrative infrastructure, systems, and processes.
Growing our business is critical to our ability to continually invest in research and development, expand our manufacturing capacity, and commercialize new generations of our robots. A key part of this strategy is to leverage our robotic technology leadership and expand our addressable market into complementary and adjacent markets by investing in new technologies and geographies. Many of these markets are emerging or dynamic, and it is difficult to predict trends of these markets, including any potential growth. Moreover, we have a limited history of commercializing and selling our robots into these markets. This expansion strategy may require a significant investment of capital and human resources, disrupt our operations, and impose substantial demands on management time. If these markets do not develop as we anticipate, or if we are unable to commercialize, increase market awareness of, or gain adoption of our solutions within them, our ability to design, develop, manufacture, market, and launch new generations of our robots may be impaired and our business, financial performance, and long-term growth prospects could be adversely affected.
We have acquired, and may in the future acquire, other companies, employee teams, or technologies, which could divert our management’s attention, result in additional indebtedness or dilution to our stockholders, or otherwise disrupt our operations and adversely affect our operating results.
We have acquired, and may in the future acquire, other companies, employee teams, or technologies to complement or expand our applications, enhance our technical capabilities, obtain personnel, or otherwise offer growth opportunities. The pursuit of acquisitions may divert the attention of management, disrupt ongoing business, and cause us to incur various expenses in identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated. These impacts may continue through integration activities.
Moreover, we may be unable to complete proposed transactions in a timely manner or at all, due to a failure to obtain any necessary funding to complete an acquisition in a timely manner or on favorable terms, the failure to obtain required regulatory or other approvals, litigation, or other disputes, which may obligate us to pay a termination fee.
We also may not achieve the anticipated benefits from an acquisition due to a number of factors, including:
•increased competition for suitable acquisition and strategic transaction targets, which could increase prices and adversely affect our ability to consummate deals on favorable or acceptable terms;
•transaction-related lawsuits or claims;
•difficulties associated with managing a larger, more complex, combined company;
•difficulties integrating the technologies and operations, including compensation structures, existing contracts, and personnel of an acquired business;
•difficulties retaining, integrating, and motivating key employees or business partners of an acquired business, and difficulties retaining or motivating our existing key employees or business partners after an acquisition;
•difficulties retaining key customers or suppliers, as applicable, of an acquired business;
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•challenges integrating internal controls, procedures and policies and accounting, finance and forecasting practices of acquired businesses with our own, especially in the context of international businesses;
•challenges relating to the structure of an investment, such as governance, accountability, operations, expense sharing and decision-making conflicts that may arise in the context of a joint venture or other majority ownership investments;
•challenges with integrating the brand identity of an acquired company with our own, as applicable;
•difficulties in operating a geographically dispersed organization, including as a result of different time zones, languages, and cultural, political and business practices;
•currency, regulatory and compliance risks associated with non-U.S. jurisdictions and entry into new markets;
•diversion of financial and management resources from existing operations or alternative acquisition or investment opportunities;
•failure to identify the problems, liabilities, or other shortcomings or challenges of an investment or acquired business, technology, or asset, including issues related to intellectual property, regulatory compliance practices, litigation, security vulnerabilities, trust and safety practices, brand management, revenue recognition or other accounting practices, or employee or user issues;
•the enactment of new laws or regulations that are adverse to an investment or acquired business, or impede our ability to achieve the expected benefits of such investments;
•new or expanded licensing, permitting, and compliance obligations as we enter new markets or lines of business (including sector-specific, privacy and data security, AI, labor, tax, import/export, and foreign investment controls), which may require costly operational changes and ongoing compliance expenditures;
•regulatory challenges from antitrust or other regulatory authorities that may block, delay, or impose conditions (such as divestitures, ownership, or operational restrictions or other structural or behavioral remedies) on the completion of transactions or the integration of acquired businesses;
•an acquired business or investment in new technologies, products, or services cannibalizing a portion of our existing business;
•additional stock-based compensation issued or assumed in connection with an acquisition or strategic transaction, which could dilute existing stockholders, reduce earnings per share, and adversely affect our stock price and results of operations;
•impairment charges associated with goodwill, long-lived assets, investments and other acquired intangible assets;
•lack of experience in new markets, products, or technologies;
•difficulty in integrating operations and assets of an acquired foreign entity with differences in language, culture, or country-specific currency and regulatory risks;
•the inability to obtain (or a material delay in obtaining) regulatory approvals necessary to complete transactions or to integrate operations, or potential remedies imposed by regulatory authorities as a condition to or following the completion of a transaction, which may include divestitures, ownership or operational restrictions or other structural or behavioral remedies;
•the failure of strategic acquisitions to perform as expected or to meet financial projections, which may be heightened due to recent macroeconomic events and market volatility;
•counterparty delays or deferrals of business decisions or shifts to competitors by third parties with whom we or an acquired business work as a result of an acquisition; and
•adverse market reaction to an acquisition, particularly if we are unable to achieve any expected benefits in our results of operations, or if the anticipated benefits are not realized as rapidly or to the extent anticipated or if the transaction costs are greater than expected.
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In addition, a significant portion of the purchase price of companies we acquire may be allocated to acquired goodwill and other indefinite-lived intangible assets, which must be assessed for impairment at least annually. In the future, if our acquisitions do not yield expected returns, we may be required to take charges to our operating results based on this impairment assessment process, which could adversely affect our operating results. Moreover, we may experience additional or unexpected changes in how we are required to account for our acquisitions pursuant to GAAP, including arrangements that we may assume in an acquisition.
Acquisitions could also result in use of substantial portions of our available cash, which may limit other potential uses of cash, and dilutive issuances of equity securities or the issuance of debt, which could adversely affect our operating results. If we finance acquisitions by issuing debt, we could face constraints related to the terms of and repayment obligation related to the incurrence of such indebtedness. In addition, if an acquired business fails to meet our expectations, our business, financial condition, and operating results may suffer.
Our use of AI and machine learning technologies introduces new risks and uncertainties.
We operate in a highly competitive environment in which innovation is critical, and our future success depends on many factors, including our use of developing technologies. However, our use of new AI technologies introduces new risks and uncertainties. The development, adoption and use of AI technologies is still in the early stages and involves significant risks and uncertainties, which may expose us to legal, reputational, and financial harm. AI algorithms and training methodologies may be flawed and datasets may be over broad, insufficient, or contain biased or inaccurate information. Additionally, rapid technological changes and competitive pressures may require significant ongoing investment to maintain effective and responsible AI capabilities. While we aim to develop and use AI responsibly and attempt to identify and mitigate ethical and legal issues presented by its use, we may be unsuccessful in identifying or resolving issues before they arise. The use of AI may give rise to risks related to harmful content, accuracy, bias, intellectual property infringement or misappropriation, defamation, privacy, cybersecurity and health and safety, among others, and also bring the possibility of new or enhanced governmental or regulatory scrutiny, litigation or other legal liability, or ethical concerns that could adversely affect our business, reputation or financial results.
If we fail to develop AI solutions and services that meet our customers’ and our own internal needs, we may fail to realize the anticipated benefits of our investments in AI or lose our competitive advantage, which could adversely affect our business, financial condition and results of operations.
Our success depends on our ability to differentiate our product and keep pace with emerging technologies. We are increasingly applying AI-based technologies to our robotics platforms and services and to our own internal operations. We have made significant investments in AI and are continuing to incur significant development and operational costs to develop and deploy our AI solutions and services for ourselves and for our customers. These investments may not generate the expected returns in the timeframe anticipated or at all, due to, among other things, rapid technological change, evolving and uncertain regulatory frameworks, restrictions on data use, privacy, security, and export controls, third-party licensing and IP risks related to data, models, and tools, potential bias, errors, or unpredictability in model outputs, and increased competition. If we fail to continue to develop AI solutions and services that meet our customers’ and our own internal needs, we may fail to realize the anticipated benefits of our investments in AI, which could adversely affect our business, financial condition and results of operations. Furthermore, failure to innovate or match the pace of AI advancements in our industry could put us at a competitive disadvantage.
Our international operations and plans to expand such operations present challenges and may expose us to new and heightened risks.
Historically, we have generated our revenues from customers in the United States. As we expand our operations internationally as part of our long-term growth strategy, this expansion of our international operations will subject us to a variety of risks and challenges, including business, regulatory, political, operational, financial and economic risks, such as:
•sales and customer service challenges associated with operating in different countries;
•increased management travel, infrastructure and legal compliance costs, including expenses for travel, translation and insurance, associated with having multiple international operations;
•difficulties in receiving payments from different geographies, including difficulties associated with currency fluctuations, payment cycles, transfer of funds or collecting accounts receivable, especially in emerging markets;
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•financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products and exposure to foreign currency exchange rate fluctuations;
•variations in economic or political conditions between each country or region;
•natural disasters, economic and political uncertainty around the world and adverse effects arising from economic interdependencies across countries and regions, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions;
•uncertainty around a potential reverse or renegotiation of international trade agreements and partnerships;
•compliance with foreign laws and regulations (including local regulations relating to sidewalks and other pedestrian utilized areas, privacy, security, and AI) and the risks and costs of non-compliance with such laws and regulations or failure to obtain regulatory approval;
•multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, employment laws, regulatory requirements and other governmental certification, approvals, permits and licenses;
•ability to hire, retain and train local employees and the ability to comply with foreign labor laws and local labor requirements, such as representations by an internal labor committee in France which is affiliated with an external trade union and the applicability of collective bargaining arrangements at the national level in certain European countries;
•compliance with laws and regulations for foreign operations, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell our software in certain foreign markets, and the risks and costs of non-compliance;
•heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of financial statements and irregularities in financial statements;
•regulatory and compliance risks that relate to maintaining accurate information and control over sales and activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), its books and records provisions or its anti-bribery provisions;
•reduced protection for intellectual property rights in certain countries, additional potentially relevant third-party patent rights and practical difficulties and costs of enforcing rights abroad; and
•compliance with the laws of numerous foreign taxing jurisdictions and overlapping of different tax regimes and digital tax imposed on our operations in foreign taxing jurisdictions.
Any of these risks could adversely affect our future international expansion and operations, reduce our revenues from outside the United States or increase our operating costs, adversely affecting our business, results of operations and financial condition and growth prospects. There can be no assurance that all of our employees, independent contractors and business partners will comply with the formal policies we have and will implement, or applicable laws and regulations. Violations of laws or key control policies by our employees, independent contractors and channel partners could result in delays in revenue recognition, financial reporting misstatements, fines, penalties or the prohibition of the importation or exportation of our robots and services and could have a material adverse effect on our business and results of operations.
If we are not successful in expanding and sustaining our international business, we may incur additional losses and our revenue growth could be harmed.
Our future results depend, in part, on our ability to sustain our penetration of the international markets in which we currently operate and to expand into additional international markets. We operate in international markets through our merchant partner relationships. Our ability to expand internationally will depend on our ability to deliver functionality and foreign language translations that reflect the needs of the international clients that we target. International expansion involves various risks, including the need to invest significant resources in such expansion and the possibility that returns on such investments will not be achieved in the near future or at all in these less familiar competitive environments. We may also choose to conduct our international business through other partnerships. If we are unable to identify partners or
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negotiate favorable terms for our partnership arrangements, our international growth may be limited. In addition, we have incurred and may continue to incur significant expenses before we generate material revenue in particular international markets as we attempt to establish our presence in those markets.
Litigation or legal proceedings could expose us to significant liabilities, occupy a considerable amount of our management’s time and attention, and damage our reputation.
We may, from time to time, be a party to various litigation claims and legal proceedings. We will evaluate these claims and proceedings to assess the likelihood of unfavorable outcomes and estimate, if possible, the amount of potential losses. Claims made or threatened by our suppliers, distributors, customers, competitors, or current or former employees could adversely affect our relationships, damage our reputation or otherwise adversely affect our business, financial condition or results of operations. The costs associated with defending legal claims and paying damages could be substantial. Our reputation could also be adversely affected by such claims, whether or not such claims are successful.
