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SOUNDTHINKING, INC.

SOUNDTHINKING, INC.SSTIEarnings & Financial Report

Nasdaq · Information Technology · Services-Prepackaged Software

SoundThinking, Inc. is a public safety technology provider specializing in acoustic monitoring solutions, most notably gunshot detection systems. It delivers data-driven tools and analytics services to law enforcement agencies, municipal governments and public safety organizations primarily across North America, helping improve emergency response efficiency and community safety outcomes.

What changed in SOUNDTHINKING, INC.'s 10-K — 2022 vs 2023

Top changes in SOUNDTHINKING, INC.'s 2023 10-K

491 paragraphs added · 437 removed · 371 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

111 edited+15 added−18 removed82 unchanged
In addition, coral reefs form the basis of coastal and marine tourism, a valuable national income sector. It is estimated that, coral reefs around the globe provide services valued between US $172 to $375 billion annually. Reefs must be protected for economic sustainability and food security.
In addition, coral reefs form the basis of coastal and marine tourism, a valuable national income sector. It is estimated that, coral reefs around the globe provide services valued between US $172 billion to $375 billion annually. Reefs must be protected for economic sustainability and food security.
We are committed to developing comprehensive, respectful and engaged partnerships with law enforcement agencies, elected officials and communities focused on making a positive difference in the world. Industry Background: The Public Safety Gap Local police departments are challenged to serve and protect in an increasingly transparent fashion without unintentionally over-policing and under serving their communities.
We are committed to developing comprehensive, respectful and engaged partnerships with law enforcement agencies, elected officials and communities focused on making a positive difference in the world. 3 Industry Background: The Public Safety Gap Local police departments are challenged to serve and protect in an increasingly transparent fashion without unintentionally over-policing and under serving their communities.
When elected officials and law enforcement have an enhanced awareness of gun violence activity and patterns, they have tools to facilitate a rapid and accurate response to gunfire incidents 10 and improve relations between law enforcement and these communities, potentially increasing crime reporting and community cooperation with investigations, which can result in improved public safety. • Improved Community Relations and Collaboration.
When elected officials and law enforcement have an enhanced awareness of gun violence activity and patterns, they have tools to facilitate a rapid and accurate response to gunfire incidents and improve relations between law enforcement and these communities, potentially increasing crime reporting and community cooperation with investigations, which can result in improved public safety. • Improved Community Relations and Collaboration.
Outside of the United States, we estimate that the market for ShotSpotter Respond includes approximately 200 cities in Central America, the Caribbean, South America and southern Africa that have at least 500,000 residents. We estimate that a customer in this market could invest an average of approximately $1.0 million per year for our public safety solution.
Outside of the United States, we estimate that the market for ShotSpotter includes approximately 200 cities in Central America, the Caribbean, South America and southern Africa that have at least 500,000 residents. We estimate that a customer in this market could invest an average of approximately $1.0 million per year for our public safety solution.
We implement our customer success initiative early in the sales process in order to ensure that we are aligned with the customer’s objectives and can positively impact their defined outcomes. We apply consultative best practices and policy development at the command staff level as well as tactical training for field patrol officers.
We implement our customer success initiative early in the sales process in order to ensure that we are aligned with the customer’s objectives and can positively impact their defined outcomes. We apply consultative best practices and policy development at the command staff level as well as tactical training 19 for field patrol officers.
We intend to capitalize on this momentum to grow sales. • Expand ShotSpotter Respond Revenue within Our Existing Customer Base. As customers realize the benefits of our solutions, we believe that we have a significant opportunity to increase the lifetime value of our customer relationships by expanding coverage within their communities through a “land and expand” strategy.
We intend to capitalize on this momentum to grow sales. • Expand ShotSpotter Revenue within Our Existing Customer Base. As customers realize the benefits of our solutions, we believe that we have a significant opportunity to increase the lifetime value of our customer relationships by expanding coverage within their communities through a “land and expand” strategy.
We actively foster a learning culture where employees are empowered to drive their career progression, supporting professional development and providing on-demand learning platforms. Our development programs play a critical role in engaging and retaining our employees as these programs offer opportunities to continually enhance their skills for a variety of career opportunities across the Company.
