Item 1. Business
Item 1. Business
Overview
Knightscope, Inc. is a Silicon Valley based technology company that designs, builds, and deploys solutions to enhance public safety. Knightscope products include ASRs and ECDs consisting of fully integrated, solar powered wireless emergency blue light towers (“BLT”), blue light emergency phones (“E-Phones”), and emergency call box systems (“Call Boxes”). Our technologies are made in the United States of America (“USA”) and are designed to enable public safety professionals to more effectively deter, intervene, capture, and prosecute criminals. Our mission is to make the USA the safest country in the world by helping protect the people, places, and things where people live, work, study and visit.
To support this mission, we design, develop, manufacture, market, deploy, and support ASRs and ECDs, with our proprietary Knightscope Security Operations Center (“KSOC”) and Knightscope Emergency Management System (“KEMS”) software user interfaces. Our ASRs and ECDs are designed to deter, detect, and report security incidents, providing innovative solutions for public safety at various venues, including convention centers, casinos, resorts, college campuses, corporate campuses and other public spaces.
We are a Delaware corporation, founded in April 2013. Our headquarters is located in Silicon Valley at 1070 Terra Bella Ave, Mountain View, CA 94043 and our telephone number is (650) 679-7626 and our website is www.knightscope.com.
Strategy
The Knightscope management team intends to continue its focus on organic growth as well as add to its core solutions portfolio through future, opportunistic acquisitions based on a target’s revenue, free cash flow, technology, talent, and facilities as well as strategic partnerships to achieve its mission.
In 2022, we completed the acquisition of Case Emergency Systems (“CASE”), a manufacturer of blue light emergency communication devices, and market the products under the portfolio of “K1B” emergency communication devices. Positioned to enhance Knightscope offerings, the K1B technologies are designed for reliability and ease of use in critical situations, providing one-touch connections to emergency services. They are solar-powered, weatherproof, and can operate wirelessly via cellular or satellite technology, making them suitable for a wide range of environments. With an installed base of nearly 10,000 devices across the USA, K1B technologies significantly enhance safety and security in public spaces by allowing individuals to quickly contact emergency services or security personnel with the push of a button on any K1B device. Our technologies aim to build on each other to create safer environments through proactive monitoring and reactive emergency communication capabilities. By integrating autonomous security with robust emergency communication systems, organizations can offer comprehensive safety solutions that are adaptive, responsive, and effective in a wide range of scenarios.
Use cases for our combined suite of ASR and K1B technologies include a wide variety of applications where a 24/7 presence, accessible emergency communication, and deterrence can assist public safety officials with incidents, disturbances, medical emergencies, theft, trespassing, fire, talk downs, and promote an overall feeling of improved safety. Areas where our products and services can be useful include, but are not limited to:
● Airports;
● Casinos;
● Commercial Real Estate;
● Corporate Campus;
● Homeowner Associations;
● Hospitals;
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● Hotels;
● Law Enforcement sites;
● Logistics sites;
● Manufacturing sites;
● Parking areas;
● Public Parks;
● Schools and;
● U.S. Federal Government buildings
Our core technologies are suitable for most environments that require law enforcement or security patrol coverage and designed to be force multipliers that offer public safety teams improved situational awareness. ASRs and ECDs conduct real-time on-site data collection and analysis in both indoor and outdoor spaces delivering alerts to security professionals through the KSOC and KEMS. The KSOC and KEMS software applications enable clients with appropriate credentials and user permissions to access the data for investigative and evidence collection purposes.
Our K1B portfolio of Emergency Communication Devices consist of the K1 Blue Light Towers, K1 Blue Light Emergency Phones, and K1 Call Boxes. Tower devices are tall, highly visible and recognizable apparatuses that provide emergency communications using cellular and satellite communications with solar power for additional safety in remote locations. E-Phones and Call Boxes offer a smaller, yet still highly visible, footprint than the towers, but with the same reliable communication capabilities.
We sell our ASRs and stationary multi-purpose security solutions under an annual all-inclusive subscription, Machine-as-a-Service (“MaaS”) business model, which includes the ASR machine as well as maintenance, service, support, data transfer, KSOC access, charging stations, and unlimited software, firmware and select hardware upgrades.
Our stationary K1B technologies are sold as point-of-sale modular systems, including Knightscope’s exclusive, self-diagnostic, alarm monitoring system, KEMS, that provides system owners daily email reports on the operational status of their system, a one-year parts warranty, and optional installation services. Modular upgrades are available for the blue light towers, such as public announcement speaker systems. Knightscope also offers an extended warranty on this series of stationary public safety towers.
