Knightscope, Inc 10-K/A, filed Apr 28, 2023
Knightscope, Inc. (KSCP)
About this 10-K/A
Knightscope, Inc filed this 10-K/A on April 28, 2023, covering the fiscal year ended December 31, 2022.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Amendment No. 1)
For the fiscal year ended
OR
For The Transition Period From To
Commission file number:
(Exact name of registrant as specified in its charter)
| (State of Other Jurisdiction of incorporation or Organization) | (I.R.S. Employer Identification No.) |
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| (Address of principal executive offices) | (Zip code) |
Registrant’s telephone number, including
area code: (
Securities registered pursuant to Section 12(b) of the Act:
| Name of each exchange | ||
| Title of each class | Trading symbol(s) | on which registered |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
¨
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.
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 (§232.0405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
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 ¨ | Accelerated filer ¨ | 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.
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨
As of June 30, 2022, the last business day of
the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s Class A
Common Stock held by non-affiliates based upon the closing price of such shares on The Nasdaq Global Market on such date was approximately
$
As of April 14, 2023, there were shares of the registrant’s Class A Common Stock outstanding.
Documents Incorporated by Reference
None.
| Auditor Name | Auditor Location | Auditor Firm ID | ||
| PCAOB ID: |
EXPLANATORY NOTE
In accordance with Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Items 10 through 14 of Part III of the Original Filing have been amended and restated in their entirety, and Item 15 of Part IV of the Original Filing has also been amended and restated in its entirety to include new certifications by our principal executive officer and principal financial officer. This Amendment No. 1 does not amend or otherwise update any other information in the Original Filing. Accordingly, this Amendment No. 1 should be read in conjunction with the Original Filing and with our other filings with the SEC subsequent to the Original Filing.
TABLE OF CONTENTS
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
Our Board of Directors currently consists of four members. Information concerning our executive officers and members of our Board of Directors as of April 28, 2023 is set forth below.
| Name | Title/Position | Age | |||
| William (“Bill”) Santana Li | Chairman and Chief Executive Officer | 53 | |||
| Linda Keene Solomon | Director | 58 | |||
| Patricia L. Watkins | Director | 64 | |||
| Patricia Howell | Director | 55 | |||
| Mallorie Burak | President and Chief Financial Officer | 52 | |||
| Stacy Dean Stephens | Chief Client Officer | 51 | |||
| Mercedes Soria | Chief Intelligence Officer | 49 | |||
| Aaron J. Lehnhardt | Chief Design Officer | 50 | |||
| Peter M. Weinberg | General Counsel | 62 |
Directors
William (“Bill”) Santana Li has served as Chairman and Chief Executive Officer (“CEO”) since April 2013, when he co-founded the Company. Mr. Li is an American entrepreneur with over 30 years of experience from working in the global automotive sector and founding and leading a number of startups. From 1990 to 1999, Mr. Li held multiple business and technical positions at Ford Motor Company across four continents. His positions at Ford ranged from component, systems, and vehicle engineering with the Visteon, Mazda, and Lincoln brands; to business and product strategy on the United States youth market, India, and the emerging markets in Asia-Pacific and South America; as well as the financial turnaround of Ford of Europe. In addition, he was on the “Amazon” team, which established an all-new modular plant in Brazil. Subsequently, he served as Director of Mergers & Acquisitions. After internally securing $250 million in financing, Mr. Li founded and served as COO of GreenLeaf LLC, a Ford Motor Company subsidiary that became the world’s second largest automotive recycler. Under his leadership, GreenLeaf grew to more than 600 employees, 20 locations worldwide, and annual sales of approximately $150 million. After successfully establishing GreenLeaf, Mr. Li was recruited by SoftBank Venture Capital to establish and serve as the President and CEO of the Model E Corporation, a newly established automobile manufacturer that focused on the “Subscribe and Drive” model in California. Mr. Li also founded Carbon Motors Corporation in 2003, and as its Chairman and CEO until February 2013, focused it on developing the world’s first purpose-built law enforcement patrol vehicle. Carbon Motors Corporation filed for Chapter 7 liquidation in June 2013. Mr. Li earned a BSEE from Carnegie Mellon University and an MBA from the University of Detroit Mercy. He is married to Mercedes Soria, the Company’s Chief Intelligence Officer. We believe Mr. Li is qualified to serve on our Board due to his more than 30 years of experience in various industries, including as our Chairman and CEO, and co-founder of the Company.
Linda Keene Solomon has served as a member of our Board since January 2022. Ms. Solomon currently serves as Chief Executive Officer of Wellspring Solutions, Inc., a position she has held since 2016. Prior to Wellspring Solutions, she served at global accounting and consulting firm Deloitte LLP from 1990 to 2016 where she built their Federal Government Services practice. Ms. Solomon led Deloitte’s homeland security consulting practice from 2004 until 2014 and currently advises national security and law enforcement companies who serve federal, state, and local government agencies. In addition, she has served as Executive Officer and Director on the Homeland Security and Defense Business Council. Ms. Solomon earned a BA in Computer Mathematics, a minor in French, and an MBA from the NYU Stern School of Business. We believe Ms. Solomon is qualified to serve on our Board due to her significant experience with security, law enforcement and government.