We may in the future become subject to claims and litigation alleging violations of the securities laws or other related claims, which could harm our business and require us to incur significant costs. Significant litigation costs could impact our ability to comply with certain financial covenants under our credit agreement. We are generally obliged, to the extent permitted by law, to indemnify our current and former directors and officers who are named as defendants in these types of lawsuits. Regardless of the outcome, such litigation may require significant attention from management and could result in significant legal expenses, settlement costs or damage awards that could have a material impact on our business, results of operations and financial condition.
Our management team has broad discretion in making strategic decisions to execute our growth plans, and there can be no assurance that our management’s decisions will result in successful achievement of our business objectives or will not have unintended consequences that negatively impact our growth prospects.
Our management team will have broad discretion in making strategic decisions to execute our growth plans and may devote time and company resources to new or expanded solution offerings, potential acquisitions, prospective customers or other initiatives that may not necessarily improve our operating results or contribute to our growth. Management’s failure to make strategic decisions that are ultimately accretive to our growth may result in unfavorable returns and uncertainty about our prospects, each of which could cause the price of our common stock to decline.
Our management as a group has limited experience operating a publicly traded company.
Our management team may not successfully or effectively manage operating as a public company subject to significant regulatory oversight and reporting obligations under U.S. securities laws. Our executive officers as a group have limited experience in the management of a publicly traded company. Given their limited experience in dealing with the increasingly complex laws governing public companies, they may need to devote more time to compliance activities, leaving less time to manage and grow our business. Complying with these obligations requires significant additional costs and resources, including implementing new systems and hiring experienced finance and legal personnel, and we may not have adequate personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal control over financial reporting required of public companies. Furthermore, deficiencies in our disclosures or controls could result in SEC inquiries, enforcement actions, shareholder litigation, or penalties. Any failure by us to effectively and efficiently meet our obligations as a publicly traded company could have a material adverse effect on our business, prospects, financial condition and operating results and/or result in legal liability or other negative consequences.
Our directors may be engaged in a range of business activities that could result in conflicts of interest.
We may be subject to various potential conflicts of interest because some of our officers and directors may be engaged in a range of business activities that could result in conflicts of interest. In addition, our executive officers and directors may devote time to their outside business interests, so long as such activities do not materially or adversely interfere with their duties owed to us. In some cases, our executive officers and directors may have fiduciary obligations associated with these business interests that interfere with their ability to devote time to our business and affairs and that could adversely affect our operations. These business interests could require significant time and attention from our executive officers and directors. In addition, we may also become involved in other transactions which conflict with the interests of our directors and the officers who may from time-to-time deal with persons, firms, institutions or companies with which we may be dealing, or which may be seeking investments similar to those desired by us. The interests of these persons could conflict with our interests.
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Our failure to attract and retain highly qualified personnel in the future could harm our business.
We are an innovative technology company. We intend to continue hiring a significant number of additional personnel, including engineers, design, production and operations personnel and service technicians for our robotic systems and services. Because of the innovative nature of our technology, we may struggle to locate or attract qualified individuals for important positions, such as software engineers, robotics engineers, machine vision and machine learning experts and others, which could affect our ability to grow and expand our business. Competition for individuals with experience designing, producing and servicing robots and their software is intense, and we may also face strong competition for qualified individuals from numerous other companies, including other similarly situated technology companies, many of whom have greater financial and other resources than we do.
In addition, new hires often require significant training and, in many cases, take significant time before they achieve full productivity. We may incur significant costs to attract and retain qualified personnel, including significant expenditures related to salaries and benefits and compensation expenses related to equity awards, and we may lose new employees to our competitors or other companies before we realize the benefit of our investment in recruiting and training them. Moreover, new employees may not be or become as productive as we expect, as we may face challenges in adequately or appropriately integrating them into our workforce and culture. If we are unable to attract, integrate and retain suitably qualified individuals who can meet our technical, operational and managerial requirements, on a timely basis or at all, our business, results of operations and financial condition could be adversely affected.
A significant portion of our revenue is concentrated with a small number of customers.
A significant portion of our revenue is concentrated with a limited number of customers. For the years ended December 31, 2025 and 2024, sales to the customers individually representing more than 10% of total revenues accounted for 55% and 91% of our total revenue, respectively. There are inherent risks whenever a large percentage of total revenues are concentrated with a limited number of customers. If any of these customers were to breach, cancel or amend our agreement, it may have an outsized effect on our revenue, cash on hand, and profitability. In addition, we may have an increased interest in accepting less favorable terms of any amendment as a result.
Failure to retain existing or attract future partnerships with merchants and consumers could have an effect on our revenue, revenue growth and margins, and our business, financial condition and results of operations could be adversely affected.
Our projected revenue relies on our ability to maximize utilization of our robot fleet and our ability to cost-effectively grow our partnerships, including in new markets. Our sidewalk delivery robots may be unable to maximize utilization due to a variety of reasons, including insufficient merchant participation, platform partner matching algorithms, failure to deliver a commercial grade product and a lack of product acceptance by merchants and/or delivery recipients. Historically, we have been able to continually increase our robot utilization through our existing strategic partnerships driven by the continued improvement in our integration, high merchant participation and widespread product acceptance by users of the partnered food delivery platforms. We are in varying stages of integration with our strategic partners and therefore have not yet achieved desired levels of utilization with our partners. To achieve profitability, we will need to continue to improve our utilization targets with all strategic partners above current levels and maintain those levels with other partners as well. As this requires cooperation by third parties, there is no guarantee that it will be achieved within a specific timeframe.
Our financial projections also anticipate generating revenues from brand sponsors who would pay to place their branding on our robots as a form of OOH branding. OOH branding on robots is a new phenomenon and as such, an unproven model. To date, for our limited number of robots, we have been able to run periodic OOH advertising campaigns with several brands in varying sectors including real estate, fashion and entertainment. OOH advertising represented 15% and 16% of our revenues for the years ended December 31, 2025 and 2024, respectively. In the future, if we are unable to realize these sales, our business model and go-to-market strategy will be jeopardized.
Our revenue and other financial projections also include revenue generated through software services. These partnerships are typically short-term for the duration of the project or subscription. Partners have no obligation to renew their contracts or subscriptions after they expire, and these contracts and subscriptions may not be renewed on the same or more profitable terms. We may not be able to accurately predict future trends of our partnerships, and our project rates may decline or fluctuate because of several factors, including their satisfaction or dissatisfaction with our products and services, the prices of our services, the prices of the products and services offered by our competitors or reductions in partner spending levels.
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We have limited experience commercializing our products at a large scale and may not be able to do so efficiently or effectively.
We have limited experience commercializing robotic systems at a large scale and may not be able to do so efficiently or effectively. A key element of our long-term business strategy is the continued growth in sales, marketing, training, customer service and maintenance and servicing operations, including hiring personnel with the necessary experience. Managing and maintaining these operations is expensive and time consuming, and an inability to leverage such an organization effectively or at all could inhibit potential sales or subscriptions and the penetration and adoption of our products into new markets. In addition, certain decisions we make regarding staffing in these areas in our efforts to maintain an adequate spending level could have unintended negative effects on our revenues, such as by weakening the sales, marketing and maintenance and servicing infrastructures or lowering the quality of customer service.
Our ability to deploy, operate and scale our Moxi robots depends on hospital access, operational practices and financial health, which can change and may be outside our control.
Our Moxi robots operate in hospital environments and are subject to a range of healthcare regulations and hospital-specific policies. Changes in hospital leadership, shifts in strategic priorities or evolving regulatory requirements, or the adoption of new internal policies or risk management procedures could restrict or prohibit the use of our robots and may impact our ability to maintain or expand our presence in existing facilities or enter new ones. Additionally, hospitals can face staffing constraints, cost pressures and liquidity challenges that may limit capital spending, delay purchases or interrupt operations, which could in turn reduce orders, delay deployments or reduce utilization of our robots in their facilities. Hospitals or regulators may also require modifications to, suspension of, or limitations on the use of third‑party equipment, which could disrupt or reduce our robot operations at customer sites. Any of these factors could negatively impact our ability to deploy, operate or scale our robots, and could adversely affect our business, financial condition and results of operations.
We will require significant capital to fund our operations and growth, and financing may not be available when needed or on acceptable terms. Additionally, any equity or equity‑linked financing could dilute our stockholders, and any debt financing could impose restrictive covenants and increase our financial obligations.
We will require significant capital to operate our business and fund our capital expenditures for the next several years. We will not be able to continue product development and our commercial deliveries, or scale our operations, if we cannot raise additional debt and/or equity financing. The level and timing of future expenditure will depend on a number of factors, many of which are outside our control. While we expect that we will have sufficient capital to fund our currently planned operations, it is possible that we will need to raise additional capital to fund our business, including to finance ongoing research and development costs, manufacturing, any significant unplanned or accelerated expenses, and new strategic alliances or acquisitions. The fact that we have limited experience commercializing our robotic systems on a large scale, coupled with the fact that our products represent a new product category in the commercial and robotic market, means we have limited historical data on the demand for our robotic systems. In addition, we expect our capital expenditures to continue to be significant in the foreseeable future as we continue generational improvements for our commercial products, and that our level of capital expenditures will be significantly affected by customer demand for our robotic systems. As a result, our future capital requirements may be uncertain and actual capital requirements may be different from those we currently anticipate. Our future capital needs and other business reasons could require us to sell additional equity or debt securities or obtain a credit facility. Such financing might not be available to us in a timely manner or on terms that are acceptable, or at all, and there is no guarantee that such funds, if raised, would be sufficient. Furthermore, the sale of additional equity or equity-linked securities could dilute our existing stockholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations.
Our ability to obtain the necessary financing to carry out our business plan is subject to a number of factors, including general market conditions and investor acceptance of our business model. These factors may make the timing, amount, terms, and conditions of such financing unattractive or unavailable to us. If we are unable to raise sufficient funds, we will have to significantly reduce our spending, delay or cancel our planned activities or substantially change our corporate structure. If we cannot raise additional funds when we need or want them, we may be forced to curtail or discontinue our operations or abandon our growth plans, which could adversely impact the Company, its business, development, financial condition, operating results or prospects.
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Earnout or other contingent consideration from acquisitions may not be attained and could adversely affect our business, financial condition, results of operations and cash flows.
In connection with acquisitions or other strategic transactions, we have, and may agree in the future, to pay earnout or other contingent consideration tied to the post‑closing performance of the acquired business or achievement of certain specified milestones, and there is no assurance such milestones will be attained. Failure to achieve earnout targets may reflect integration challenges, changes in market conditions, strategic or operational adjustments, or regulatory and compliance constraints encountered by the combined business. If earnout consideration is not earned or is disputed, we could face disagreements or litigation with sellers, incur additional costs to manage or resolve disputes, and divert management attention from ongoing operations. Conversely, if earnout milestones are achieved, we may be required to make additional cash payments or issue equity or other consideration, which could increase our expenses, reduce our cash, dilute our existing stockholders, or contribute to volatility in our results depending on the structure and accounting for such arrangements. Earnout consideration can also create misaligned incentives or short‑term decision‑making at acquired businesses and may complicate integration planning. Any of these events could adversely affect our business, financial condition, results of operations and cash flows.
We may be unable to adequately control the costs associated with our operations.
We will require significant capital to develop and grow our business, including developing and producing our commercial robotic systems and other products, establishing or expanding design, research and development, production, operations and maintenance and service facilities and building our brand and partnerships. We have incurred and expect to continue incurring significant expenses which will impact our profitability, including research and development expenses, procurement costs, business development, operation and integration expenses as we build and deploy our robotic fleet, and general and administrative expenses as we scale our operations, identify and commit resources to investigate new areas of demand and incur costs as a public company. In addition, we may incur significant costs servicing, maintaining and refurbishing our robots, and we expect that the cost to repair and service our robots will increase over time as they age. Our ability to become profitable in the future will not only depend on our ability to complete the design and development of our robots to meet projected performance metrics, identify and investigate new areas of demand and successfully market our robotic services, but also to sell, whether outright or through subscriptions, our systems at prices needed to achieve our expected margins and control our costs, including the risks and costs associated with operating, maintaining and financing our robots. If we are unable to efficiently design, develop, manufacture, market, deploy, distribute and service our robots in a cost-effective manner, our margins, profitability and prospects would be materially and adversely affected.
An impairment of the value of our goodwill, definite-lived intangible assets, or other long-lived assets could have a material adverse effect on our financial statements.