We actively foster a learning culture where employees are empowered to drive their career progression, supporting professional development and providing on-demand learning platforms. Our development programs play a critical role in engaging and retaining our 24 employees as these programs offer opportunities to continually enhance their skills for a variety of career opportunities across the Company.
Advanced digital signal processing algorithms filter out background sounds such as traffic, and extract pulse features from the audio signal 7 that, along with the time and angle of arrival of the sound, are sent to our servers where algorithms compute the location of the sound source. The sensors do not have the ability to live stream audio.
Advanced digital signal processing algorithms filter out background sounds such as traffic, and extract pulse features from the audio signal that, along with the time and angle of arrival of the sound, are sent to our servers where algorithms compute the location of the sound source. The sensors do not have the ability to live stream audio.
One of our incident review specialists may add 8 other contextual information related to the incident such as the possibility of multiple shooters, high-capacity or fully automatic weapons and vehicles. The 911 dispatcher may add their own notes relating to the incident in which case the notes are time- and date-stamped and indicate the operator’s identification.
One of our incident review specialists may add other contextual information related to the incident such as the possibility of multiple shooters, high-capacity or fully automatic weapons and vehicles. The 911 dispatcher may add their own notes relating to the incident in which case the notes are time- and date-stamped and indicate the operator’s identification.
We have a three-pronged strategy to grow our diversity over time by (1) attracting diverse talent and ensuring fair hiring through inclusive and strategic recruitment practices, (2) 21 creating an inclusive workplace environment for employees, and (3) joining forces with our customers, partners and peers to drive industry progress.
We have a three-pronged strategy to grow our diversity over time by (1) attracting diverse talent and ensuring fair hiring through inclusive and strategic recruitment practices, (2) creating an inclusive workplace environment for employees, and (3) joining forces with our customers, partners and peers to drive industry progress.
In addition, we believe that in communities plagued by gun violence, there is often a lack of trust between the community’s residents and its police force, which can exacerbate the underreporting of gunfire and create a vicious cycle of underreporting, 4 lack of response and increased mistrust due to continued unaddressed gun violence in the community.
In addition, we believe that in communities plagued by gun violence, there is often a lack of trust between the community’s residents and its police force, which can exacerbate the underreporting of gunfire and create a vicious cycle of underreporting, lack of response and increased mistrust due to continued unaddressed gun violence in the community.
Competition The markets for public safety and security solutions are highly fragmented and evolving. Whether installed in local communities, on critical infrastructure or on a campus, for a gunfire detection system to be effective, the protection zone must be comprehensive. We believe our gunshot detection solutions represent the most effective public safety and security solutions on the market.
Competition The markets for public safety and security solutions are highly fragmented and evolving. Whether installed in local communities, on critical infrastructure or on a campus, for a gunfire and weapons detection system to be effective, the protection zone must be comprehensive. We believe our gunshot detection solutions represent the most effective public safety and security solutions on the market.
Specialized Gunshot Detection Software The heart of our gunshot detection solutions is our sophisticated and specialized software. Our software analyzes audio signals for potential gunshots detected by our intelligent sensors. Our sensor filters out ambient background 6 noise, such as traffic or wind, and looks for impulsive sounds characteristic of gunfire.
Specialized Gunshot Detection Software The heart of our gunshot detection solutions is our sophisticated and specialized software. Our software analyzes audio signals for potential gunshots detected by our intelligent sensors. Our sensor filters out ambient background noise, such as traffic or wind, and looks for impulsive sounds characteristic of gunfire.
The accuracy of the coordinates derived from our proprietary software is significantly improved when, as is typically the case, more than three sensors participate. We deploy our sensor arrays such that, on average, six to eight sensors participate in the detection of a gunshot.
The accuracy of the coordinates derived from our proprietary software is significantly improved when, as is typically the case, more than three sensors 7 participate. We deploy our sensor arrays such that, on average, six to eight sensors participate in the detection of a gunshot.
Our sensors are designed and tested against international standards for installation in unprotected outdoor environments. Special consideration is given to minimize the sound of wind, rain and hail, which could otherwise limit the range of detection and produce false results.
Our sensors are designed and tested against international standards for installation in unprotected outdoor environments. Special consideration is given to minimize the sound of wind, rain and hail, which could otherwise 8 limit the range of detection and produce false results.