Industry background
In the USA, there are more than 11,000 private security firms and approximately 18,000 law enforcement agencies – a fragmented marketplace relying primarily on humans to safeguard people and assets primarily through monitoring and patrol activities. We believe that our products offer a better economic proposition for our clients relative to a solely human guard or a mobile vehicle patrol unit operating 24/7, enabling the estimated 2.5 million law enforcement and security professionals to focus on strategic decision-making and enforcement.
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Products
ASRs and ECDs
K3 and K5 ASRs
The K3 ASR and K5 ASR are designed to roam a geo-fenced area autonomously by utilizing numerous sensors and lasers, either on a random basis or based on a particular patrolling algorithm. They can successfully navigate around people, vehicles and objects in dynamic indoor or outdoor environments. To do this, the ASRs employ several autonomous motion and self-driving technologies, including lasers, ultrasonic sensors, inertial measurement unit (“IMU”), and wheel encoders integrated into a navigation software stack enabling autonomy. Each ASR can generate 1 to 2 terabytes of data per week and over 90 terabytes of data per year, which is accessible for review and analysis via the KSOC. Clients can recall, review, and save the data for analysis, forensic or archival purposes. Each ASR can autonomously charge and recharge on a 24-hour basis, 7 days per week without human intervention. Clients may also utilize the patrol scheduler feature on the KSOC to schedule periodic or regular patrols during certain times for alternative patrol routes.
The approximate dimensions of the K5 are as follows: Height: 5 feet, Width: 3 feet, Weight: 398 pounds.
The K5 is designed to be used primarily outdoors in such environments as open air malls, corporate campuses, hospitals, stadiums, retailers, warehouses, logistics facilities, college campuses, airports, train stations and multi-level parking structures. The K5’s advanced anomaly detection features include:
● 360-degree high-definition night and day video capture positioned at eye-level;
● Live streaming and recorded high-definition video capabilities;
● Automatic license plate recognition;
● People detection, which can alert a user in real-time of people detected on their premises, together with 360-degree recorded high-definition video. A user can use the timestamp of the recording to search through other data detected to assess and better understand other conditions in the area patrolled by the ASR;
● Thermal imaging, which allows for triggered alerts based on temperature. For example, assisting with alerts regarding increased risks of fires;
● Two-way communication feature may be utilized for both public announcements and avoidance of human physical confrontations with dangerous individuals; and
● Signal detection can be utilized as a rogue router detector for sensitive locations.
The approximate dimensions of the K3 are as follows: Height: 4 feet, Width: 2 feet, Weight: 340 pounds.
The K3 is tailored for indoor usage, allowing it to autonomously navigate complex dynamic indoor environments such as an indoor mall, office building, manufacturing facility, hospital, stadium plaza, warehouse or school. It has the same suite of advanced anomaly detection capabilities as the K5, but the parking utilization, parking meter and license plate recognition features are turned off.
The ASRs include several communications features. The units can transfer data over both 4G LTE networks and Private LTE. The company is also developing capabilities to operate over 5G networks for planned deployment in the future. Each one has an available intercom that may be used for two-way communication with a public safety team. In addition, one or multiple units may be used as a live broadcast public address system or to deliver pre-recorded messages based on time, location, detection or randomly.
The ASRs run on rechargeable batteries. They are configured to patrol autonomously for approximately two to three hours, following which, without human intervention, the ASRs find and dock to a charging station, recharging for approximately 20 minutes or more before resuming patrol. The ASRs remain operational during the charging period, providing 24/7 uptime to clients.
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K1 Tower
The K1 Tower carries all the relevant features from the K5 but in a large stationary format. The K1 can be used indoors or outdoors and especially at ingress/egress points for both people and vehicles.
The approximate dimensions of the K1 are: Height: 6 feet, Width: 3 feet, Weight: 150 pounds.
K1 Hemisphere
The new K1 Hemisphere, with its smaller profile, is a stationary unit designed for both indoor and outdoor use. The Hemisphere can easily be mounted to a variety of surfaces or objects and has 3 cameras that provide up to 210-degrees of eye-level, high-definition video, a strobe light, automatic license plate recognition, facial recognition (optional), automated broadcast announcements, and intercom capability running on a wired or wireless network.