We have a significant amount of goodwill, definite-lived intangible assets, and other long-lived assets on our consolidated financial statements. Under GAAP, we are required to evaluate our goodwill, definite-lived intangible assets, and other long-lived assets for impairment. As of June 30, 2026, assets required to be tested for impairment either annually or more frequently, if events or circumstances indicate an impairment may exist, represented approximately 33% of the assets on our unaudited condensed consolidated balance sheets.
We have recorded a significant amount of goodwill and intangible assets as a result of acquisitions. As of June 30, 2026, there was $28.0 million of goodwill and $34.5 million of intangible assets on our unaudited condensed consolidated balance sheets. The intangible assets are principally composed of developed technology, customer relationships and trade names. Failure to achieve business objectives and financial projections could result in asset impairments, which would result in non-cash charges to our unaudited condensed consolidated statements of operations and comprehensive loss. Refer to Note 5. Goodwill and Intangible Assets, Net for further information related to goodwill and intangible assets. In addition, as of June 30, 2026, we have $60.6 million of other long-lived assets subject to impairment testing. These assets are comprised of property & equipment and operating lease assets. Refer to Note 8. Property and Equipment, Net and Note 9. Leases for further information related to property and equipment, and lease assets.
Goodwill is tested for impairment annually as of October 1, or when events or changes in circumstances indicate that impairment may exist. Definite-lived intangible assets and other long-lived assets are tested for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. Determining whether an impairment exists can be difficult as a result of increased uncertainty and requires management to make significant estimates and judgments. A non-cash intangible asset impairment charge could have a material adverse effect on our financial position and results of operations. Events or circumstances that could trigger an impairment review include, but are not limited to, a significant adverse change in legal factors or in the business or political climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of our use of the acquired
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assets or the strategy for our overall business, significant negative industry or economic trends or significant underperformance relative to projected future results of operations.
For the six months ended June 30, 2026 and for the year ended December 31, 2025, we did not identify any indicators that our definite-lived intangible assets or other long-lived assets may not be recoverable or that our goodwill was impaired. However, future changes in operations or our environment could result in future impairment charges which could have an adverse effect on our financial results.
Risks Related to Our Products and Technology
Our robots rely on sophisticated software technology that may incorporate third-party components and networks to operate.
Our robots may require certain third-party software and networks to function safely and effectively. As such, our future revenues and financial projections rely on our ability to maintain access to third-party components that are currently utilized to operate our fleet or may become necessary to operate our fleet in the future. There is a risk that these third-party components may become difficult or costly to replace.
In addition, integration of new third-party components may require significant work and require substantial investment of our time and resources. Our use of additional or alternative third-party software would require us to enter into new license agreements with third parties, which may not be available on commercially reasonable terms or at all. Furthermore, performance degradation, including failure of integration, or lack of access to necessary third-party components could result in poor performance or even grounding of our entire fleet, which could adversely impact our ability to continue our operations.
Additionally, the software powering our technology systems incorporates software covered by open-source licenses. The terms of many open-source licenses have not been interpreted by U.S. courts, and there is a risk that the licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to operate our systems. In the event that portions of our proprietary software are determined to be subject to an open-source license, we could be required to publicly release the affected portions of our source code or re-engineer all or a portion of our technology systems, each of which could reduce or eliminate the value of our technology systems. Such risk could be difficult or impossible to eliminate and could adversely affect our business, financial condition, and results of operations.
The benefits to customers of our products could be supplanted by other technologies or solutions or competitors’ products that utilize similar technology to ours in a more effective way.
The benefits to customers of our products could be supplanted by other technologies or solutions or competitors’ products that utilize similar technology to ours in a more effective way. We cannot be sure that alternative technologies or improvements to AI, industrial automation or other technologies, processes or industries will not match or exceed the benefits of our products or be more cost effective than our products. The development of any alternative technology that could compete with or supplant our products may materially and adversely affect our business, prospects, financial condition and operating results, including in ways we do not currently anticipate. Any failure by us to develop new or enhanced technologies or processes, or to react to changes in existing technologies, could materially delay our development and introduction of new and enhanced products, which could result in the loss of competitiveness of our robotic systems and solutions, decreased revenue and a loss of market share to competitors. Our research and development efforts may not be sufficient to adapt to new or changing technologies. While we plan to upgrade and adapt our robotic systems and solutions as we or others develop new technology, our robotic systems and solutions may not compete effectively with alternative products if we are not able to source and integrate the latest technology into our systems and solutions.
If we cannot adapt to evolving technology or customer demands in a timely and cost-effective manner, our ability to sustain and grow our business may be adversely affected.
The markets for our robots, as well as the specific industries in which our partners and customers operate, are characterized by rapidly changing technology, evolving industry standards, and frequent new service introductions. Our ability to deliver technologically sophisticated solutions to our partners and customers requires an ongoing commitment to maintaining and improving existing technology, developing our operations and the utilization of our delivery robots, and investing in personnel and resources. The widespread adoption of new technologies and services, new industry standards, or significant changes in partner or customer requirements could require substantial new investments in our technology and operations.
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In our pursuit of international expansion, our technology maintenance and expansion costs may increase due to investment outside the U.S. and the increased costs of compliance with local laws and regulations. In addition, changes in customer requirements, technological advances, or standards in other countries may further lengthen the time necessary to generate revenue, and, as a result, we may not be able to recover the cost of these investments.
Although we regularly upgrade our technological capabilities to handle increased utilization necessary for our customers’ businesses, there can be no assurance that such upgrades would adequately mitigate the risk that our robots may not be able to meet the needs of our partners and customers in the future or, may become obsolete, unmarketable, or subject to competitive pressures. The costs of modifying our robot technology in response to technological change, customer requirements, or industry changes could be substantial.
Furthermore, our ability to deliver technologically sophisticated robot utilization to our partners and customers depends on our suppliers providing us with the equipment that meets our specifications. If our suppliers cannot provide us with the equipment needed, or if we are required to modify our robots based on technological changes, we may not be able to serve our partners and customers or may incur significant costs in doing so, which could materially adversely affect our business and results of operations.
The benefits of our products to customers and projected return on investment have not been substantiated through long-term trials or use.
Our core products’ benefits to customers and projected return on investment have not been substantiated through long-term trials or use. We currently have a limited frame of reference by which to evaluate the performance of our robotic systems upon which our business prospects depend. There can be no assurance that such robotic systems will provide their expected benefit to customers. Our robotic systems may not perform consistently with customers’ expectations or effectively compete with other robotics products which may become available. Any failure of our robotic systems and software to perform as expected could harm our reputation and result in adverse publicity, lost revenue, delivery delays, product recalls, product liability claims and significant warranty and other expenses and could have a material adverse impact on our business, prospects, financial condition and operating results. Additionally, problems and defects experienced by competitors or others in the robotics market could, by association, have a negative impact on perception and customer demand for our robotic systems.
Defects, glitches, or malfunctions in our products could compromise the performance of our products, lead to injury or property damage, and result in product recalls or lower than expected return on investment for customers, each of which could adversely affect our results of operations, financial condition and our reputation.
The design, manufacture and marketing of our products involve certain inherent risks, and our software or hardware may experience errors or performance problems in the future. Our products incorporate sophisticated computer software and hardware, both of which are subject to potential errors or failures, particularly when new features are introduced. Such issues, including manufacturing or design defects, glitches, malfunctions, connectivity issues between the central processing unit and peripheral vehicle subsystems, operator errors, unanticipated use of our robotic systems, or inadequate disclosure of risks relating to the use of our robots, among others, could compromise the performance of our products, lead to injury or property damage, and result in product recalls or lower than expected return on investment for customers.
We conduct extensive testing of our robots, in some instances in collaboration with our customers, to ensure that any such issues can be identified and addressed in advance of commercial launch of the products. However, there can be no assurance that we will be able to identify all such issues or that, if identified, our efforts to address them will be effective in all cases. In addition, although we intend to be involved in material decisions in the supply chain and manufacturing process, given that we also rely on our partners to meet our quality standards, we may not always be aware of manufacturing defects that could occur at our third-party manufacturers.
Such adverse events could lead to unexpected failures in our products and could result, in certain cases, in the removal of our products from the market, which could result in significant costs. To the extent any manufacturing defect occurs, our agreement with the third-party manufacturer may contain a limitation on the third-party manufacturer’s liability, and therefore we could be required to incur the majority of related costs. Product defects or recalls could also result in negative publicity, damage to our reputation or, in the event of regulatory developments, delays in new product acceptance.
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Because our robots operate in public spaces, safety incidents arising from human supervision, connectivity issues, third-party software or automation could cause injury, trigger recalls or result in uninsured product liability and warranty claims that adversely affect our business.
Our ability to attract and retain customers (including merchants, platform partners and brand sponsors) is heavily dependent on our reputation for safety and reliability. Our safety track record has been instrumental in helping us attract and retain our existing customers. Because we operate in public spaces, the performance of our robots is highly visible and we must maintain the highest standards for public safety. For our sidewalk delivery robots, our operating procedures and automated systems are designed to ensure that they yield the right of way to vehicles, pedestrians or sidewalk and road users, as they are programmed to cross only at controlled intersections during a pedestrian “walk” signal and to slow down or stop if a pedestrian approaches the delivery robot from any direction. Our partners require timely reporting of any material safety incidents, and if they are not confident in our ability to maintain safe operations, our commercial relationships may be jeopardized.
To date, we have not experienced material safety incidents, nor have our partners raised any concerns about our safety standards and track record. However, any actual or perceived public safety incidents, whether caused by human error, technical malfunction, or other factors, or any actual or perceived association with public health and safety incidents or regulatory inquiry, in the case of our Moxi robots, could put our commercial relationships and financial viability at risk. Any such occurrence could delay market acceptance of our products, damage our reputation, result in product recalls, increase service and warranty costs, lead to product liability claims and cause a loss of revenue.
Furthermore, the use of our robots, including our sidewalk delivery robots and Moxi robots, in public and commercial environments could result in bodily injury, property damage, or other harms, and we anticipate that as part of our ordinary course of business we may be subject to product liability and warranty claims alleging defects in the design or manufacture of our products. A product liability claim, regardless of its merit or eventual outcome, could result in significant legal defense costs and high punitive damage payments. Although we maintain product liability insurance, the coverage is subject to deductibles and limitations, and may not be adequate to cover future claims. Additionally, we may be unable to maintain our existing product liability insurance in the future at satisfactory rates or adequate amounts. Our insurance coverage is subject to deductibles, exclusions, limits, and renewal risk and may not cover all damages in the event of a claim. Contractual indemnities from suppliers or manufacturing partners may be limited, disputed, or unenforceable. Any significant claim, recall, or adverse safety event could harm our reputation and materially adversely affect our business, results of operations and financial condition.
Misuse of our delivery robots and related technology could harm our reputation and result in litigation, regulatory enforcement actions or reduced demand for our products and services.
Our robots and services, including delivery services, robots, cameras, sensors, related software, training, and operational support services, may be misused by partners, customers or third parties. For example, our delivery robots and related imaging technologies may be used in ways that violate privacy, surveillance, trespass, data protection, export control, or other laws, or in ways that are perceived as unethical or harmful, even where such use is outside of our control and not authorized by us. In addition, the data generated by delivery robots, cameras, sensors, and other connected technologies may be combined with other information in ways that could increase privacy or security risks. Misuse of these products or data could result in negative press coverage, reputational harm, reduced customer demand, increased scrutiny by regulators, and the loss of business relationships.
Certain of our partners and customers may use our products and services in regulated environments, including healthcare, which may be subject to heightened legal requirements and public scrutiny. In some cases, we may rely on partners and customers to implement required policies, permissions, notices, and safeguards, including those related to privacy and data protection. If we or our partners or customers fail to comply with applicable laws, contractual requirements, or regulatory standards, we could be subject to litigation, regulatory investigations, enforcement actions, fines, penalties, or other liabilities, and our business, financial condition and results of operations could be materially adversely affected.
Additionally, partners, customers, operators, or service providers could use our products in a manner that is inconsistent with the products’ intended use. Misuse of our products may cause an increased risk of injury to customers, which could harm our reputation in the marketplace, as well as lead to potential product liability lawsuits.