Patricia (“Patty”) L. Watkins has served as a member of our Board since January 2022. Ms. Watkins has been a Managing Partner of M.O.R.E. SALES Advisors, a sales and marketing advisory firm providing services to technology firms since 2019. In 2019, she served as the Vice President of Sales for the Americas and Europe, and for Conversational AI, SaaS, Software and Services for Avaamo, Inc. From 2017 to 2019, she served as Vice President of Sales for Genesys, Inc., a provider of cloud and on-premise customer engagement solutions, she served as VP of Sales for Motionloft, a provider of sensor and analytics solutions in 2017, and from 2015 to 2016, she served SA Global Vice President of Sales for Internap Holding LLC, a global provider of infrastructure solutions. She possesses over 20 years of experience in senior executive roles in the global technology sector, including at HP, AT&T and Teradata, with a background that expands hardware, software, SaaS, Cloud, customer experience, data analytics, machine learning and artificial intelligence. Ms. Watkins holds a BBA from the University of Texas, in Austin (with honors), and an MBA from Santa Clara University where she was a member of Beta Gamma Sigma, the International Business Honor Society. We believe Ms. Watkins is qualified to serve on our Board due to her extensive technology and software experience.
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Patricia (“Trish”) Howell has served as a member of our Board since January 2022. Ms. Howell has approximately 30 years of experience leading operations functions in multiple industries. She joined Avail Medsystems, Inc. as Vice President, Manufacturing in February 2021. Ms. Howell also serves as the Independent Director and Audit Committee Chair of CVR Medical, where she was appointed in March 2020. From December 2019 to February 2021, Ms. Howell was Vice President of Operations at Stryker Corporation (formerly ZipLine Medical, where she held the same role from 2016-2019). From 2013-2016, Ms. Howell served as Vice President of Operations at Pulmonx Corporation where she led manufacturing, quality, and supply chain. Ms. Howell holds a BS in Mechanical Engineering from the University of Michigan and an MBA in Finance from the University of Michigan-Dearborn. She is also a member of the National Association of Corporate Directors. We believe Ms. Howell is qualified to serve on our Board due to her significant operations and corporate governance experience.
Executive Officers
William (“Bill”) Santana Li. Mr. Li’s biographical information is set forth above under the heading “Directors.”
Mallorie Burak has served as our Chief Financial Officer (“CFO”) since October 2020 and as our President since January 2023. Ms. Burak is an experienced financial executive, bringing over 28 years of expertise across a broad spectrum of industries ranging from early-stage start-ups to multi-national, public corporations. Prior to joining the Company, she served as CFO at ThinFilm Electronics ASA, an innovative solid-state lithium battery start-up, from 2019 to 2020 and Alta Devices, Inc., a GaAs thin-film solar technology start-up, from 2016 to 2019. Prior to Alta Devices Ms. Burak served as CFO at FriendFinder Networks, Rainmaker Systems, FoodLink, and Southwall Technologies. Ms. Burak has significant experience working with a variety of financing sources, both public and private, as well as significant experience leading and managing M&A related activities. Ms. Burak holds a BSBA and MBA from San Jose State University.
Stacy Dean Stephens has served as our Chief Client Officer since May 2013 and co-founded the Company in April 2013. Previously, he co-founded Carbon Motors Corporation with Mr. Li, where he led marketing operations, sales, product management, partnership marketing and client service. At Carbon Motors, Mr. Stephens established the “Carbon Council,” a client interface and users group consisting of over 3,000 law enforcement professionals across all 50 states and actively serving over 2,200 law enforcement agencies. Carbon Motors Corporation filed for Chapter 7 liquidation in June 2013. Prior to co-founding Carbon Motors Corporation, Mr. Stephens served as a police officer for the Coppell (Texas) Police Department from 2000 to 2002. Mr. Stephens studied aerospace engineering at the University of Texas in Arlington. He subsequently earned a degree in criminal justice and graduated as valedictorian from Tarrant County College in Fort Worth, Texas. He is a member of the International Association of Chiefs of Police (“IACP”) and also sits on the IACP Division of State Associations of Chiefs of Police SafeShield Project, which seeks to critically examine existing and developing technologies for the purpose of preventing and minimizing officer injuries and fatalities.
Mercedes Soria has served as our Chief Intelligence Officer since May 2013 and has been with the Company since April 2013. Ms. Soria is a technology professional with over 15 years of experience in systems development, life cycle management, project leadership, software architecture and web applications development. Ms. Soria led IT strategy development at Carbon Motors Corporation from 2011 until 2013. From 2002 to 2010, Ms. Soria was Channel Manager and Software Development Manager for internal operations at Deloitte & Touche LLP. From 1998 to 2002, Ms. Soria worked as a software developer at Gibson Musical Instruments leading the effort to establish its online presence. Ms. Soria obtained Bachelor and Master’s degrees in Computer Science from Middle Tennessee State University with honors, as well as an Executive MBA from Emory University. She is also a certified Six Sigma green belt professional and a member of the Society of Hispanic Professional Engineers. She is married to William Santana Li, the Company’s Chairman and Chief Executive Officer.