Our public safety solution provides cities with the ability to react quickly to gun violence, thus providing the ability to improve their responses and residents’ perception of their responses. This provides our customers with the opportunity to foster improved community relations and collaboration with their residents. • Improved Police Officer Safety .
Our public safety solution provides cities with the ability to react quickly to gun violence, thus providing the ability to improve their responses and residents’ perception 12 of their responses. This provides our customers with the opportunity to foster improved community relations and collaboration with their residents. • Improved Police Officer Safety .
A 2016 report published by The Brookings Institute analyzing data collected from ShotSpotter Respond and our customers suggests that approximately 80% of the gunshots detected by our public safety solution are not reported to 911 by residents.
A 2016 report published by The Brookings Institute analyzing data collected from ShotSpotter and our customers suggests that approximately 80% of the gunshots detected by our public safety solution are not reported to 911 by residents.
We are not, however, including the information contained on our website, or information that may be accessed through links on our website, as part of, or incorporating such information by reference into, this Annual Report on Form 10-K. 23
We are not, however, including the information contained on our website, or information that may be accessed through links on our website, as part of, or incorporating such information by reference into, this Annual Report on Form 10-K.
Mobile Device Support-Apple iOS and Android-phones/tablets and watches Related Applications and Services ShotSpotter Insight All historical incident data in our database can be viewed, searched, sorted, and filtered using our ShotSpotter Insight application.
Mobile Device Support-Apple iOS and Android-phones/tablets and watches 10 Related Applications and Services ShotSpotter Insight All historical incident data in our database can be viewed, searched, sorted, and filtered using our ShotSpotter Insight application.
Go-To-Market We sell our solutions through our direct sales teams, and starting in 2022, two reseller organizations. Our sales teams focus on both new customer acquisition, customer renewal, add-on sales, and coverage expansion.
Go-To-Market We sell our solutions through our direct sales teams, and starting in 2022, we utilized two reseller organizations. Our sales teams focus on both new customer acquisition, customer renewal, add-on sales, and coverage expansion.
All of our efforts are focused on driving positive measurable outcomes on gun violence reduction and prevention, which we know leads to positive word of mouth referrals that can attract new customers and drive an increase in sales. • Grow Our Security Business. We have developed our ShotSpotter SecureCampus solution for universities and other educational institutions.
All of our efforts are focused on driving positive measurable outcomes on gun violence reduction and prevention, which we know leads to positive word of mouth referrals that can attract new customers and drive an increase in sales. • Grow Our Security Business. We have developed our ShotSpotter for Campus, (formerly ShotSpotter SecureCampus) solution for universities and other educational institutions.
We believe that our solutions are superior in terms of comprehensiveness of 20 functionality, analytical and collaboration tools, workflow process and proven effectiveness at scale.
We believe that our solutions are superior in terms of comprehensiveness of functionality, analytical and collaboration tools, workflow process and proven effectiveness at scale.
Environmental condition tests performed on the sensors include temperature cycling, temperature soak, shock, vibration, and salt, fog and moisture ingress protection. We typically design and deploy arrays of 10 to 25 sensors per square mile taking into consideration the unique acoustic environment in which we are deploying.
Environmental condition tests performed on the sensors include temperature cycling, temperature soak, shock, vibration, and salt, fog and moisture ingress protection. We typically design and deploy arrays of 15 to 25 sensors per square mile taking into consideration the unique acoustic environment in which we are deploying.
We intend to continue to invest in building a global sales organization as we further penetrate the market for ShotSpotter Respond and expand the customer base for our security solutions. 18 Marketing Our marketing function has several focus areas, with demand generation being the largest investment.
We intend to continue to invest in building a global sales organization as we further penetrate the market for ShotSpotter and expand the customer base for our security solutions. Marketing Our marketing function has several focus areas, with demand generation being the largest investment.
We offer a wide array of benefits including comprehensive health and welfare insurance, paid time-off and leave, and we sponsor a 401(k) plan to provide defined contribution retirement benefits. Growth and Development Career development is a primary reason new hires decide to join ShotSpotter.
We offer a wide array of benefits including comprehensive health and welfare insurance, paid time-off and leave, and we sponsor a 401(k) plan to provide defined contribution retirement benefits. Growth and Development Career development is a primary reason new hires decide to join SoundThinking.