We develop and utilize products that create exposure to potential product liability, warranty liability, and personal injury claims and litigation, and insurance coverage may be inadequate or unavailable to cover any losses we incur.
Some of our products and services involve or are used in applications and situations that involve risk of personal injury and death. Our products and services expose us to potential product liability, warranty liability, personal injury claims, and
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litigation relating to the use or misuse of our products, including allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product or activities associated with the product, negligence, and strict liability. The risk of one or more product liability claims or lawsuits may be even greater after we launch delivery robots with new features or enter new markets where we have no prior experience operating in and rely on newly hired staff or new independent distributors or contractors to provide new partner and customer training and support. In addition, the misuse of our products and services or the failure of partners or customers to adhere to operating guidelines could cause significant harm to customers, including death, which could result in product liability claims.
Product liability lawsuits and claims and safety alerts, with or without merit, regardless of any available insurance coverage, could cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management from our core business, harm our reputation and adversely affect our ability to attract and retain customers, any of which could have a material adverse effect on our business, financial condition and operating results. In addition, defects in our products could reduce demand for our products and services and result in a decrease in revenue and market acceptance and damage to our reputation.
Misuse of our robots for illegal purposes, including the transportation of controlled substances or other contraband, could expose us to civil liability, criminal investigation, regulatory action, and reputational harm.
Our delivery robots may be used or misused by third parties, either through established partner platforms or through potential future programs which may allow individuals to utilize our delivery robots directly. In such cases, the third party user would determine the contents of the delivery robot and direct such delivery robot’s destination, subject to certain established operational parameters. Consequently, we will have limited ability to inspect, monitor, or control the contents loaded into our delivery robots or to verify that any such delivery is lawful at the time of occurrence.
Our delivery robots could therefore be used to transport illegal drugs, controlled substances, weapons, counterfeit goods, or other contraband, or to otherwise facilitate unlawful conduct such as deliveries in violation of local, state, or federal law. We may have no advance knowledge of such misuse and may not become aware of an incident until after it has occurred, if at all. Our capacity to detect misuse in real time is constrained by the nature of our technology: our robots are generally designed to transport sealed or user-loaded packages without verifying their contents, and any monitoring capabilities we do have, such as GPS tracking, route monitoring, or onboard sensors, may not be sufficient to identify or prevent illegal activity, particularly if a user deliberately circumvents our safeguards.
If our delivery robots are used to facilitate an illegal delivery, law enforcement or regulatory authorities could seize or impound the delivery robot as evidence or contraband, which could result in loss of assets, disruption to our operations, and negative publicity, regardless of our lack of involvement in or knowledge of the underlying illegal conduct. We could also become the subject of criminal or civil investigations or proceedings, including potential claims or charges premised on theories of negligence, aiding and abetting, facilitation, or vicarious or secondary liability. Legal standards governing the liability of technology and equipment providers for the unlawful acts of their customers are unsettled and vary by jurisdiction, and we cannot predict how courts, regulators, or law enforcement agencies will characterize our role in any given incident. Defending against such claims or proceedings, even successfully, could require us to incur substantial legal expenses, divert management attention, and expend significant resources, and an adverse outcome could result in fines, penalties, injunctive relief, or other liability. Moreover, even in the absence of legal liability, publicized incidents involving the misuse of our robots for illegal purposes could cause significant reputational harm to our brand and diminish trust among consumers, business partners, municipalities, and regulators.
In addition, such misuse of our delivery robots could prompt heightened scrutiny from federal, state, and local regulators, including agencies responsible for transportation safety, controlled substances enforcement, and consumer protection, and could result in new or more restrictive regulations applicable to our delivery robots and the services we offer or to the broader autonomous delivery industry. Regulators or municipalities could impose operating restrictions, require enhanced monitoring or content-verification capabilities that may not be technically or commercially feasible, suspend or revoke permits or licenses necessary for our operations, or otherwise limit our ability to operate in one or more jurisdictions.
Accessibility concerns or failure to comply with disability access laws may result in claims, operational restrictions, or reputational harm.
Our sidewalk delivery robots operate on public sidewalks in high-density urban environments across multiple U.S. markets. In these environments, our sidewalk delivery robots share pedestrian infrastructure with individuals with disabilities, including those who use wheelchairs, mobility devices, or canes. If our sidewalk delivery robots obstruct pathways or curb ramps, or otherwise impede access for individuals with disabilities, or if we fail to comply with applicable accessibility laws, we could face claims under the Americans with Disabilities Act, state accessibility laws, or local disability access ordinances, as well as negative publicity and increased regulatory scrutiny.
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As our fleet of sidewalk delivery robots has grown, we have faced increased public attention regarding accessibility concerns. Incidents involving sidewalk delivery robots and individuals with disabilities have led some jurisdictions to ban or restrict sidewalk delivery operations.
If additional jurisdictions adopt similar restrictions, or if regulators in our current or target markets impose new accessibility requirements, revoke or decline to renew our permits, or terminate our pilot programs, our ability to maintain or expand operations could be materially adversely affected. We proactively engage with disability rights advocates and work with municipal regulators to address accessibility and safety concerns, but there can be no assurance these efforts will prevent adverse regulatory actions, permit denials, or operational restrictions.
Any claims, litigation, regulatory restrictions, or high-profile incidents involving our robots and individuals with disabilities could harm our reputation and materially adversely affect our business, financial condition, and results of operations.
Even if we successfully market our robotic systems, the purchase or subscription, adoption and use of these systems may be materially and negatively impacted if our customers resist their use and adoption.
We have designed and developed our robotic systems with the goal of reducing operating costs and greenhouse gases. Even if we successfully market our products and services to customers, the purchase, adoption and the use of the products may be materially and negatively impacted if our customers resist or delay the use and adoption of these new technology products and services. Customers may resist or delay the adoption of our products and services for several reasons, including lack of confidence in autonomous and semi-autonomous vehicles. If our customers resist or delay adoption of our robotic services, our business, prospects, financial condition and operating results will be materially and adversely affected.
We are substantially reliant on our relationships with suppliers and service providers for the parts and components in our robots, as well as for the manufacture of our robots, and disruptions or loss of these partners could delay production and harm our business.
Our future business depends in large part on our ability to execute our plans to design, develop, manufacture, market, deploy and service our robots on time. Our robots contain hundreds of components that are assembled by third-party manufacturing partners. Collaboration with third parties for the engineering, design, manufacturing and testing of robots is subject to risks related to operations outside our control. We could experience delays if our current or future partners cease doing business with us, miss agreed-upon timelines, experience capacity constraints or otherwise fail to deliver components or manufacture robots as expected, or experience outages, transitions, or other disruptions. Similarly, the expiration of agreements governing such arrangements or the transition of services between providers could lead to the loss of institutional knowledge or service disruptions.
For example, certain of our remote piloting services are currently provided by third-party vendors, including service centers outside of the United States. Services provided pursuant to arrangements with these third-party vendors could be disrupted due to events outside of their control such as power failures, cybersecurity incidents, internet traffic congestion or increased latency, natural disasters, or deterioration in their economic condition. Furthermore, we may experience potential disputes with partners, and we could be affected by adverse publicity related to our partners whether or not such publicity is related to their collaboration with us, any of which could adversely affect our relationships, brand or prospects. Our ability to successfully build a premium brand could also be adversely affected by perceptions about the quality of robots we produce with our manufacturing partners or of other robots they manufacture. Any such disputes could lead to a loss of these relationships.
While we have not experienced any material impacts of such disruptions to date, disruptions that result from our reliance on third parties as service providers or the loss of these relationships, whether for these reasons or others, could delay production and harm our business.
Severe weather conditions and climate change could have a material adverse impact on our business by negatively impacting the operations of our robots.
Our robots are designed to operate in a range of environmental conditions commonly encountered in markets in which we operate. While earlier deployments focused on warm and dry climates, our current generation of robots is capable of operating in rain and snow, and we have launched and expect to continue launching in regions that experience such conditions.
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Notwithstanding these expanded capabilities, severe weather events and the effects of climate change, including extreme temperatures, heavy precipitation, flooding, or other adverse conditions, may exceed the operating limits of our robots or require us to temporarily suspend operations to ensure safety and reliability. While we intend to continue enhancing our robots’ environmental resilience with each new generation, there can be no assurance that these efforts will fully mitigate the risks posed by severe or extreme weather conditions, which could reduce our operating hours, increase maintenance costs, delay geographic expansion, or otherwise adversely affect our business.
The inability of our supply chain to deliver certain key electrical components, such as semiconductors, could materially adversely affect our business, financial condition and results of operations.
Certain highly complex components used to manufacture our robots are obtained from single or limited sources that we may have to compete for with other participants in the robotics, consumer electronics and automotive markets. Global supply chain problems directly impact our ability to obtain these components cost-effectively. If our supply chain fails to deliver products to us in sufficient quality or quantity on a timely basis, we will be challenged to meet our target production and development timelines and could incur significant additional expenses for expedited freight and other related costs. Our supply chain may also be adversely impacted by events outside of our control, including macroeconomic events, trade restrictions and economic recessions.
Our robots are reliant on semiconductors. In recent years, there has been an ongoing shortage of semiconductors. The semiconductor supply chain is complex, with capacity constraints occurring throughout. We have and will continue to work closely with our suppliers to minimize any potential adverse impacts of the global semiconductor chip shortage and monitor the availability of semiconductor chips and other key components and any other supply chain inefficiencies that may arise. In an effort to mitigate these risks, in some cases, we may have to incur higher costs due to investment in supply chain resiliency and to secure available inventory or make non-cancelable purchase commitments with semiconductor suppliers, which introduce inventory risk if our forecasts and assumptions prove inaccurate. Furthermore, if we are not able to mitigate the impact of the semiconductor chip shortage, any direct or indirect supply chain disruptions may have a material adverse impact on our business, financial condition and results of operations.
We, any manufacturing partners and suppliers may rely on complex machinery for production, which involves a significant degree of risk and uncertainty in terms of operational performance and costs.
We, any third-party manufacturing partners and suppliers may rely on complex machinery for the production, assembly, repair and maintenance of our robotic systems, which involves a significant degree of uncertainty and risk in terms of operational performance and costs. Our operational facilities, and those of any third-party manufacturing partners and suppliers, consist, or are expected to consist, of large-scale machinery combining many components. These components may suffer unexpected malfunctions from time to time and may require repairs and spare parts to resume operations, which may not be available when needed. Unexpected malfunctions of these components may significantly affect the intended operational efficiency of such machinery. Operational performance and costs can be difficult to predict and are often influenced by factors outside of our or any third-party manufacturing partners’ and suppliers’ control, such as, but not limited to, scarcity of natural resources, environmental hazards and remediation, costs associated with decommissioning of machines, labor disputes and strikes, difficulty or delays in obtaining governmental permits, damages or defects in electronic systems, industrial accidents, fire, seismic activity and natural disasters. Should these operational risks materialize, they may result in the personal injury to or death of workers, the loss of production equipment, damage to production facilities, monetary losses, delays and unanticipated fluctuations in production, environmental damage, administrative fines, increased insurance costs and potential legal liabilities, all which could have a material adverse effect on our business, prospects, financial condition and operating results.
Consolidation in the healthcare industry could have an adverse effect on our business, financial condition or results of operations.
The healthcare industry has been consolidating, and organizations continue to consolidate purchasing decisions for many of our healthcare provider customers. As the healthcare industry consolidates, competition to provide products and services is expected to continue to intensify, resulting in pricing pressures and decreased average selling prices. In addition, for smaller hospitals or groups that do not consolidate with larger networks, these entities may face increasing cost and/or competitive pressures, which could impact their ability to purchase our products or services or make contractual payments over time. We expect that market demand, government regulation, third-party payer coverage and reimbursement policies, government contracting requirements, new entrants, technology and societal pressures will continue to change the worldwide healthcare industry, resulting in further consolidation, which may exert further downward pressure on prices of our Moxi robot and may have a material adverse impact on our business, financial condition or results of operations.
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Risks Related to Intellectual Property
If we cannot protect, maintain and enforce our intellectual property rights, our competitive position and business could be adversely affected.