Aaron J. Lehnhardt has served as our Chief Design Officer since November 2015. Previously, from the Company’s inception in April 2013 until November 2015, Mr. Lehnhardt served as Chief Designer of the Company. From 2002 to April 2013, Mr. Lehnhardt was the co-owner of Lehnhardt Creative LLC where he worked on advanced propulsion vehicle design, personal electronics, product design, video game design, and concept development work. From 2004 to 2011, Mr. Lehnhardt was Chief Designer at California Motors (“Calmotors”), where he led the design for various concepts for HyRider hybrid vehicles, the Calmotors 1000 horsepower hybrid super car, Terra Cruzer super off-road vehicle, multiple vehicles for the U.S. Military, and various other hybrid and electric vehicles. He was also the lead designer and partner of Ride Vehicles LLC, a sister company to Calmotors, which worked on a 3-wheeled, standup personal mobility vehicle. Mr. Lehnhardt began his career in 1994 in the Large Truck Design Studio of Ford Motor Company, where he worked on the Aeromax and Excursion truck programs. Mr. Lehnhardt earned his Bachelor of Fine Arts in Transportation Design from the College for Creative Studies in Detroit, Michigan. He also served as an Alias 3D instructor at the College for Creative Studies.
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Peter M. Weinberg has served as our General Counsel since July 2021. Prior to joining the Company, Mr. Weinberg served as General Counsel at solar cell designer and manufacturer, Alta Devices from 2015 to 2019. Prior to Alta Devices, he served as Legal Counsel in the communications and information technology company, NEC Corp. of America from 1999 to 2005, and was appointed General Counsel for semiconductor and technology solutions company, NEC Electronics America, where he served from 2005 to 2010. Mr. Weinberg started his legal career with design/builder Takenaka USA Corp, where he was recruited from Fordham University Law School in 1990 to be its first in-house counsel and served until 1999. Mr. Weinberg also holds a Bachelor degree from Stony Brook University and a Masters degree from New York University.
Family Relationships
There are no family relationships among any of our directors and executive officers, except that William Santana Li, our Chairman and Chief Executive Officer, is married to Mercedes Soria, our Chief Intelligence Officer.
Corporate Governance
Code of Conduct
We have a written code of conduct in place that applies to all our employees and directors, including our principal executive officer and principal financial officer. A copy of our code of conduct is available on our website at https://ir.knightscope.com/corporate-governance/governance-overview. We are required to disclose certain changes to, or waivers from, that code for our senior financial officers. We intend to use our website as a method of disseminating any change to, or waiver from, our code of conduct as permitted by applicable SEC rules.
Audit Committee
The Board of Directors has a separately-designated standing Audit Committee. The Audit Committee operates under a written charter adopted by the Board of Directors. A copy of the Audit Committee Charter is available under Corporate Governance on the Investor Relations page of the Company's website at https://ir.knightscope.com/corporate-governance/governance-overview.
The members of the Audit Committee currently consist of Trish Howell (Chair), Linda Keene Solomon and Patty Watkins.
Our Board has determined that each of the directors serving on our Audit Committee is independent within the meaning of applicable Nasdaq rules and Rule 10A-3 under the Exchange Act. In addition, our Board has determined that Ms. Howell qualifies as an “audit committee financial expert” within the meaning of SEC regulations and applicable Nasdaq rules.
Our Audit Committee, among other things, assists our Board with its oversight of the integrity of our financial statements; our compliance with legal and regulatory requirements; the qualifications, independence, and performance of the independent registered public accounting firm; our information technology systems, processes, and procedures, including risk related to cybersecurity; and the design and implementation of our risk assessment and risk management. Among other things, our Audit Committee is responsible for reviewing and discussing with our management the adequacy and effectiveness of our disclosure controls and procedures. The Audit Committee also discusses with our management and independent registered public accounting firm the annual audit plan and scope of audit activities, scope and timing of the annual audit of our financial statements, and the results of the audit, quarterly reviews of our financial statements and, as appropriate, initiates inquiries into certain aspects of our financial affairs. Our Audit Committee is responsible for establishing and overseeing procedures for the receipt, retention, and treatment of any complaints regarding accounting, internal accounting controls or auditing matters, as well as for the confidential and anonymous submissions by our employees of concerns regarding questionable operations, accounting or auditing matters. In addition, our Audit Committee has direct responsibility for the appointment, compensation, retention, and oversight of the work of our independent registered public accounting firm. Our Audit Committee has sole authority to approve the hiring and discharging of our independent registered public accounting firm, all audit engagement terms and fees, and all permissible non-audit engagements with the independent registered public accounting firm. Our Audit Committee reviews and oversees all related person transactions in accordance with our policies and procedures.