COPLINK X provides law enforcement with the abilities to: • Search through structured and unstructured data to obtain immediate tactical leads. • Access law enforcement data records from a centralized, user-friendly interface. • Leverage advanced link analysis to quickly detect relationships between people, places and events. • Link leads to reports, suspects and other entities. • Identify crime trends to make operational and resource decisions.
CrimeTracer provides law enforcement with the abilities to: • Search through structured and unstructured data to obtain immediate tactical leads. • Access law enforcement data records from a centralized, user-friendly interface. • Leverage advanced link analysis to quickly detect relationships between people, places and events. • Link leads to reports, suspects and other entities. • Identify crime trends to make operational and resource decisions.
We also maintain a website at www.shotspotter.com, at which you may access these materials, free of charge, as reasonably practicable after they are electronically filed with, or furnished to, the SEC.
We also maintain a website at www.soundthinking.com, at which you may access these materials, free of charge, as reasonably practicable after they are electronically filed with, or furnished to, the SEC.
An additional alternative to develop investigative leads is using the law enforcement agency's existing Record Management System ("RMS") search function. We believe COPLINK X is uniquely positioned due to its comprehensive and regularly enhanced features and functions, and our large private Criminal Justice Information Standard data set which we believe to be the largest available.
An additional alternative to develop investigative leads is using the law enforcement agency's existing Record Management System ("RMS") search function. We believe CrimeTracer is uniquely positioned due to its comprehensive and regularly enhanced features and functions, and our large private Criminal Justice Information Standard data set which we believe to be the largest available.
ShotSpotter Connect helps address this new reality by helping agencies make their largest cost center – patrol – more efficient and effective in reducing crime and better engaging with the community. ShotSpotter Connect automates the planning of directed patrols for all serious crime data across an entire jurisdiction on a daily basis.
ResourceRouter helps address this new reality by helping agencies make their largest cost center – patrol – more efficient and effective in reducing crime and better engaging with the community. ResourceRouter automates the planning of directed patrols for all serious crime data across an entire jurisdiction on a daily basis.
We believe there is demand for ShotSpotter Connect both within our existing ShotSpotter Respond customer base and within a broader set of police departments that are not ShotSpotter customers today. We estimate that the market for our ShotSpotter Connect solution includes up to 1,500 cities, based on cities that have a population above 25,000 people.
We believe there is demand for ResourceRouter both within our existing ShotSpotter customer base and within a broader set of police departments that are not ShotSpotter customers today. We estimate that the market for our ResourceRouter solution includes up to 1,500 cities, based on cities that have a population above 25,000 people.
We evaluate opportunities to develop or acquire complementary products and services. For example, our acquisition of HunchLab in 2018, renamed ShotSpotter Connect, provides an opportunity to increase our revenue per customer with a related and value-added technology that helps deter crime through strategically planned patrols.
We evaluate opportunities to develop or acquire complementary products and services. For example, our acquisition of HunchLab in 2018, renamed ResourceRouter, provides an opportunity to increase our revenue per customer with a related and value-added technology that helps deter crime through strategically planned patrols.
The ShotSpotter Respond alert received by the ShotSpotter Dispatch application includes a unique identification number (Respond ID number), a precise time and date of the gunfire (trigger time), approximate street address of the gunfire, number of shots and police district and beat identification.
The ShotSpotter alert received by the ShotSpotter application includes a unique identification number (ShotSpotter ID number), a precise time and date of the gunfire (trigger time), approximate street address of the gunfire, number of shots and police district and beat identification.
It has been used by the New York Police Department for years at scale by thousands of officers as an on-premise solution. The solution provides: • Complete Digital Case Management. ShotSpotter Investigate addresses the challenges investigators and supervisors face in conducting and documenting investigations.
It has been used by the New York Police Department for years at scale by thousands of officers as an on-premise solution. The solution provides: • Complete Digital Case Management. CaseBuilder addresses the challenges investigators and supervisors face in conducting and documenting investigations.
We estimate the market for our solution consists of over nearly 3,000 local, state and federal agencies in the United States and potentially thousands internationally. We expect that, on average, United States customers could invest approximately $100,000 per year for our ShotSpotter Investigate solution and international customers could invest approximately $500,000 per year.
We estimate the market for our solution consists of over nearly 3,000 local, state and federal agencies in the United States and potentially thousands internationally. We expect that, on average, United States customers could invest approximately $100,000 per year for our CaseBuilder solution and international customers could invest approximately $500,000 per year.