Our success, in large part, depends on our ability to protect and maintain the proprietary nature of our technology. We must prosecute and maintain our existing patents and obtain new patents. However, some of our proprietary information may not be patentable, and there can be no assurance that others will not utilize similar or superior solutions to compete with us. We cannot guarantee that we will develop proprietary products that are patentable, or that, if issued, any patent will give us a competitive advantage, or that such patent will not be challenged by third parties. The process of obtaining patents can be time consuming and offers no guarantee of success, as a patent may not be granted or may provide insufficient scope or strength to protect the intended intellectual property. We cannot guarantee that our means of protecting our proprietary rights will suffice or that others will not independently develop competitive technology or design around patents or other intellectual property rights issued to us. Any patents that we or our licensors have obtained or obtain in the future may be challenged, invalidated, or unenforceable. If necessary, we intend to initiate actions to protect our intellectual property, which will be costly and time consuming. If we are unable to adequately protect our intellectual property, we could lose valuable competitive advantages, and our business could suffer as a result.
We may be subject to claims of infringement of third-party intellectual property rights.
Our operating results may be adversely affected if third parties claim that our products infringed their patent, copyright, or other intellectual property rights. We cannot assure that our products do not, or will not in the future, infringe patents held by others. Although there have been no allegations made to this effect, we cannot be sure that we will not receive such correspondence from third parties or competitors in the future. Such assertions could lead to expensive and unpredictable litigation, diverting the attention of management and technical personnel. Litigation may be necessary to enforce our intellectual property rights, to protect our trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity, misappropriation, or other claims. Any such litigation could result in substantial costs and diversion of our resources. Moreover, any settlement of or adverse judgment resulting from such litigation could require us to obtain a license to continue to use the technology that is the subject of the claim, or otherwise restrict or prohibit our use of the technology. Any required licenses may not be available to us on acceptable terms, if at all. An unsuccessful result in such litigation could adversely affect our business, including injunctions, exclusion orders, and royalty payments to third parties.
Because our video and LiDAR licensing model is new and operates within an evolving legal and commercial framework, we may be unable to generate recurring revenue at expected levels, which could impair our planned data licensing revenue stream.
We have limited experience with licensing our video and LiDAR data for use by third‑party AI companies to train their models. Our ability to generate recurring and scalable revenue from this strategy is unproven. Demand for our datasets may be unpredictable and episodic, as model training needs can be irregular and may not translate into renewals. Pricing, usage rights, and volume commitments are still developing in this market, and counterparties with substantial purchasing power, including major technology companies and brokers, may exert pressure for lower prices, broader usage rights, exclusivity or other terms that may be less favorable to us. If we are unable to effectively market our datasets, secure repeat purchases, or expand usage with existing customers, or if counterparties shift to alternative sources of data, synthetic data, internally generated data, or open datasets, our growth and margins could be negatively impacted.
Our data licensing model also depends on our continued ability to lawfully collect and distribute the video and LiDAR data we obtain through our robots. Changes in laws or interpretations could limit what we can capture or sell, require costly modifications to our collection and processing workflows or necessitate contractual restructuring. If we fail to obtain and maintain necessary rights and permissions, adhere to usage restrictions or adequately address data quality, traceability and safety concerns associated with model training, we could face customer disputes, termination rights, indemnification claims, reputational harm or regulatory inquiries, all of which could impair our planned data licensing revenue stream.
Risks Related to Cybersecurity and Privacy
Security breaches and other disruptions could compromise our proprietary information and expose us to liability, including class action litigation and regulatory penalties, which would cause our business and reputation to suffer.
We rely on trade secrets, technical know-how, and other unpatented proprietary information relating to our product development and manufacturing activities to provide us with competitive advantages. We protect this information by
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entering into confidentiality agreements with our employees, consultants, strategic partners and other third parties. We implement reasonable administrative, technical, and physical safeguards for computer systems and networks to prevent unauthorized access to, and the dissemination of, our proprietary information.
We face internal and external physical and data security threats. For example, current, departing, or former employees or third parties could attempt to improperly use or access our facilities, robots, computer systems or networks to copy, obtain, or misappropriate our proprietary information or otherwise interrupt our business. Like others, we are also subject to significant operational and system or network disruptions from numerous causes, including environmental threats, utility outages, IP theft, facilities access issues, ransomware attacks, computer viruses, data loss, denial-of-service and other common cyber-attacks.
Security breaches, computer malware, phishing, spoofing and other cyber-attacks have become more prevalent and sophisticated in recent years. We do not believe that such attacks have caused us any material damage to date, but because the techniques used by computer hackers and others to access or sabotage networks constantly evolve and generally are not recognized until launched against a target, we may be unable to anticipate, counter or ameliorate all these techniques. As a result, our business confidential and our customers’ proprietary information may be misappropriated, and we cannot predict the impact of any future incident. Any loss of such information could harm our competitive position, result in a loss of customer confidence in the adequacy of our threat mitigation and detection processes and procedures, cause us to incur significant costs to remedy the damages caused by the incident, and divert management and other resources. In addition, the costs related to cyber-attacks or other security threats or computer systems and our ability to timely recover disruptions to our business operations may not be fully insured or indemnified by others.
We routinely implement improvements to our facilities, robot fleet, computer and network security safeguards, and we are devoting increasing resources to the security of our information technology systems. However, we cannot be sure that such system improvements will be sufficient to deter, prevent or limit the damage from any physical threat, future cyber-attack, network or operational disruptions. As a result, the occurrence of any of the events described above could result in the loss or theft of our intellectual property or client data and other sensitive information due to cybersecurity breaches, diversion of the management’s attention and other resources, or otherwise adversely affect our internal operations, reputation, financial results or stock price.
We are subject to cybersecurity risks to our robot fleet, operational systems, security systems, infrastructure, integrated software in our products and data processed by us or third-party vendors.
Our business and operations involve the collection, storage, processing and transmission of personal data and certain other sensitive and proprietary data of collaborators, customers and others. Additionally, we maintain sensitive and proprietary information relating to our business, such as our own proprietary information and personal data relating to our employees. We may be a target for attacks by state-sponsored actors and others designed to disrupt our operations or to attempt to gain access to our systems or data that is processed or maintained in our business. Additionally, we are subject to increased security risks due to many personnel and third-party partners working remotely, some of which are located outside of the United States.
We are at risk for interruptions, outages and breaches of our: (a) operational systems, including business, financial, accounting, product development, data processing or production processes, owned by us or our third-party vendors or suppliers; (b) facility security systems, owned by us or our third-party vendors or suppliers; (c) transmission control modules or other in-product technology, owned by us or our third-party vendors or suppliers; (d) the integrated software in our units; (e) customer data that we process or that our third-party vendors or suppliers process on our behalf; or (f) to describe the cybersecurity and operational risks that are related to outsourced overseas hardware and electronics supply chain manufacturers. If any of the supply chain (parts) (manufacturers) have interruptions or cybersecurity deficiencies, that would also have a direct impact on our operations. Because techniques used to obtain unauthorized access to or to sabotage information systems change frequently and may not be known until launched against a target, we may be unable to anticipate or prevent these attacks, react in a timely manner, or implement adequate preventive measures, and may face delays in our detection or remediation of, or other responses to, security breaches and other privacy-and security-related incidents. Such incidents could: materially disrupt our operational systems; result in loss of intellectual property, competitive advantage, trade secrets or other proprietary or competitively sensitive information; compromise certain information of customers, employees, suppliers, or others; jeopardize the security of our facilities; or affect the performance of in-product technology and the integrated software in our units. Certain efforts may be state-sponsored or supported by significant financial and technological resources, making them even more difficult to detect, remediate, and otherwise respond to.
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We have included products and services that utilize data connectivity to monitor performance and identify opportunities to enhance performance and for safety and cost-saving preventative maintenance, but these products and services cannot guarantee we have identified all performance, cost-savings and safety issues. The availability and effectiveness of these products and services depend on the continued operation of information technology and communications systems. Our systems are vulnerable to damage or interruption from, among others, physical theft, fire, terrorist attacks, natural disasters, power loss, war, telecommunications failures, viruses, denial or degradation of service attacks, ransomware, social engineering schemes, insider theft or misuse or other attempts to harm our systems.
We have implemented certain systems and processes that are designed to protect our data and systems, prevent data loss, and prevent other security breaches and security incidents, but these security measures cannot guarantee security. The IT, infrastructure, business processes and third-party service providers used in our business may be vulnerable to cyberattacks or security breaches, and third parties may be able to access data, including personal data and other sensitive and proprietary data of us and our customers, collaborators and partners, our employees’ personal data, or other sensitive and proprietary data, accessible through those systems. Employee error, malfeasance, or other errors in the storage, use, or transmission of any of these types of data could result in an actual or perceived privacy or security breach or other security incident.
Moreover, there are inherent risks associated with developing, improving, expanding and updating our current systems, such as the disruption of our data management, procurement, production execution, finance, supply chain and sales and service processes. These risks may affect our ability to manage our data and inventory, procure parts or supplies or manufacture, deploy, deliver and service our units, adequately protect our intellectual property or achieve and maintain compliance with, or realize available benefits under, applicable laws, regulations and contracts. We cannot be sure that these systems upon which we rely, including those of our third-party vendors or suppliers, will be effectively implemented, maintained or expanded as planned. If we do not successfully implement, maintain or expand these systems as planned, our operations may be disrupted, our ability to accurately and timely report our financial results could be impaired, and deficiencies may arise in our internal control over financial reporting, which may impact our ability to certify our financial results. Moreover, our proprietary information or intellectual property could be compromised or misappropriated, and our reputation may be adversely affected. If these systems do not operate as we expect them to, we may be required to expend significant resources to make corrections or find alternative sources for performing these functions.
Any actual or perceived security breach or security incident, or any systems outages or other disruption to systems used in our business, could interrupt our operations, result in loss or improper access to, or acquisition or disclosure of, data or a loss of intellectual property protection, harm our reputation and competitive position, reduce demand for our products, damage our relationships with consumers, partners, collaborators, or others, or result in claims, including class action litigation, regulatory investigations, and proceedings and significant legal, regulatory and financial exposure, and any such incidents or any perception that our security measures are inadequate could lead to loss of confidence in us and harm to our reputation, any of which could adversely affect our business, financial condition and results of operations. If consumer trust is affected due to safety or cybersecurity concerns, it could reduce the adoption or selected use of our services. Any actual or perceived breach of privacy or security, or other security incident, impacting any entities with which we share or disclose data (including, for example, our third-party technology providers) could have similar effects. We expect to incur significant costs in an effort to detect and prevent privacy and security breaches and other privacy- and security-related incidents and may face increased costs and requirements to expend substantial resources in the event of an actual or perceived privacy or security breach or other incident.
Unauthorized access to or misuse of the data we sell or license could expose us to liability and harm our business.
If the video or LiDAR data we sell or license is accessed, used, or disclosed in an unauthorized manner due to a cybersecurity breach, third-party contractual non-compliance or inadvertent internal error or misconfiguration, insufficient contractual protections, misuse by third parties or other reasons, we could be subject to claims, including class action litigation, regulatory actions, or reputational harm. We rely on agreements with our customers and partners to protect the data we provide, but we cannot guarantee that these measures will be sufficient to prevent all unauthorized uses or disclosures. Any such incident could result in loss of customer trust, legal liability, and adverse effects on our business and results of operations.
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We are subject to evolving laws, regulations, standards, policies and contractual obligations related to privacy and security laws and regulations, and our actual or perceived failure to comply with such obligations could result in litigation, harm our reputation, subject us to significant fines and liability, or otherwise adversely affect our business, prospects, financial condition and operating results.
We are subject to or affected by a number of federal, state and local laws and regulations, as well as contractual obligations and industry standards, that impose certain obligations and restrictions with respect to data privacy and security, and govern our collection, storage, retention, protection, use, processing, transmission, sharing and disclosure of personal information, including that of our employees, customers and others. Most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities and others of security breaches involving certain types of data. Such laws may be inconsistent or may change or additional laws may be adopted. Compliance with applicable privacy and data security laws and regulations is a continuously evolving, rigorous and time-intensive process, and as such, we cannot guarantee full compliance with all privacy and data security laws and regulations applicable to us. In addition, our agreements with certain customers may require us to notify them in the event of a security breach. Such mandatory disclosures are costly, could lead to negative publicity, result in penalties or fines, result in litigation, may cause our customers to lose confidence in the effectiveness of our security measures and require us to expend significant capital and other resources to respond to and/or alleviate problems caused by the actual or perceived security breach.