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Item 11. Executive Compensation
Summary Compensation Table
The following table sets forth certain information with respect to annual compensation for the years indicated for the Company’s named executive officers.
| Option | |||||||||||||||||||
| Salary | Bonus | Awards | Total | ||||||||||||||||
| Name and Principal Position | Year | ($) | ($) | ($)(1) | ($) | ||||||||||||||
| William Santana Li | 2022 | 496,907 | 278,261 | 635,896 | 1,411,064 | ||||||||||||||
| Chairman and Chief Executive Officer | 2021 | 300,000 | 230,000 | — | 530,000 | ||||||||||||||
| Mallorie Burak | 2022 | 344,391 | 264,457 | 238,564 | 847,412 | ||||||||||||||
| President and Chief Financial Officer | 2021 | 250,000 | 205,000 | 3,038,387 | 3,493,387 | ||||||||||||||
| Mercedes Soria (2) | 2022 | 344,391 | 164,457 | 210,595 | 719,443 | ||||||||||||||
| Chief Intelligence Officer | |||||||||||||||||||
(1) Amounts reflect the aggregate grant date fair value of grants made in each respective fiscal year computed in accordance with stock-based accounting rules (Financial Standards Accounting Board Accounting Standards Codification Topic 718 Stock Compensation). Assumptions used in the calculations of these amounts are included in Note 7 to our financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2022.
(2) Ms. Soria was not a named executive officer in 2021. As noted above, Ms. Soria is married to Mr. Li.
Narrative Disclosure to Summary Compensation Table
The compensation of the Company’s named executive officers is comprised of the following major elements: (a) base salary; (b) an annual, discretionary cash bonus; and (c) long-term equity incentives, consisting primarily of stock options granted under the Company’s equity incentive plan. These principal elements of compensation are described below.
Base Salaries
Base salary is provided as a fixed source of compensation for our executive officers. Adjustments to base salaries are reviewed annually and as warranted throughout the year to reflect promotions or other changes in the scope of breadth of an executive officer’s role or responsibilities, as well as to maintain market competitiveness. Upon recommendation of the Company’s independent compensation consultant, base salaries adjustments of our named executive officers were approved in May 2022 by the Compensation Committee to reflect changes in responsibility and/or retention risk, with base salaries targeted at the 75th percentile of a peer group.
Annual Bonuses
Annual bonuses may be awarded based on qualitative and quantitative performance standards and are designed to reward performance of our named executive officers individually. The determination of a named executive officer’s performance may vary from year to year depending on economic conditions and conditions in our industry and may be based on measures such as stock price performance, the meeting of financial targets against budget, the meeting of acquisition objectives and balance sheet performance. For 2022, bonuses were awarded based on the achievement of various individual and operational goals, such as ASR deployments, revenue, new contracts and other operational metrics.
Long-Term Equity Incentives
Grants made under our equity incentive plan provide continual motivation for our officers, employees, consultants and directors to achieve our business and financial objectives and align their interests with the long-term interests of our stockholders. The purpose of grants made under our equity incentive plan is to promote greater alignment of interests between employees and stockholders, and to support the achievement of our longer-term performance objectives, while providing a long term retention element. For 2022, our named executive officers were awarded option awards with a four year vesting term, subject to continuous service with the Company. See “Outstanding Equity Awards at Fiscal Year-End” below for additional information.
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Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information with respect to outstanding options held by our named executive officers at December 31, 2022.
| Option Awards | ||||||||||||||||
| Number of | Number of | |||||||||||||||
| Securities | Securities | |||||||||||||||
| Underlying | Underlying | Option | ||||||||||||||
| Unexercised | Unexercised | Exercise | Option | |||||||||||||
| Options (#) | Options (#) | Price | Expiration | |||||||||||||
| Name | Grant Date | Exercisable | Unexercisable | ($) | Date | |||||||||||
| William Santana Li | 7/12/2022 | — | 383,100 | (1)(2) | 3.04 | 7/11/2032 | ||||||||||
| Mallorie Burak | 10/8/2020 | 270,833 | 229,167 | (1)(2) | 2.34 | 10/7/2030 | ||||||||||
| 12/23/2021 | 125,000 | 375,000 | (1)(2) | 10.00 | 12/22/2031 | |||||||||||
| 7/12/2022 | — | 143,724 | (1)(2) | 3.04 | 7/11/2032 | |||||||||||
| Mercedes Soria | 4/21/2014 | 113,000 | — | (1)(3) | 0.16 | 4/20/2024 | ||||||||||
| 11/17/2016 | 187,000 | — | (1)(3) | 0.60 | 11/17/2026 | |||||||||||
| 4/22/2018 | 200,000 | — | (1)(2) | 1.26 | 4/21/2028 | |||||||||||
| 5/9/2019 | 447,916 | 52,084 | (1)(2) | 1.24 | 5/9/2029 | |||||||||||
| 2/27/2020 | 70,833 | 29,167 | (1)(2) | 0.91 | 2/26/2030 | |||||||||||
| 6/24/2020 | 21,875 | 13,125 | (1)(2) | 0.91 | 6/23/2030 | |||||||||||
| 7/12/2022 | — | 126,874 | (1)(2) | 3.04 | 7/11/2032 | |||||||||||
(1) The stock options vest and become exercisable as to 25% of the option shares after 12 months, and vest as to the remaining shares in equal monthly installments over the subsequent 36 months, subject to continuous service as of each vesting date.
(2) Exercisable for shares of Class A Common Stock.
(3) Exercisable for shares of Class B Common Stock, which can be subsequently converted to Class A Common Stock on a one-for-one basis.
Potential Payments Upon Termination or Change in Control
Below is a summary of the potential payments that each of our named executive officers would have received upon the occurrence of the termination events specified below, assuming that each triggering event occurred on December 31, 2022. The potential payments outlined below are set forth in the respective employment agreement for each named executive officer.