The dimensions of the K1 Hemisphere are: Diameter: 24 inches, Depth: 10 inches, Weight: 30 pounds.
K1 Blue Light Tower
The K1 Blue Light Tower emergency phone is for outdoor use and delivers completely wireless emergency phone operation, 24/7/365, even in harsh weather conditions with voice connectivity, broadcast warning capability, a flashing strobe, and night area illumination to assist responders in locating callers.
The approximate dimensions of the K1 Blue Light Tower are: Height: 12 feet, Width: less than one foot, Weight: 208 pounds.
K1 Blue Light Emergency Phone
The K1 Blue Light Emergency Phone is a compact, full-featured emergency calling solution for indoor and outdoor use. It is ideally suited for areas with limited space and offers one-touch connectivity and a high-visibility blue strobe in places tower designs may not fit. The E-Phone enhances public safety by providing robust, reliable, and clear voice-to-voice communication over a cellular network.
The dimensions of the K1 Blue Light Emergency Phone are: Height: 31.5 inches, Width: 10.5 inches, Weight: 52 pounds.
K1 Call Box
The K1 Call Box is our smallest emergency call box system, delivering one-touch connection with a simple housing and interface. Call Boxes are typically mounted to a pole for outdoor use and can be outfitted with solar charging capabilities. Like all Knightscope emergency communications devices, it can provide a completely wireless solution for emergency phone calls, or it can be adapted to work with existing nearby wiring. Designed to work with hands-free ease, a handset, and TTY pad are additional options available on this device.
The dimensions of the K1 Call Box are: Height: 19.6 inches, Width: 15.3 inches, Weight: 47.4 pounds.
KSOC
The KSOC is our intuitive, browser-based interface that, coupled with our ASRs, and other line of products, provides our clients and security professionals with “smart mobile eyes and ears and voice – on the ground”. Once alerted of an abnormal event, such as a person spotted during a specific time in a particular location, authorized users can view the live stream of data in the KSOC from each of the ASRs in the user’s network, accessing it from a 911 dispatch center, security operations center or a remote laptop.
KEMS
The KEMS platform allows clients and technicians to better understand the real-time health and status of K1 Blue Light Towers, E-Phones and Call Boxes in network. The cloud-based application monitors the system wide state-of-health, alerts users of operational issues, provides technicians with real-time error detection/diagnostics, and collects/reports system performance statics.
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KNOC
The Company has built a custom set of tools that enables our employees to manage and monitor the network of ASRs and other Knightscope technologies operating in the field nationwide, which it refers to as the Knightscope Network Operations Center (“KNOC”). These tools allow our team to monitor the health of the ASRs down to the millisecond, with dozens of alerts related to critical indicators and statistics, including charging, software, navigation and temperatures. We also use the KNOC to execute over-the-air software upgrades, patches and other related items. The KNOC is staffed 24/7 by the Company in the U.S.
Knightscope+
Knightscope+ is a virtual monitoring and response solution providing an alternative for client sites that do not have the resources to receive and respond to alerts generated by Knightscope’s ASRs and other products. The service enables a full-service solution for ASR clients, including but not limited to, alerts, broadcast messaging, and two-way communications. Knightscope+ operators have extensive training and experience related to remote monitoring for greater situational awareness. Remote monitoring is an optional service that can be bundled into MaaS subscriptions.
Products in Development
The Company recently announced that its K7 multi-terrain ASR is under concept development. The K7 is expected to have the same features as the K5, but to employ four wheels for use on more rugged outdoor terrain such as dirt, sand, gravel and much larger environments. We expect that the K7 could be utilized at airfields, power utilities, borders, solar farms, wind farms or oil or gas fields as well as at numerous existing clients. While this technology builds on a great deal of our technology stack, we anticipate that its development will require significant additional time and resources before it can be launched into full-scale production.
Clients
Knightscope clients use the Company’s technology to protect people and assets. Our products are designed to enhance safety in public and private places by providing rapid communication and monitoring capabilities to small or large, remote, and inhospitable environments. The Company’s clients use Knightscope products to monitor or respond to medical emergencies, weather-related issues, and natural disasters, as well as to discourage, detect, and alert them of potential criminal activity.
