Stock-Based Compensation

6 Months Ended

Jun. 30, 2023

Stock-Based Compensation

Stock-Based Compensation

NOTE 5: Stock-Based Compensation

Equity Incentive Plans

In April 2014, the Company adopted the Knightscope, Inc. 2014 Equity Incentive Plan (the “2014 Plan”) allowing for the issuance of up to 2,000,000 shares of common stock through grants of options, stock appreciation rights, restricted stock or restricted stock units. In December 2016, the 2014 Plan was terminated, and the Company adopted the Knightscope, Inc. 2016 Equity Incentive Plan (the “2016 Plan”) in which the remaining 1,936,014 shares available for issuance under the 2014 Plan at that time were transferred to the 2016 Plan. Awards outstanding under the 2014 Plan at the time of the 2014 Plan’s termination continue to be governed by their existing terms. The shares underlying any awards that are forfeited, canceled, repurchased or are otherwise terminated by the Company under the 2014 Plan will be added back to the shares of common stock available for issuance under the 2016 Plan. The 2016 Plan provides for the granting of stock awards such as incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock or restricted stock units to employees, directors and outside consultants as determined by the Board of Directors.

The Board may grant stock options under the 2016 Plan at a price of not less than 100% of the fair market value of the Company’s common stock on the date the option is granted. The option exercise price generally may not be less than the underlying stock’s fair market value at the date of grant and generally have a term of ten years. Incentive stock options granted to employees who, on the date of grant, own stock representing more than 10% of the voting power of all of the Company’s classes of stock, are granted at an exercise price of not less than 110% of the fair market value of the Company’s common stock. The maximum term of incentive stock options granted to employees who, on the date of grant, own stock having more than 10% of the voting power of all the Company’s classes of stock, may not exceed five years. The Board of Directors also determines the terms and conditions of awards, including the vesting schedule and any forfeiture provisions. Options granted under the 2016 Plan may vest upon the passage of time, generally four years, or upon the attainment of certain performance criteria established by the Board of Directors. The amounts granted each calendar year to an employee or non-employee is limited depending on the type of award. Stock options comprise all of the awards granted since the Plan’s inception.

On June 23, 2022, following approval by the Board of Directors, the Company’s stockholders adopted the Knightscope, Inc. 2022 Equity Incentive Plan (the “2022 Plan”) allowing for the issuance of up to 5,000,000 shares of Class A Common Stock through grants of options, stock appreciation rights, restricted stock awards, restricted stock units, performance awards, and other stock or cash-based awards. In connection with the adoption of the 2022 Plan, shares previously available for new grants under the 2016 Plan are available for new grants under the 2022 Plan, and shares subject to outstanding stock options under the prior plans as of the date of stockholder approval of the 2022 Plan, subsequently cease to be subject to such stock options (other than by reason of exercise of such stock options). The number of shares authorized under the 2022 Plan will be increased each January 1^st, beginning January 1, 2023 and ending on (and including) January 1, 2032, by an amount equal to the lesser of (a) 5% of our outstanding Class A Common Stock and Class B Common Stock outstanding on December 31^st of the immediately preceding calendar year (rounded up to the nearest whole share) and (b) a number of shares determined by the committee. Shares subject to awards that lapse, expire, terminate, or are canceled prior to the issuance of the underlying shares or that are subsequently forfeited to or otherwise reacquired by us will be added back to the shares of common stock available for issuance under the 2022 Plan.

The Board of Directors also determines the terms and conditions of awards, including the vesting schedule and any forfeiture provisions. Options granted under the 2022 Plan may vest upon the passage of time, generally four years, or upon the attainment of certain performance criteria established by the Board of Directors. The Company may from time-to-time grant options to purchase common stock to nonemployees for advisory and consulting services. The amounts granted each calendar year to an employee or non-employee is limited depending on the type of award.

Stock option activity under all of the Company’s equity incentive plans for the six-month period ended of June 30, 2023, is as follows:

					Weighted
			Weighted		Average
	Shares	Number of	Average		Remaining	Aggregate
	Available for	Shares	Exercise		Contractual	Intrinsic
	Grant	Outstanding	Price		Life (Years)	Value (000’s)
Available and outstanding as of December 31, 2022	3,538,268	10,081,915	$	3.11	7.61	$	4,098
2022 Plan annual increase	1,917,456	—		—	—		—
Granted	(975,000)	975,000		0.44	—		—
Exercised	—	(451,020)		0.58	—		—
Forfeited	1,200,240	(1,200,240)		4.50	—		—
Available and outstanding as of June 30, 2023	5,680,964	9,405,655	$	2.78	7.45	$	166
Vested and exercisable as of June 30, 2023	—	5,252,184	$	2.27	6.38	$	42

The weighted average grant date fair value of options granted during the six-month period ended June 30, 2023, was $0.23 per share. There were 451,020 options exercised during the six-month period ended June 30, 2023, compared to 152,746 options exercised in the prior year period. The fair value of the options that vested during the six-months ended June 30, 2023 and 2022, was $1.4 million and $523, respectively.

As of June 30, 2023, the Company had unamortized stock-based compensation expense of $6.4 million that will be recognized over the weighted average remaining vesting term of options of 1.79 years.

The assumptions utilized for option grants during the three and six-months ended June 30, 2023 and 2022, are as follows:

	Three-months ended				Six-months ended
	June 30,				June 30,
	2023		2022		2023		2022
Risk-free interest rate	3.62	%	—	%	3.62	%	0.96	%
Expected dividend yield	—	%	—	%	—	%	—	%
Expected volatility	54.73	%	—	%	54.71	%	53.84	%
Expected term (in years)	5.4		—		5.4		6.1

A summary of stock-based compensation expense recognized in the Company’s condensed consolidated statements of operations is as follows:

	Three-months ended				Six-months ended
	June 30,				June 30,
	2023		2022		2023		2022
Cost of revenue, net	$	107	$	82	$	200	$	162
Research and development		125		243		125		470
Sales and marketing		55		61		108		132
General and administrative		444		341		744		688
Total	$	731	$	727	$	1,177	$	1,452