Involuntary Termination without Cause, Upon Death or Disability
| Severance(1) | Health Benefits(1) | Total | ||||||||||
| Name | ($) | ($) | ($) | |||||||||
| William Santana Li | 252,500 | 3,583 | 256,083 | |||||||||
| Mallorie Burak | 175,000 | 12,600 | 187,600 | |||||||||
| Mercedes Soria | 175,000 | 3,583 | 178,583 | |||||||||
| (1) | Equal to six months of (i) base salary paid in accordance with the Company’s normal payroll practices, and (ii) continued COBRA health coverage. |
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Involuntary Termination without Cause, Upon Death or Disability or Resignation for Good Reason in connection with a Change in Control
| Acceleration | ||||||||||||||||||||
| of Equity | Health | |||||||||||||||||||
| Severance(1) | Bonus(2) | Awards(3) | Benefits(1) | Total | ||||||||||||||||
| Name | ($) | ($) | ($) | ($) | ($) | |||||||||||||||
| William Santana Li | 505,000 | 423,000 | — | 7,165 | 935,165 | |||||||||||||||
| Mallorie Burak | 350,000 | 250,000 | — | 25,199 | 625,199 | |||||||||||||||
| Mercedes Soria | 350,000 | 250,000 | — | 7,165 | 607,165 | |||||||||||||||
| (1) | Equal to twelve months of (i) base salary paid in accordance with the Company’s normal payroll practices, and (ii) continued COBRA health coverage. |
| (2) | Represents a single, lump sum payment equal to 100% of the executive’s target bonus for the applicable fiscal year. |
| (3) | Represents the value of unvested options awards held on December 31, 2022 that would be subject to accelerated vesting, based on the fair market value of our share of Class A Common Stock as of December 31, 2022, calculated by multiplying the number of shares of Class A Common Stock underlying each such option by the closing price of our shares of Class A Common Stock as of December 30, 2022 (the last trading date of 2022), less the applicable per share exercise price of such option. Due to the closing price on December 30, 2022 being greater than the applicable exercises prices of the option awards, there is no value for acceleration of equity awards. |
Director Compensation
Each non-executive director receives an annual cash fee of $60,000, or $70,000 if the director serves as the chairperson of a Board committee, payable in quarterly installments. Each non-executive director also received an initial grant of 40,000 nonstatutory stock options that vests after the first anniversary of their Board service and will be eligible to receive awards under the Company’s equity incentive plans as may be determined from time to time by the Board in its discretion. Mr. Li does not receive compensation for his service on the Board.
The following table summarizes the total compensation earned by each of our non-employee directors who served during 2022.
| Name | Fees Earned or ($)(3) | Option Awards ($)(1)(4) | Total ($) | |||||||||
| Kristi Ross(2) | 70,000 | 62,983 | 132,983 | |||||||||
| Linda Keene Solomon | 60,000 | 62,983 | 122,983 | |||||||||
| Jackeline V. Hernandez Fentanez(2) | 70,000 | 62,983 | 132,983 | |||||||||
| Patricia L. Watkins | 60,000 | 62,983 | 122,983 | |||||||||
| Patricia Howell | 60,000 | 62,983 | 122,983 | |||||||||
| Suzanne Muchin(2) | 60,000 | 63,021 | 123,021 | |||||||||
(1) Amounts reflect the aggregate grant date fair value of grants made in each respective fiscal year computed in accordance with stock-based accounting rules (Financial Standards Accounting Board Accounting Standards Codification Topic 718 Stock Compensation). Assumptions used in the calculations of these amounts are included in Note 7 to our financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2022.
(2) On January 26, 2023, each of Kristi Ross, Jackeline Hernandez Fentanez and Suzanne Muchin voluntary resigned from the Board.
(3) The fees presented represent the annual cash fees earned by each director. On January 5, 2023, each of the independent directors waived her right to the fourth quarter 2022 board fee installment, payable in January 2023.
(4) Each of our directors held 40,000 unvested stock options as of December 31, 2022, which vested in full on January 27, 2023. Each of Kristi Ross, Jackeline Hernandez Fentanez and Suzanne Muchin forfeited their stock options upon their respective resignations from the Board.
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Security Ownership of Certain Beneficial Owners and Management
The following table sets out certain information with respect to the beneficial ownership of the voting securities of the Company, as of April 14, 2023, for:
| · | each person who we know beneficially owns more than 5% of any class of our voting securities; |
| · | each of our directors; |
| · | each of our named executive officers; and |
| · | all of our directors and executive officers as a group. |
Percentage ownership is based on 39,338,910 shares of Class A common stock outstanding and 10,357,822 shares of Class B common stock outstanding, in each case, as of April 14, 2023.
We have determined beneficial ownership in accordance with the rules of the SEC. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power. In computing the number of shares beneficially owned by an individual or entity and the percentage ownership of that person, shares subject to options, or other rights, held by such person that are currently exercisable or will become exercisable within 60 days of the date of April 14, 2023, are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person. Unless otherwise indicated, the address of all listed stockholders is c/o Knightscope, Inc., 1070 Terra Bella Avenue, Mountain View, California 94043. Except as indicated by the footnotes below, we believe that the persons and entities named in the table below have sole voting and investment power with respect to all securities that they beneficially own, subject to applicable community property laws.