The global data protection landscape is rapidly evolving, and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. We may not be able to monitor and react to all developments in a timely manner. As we expand our operations, we may be subject to the CCPA, BIPA, and other similar state privacy laws and regulations relating to privacy and data security may increase our compliance costs and potential liability.
Additionally, as our international presence expands, we may become subject to or face increasing obligations under laws and regulations in countries outside the United States, many of which, such as the GDPR and national laws supplementing the GDPR, as well as legislation substantially implementing the GDPR in the United Kingdom, are significantly more stringent than those currently enforced in the United States. Many other jurisdictions globally are considering or have enacted legislation providing for local storage of data or otherwise imposing privacy, data protection and data security obligations in connection with the collection, use and other processing of personal data.
Aspects of our operations, including the operations of our Moxi robot, may create, receive, maintain, or transmit protected health information (“PHI”), causing us to be deemed a “business associate” under HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), and the implementing Privacy, Security, and Breach Notification Rules. In the United States, HIPAA imposes privacy, security, and breach notification obligations on covered entities and their business associates to limit the use and disclosure of individually identifiable health information without patient consent and to ensure the confidentiality, integrity, and availability of individually identifiable health information in electronic form. Entities that are found to be in violation of HIPAA, as a result of a breach of unsecured protected health information, a complaint about privacy practices, or an audit by the U.S. Department of Health and Human Services (“HHS”), may be subject to significant civil, criminal, and administrative fines and penalties and/or additional reporting and oversight obligations if they are required to enter into a resolution agreement and corrective action plan with HHS through settlement agreements. Further, in the case of a breach, litigation often ensues. Additionally, in the United States, whether or not HIPAA applies, according to the Federal Trade Commission (the “FTC”), violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair and/or deceptive acts or practices in violation of Section 5(a) of the FTC Act. Additionally, federal and state consumer protection laws are increasingly being applied by the FTC and states’ attorneys general to regulate the collection, use, storage, and disclosure of personal information, through websites or otherwise. There are also state general privacy laws and health data specific privacy laws that place limits on the use and disclosure of non-HIPAA consumer health data.
We publish privacy policies and other documentation regarding our collection, processing, use and disclosure of personal information and/or other confidential information. Although we endeavor to comply with our published policies and other documentation, we may at times fail to do so or may be perceived to have failed to do so. Moreover, despite our efforts, we may not be successful in achieving compliance, including if our employees, contractors, service providers or vendors fail to comply with our published policies and documentation. Such failures can subject us to potential action by governmental or regulatory authorities if they are found to be deceptive, unfair, or misrepresentative of our actual practices. We are also aware of certain media reports relating to the alleged use of our robots as elements in law enforcement surveillance efforts. As a general policy, we do not share data with law enforcement, except in certain narrow circumstances where (1) we are required to share data when served with a warrant or subpoena, or (2) there are insurance claims, active incident investigations, or acts of armed violence or theft attempts involving our personnel or property. Public perception of our
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involvement in such surveillance activities could harm our reputation, and consequently, our business prospects and financial condition. Any actual or perceived inability of us to adequately address privacy and security concerns or comply with applicable laws, rules and regulations relating to privacy, data protection or data security, or applicable privacy notices, could lead to investigations, claims and proceedings by governmental entities and private parties, damages for contract breach and other significant costs, penalties and other liabilities. Any such claims or other proceedings could be expensive and time-consuming to defend and could result in adverse publicity. Any of the foregoing may have an adverse effect on our business, prospects, results of operations and financial condition.
Because we operate our Moxi robots in hospitals, we may face evolving and uncertain regulatory and compliance requirements that could restrict or delay deployments, increase costs and materially harm our business, financial condition and results of operations.
Our Moxi robots do not perform clinical functions or provide patient care; however, we operate within regulated healthcare environments and rely on access to hospitals, which subjects us to an evolving and uncertain regulatory landscape. Changes in laws, regulations, such as those governing infection control, workplace safety or the use of autonomous equipment, could increase compliance burdens or restrict our operations. For example, regulators could determine that certain features or use cases of our robots render them subject to medical device or other healthcare-specific regulation, triggering additional requirements related to design controls, quality systems, labeling, reporting or premarket clearance or approval. Separately, workplace safety, robotics, autonomous systems or other rules could impose constraints on how our robots are deployed, where they can operate, or the level of human oversight required. Hospitals may adopt or tighten internal policies, credentialing, and vendor risk management standards that are more restrictive than applicable law, which could delay or prevent deployments or require costly modifications. Failure to timely comply with existing or new requirements, or adverse findings in audits, inspections, or incident investigations, could lead to penalties, contractual remedies, loss of facility access, forced product changes, product holds, reputational harm or loss of revenue. Even the perception that our systems could be regulated more stringently may cause customers to defer purchasing decisions, extend sales cycles or demand pricing or indemnity concessions. Any of these outcomes could materially and adversely affect our business, financial condition, and results of operations.
Our internal use of AI, generative AI, and machine learning tools may expose us to heightened cybersecurity risks.
As we expand our use of AI, generative AI, and machine learning tools in our day-to-day business activities, the associated cybersecurity risks are intensifying, increasing the potential for system vulnerabilities and exposure to malicious threats. Our use of AI, generative AI, and machine learning tools in our internal operations could expose us to cybersecurity-related costs and risks, including: (i) the potential introduction of new vulnerabilities or cybersecurity risks within our information technology systems; (ii) the potential inadvertent or unauthorized release of our confidential or proprietary information resulting from the use (whether or not authorized) of AI or machine learning tools by our employees, contractors, agents, representatives, vendors or customers; (iii) the potential loss of our intellectual property or our potential infringement of the intellectual property rights of third parties resulting from the use (whether or not authorized) of AI or machine learning tools in our operations; (iv) potential legal or reputational harms due to unauthorized exposure of sensitive data or unauthorized use of intellectual property resulting from the use of AI, generative AI, and machine learning tools; (v) potential compromise to safety if AI-related cybersecurity incidents affect our operational systems or result in decision-making based on biased, incorrect, or compromised AI models or information; and (vi) the increased difficulty in detecting, containing, or mitigating cyberattacks due to the rapid evolution and increased adoption of AI, generative AI, and machine learning tools by threat actors. While we aim to develop and use AI, generative AI, and machine learning tools responsibly and to proactively identify and mitigate cybersecurity issues presented by their use, we may be unsuccessful in identifying or resolving such issues before they arise. Any of these risks could have a materially adverse effect on our business, financial condition and results of operations.
Risks Related to our Industry and External Environment
Unfavorable changes in interest rates and foreign currency exchange rates may adversely affect our financial condition, liquidity and results of operations.
Fluctuations in interest rates and foreign exchange rates may negatively impact our business. These rates are highly sensitive to many factors beyond our control, including general economic conditions, both domestic and foreign, and the monetary and fiscal policies of various governmental and regulatory authorities. Any of such widespread economic conditions could negatively impact our supply chain partners and the industry as a whole, which could materially decrease our profits and cash flow. For example, we have experienced increased costs in acquiring parts for our robots as a result of the global semiconductor industry facing shortages in supply as well as inflation and increased interest rates. If adverse
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macroeconomic conditions persist, including inflationary pressures, unfavorable changes in foreign currency exchange rates or further increases in interest rates, we and our supply chain partners may be forced to raise prices or incur additional costs, which could further impact our profitability and cash flow.
Our business depends on discretionary spending patterns in the areas in which the restaurants on our partners’ platforms operate and in the economy at large. Economic downturns or other events (like widespread health/pandemic outbreaks) impacting the United States and global economy could materially adversely affect our results of operations.
Purchases at restaurants and food and beverage hospitality services locations are discretionary for consumers and we are therefore susceptible to changes in discretionary spending patterns or economic slowdowns in the geographic areas in which restaurants on our partners’ platforms operate and in the economy at large. Discretionary consumer spending can be impacted by general economic conditions, unemployment, consumer debt, inflation, rising gasoline prices, interest rates, consumer confidence and other macroeconomic factors. We believe that consumers generally are more willing to make discretionary purchases, including delivery, dine-in or carryout of restaurant meals, during favorable economic conditions. Disruptions in the overall economy, including high unemployment, pandemic events, inflation, rising gasoline prices, financial market volatility and unpredictability, and the related reduction in consumer confidence, could negatively affect food and beverage sales throughout the restaurant industry, including orders through our partners’ platforms. Additionally, merchants on our partners’ platforms may be negatively impacted by general economic conditions, supply chain issues, labor shortages, inflation, or other macroeconomic factors, which could negatively impact their ability to fulfill orders. There is also a risk that if uncertain economic conditions persist for an extended period of time or worsen, consumers might make long-lasting changes to their discretionary spending behavior, including ordering food for delivery, dine-in or carryout less frequently. The ability of the U.S. economy to handle this uncertainty is likely to be affected by many national and international factors that are beyond our control. These factors, including national, regional and local politics and economic conditions, disposable consumer income and consumer confidence, also affect discretionary consumer spending. If any of these factors cause restaurants to cease operations or cease using our partners’ platforms, it could also significantly harm our financial results, for the reasons set forth elsewhere in these risk factors. Continued uncertainty in or a worsening of the economy, generally or in a number of our markets, and diners’ reactions to these trends could adversely affect our business and cause us to, among other things, reduce the number and frequency of new market openings or cease operations in existing markets.
Inflationary pressures may increase our operating costs and adversely affect our business, financial condition and results of operations.
Inflation increases the cost of labor and materials needed to build and operate robots. For example, we have observed an increase in cost of labor for managing and maintaining robots in the field over the past several years. Over a longer time horizon, technological improvements may continue to reduce the cost of our key components such as sensors, batteries and computers; however, such reductions may not occur as quickly or as extensively as we expect, or at all. While we expect the unit cost of labor for operating robots to increase over time with inflation, robotic solutions leverage labor more efficiently than human labor. As such, we believe labor inflation increases the cost of human labor and similar alternatives to robots more than it increases the cost of robots, and that improvements in robot autonomy will continue to reduce the rate of labor usage over time. Nevertheless, our relative cost advantage could narrow if inflation accelerates, if component cost reductions slow, if wage growth outpaces productivity gains, or if improvements in robot autonomy do not reduce the rate of labor usage as anticipated. Any of these developments could require us to raise prices, accept lower margins, or both, which could reduce customer demand and have a material adverse effect on our business, financial condition and results of operations.
We operate in a competitive industry that is subject to rapid technological change, and competitors may have or attain more resources and/or greater market recognition than we do.
Our competitor base may change or expand as we continue to develop and commercialize our robotic systems in the future. Some of these companies are direct competitors, while others provide adjacent services such as delivery with autonomous vehicles on streets that could impact our market. A number of these companies may have, or may attain, more resources and/or greater market recognition than we do. These or other competitors may develop new technologies or products that provide superior results to customers or are less expensive than our products. Our technologies and products could have reduced competitiveness by such developments.
Our competitors may respond more quickly to new or emerging technologies, undertake more extensive marketing campaigns, have greater financial, marketing, manufacturing and other resources than we do, or may be more successful in attracting potential customers, employees and strategic partners. In addition, potential customers could have long-standing
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or contractual relationships with competitors. Potential customers may be reluctant to adopt our products, particularly if they compete with or have the potential to compete with or diminish the need/utilization of products or technologies supported through these existing relationships. If we are not able to compete effectively, our business, prospects, financial condition, and operating results will be negatively impacted.
In addition, because we operate in a new market, the actions of our competitors could adversely affect our business. Adverse events such as product defects or legal claims with respect to competing or similar products could cause reputational harm to the robotics market on the whole and, accordingly, our business.
If use of the internet via websites, mobile devices and other platforms, particularly with respect to online food ordering, does not continue, our business and growth prospects will be harmed.
Our business and growth prospects are substantially dependent upon the continued use of the internet as an effective medium of transactions by diners. Internet use may not continue to develop at historical rates, and diners may not continue to use the internet and other online services to order their food at current or increased growth rates or at all, which could adversely impact our business, results of operation and financial condition. In addition, the internet and mobile applications may not continue to be accepted as a viable platform or resource for a number of reasons, including:
•actual or perceived lack of security of information or privacy protection;
•possible disruptions, computer viruses or other damage to internet servers, users’ computers or mobile applications;
•excessive governmental regulation; and
•unacceptable delays due to actual or perceived limitations of wireless networks.
