Knightscope(KSCP) - 2022 Q4 - Annual Report

PART I Item 1. Business Knightscope provides Autonomous Security Robots (ASRs) and blue light emergency communication devices, utilizing a Machine-as-a-Service (MaaS) subscription model for ASRs - Knightscope designs, develops, manufactures, markets, deploys, and supports Autonomous Security Robots (ASRs), autonomous charging stations, proprietary Knightscope Security Operations Center (KSOC) software, and blue light emergency communication devices[18] - The acquisition of CASE Emergency Systems on October 14, 2022, significantly expanded Knightscope's infrastructure to over 7,000 devices deployed and provided direct access to new client segments[20][21] - The company operates a Machine-as-a-Service (MaaS) subscription model for ASRs, encompassing lease, maintenance, support, data transfer, and software upgrades, while blue light emergency communication devices are sold as point-of-sale modular systems with optional services[25][26] - As of December 31, 2022, Knightscope had 111 full-time employees and one part-time employee, which was reduced to 92 full-time employees and one part-time employee by March 30, 2023, following a January 2023 cost-reduction plan[66][67] Overview This section provides a general description of Knightscope's business and offerings Strategy This section outlines Knightscope's strategic objectives and growth initiatives Industry background This section describes the market context and trends relevant to Knightscope's security technology business Products This section details Knightscope's current product portfolio, including ASRs and emergency communication devices KSOC This section describes the proprietary Knightscope Security Operations Center (KSOC) software Products in Development This section highlights new products and technologies currently under development by Knightscope KNOC This section provides information on the Knightscope Network Operations Center (KNOC) Knightscope+ This section describes the Knightscope+ service offerings Clients This section outlines the types of clients and market segments served by Knightscope Sales and Marketing This section details Knightscope's strategies for selling and promoting its products and services Research and Development This section describes Knightscope's activities and investments in research and development Intellectual Property This section covers Knightscope's intellectual property portfolio and protection strategies Manufacturing and Suppliers This section describes Knightscope's manufacturing processes and relationships with key suppliers Competition This section analyzes the competitive landscape within the autonomous security and emergency communication markets Government Regulation This section discusses the governmental regulations pertinent to Knightscope's operations and products Backlog and Seasonality This section provides information on Knightscope's order backlog and any seasonal variations in its business Human Capital This section details information regarding Knightscope's employees and human resource management Available Information This section specifies where public information about Knightscope can be accessed Item 1A. Risk Factors Knightscope faces significant risks including recurring net losses, limited revenue, market acceptance, intense competition, and stock price volatility, raising substantial doubt about its going concern ability - Knightscope has a history of net losses and limited revenues since inception, leading its independent registered public accounting firm to express substantial doubt about its ability to continue as a going concern[74][77][78] - The company's financial success is highly sensitive to global economic conditions, including inflation, interest rates, and supply chain disruptions, which have negatively impacted its business and are expected to continue doing so[86][87][88] - The market for advanced physical security technology is new and unproven, and limited market acceptance of Knightscope's products, coupled with public perception of robots, could significantly harm its business[82][93] - Knightscope's debt arrangements, including Convertible Notes, impose significant operating and financial restrictions, such as maintaining a minimum cash balance of $1.5 million, with any breach potentially leading to default and asset foreclosure[96][98] - As of February 24, 2023, holders of Class B Common Stock and Super Voting Preferred Stock collectively control approximately 79.32% of the company's total voting rights, allowing them to exert significant influence over management and corporate affairs[109][110] - Knightscope's Class A Common Stock is listed on The Nasdaq Global Market but received a notice on March 29, 2023, for non-compliance with the minimum Market Value of Listed Securities (MVLS) requirement of $50 million, with 180 days to regain compliance[114][115] Selected Risks Related to the Business and the Global Economy This section details specific risks associated with Knightscope's business operations and the broader economic environment Risks related to Ownership of our Class A Common Stock This section outlines risks pertinent to holding Knightscope's Class A Common Stock Item 1B. Unresolved Staff Comments There are no unresolved staff comments to report Item 2. Properties Knightscope leases its headquarters and production facility in Mountain View, California (15,000 sq ft) for ASR design, engineering, testing, manufacturing, and support - Knightscope leases a 15,000 sq ft facility in Mountain View, California, which serves as its headquarters and primary production site for ASRs[134] - Blue Light EPhone Towers and Emergency Call Boxes are designed and assembled in two additional leased facilities located in Irvine and Downey, California[134] - The company wholly owns its ASRs and typically builds them in batches based on client demand, thereby avoiding significant inventory stocking[134] Item 3. Legal Proceedings Knightscope is not currently a party to any material legal proceedings and is unaware of any pending or threatened litigation that could have a material adverse effect on its business, operating results, financial condition, or cash flows - The Company is not presently a party to any litigation it believes to be material and is unaware of any pending or threatened litigation that could materially adversely affect its business, operating results, financial condition, or cash flows[135] Item 4. Mine Safety Disclosures This item is not applicable to Knightscope, Inc. PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Knightscope's Class A Common Stock is listed on the Nasdaq Global Market under the symbol 'KSCP', with 14,499 holders of Class A and 12 holders of Class B as of February 24, 2023 - Knightscope's Class A Common Stock is listed and traded on the Nasdaq Global Market under the symbol 'KSCP'[137] Common Stock Holders (as of Feb 24, 2023) | Class of Stock | Holders of Record | | :------------------- | :---------------- | | Class A Common Stock | 14,499 | | Class B Common Stock | 12 | - The company has not paid any cash dividends on its Class A Common Stock to date and does not anticipate paying any in the foreseeable future, planning to retain future earnings for business expansion[138][139] Item 6. [Reserved]