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| Class
A Common Stock | Class B Common Stock | Series A Preferred Stock | Series B Preferred Stock | Series m- 2 Preferred Stock | Combined Voting | |||||||||||||||||||||||||||||||||||||||
| Beneficially Owned | Beneficially Owned | Beneficially Owned | Beneficially Owned | Beneficially Owned | Power(1) | |||||||||||||||||||||||||||||||||||||||
| Number | % | Number | % | Number | % | Number | % | Number | % | |||||||||||||||||||||||||||||||||||
| Name of Beneficial Owner | ||||||||||||||||||||||||||||||||||||||||||||
| 5% Stockholders: | ||||||||||||||||||||||||||||||||||||||||||||
| William (“Bill”) Santana Li(2)(3) | 806,770 | 2.0 | % | 7,300,000 | 68.5 | % | — | — | — | — | — | — | 36.4 | % | ||||||||||||||||||||||||||||||
| Stacy Dean Stephens | — | — | 3,000,000 | 29.0 | % | — | — | — | — | — | — | 15.1 | % | |||||||||||||||||||||||||||||||
| NetPosa Technologies (Hong Kong) Limited(4) | — | — | — | — | — | — | 2,450,860 | 70.0 | % | — | — | 12.5 | % | |||||||||||||||||||||||||||||||
| F50 Ventures Fund LP(5) | — | — | — | — | 559,785 | 39.5 | % | 183,248 | 5.2 | % | — | — | 3.7 | % | ||||||||||||||||||||||||||||||
| Lab IX(6) | — | — | — | — | 223,914 | 15.8 | % | — | — | — | — | 1.1 | % | |||||||||||||||||||||||||||||||
| Godfrey Sullivan(7) | — | — | — | — | 158,452 | 11.2 | % | — | — | — | — | * | ||||||||||||||||||||||||||||||||
| Andrew M. Brown(8) | 1,153,383 | 2.9 | % | — | — | — | — | — | — | — | — | * | ||||||||||||||||||||||||||||||||
| Andrew M. Brown Family Protection Trust(9) | 1,242,424 | 3.2 | % | — | — | — | — | — | — | — | — | * | ||||||||||||||||||||||||||||||||
| Series Knightscope LLC F50 Global Syndicate Fund LLC(10) | — | — | — | — | — | — | 434,733 | 12.4 | % | — | — | 2.2 | % | |||||||||||||||||||||||||||||||
| AIDS Healthcare Foundation(11) | — | — | — | — | — | — | 270,060 | 7.7 | % | 150,000 | 93.8 | % | 2.1 | % | ||||||||||||||||||||||||||||||
| Equity Trust Company(12) | — | — | — | — | — | — | — | — | 10,000 | 6.3 | % | * | ||||||||||||||||||||||||||||||||
| Named Executive Officers and Directors: | ||||||||||||||||||||||||||||||||||||||||||||
| William (“Bill”) Santana Li(2)(3) | 806,770 | 2.0 | % | 7,300,000 | 68.5 | % | — | — | — | — | — | — | 36.4 | % | ||||||||||||||||||||||||||||||
| Mallorie Burak(13) | 510,413 | 1.3 | % | — | — | — | — | — | — | — | — | * | ||||||||||||||||||||||||||||||||
| Mercedes Soria(2)(3) | 806,770 | 2.0 | % | 7,300,000 | 68.5 | % | — | — | — | — | — | — | 35.1 | % | ||||||||||||||||||||||||||||||
| Linda Keene Solomon(13) | 40,000 | * | — | — | — | — | — | — | — | — | * | |||||||||||||||||||||||||||||||||
| Patricia L. Watkins(13) | 40,000 | * | — | — | — | — | — | — | — | — | * | |||||||||||||||||||||||||||||||||
| Patricia Howell(13) | 40,000 | * | — | — | — | — | — | — | — | — | * | |||||||||||||||||||||||||||||||||
| All executive officers and directors as a group (12 individuals)(2)(14) | 2,483,536 | 5.9 | % | 10,600,000 | 96.7 | % | — | — | — | — | — | — | 51.5 | % | ||||||||||||||||||||||||||||||
* Represents beneficial ownership of less than 1%.
(1) Represents the percentage of voting power with respect to all shares of the Company’s outstanding capital stock as if converted to Class A common stock and Class B common stock, as applicable, as a single class. The holders of Series A preferred stock, Series B preferred stock, Series m-2 preferred stock and Class B common stock are entitled to 10 votes per share. The holders of our Series S preferred stock, Series m preferred stock, Series m-1 preferred stock, Series m-3 preferred stock, Series m-4 preferred stock and Class A common stock are entitled to one vote per share. Does not include shares underlying options.
(2) Combined voting power Includes an aggregate of 2,478,490 shares of Class A common stock for which Mr. Li has been designated by other stockholders of the Company as such stockholders’ proxy and attorney-in-fact. See in part footnotes 8 and 9 below.
(3) Includes 806,770 shares of Class A common stock and 300,000 shares of Class B common stock, respectively, underlying stock options that are currently exercisable or exercisable within 60 days of April 14, 2023, held by Ms. Soria, who is Mr. Li’s wife.