Any of these developments could reduce online order volumes, increase customer acquisition costs or impair engagement, which could harm our growth prospects.
Our products and services are disruptive, and important assumptions about the market demand, pricing, adoption rates and sales cycle, for our current and future products and services may be inaccurate.
The market demand for and adoption of our robots is unproven, and important assumptions about the characteristics of targeted markets, pricing and sales cycles may be inaccurate, including due to evolving regulatory and safety standards, or resistance by customer employees and labor unions, all of which are outside of our control, could cause delays or otherwise impair adoption of these new technologies, which may adversely affect our growth, financial position and prospects. Given the evolving nature of the markets in which we operate, it is difficult to predict customer demand or adoption rates for our products or the future growth of the markets we expect to target. If one or more of the targeted markets experience a shift in customer or prospective customer demand, our products may not compete as effectively, if at all, and they may not be fully developed into commercial products. If demand for our robots does not develop as expected or if we cannot accurately forecast pricing, adoption rates and sales cycle for our products, our business, results of operations and financial condition will be adversely affected.
Adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults, or non-performance by domestic and international financial institutions or transactional counterparties, could adversely affect our business, financial condition and results of operations.
Actual events involving reduced or limited liquidity, defaults, non-performance or other adverse developments that affect domestic and international financial institutions or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds, have in the past and may in the future lead to market-wide liquidity problems. However, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on acceptable terms or at all. Any decline in available funding or access to our cash and liquidity resources could, among other risks, adversely impact our ability to meet our operating expenses, financial obligations or fulfill our other obligations, or result in breaches of our financial and/or contractual obligations. Any of these impacts, or any other impacts resulting from the factors described above or other related or similar factors not described above, could have material adverse impacts on our liquidity and our current and/or projected business operations, financial condition and results of operations.
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We are dependent on general economic conditions.
Our future performance will be subject to factors beyond our control, including general economic conditions and conditions in the robotics industry. Our business model depends on companies purchasing our robotic and branding services, and is thus dependent on national and international economic conditions. Uncertain economic conditions have created volatility in the United States. Such adverse national and international economic conditions may reduce the future availability of dollars companies have to spend on our services, which would negatively impact our revenues and possibly our ability to continue operations. For example, rising labor costs in recent years have led to increased interest in last-mile automation, while higher interest rates have resulted in a decrease in investment activity and overall capital allocation to hardware startups. The worsening of global economic conditions has in the past adversely affected, and could in the future adversely affect, our business, financial condition or results of operations, and the worsening of economic conditions in certain specific regions of the country could impact the expansion and success of our businesses in such areas.
We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations.
Our facilities or operations, or those of any third-party manufacturers or suppliers, could be adversely affected by events outside of our or their control, such as natural disasters, wars, health epidemics and other calamities. Our robots are charged overnight and rely on broadband internet connectivity to operate; therefore, power outages and broadband connectivity disruptions would adversely impact our operations. Furthermore, as hardware, our robots can be damaged or irreparably destroyed by the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist or malicious attacks or similar events.
Risks Related to our Regulatory Environment
Tariffs imposed by the United States and other countries, as well as changing trade relations, regional and international conflicts, and political conditions could have a material adverse effect on our business and results of operations.
Changes in United States and foreign governments’ trade policies, as well as volatility caused by regional and international conflicts, and the political climate in the United States, have resulted in, and may continue to result in, tariffs on imports into and exports from the United States. Tariffs on certain products can increase our costs of doing business. If we are unable to recover these costs, our business may be adversely impacted. Diminished trade relations, conflicts between the United States and other countries, and any escalation of tariffs could have a material adverse effect on our financial performance and results of operations.
Use of emerging technologies like AI, machine learning and generative AI, will require us to navigate an uncertain legal and regulatory landscape, and failure to comply with these rapidly evolving laws and regulations may negatively impact our ability to grow our business.
We continue to utilize and evaluate emerging technologies like AI, machine learning and generative AI for incorporation into our business. The domestic and international regulatory landscape surrounding these emerging technologies including AI, is rapidly evolving and uncertain, and may require us to incur significant costs to modify, maintain, or align our business practices, solutions and services to comply with domestic and foreign rules and regulations, the nature of which cannot be determined at this time and may be inconsistent from jurisdiction to jurisdiction.
This increasing divergence globally among AI regulations, which will require us to navigate a fragmented regulatory landscape, may impose significant requirements on how we design, build and deploy AI and handle non-personal data for ourselves or limit our ability to incorporate certain AI capabilities into our offerings. As we expand into new markets and scale deployments, we may be required to implement new governance controls, documentation, testing, monitoring, auditability, transparency, and human oversight measures, and to modify our models, datasets, and product designs to meet jurisdiction-specific requirements. This may negatively impact our ability to expand into new markets if we are unable to comply with their regulatory requirements. Violations of these laws or regulations may lead to reputational damage, financial penalties and increased regulatory scrutiny and oversight. This could adversely affect our business, financial condition or results of operations.
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Evolving privacy, data protection, and AI regulation may restrict our ability to collect, process, and license video and LiDAR datasets, increase our compliance costs or expose us to investigations, fines or litigation.
Our business model includes collecting, processing, and licensing large-scale video and LiDAR datasets to third parties for model training. Global, federal, state, and local laws and regulations governing privacy, data protection, and AI technologies are rapidly evolving and, in some cases, unclear or inconsistent, including with respect to biometric identifiers, geolocation, in-vehicle or bystander recordings, profiling, and automated decision-making. Regulators may impose or expand requirements such as consent, notice, purpose limitation, data minimization, security safeguards, impact assessments, algorithmic transparency, and opt-out rights, as well as restrictions on cross-border data transfers and broker registration. Compliance may require significant changes to our data collection practices, technical infrastructure, and contractual frameworks, and may increase costs and delay product and licensing timelines. Any perceived or actual noncompliance by us or our vendors or customers could result in regulatory inquiries, enforcement actions, administrative orders, fines, data deletion or use restrictions, mandatory remediation, private litigation (including class actions), or suspension of our data licensing activities, any of which could adversely affect our reputation, operations and financial results.
We may become subject to new or changing governmental regulations relating to the design, manufacturing, marketing, distribution, servicing or use of our products, including as a result of climate change, and a failure to comply with such regulations could have an adverse effect on our business operations.
We are subject to federal, state and local laws and regulations in the United States as well as applicable laws and regulations in each foreign jurisdiction in which we do business. These laws and regulations govern, among other things, the design, manufacturing, marketing, distribution, servicing, or use of our products. A failure to comply with such regulations could lead to withdrawal or recall of our products from the market, delay our projected revenues, increase cost, or make our business unviable if we are unable to modify our products to comply. Such laws and regulations may require us to pause sales and modify our products, which could result in a material adverse effect on our revenues and financial condition. Such laws and regulations can also give rise to liability such as fines and penalties, property damage, bodily injury and cleanup costs. Capital and operating expenses needed to comply with laws and regulations can be significant, and violations may result in substantial fines and penalties, third-party damages, suspension of production or a cessation of our operations. Any failure to comply with such laws or regulations could lead to withdrawal or recall of our products from the market.
Further, concerns over environmental pollution and climate change have produced significant legislative and regulatory efforts on a global basis, and we believe this will continue both in scope and in the number of countries participating. These changes could directly increase the cost of energy, which may have an effect on the way we manufacture products or utilize energy to produce our products. In addition, any new regulations or laws in the environmental area might increase the cost of raw materials or key components we use in our products. Environmental regulations may require us to reduce product energy usage and to participate in compulsory recovery and recycling of our products or components. We are unable to predict how any future changes will impact us and if such impacts will be material to our business.
Climate change laws, environmental regulations, and other similar measures may also have an effect on the operating activities of our customers, which may, in turn, reduce the demand for our products and services. To the extent increasing concentrations of greenhouse gases in the Earth’s atmosphere may produce climate changes that have significant physical effects, such as increased frequency and severity of storms, droughts, floods and other climatic events, such events could have a material adverse effect on the Company and potentially subject the Company to further regulation.
Foreign and domestic antitrust laws could significantly affect our ability to expand our business through acquisitions, joint ventures or other strategic transactions.
Acquisitions and strategic investments as part of our growth strategy could subject us to enhanced scrutiny under U.S. and foreign antitrust and competition laws and foreign investment review regimes. Certain transactions may require premerger notification and clearance (including under the Hart-Scott-Rodino Antitrust Improvements Act in the United States) and reviews by other regulators, which can result in lengthy investigations, extensive information requests, operational restrictions, or injunctions that delay or prevent closing. Competition or foreign investment authorities may challenge a transaction or require commitments that limit how we integrate or operate the acquired business or otherwise diminish the strategic value of the transaction. Increasing scrutiny of acquisitions involving robotics, automation, AI, data, and other sensitive technologies may heighten the risk of extended reviews, mitigation agreements, or prohibition in certain jurisdictions. We could incur substantial costs, devote significant management time, and experience business disruption responding to these reviews and operating under hold‑separate or other constraints. Failure to comply with premerger
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notification, “gun‑jumping,” information‑sharing, or interlocking directorate rules could result in significant fines and penalties and harm our reputation and ability to consummate current or future transactions. Even after closing, we may be subject to ongoing monitoring, consent decrees, or private litigation challenging our transactions. Any delay, prohibition, required remedy, or related enforcement action could adversely affect our business, financial condition, results of operations, and prospects.
We are subject to domestic and foreign anti-corruption and anti-money laundering laws and regulations. We can face criminal liability and other serious consequences for violations, which can harm our business, prospects, financial condition and operating results.
We are subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, and other anti-corruption, anti-bribery and anti-money laundering laws in countries in which we conduct activities. In addition, we may become subject to other anti-corruption, anti-bribery and anti-money laundering laws if we expand our operations into new jurisdictions. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, business partners, third-party intermediaries, representatives, and agents from authorizing, promising, offering or providing, directly or indirectly, improper payments or anything else of value to government officials, political candidates, political parties, or commercial partners for the purpose of obtaining or retaining business or securing an improper business advantage.
We have direct and indirect interactions with foreign officials, including in furtherance of sales to governmental entities in non-U.S. countries. We sometimes leverage third parties to conduct our business abroad, and our third-party business partners, representatives, and agents may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of our employees or these third parties, even if we do not explicitly authorize or have actual knowledge of such activities. The FCPA and other applicable laws and regulations also require that we keep accurate books and records and maintain internal controls and compliance procedures designed to prevent any such actions. While we have policies and procedures to address compliance with such laws, there can be no assurance that all of our employees, business partners, third-party intermediaries, representatives and agents will not take actions in violation of our policies and applicable law, for which we may be ultimately held responsible. Our exposure for violating these laws increases as our international presence expands and as we increase sales and operations in foreign jurisdictions.
Any violations of the laws and regulations described above may result in whistleblower complaints, adverse media coverage, investigations, substantial civil and criminal fines and penalties, damages, settlements, prosecution, enforcement actions, imprisonment, the loss of export or import privileges, suspension or debarment from government contracts, tax reassessments, breach of contract and fraud litigation, reputational harm and other consequences, any of which could adversely affect our business, prospects, financial condition and operating results. In addition, responding to any investigation or action will likely result in a significant diversion of management’s attention and resources and significant defense costs and other professional fees.
The evolving regulations around personal delivery devices (or public mobile robots), could materially impact our business and growth prospects in new markets.
Sidewalk robots, as opposed to autonomous vehicles operating on public streets, are not by default prohibited from operations in most jurisdictions. But there is no guarantee that the current permissive environment will not change in the future, especially as more sidewalk robots get deployed. While we currently have the requisite permits and support from local municipalities in areas we operate, any change in regulations or permit requirements could adversely impact our business. While we proactively engage with lawmakers, academics, standards-setting organizations, urban planning nonprofits, disability rights advocates, senior citizen organizations, pedestrian advocacy groups and regional bicycle coalitions to anticipate and mitigate potential regulatory challenges, we cannot be assured that such efforts will be successful, and failure to achieve favorable outcomes may have an adverse effect on our business, prospects, results of operations and financial condition.