Knightscope’s ASRs, and K1B ECDs provide our clients with the ability to augment their existing security infrastructure, enabling human security resources to be more strategic in their approach to security. Our ASRs, and ECDs have been deployed across a broad range of clients, including but not limited to casinos, corporations, law enforcement, municipalities, universities, and property management companies. In addition, Knightscope continues to partner with strategic resellers for our K1B portfolio, such as value-added resellers offering safety equipment looking to augment the security solutions offered to their customers with advanced technology.
Marketing and Sales
The Company has been able to successfully sell new contracts through virtual private demonstrations and live demonstrations with decision makers utilizing its innovative “Robot Roadshow” which has been instrumental in securing stakeholder ‘buy in’ to help close more contracts. The initiative entails a cross-country tour of a physical “Pod” housing numerous ASRs, the K1 Blue Light Emergency Phone, and Knightscope’s new Automated Gunshot Detection system, providing a one-on-one hybrid offline/online selling technique with in-person robots and telepresence and/or onsite sales staff.
On January 3, 2024, the Company announced that it achieved an Authority-to-Operate (“ATO”) from the Federal Risk and Authorization Management Program (“FedRAMP”). The federal government adopted the Cloud First Policy, which requires all cloud service providers that hold federal data to be FedRAMP certified. FedRAMP compliance is one of the factors that enables Knightscope to do business with federal agencies.
We regularly advertise in the media through various online and offline channels.
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Research and Development
Our research and development efforts focus primarily on the development of robust base technology, new technology as well as scaling efforts. In addition, we will continue to enhance our ASR and K1B, capabilities and features, and the functionality of the KSOC and KEMSs software platforms. In January 2024, we received our ATO from FedRAMP, sponsored by the U.S. Department of Veterans Affairs. FedRAMP is a government-wide program that provides a standardized approach to security assessment, authorization, and continuous monitoring for cloud products and services. FedRAMP compliance is one of the factors that enables Knightscope to do business with federal agencies. This achievement means that Knightscope can be listed on the FedRAMP Marketplace as an approved provider for federal agencies as a next step and can also begin its deployment processes to perform on the contract awarded by the U.S. Department of Veteran Affairs (the “VA”) for its first K5 GOV. The K5 GOV is an ASR exclusively developed for the U.S. Federal Government.
Intellectual Property
The Company holds twelve patents collectively covering its ASRs, the security data analysis and display features of the KSOC and its parking monitor feature. The Company also has pending patent applications relating to its ASRs, KSOC, parking monitor feature, behavioral autonomous technology and the ASRs’ behavioral autonomous technology relating to visible weapon detection. The Company owns a trademark registration for its name “Knightscope” in the U.S. On August 10, 2021, the Company filed two trademark applications (Serial Numbers: 90875695 for LONG KNIGHTSCOPE. SHORT THE CRIMINALS and 90875697 for $KSCP). The Company relies and expects to continue to rely on a combination of confidentiality agreements with its employees, consultants, and third parties with whom it has relationships, as well as trademark, copyright, patent, trade secret, and domain name protection laws, to protect its proprietary rights.
Manufacturing and Suppliers
Knightscope assembles its ASRs at its Mountain View, California headquarters and ECDs in Downey and Irvine, California from components manufactured by more than 100 suppliers. The Company’s top three suppliers, measured by spending, are Alco Metal Fab, based in Santa Ana, California, Advanced Interconnection Technologies, based in Anaheim, California, and E and M Electric and Machinery Inc., based in Healdsburg, California. The Company is not highly dependent on any one supplier and believes it can source components from other suppliers and has done so when necessary.
In order to optimize our ability to serve our clients, we have partnered with one of our strategic investors, Konica Minolta, Inc., among others, to train their technicians to service, maintain and support our machines-in-network and assist us with our nationwide scaling efforts. As our fleet of deployed ASRs and K1B devices grows, the Company has engaged additional third-party service providers with broad geographic footprints to support our clients.
We believe that by opting to outsource field services, Knightscope is able to laser-focus on what we do best: innovation and product development. This strategic move not only streamlines our operations but also grants us access to specialized expertise and reach without the overhead of developing these capabilities in-house. We believe that this is a cost-effective approach that transforms fixed expenses into variable ones, offering the flexibility to scale operations in response to ever-changing market demands. Moreover, it reduces the burden of compliance and regulatory risks, allowing us to penetrate new markets with the aid of partners who have established local networks and expertise. Ultimately, outsourcing empowers us to dedicate more resources to strategic planning and innovation, allowing us to focus on staying ahead in the competitive technology landscape.