(4) The address for NetPosa Technologies (Hong Kong) Limited is Suite 1023, 10/F, Ocean Centre, 5 Canton Road, Tsim Sha Tsui, Kowloon Hong Kong.
(5) The address for F50 Ventures Fund LP is 2132 Forbes Avenue, Santa Clara, California 95050.
(6) The address for Lab IX is 6201 America Center Drive, San Jose, California 95002.
(7) The address for Mr. Sullivan is 20400 Stevens Creek Blvd., Suite 750, Cupertino, California 95014.
(8) Based on a Schedule 13G/A filed with the SEC on February 14, 2023. The address for Andrew M. Brown is 99 Wall Street, Suite 2250, New York, New York 10005. The shares are subject to a voting proxy, dated November 18, 2021, granted in favor of Mr. Li. Does not include warrants held by Mr. Brown to purchase 835,787 shares of Series m-3 preferred stock convertible into shares of Class A common stock. Mr. Brown does not report shared beneficial ownership with the Andrew M. Brown Family Protection Trust. See footnote 9 for additional information.
(9) Based solely on a Schedule 13G filed with the SEC on November 14, 2022. The address for the Andrew M. Brown Family Protection Trust is c/o Premier Trust Inc., 4465 S. Jones Blvd., Las Vegas, Nevada 89103. The shares are subject to a voting proxy, dated November 18, 2021, granted in favor of Mr. Li. Does include warrants held by the Andrew M. Brown Family Protection Trust to purchase 534,099 shares of Series S or Series m-3 preferred stock convertible into shares of Class A common stock. The Andrew M. Brown Family Protection Trust does not report shared beneficial ownership with Andrew Brown. See footnote 8 for additional information.
(10) The address for Series Knightscope LLC F50 Global Syndicate Fund LLC is 2625 Middlefield Road, Ste. 414, Palo Alto, California 94301.
(11) The address for AIDS Healthcare Foundation is 6255 Sunset Boulevard, 21st Floor, Los Angeles, California 90028.
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(12) Represents securities held by Equity Trust Company FBO Tiffany Thy Tran Roth IRA. The address for Equity Trust Company FBO Tiffany Thy Tran Roth IRA is 1 Equity Way, Westlake, Ohio 44145.
(13) Represents stock options that are currently exercisable or exercisable within 60 days of April 14, 2023.
(14) Includes 2,483,536 shares of Class A common stock and 600,000 shares of Class B common stock, respectively, underlying stock options that are currently exercisable or exercisable within 60 days of April 14, 2023.
Equity Compensation Plan Information
The following table sets forth information as of December 31, 2022, regarding our equity incentive plans, which consists of awards issued under our 2014 Equity Incentive Plan, 2016 Equity Incentive Plan and 2022 Equity Incentive Plan:
| Plan Category | Number of securities to be issued upon exercise of outstanding options | Weighted-average exercise price of outstanding options | Number of securities remaining available for future issuance under equity compensation plans | |||||||||
| Equity compensation plans approved by security holders | ||||||||||||
| 2014 Equity Incentive Plan | 611,000 | $ | 3.11 | — | ||||||||
| 2016 Equity Incentive Plan | 7,333,616 | $ | 3.11 | 675,567 | ||||||||
| 2022 Equity Incentive Plan | 2,137,299 | $ | 3.11 | 2,862,701 | ||||||||
| Equity compensation plans not approved by security holders | — | — | — | |||||||||
| Total | 10,081,915 | $ | 3.11 | 3,538,268 | ||||||||
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Item 13. Certain Relationships and Related Transactions, and Director Independence
The following is a description of transactions to which we were a party since December 31, 2022 in which the amount involved exceeded or will exceed $120,000, and in which any of our executive officers, directors or holders of more than 5% of any class of our voting securities, or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest.
Related Person Transactions
Konica Minolta, Inc.
One of the Company’s vendors, Konica Minolta, Inc. (“Konica Minolta”), is a stockholder of the Company and beneficially owned greater than 5% of our total voting power earlier in 2022. Konica Minolta provides the Company with repair services to its ASRs. The Company paid Konica Minolta $381,587, $355,428 and $218,425 in service fees for the years ended December 31, 2022, 2021 and 2020, respectively. The Company had payables of $117,000 and $29,279 owed to Konica Minolta as of December 31, 2022 and 2021, respectively.
Director and Officer Indemnification and Insurance
Our Amended and Restated Certificate of Incorporation and our bylaws provide that we indemnify each of our directors and officers to the fullest extent permitted by the General Corporation Law of the State of Delaware. Further, we have entered into indemnification agreements with each of our directors and officers, and we have purchased a policy of directors’ and officers’ liability insurance that insures our directors and officers against the cost of defense, settlement or payment of a judgment under certain circumstances.
Policies and Procedures for Approving Transactions with Related Persons
Our Audit Committee reviews and oversees all related person transactions in accordance with our policies and procedures, either in advance or when we become aware of a related person transaction that was not reviewed and approved in advance; however, the Board has not adopted a written policy or procedures governing its approval of transactions with related persons. Other than as described above, there were no related person transactions in the years ended December 31, 2021 or 2022. The transactions described above were approved by the Board of Directors at the time they were entered into.