Over two dozen states across the United States have enacted legislation regulating personal delivery devices (“PDDs”), also known as public mobile robots (“PMRs”), using a definition that includes sidewalk delivery robots such as ours. While these regulations have been largely industry-friendly and intended to streamline the rollout of PDDs in those jurisdictions, they are not yet uniform and may present some challenges as we seek to deploy in new markets. For example, Washington state has an unladen weight restriction below 120lbs, and the City of Santa Monica and New York state both prohibit the operation of autonomous devices on sidewalks. These ordinances and statutes require amendments in order for us to expand into those jurisdictions.
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In some municipal jurisdictions, such as the cities of Chicago and Los Angeles, PDDs are still regulated under pilot programs at the discretion of the cities’ departments of transportation. These frameworks may require ongoing discussions and positive community feedback to enable further deployment and market expansion. We expect that some number of jurisdictions that are granting their first PDD licenses will create pilot programs as well prior to full commercial regulatory licensing.
Furthermore, the cellular network and radio systems contained in our robots are regulated by the U.S. Federal Communications Commission (the “FCC”), which allocates cellular and wireless bandwidth to ensure minimal conflict between operators. And the battery packs within our robots use custom lithium-ion cells. The transportation and effective storage of lithium-ion batteries is tightly regulated by the U.S. Department of Transportation (the “DOT”) and other regulatory bodies. Any failure to comply with the DOT’s storage and transport requirements or the FCC’s regulations on wireless communications could result in fines, loss of permits and licenses or other regulatory consequences, which could limit our ability to manufacture and deliver our robotic systems and negatively affect our business, prospects, financial condition, results of operations and cash flows.
Expanding our products, services, and geographic footprint may subject us to additional and evolving regulatory, licensing, and compliance obligations.
As we aim to introduce new products and services and expand into new markets, including through acquisitions, we expect to become subject to additional regulations, restrictions, and licensing requirements. As we expand and localize our international activities, we expect that our obligations in the markets in which we operate will continue to increase. This may include laws and regulations surrounding product safety and certification, data privacy and cybersecurity, healthcare and financial services regulations, labor and employment, environmental, import/export controls, and foreign investment or national security reviews, among others. Obtaining and maintaining required approvals, certifications, and licenses can be costly and time‑consuming, and failure or perceived failure to comply may result in fines, penalties, injunctions, mandated product changes, delays in launches or deployments, restrictions on data use or cross‑border transfers, and contractual liability. Moreover, overlapping or inconsistent requirements across jurisdictions may require us to modify products, features, or operational processes on a country‑by‑country basis, increase compliance costs, and divert management attention, any of which could adversely affect our business, results of operations, financial condition, and prospects.
Changes to tax laws or exposure to additional tax liabilities may have a negative impact on our operating results.
Changes in U.S. federal and state tax laws and rates could adversely affect our results of operations and cash flows. It is also possible that changes in overall profitability, changes in U.S. GAAP, or changes in the valuation of deferred tax assets could adversely affect our future results of operations.
In addition, we regularly undergo tax audits in various jurisdictions in which we operate. Although we believe that our income tax provisions and accruals are reasonable and in accordance with U.S. GAAP, and that we prepare our tax filings in accordance with all applicable tax laws, the final determination with respect to any tax audits and any related litigation, could be materially different from our historical income tax provisions and accruals. The results of a tax audit or litigation could materially affect our operating results and cash flows in the periods for which that determination is made. In addition, future period net income may be adversely impacted by litigation costs, settlements, penalties and interest assessments.
Risks Related to Ownership of Our Common Stock
The market price and trading volume of our common stock may be volatile and could decline significantly.
Stock exchanges and quotation systems, including The Nasdaq Capital Market (“Nasdaq”), on which our common stock is listed or may be listed or quoted on in the future have from time to time experienced significant price and volume fluctuations. Even if an active, liquid and orderly trading market develops and is sustained for our common stock, the market price of our common stock may be volatile and could decline significantly. In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur. If the market price of our common stock declines significantly, you may be unable to resell your shares at or above the market price of our common stock as of the date of purchase. We cannot assure you that the market price of our common stock will not fluctuate widely or decline significantly in the future in response to a number of factors, including, among others, the following:
•the realization of any of the risk factors presented in our most recent Annual Report on Form 10-K, as supplemented by those presented in this Quarterly Report on Form 10-Q;
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•actual or anticipated differences in our estimates, or in the estimates of analysts, for our revenues, results of operations, level of indebtedness, liquidity or financial condition;
•additions and departures of key personnel;
•our ability to maintain the listing of our common stock on Nasdaq;
•failure to comply with the Sarbanes-Oxley Act or other laws or regulations;
•future issuances, sales, resales or repurchases or anticipated issuances, sales, resales or repurchases, of our common stock;
•publication of research reports about us, or our industry;
•the performance and market valuations of other similar companies;
•broad disruptions in the financial markets, including sudden disruptions in the credit markets;
•speculation in the press or investment community;
•actual, potential or perceived control, accounting or reporting problems; and
•changes in accounting principles, policies and guidelines.
In the past, securities class-action litigation has often been instituted against companies following periods of volatility in the market price of their shares. This type of litigation could result in substantial costs and divert our management’s attention and resources, which could have a material adverse effect on us.
We are obligated to develop and maintain proper and effective internal control over financial reporting. If we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired. In addition, the presence of a material weakness increases the risk of material misstatement of the consolidated financial statements.
We are a public company and are required, pursuant to Section 404(a) of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting on our Annual Report on Form 10-K. Effective internal control over financial reporting is necessary for reliable financial reports and, together with adequate disclosure controls and procedures, such internal controls are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations. Ineffective internal controls could also cause investors to lose confidence in reported financial information, which could have a negative effect on the trading price of our common stock.
The report by management is required to include disclosure of any material weaknesses identified in internal control over financial reporting. However, for as long as we are an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), our independent registered public accounting firm will not be required to attest to the effectiveness of internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act. Management’s assessment of internal controls could detect problems with internal controls, and an independent assessment of the effectiveness of internal controls by our auditors could detect further problems that management’s assessment might not, and could result in the identification of material weaknesses that were not otherwise identified. Undetected material weaknesses in internal controls could lead to financial statement restatements and require us to incur the expense of remediation. We are required to disclose changes made in internal control and procedures on a quarterly basis. To comply with the public company requirements, we may need to undertake various actions, such as implementing new internal controls and procedures and hiring accounting or internal audit staff. The design and implementation of internal control over financial reporting has required and will continue to require significant time and resources from management and other personnel.
As a result of management’s assessment of our internal control over financial reporting as of December 31, 2025, management identified multiple material weaknesses in our internal controls over financial reporting. A “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is more than a reasonable possibility that a material misstatement of our annual or interim financial statements will not be
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prevented or detected on a timely basis. Refer to Part II, Item 9A. “Controls and Procedures” within our Annual Report on Form 10-K for the year ended December 31, 2025 for a full discussion of the results of management’s assessment.
If we are unable to assert that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of financial reports, which would cause the price of our common stock to decline, and we may be subject to investigation or sanctions by the SEC.
We are an emerging growth company and a smaller reporting company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies and smaller reporting companies could make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including:
•not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act;
•reduced disclosure obligations regarding executive compensation in our periodic reports and Annual Report on Form 10-K; and
•exemptions from the requirements of holding non-binding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We will remain an emerging growth company until the earliest of (i) the end of the fiscal year following the fifth anniversary of the first sale of our common stock pursuant to a registration statement under the Securities Act; (ii) the last day of the fiscal year in which we have more than $1.235 billion in annual revenues; (iii) the date we become a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; or (iv) the date on which we have issued, in any three-year period, more than $1.00 billion in non-convertible debt securities.
We cannot predict if investors will find our common stock less attractive if we choose to rely on any of the exemptions afforded emerging growth companies. If some investors find our common stock less attractive because we rely on any of these exemptions, there may be a less active trading market for our common stock and the market price of our common stock may be more volatile.
Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have elected to avail ourselves of this provision of the JOBS Act. As a result, we will not be subject to new or revised accounting standards at the same time as other public companies that are not emerging growth companies. Therefore, our consolidated financial statements may not be comparable to those of companies that comply with new or revised accounting pronouncements as of public company effective dates.
We are also a “smaller reporting company” as defined in the Exchange Act. We may continue to be a “smaller reporting company” even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter, or our annual revenues are less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.
Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.
Our amended and restated certificate of incorporation and our amended and restated bylaws contain provisions that could delay or prevent a change in control of our company. These provisions could also make it difficult for stockholders to elect directors who are not nominated by current members of our Board or take other corporate actions, including effecting changes in our management. These provisions:
•establish a classified Board so that not all members of our board are elected at one time;
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•permit only the Board to establish the number of directors and fill vacancies on the board;
•provide that directors may only be removed “for cause” and only with the approval of two-thirds of our stockholders;
•require super-majority voting to amend some provisions in our amended and restated certificate of incorporation and amended and restated bylaws;
•authorize the issuance of “blank check” preferred stock that our board could use to implement a stockholder rights plan;
•eliminate the ability of our stockholders to call special meetings of stockholders;
•prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;
•prohibit cumulative voting; and
•establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
In addition, our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for: any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law (the “DGCL”), our amended and restated certificate of incorporation, or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine.
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Our amended and restated certificate of incorporation provides that the federal district courts of the United States of America will, unless we consent in writing to an alternative forum, be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (“Federal Forum Provision”). Our decision to adopt a Federal Forum Provision followed a decision by the Supreme Court of the State of Delaware holding that such provisions are facially valid under Delaware law. While there can be no assurance that federal courts or state courts will follow the holding of the Delaware Supreme Court or determine that the Federal Forum Provision should be enforced in a particular case, application of the Federal Forum Provision means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court. Neither the exclusive forum provision nor the Federal Forum Provision applies to suits brought to enforce any duty or liability created by the Exchange Act. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder also must be brought in federal court. Our stockholders will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder.
Any person or entity purchasing or otherwise acquiring or holding any interest in any of our securities shall be deemed to have notice of and consented to our exclusive forum provisions, including the Federal Forum Provision. These provisions may limit a stockholder’s ability to bring a claim in a judicial forum of their choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees.
In addition, Section 203 of the DGCL may discourage, delay or prevent a change in control of our company. Section 203 imposes certain restrictions on mergers, business combinations and other transactions between us and holders of 15% or more of our common stock.
We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
We have never declared or paid any cash dividends on our capital stock, and we do not intend to pay any cash dividends in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our Board. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Unregistered Sales of Equity Securities
None.
Issuer Purchases of Equity Securities
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
During the fiscal quarter ended June 30, 2026, none of our directors or officers informed us of the adoption termination
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ITEM 6. EXHIBITS
| Exhibit No. | Description | |||||||
| 1.1+ | Sales Agreement, dated May 11, 2026, by and among the Company and Evercore Group L.L.C., Guggenheim Securities, LLC, Oppenheimer & Co. Inc., Northland Securities, Inc. and Wedbush Securities Inc. (incorporated by reference to the Company’s Registration Statement on Form S-3 filed with the SEC on May 11, 2026). | |||||||
| 4.1 | Form of Indenture (incorporated by reference to the Company’s Registration Statement on Form S-3 filed with the SEC on May 11, 2026). | |||||||
| 10.1 | Form of Indemnification Agreement (incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on June 24, 2026). | |||||||
31.1* | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||
31.2* | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||
32.1** | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||||
32.2** | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||||
| 101.INS | Inline XBRL Instance Document. | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document. | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document. | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | |||||||
+ Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish supplemental copies of any of the omitted schedules and exhibits to the SEC upon its request.
* Filed herewith.
** Furnished in accordance with Item 601(b)(32)(ii) of Regulation S-K.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SERVE ROBOTICS INC. | ||||||||
Dated: August 6, 2026 | By: | /s/ Ali Kashani | ||||||
Ali Kashani | ||||||||
| Chief Executive Officer | ||||||||
| (Principal Executive Officer) | ||||||||
Dated: August 6, 2026 | By: | /s/ Brian Read | ||||||
Brian Read | ||||||||
Chief Financial Officer | ||||||||
(Principal Financial and Accounting Officer) | ||||||||
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