Competition
At the moment, we are not aware of any direct competitors for our ASR products in the advanced physical security technology space that have viable commercial products in the USA, addressing both outdoor and indoor applications, at the same scale as Knightscope. It is a common misconception outside of the security industry that we compete against closed-circuit television (“CCTV”) providers. We do not believe that they are competitive products because cameras do not provide a physical presence, are typically used for forensics after an event, and do not offer a client the plethora of capabilities available with our technologies. We believe that having these two types of systems working together provide a more holistic approach to promoting safety and reducing crime. While traditional human guards provide a closer competitor in some cases, we believe that utilizing our “Software, Hardware, Humans” approach is much more effective.
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We are aware of a start-up, SMP Robotics Services Corp. (“SMP”), which produces an outdoor autonomous security platform that it markets through third-party distributors which has primarily been focused on international markets but appears to be attempting re-entry to the U.S. market. We had previously listed Gamma 2 Robotics and SHARP Electronics as potential competitors in this space. However, according to industry sources, we understand that both Gamma 2 Robotics and SHARP Electronics have ceased operations in the security robot space after failed attempts to enter the market. Cobalt Robotics, a company exclusively focused on indoor applications, may be considered a partial competitor. Additionally, Turing AI has recently begun offering an indoor-only robot and Robotic Assistance Devices, a subsidiary of Artificial Intelligence Technology Solutions has continued to grow its stationary fixed device offerings, similar to other fixed solutions, such as those offered by Verkada. Flock Safety provides advanced security and surveillance solutions primarily focused on license plate reading and vehicle recognition technology, though they do not offer the mobility or range of a robot. Similarly, there are numerous startups focused on fixed camera crime analytics.
We do not actively compete against security companies, although sometimes clients will choose our ASRs instead of a security personnel. We augment clients’ security apparatus by providing technology to better monitor and safeguard assets and people. Our ASRs offer clients a significant cost reduction relative to the cost of human security guards. In addition, ASRs offer significantly more capabilities, such as license plate detection, data gathering, thermal imaging and people detection that are delivered consistently, on a 24-hour, 7 day per week basis, without regular human intervention. In certain cases, our technology complements and improves the operations of traditional security firms.
Competitors for our K1B portfolio include Code Blue Corporation, Talk-a-Phone, GaiTronics (“Hubbell”), and Rath. To differentiate its towers and call boxes from the competition, Knightscope has focused on providing its clients with self-sufficient solutions that include the use of solar power and wireless communications, requiring that no power infrastructure be in place in order for the products to work or landlines, making for easier installation and maintenance.
Government Regulation
Our operations are subject to numerous governmental laws and regulations, including those governing antitrust and competition, the environment, collection, recycling, treatment and disposal of covered electronic products and components.
In addition, a number of data protection laws impact, or may impact, the manner in which we collect, process and transfer personal data. U.S. laws that have been applied to protect user privacy (including laws regarding unfair and deceptive practices) may be subject to evolving interpretations or applications in light of privacy developments. Compliance with enhanced data protection laws requires additional resources and efforts, and noncompliance with personal data protection regulations could result in increased regulatory enforcement and significant monetary fines and costs.
Backlog and Seasonality
As of December 31, 2023, we had orders representing approximately $3.4 million in new contracts outstanding that we expect to be able to deliver within the year based on production capacity. Of the total sales outstanding as of December 31, 2023, $2.3 million represent MaaS agreements for ASR deployments and $1.1 million relates to orders for K1B.
We have not experienced any significant effects relating to seasonality for our products and services.
Human Capital
As of December 31, 2023, the Company had 95 full-time employees and one part-time employee working primarily out of our combined headquarters and production facility in Mountain View, California and production facilities in Downey and Irvine, California. We are not a party to any collective bargaining agreements.
The Company believes that our future growth and success will depend in part on our ability to attract and retain highly skilled employees. The executive management team is responsible for developing and executing the Company’s human capital strategy. The human capital strategy includes the attraction, acquisition, engagement, and development of the Company’s employees as resources allow.
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Available Information
We file reports and other information with the SEC, which are accessible on the SEC’s website at www.sec.gov. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available, free of charge, on our website at ir.knightscope.com. We make these reports available through our website as soon as reasonably practicable after we electronically file such reports with, or furnish such reports to, the SEC. The information provided on, or accessible through, our website is not a part of, or incorporated into, this Annual Report on Form 10-K. You may also access this information, free of charge, at the SEC’s website at http://www.sec.gov.
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