Director Independence
Nasdaq listing rules require that a majority of the Board be comprised of independent directors. The Board has determined that Linda Keene Solomon, Patty Watkins and Trish Howell is each an “independent director” as defined under the applicable Nasdaq rules and SEC rules and regulations. Mr. Li is not independent due to his service as a current executive officer of the Company. The Board makes a determination regarding the independence of each director annually based on relevant facts and circumstances. Applying the standards and independence criteria defined by the Nasdaq listing standards, the Board has made a determination as to each independent director that no relationships exist which, in the opinion of the Board, would interfere with the exercise of her independent judgment in carrying out the responsibilities of a directors.
The Board of Directors has also determined that Linda Keene Solomon, Patty Watkins and Trish Howell, representing all of the members of the Audit Committee, are all "independent directors" under Nasdaq listing standards and SEC rules applicable to Audit Committee members.
The Board of Directors has determined that Linda Keene Solomon, Patty Watkins and Trish Howell are “independent directors” under Nasdaq listing standards and SEC rules applicable to Compensation Committee members.
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Item 14. Principal Accountant Fees and Services
Independent Registered Public Accounting Firm Fees
The following table presents fees billed or to be billed by BPM for the audit of our consolidated financial statements and for other services provided in the years ended December 31, 2022 and 2021. All of these services and fees were pre-approved by the audit committee.
| 2022 | 2021 | |||||||
| Audit Fees(1) | $ | 546,022 | $ | 531,700 | ||||
| Audit-Related Fees(2) | $ | 8,025 | - | |||||
| Tax Fees | - | - | ||||||
| All Other Fees | - | - | ||||||
| Total Fees | $ | 554,047 | $ | 531,700 | ||||
| (1) | Audit Fees include fees associated with the annual audit of our consolidated financial statements and for issuing a report thereon; the review of our periodic reports and services related to, or required by, statute or regulation, such as fees for comfort letters, consents; and assistance with and review of documents filed with the SEC. In addition, Audit Fees paid to BPM in 2021 include $166,907 in fees for the re-audit of the 2019 fiscal year financial statements in accordance with Public Company Accounting Oversight Board (United States) standards. |
| (2) | Audit-Related Fees are assurance-related services that traditionally are performed by the independent accountant, such as attest services that are not required by statute or regulation and included consultations on accounting matters. |
The Audit Committee has concluded that the provision of the non-audit services is compatible with maintaining the independence of BPM.
Audit Committee Pre-Approval Policy and Procedures
Under its charter, the Audit Committee is responsible for approving the fees and any other significant compensation paid to our independent registered public accounting firm and pre-approving any non-audit services to be performed by our independent registered public accounting firm. The pre-approval requirement may be waived only if the non-audit services meet a de minimis exception allowed by law. In carrying out this responsibility, the Audit Committee follows the following general procedures for the preapproval of non-audit services:
| · | If applicable, each year the Audit Committee reviews and pre-approves a schedule of the proposed non-audit services and estimated fees to be provided by the independent registered public accounting firm during the next annual audit cycle. |
| · | Actual amounts paid to the independent registered public accounting firm are monitored by management and reported to the Audit Committee. |
| · | Any non-audit services proposed to be provided by the independent registered public accounting firm and the related fees that have not been pre-approved during the annual review by the Audit Committee must be pre-approved by the Audit Committee in advance of any work performed (unless the services meet the de minimis exception allowed by law). |
| · | Incremental fees for previously approved non-audit services that are expected to exceed the previously approved fee estimate must also be pre-approved by the Audit Committee. |
The Audit Committee has determined that the provision of the services listed above is compatible with maintaining the principal accountant's independence, and pre-approved all such services and fees in 2022. All services and fees for 2021 were pre-approved by the sole director, which occurred prior to the initial listing on Nasdaq.
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Part IV
Item 15. Exhibits, Financial Statement Schedules
The following exhibits are filed with, or incorporated by reference in this Annual Report
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| † | Previously filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 31, 2023. |
| + | Filed herwith. |
| # | Certain exhibits and schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted exhibits or schedules upon request; provided that the Company may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended. |
| ** | Certain exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish supplementally to the Securities and Exchange Commission a copy of any omitted exhibits or schedules upon request. |
| * | Represents management contract or compensatory plan or arrangement. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on April 28, 2023.
| KNIGHTSCOPE, INC. | ||
| By: | /s/ Mallorie Burak | |
| Mallorie Burak | ||
| President and Chief Financial Officer | ||
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Exhibit 31.3
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, William Santana Li, certify that:
| 1. | I have reviewed this this Amendment No. 1 on Form 10-K/A of Knightscope, Inc.; and |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
| Dated: April 28, 2023 | By: | /s/ William Santana Li | |
| Name: | William Santana Li | ||
| Title: | Chief Executive Officer | ||
| (Principal Executive Officer) | |||
Exhibit 31.4
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Mallorie Burak, certify that:
| 1. | I have reviewed this this Amendment No. 1 on Form 10-K/A of Knightscope, Inc.; and |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. |
| Dated: April 28, 2023 | By: | /s/ Mallorie Burak | |
| Name: | Mallorie Burak | ||
| Title: | President and Chief Financial Officer | ||
| (Principal Financial Officer) | |||