While we are not aware of any direct competitors offering wide-area solutions comparable to ShotSpotter Respond, we believe the primary competitors in the broader gunfire detection space are V5 Systems, Safety Dynamics, Inc., Wi-Fiber, Inc., Databouy, EAGL Technology, Alarm.com and Flock Safety.
While we are not aware of any direct competitors offering wide-area solutions comparable to SoundThinking, we believe the primary competitors in the broader gunfire detection space are V5 Systems, Safety Dynamics, Inc., Wi-Fiber, Inc., Databouy, EAGL Technology, Alarm.com and Flock Safety.
It is designed to drive a new and qualified pipeline for each product in our Precision Policing Platform. The program consists of a series of targeted email, digital and offline campaigns to key personas in prospective agencies, as well as influencers, to drive interest in our suite of products.
It is designed to drive a new and qualified pipeline for each product in our SafetySmart platform. The program consists of a series of targeted email, digital and offline campaigns to key personas in prospective agencies, as well as influencers, to drive interest in our suite of products.
The two reseller organizations focus on COPLINK X sales efforts and university security sales. Our security solutions sales efforts focus primarily on highways, and corporate campuses, national retailers, and in some cases, stadiums, arenas, and venues supporting large groups of employees and/or patrons.
The two reseller organizations focus on CrimeTracer sales efforts and university security sales. Our security solutions sales efforts focus primarily on highways, and corporate campuses, national retailers, and in some cases, stadiums, arenas, and venues supporting large groups of employees and/or patrons.
We expect that, on average, a customer could invest approximately $50,000-$100,000 per year for our ShotSpotter Connect solution. We expect that ShotSpotter Connect may also be needed by potential international customers as well, who could invest over $100,000 per year for the solution.
We expect that, on average, a customer could invest approximately $50,000-$100,000 per year for our ResourceRouter solution. We expect that ResourceRouter may also be needed by potential international customers as well, who could invest over $100,000 per year for the solution.
However, urban areas and critical infrastructure require a wider system of protection that can cover a large area. We also compete with other possible uses of the limited funding available to our ShotSpotter Respond customers.
However, urban areas and critical infrastructure require a wider system of protection that can cover a large area. We also compete with other possible uses of the limited funding available to our SoundThinking customers.
Unfortunately, the options to do this in a digitized and automated way are generally lacking. We believe ShotSpotter Investigate offers the most complete investigative case management solution on the market that has been proven to be effective with one of the leading law enforcement agencies in the country.
Unfortunately, the options to do this in a digitized and automated way are generally lacking. We believe CaseBuilder offers the most complete investigative case management solution on the market that has been proven to be effective with one of the leading law 18 enforcement agencies in the country.
We are continually investing in our global workforce to further drive diversity and inclusion, provide fair and competitive pay and benefits to support our employees’ well-being, and to foster the growth and development of all employees. As of December 31, 2022, we employed 213 people, all of whom were based in the United States.
We are continually investing in our global workforce to further drive diversity and inclusion, provide fair and competitive pay and benefits to support our employees’ well-being, and to foster the growth and development of all employees. As of December 31, 2023, we employed 312 people, all of whom were based in the United States.
COPLINK X competitors COPLINK X has a few direct competitors and also competes with a few alternative approaches to develop investigative leads. Direct competitors include Lexis Nexis Accurint Virtual Crime Center, Peregrine, and Finder Software Solutions.
CrimeTracer Competitors CrimeTracer has a few direct competitors and also competes with a few alternative approaches to develop investigative leads. Direct competitors include Lexis Nexis Accurint Virtual Crime Center, Peregrine, and Finder Software Solutions.
We believe there is an opportunity to bring a complete digital case management solution to the market to help improve clearance rates of all crime types and accelerate solvability under the ShotSpotter brand and sell to both our installed base and new potential customers, such as prisons. 13 ShotSpotter Investigate provides a complete case management solution for detectives and supervisors in local, state and federal law enforcement agencies.
We believe there is an opportunity to bring a complete digital case management solution to the market to help improve clearance rates of all crime types and accelerate solvability under the SoundThinking brand and sell to both our installed base and new potential customers, such as prisons. 15 CaseBuilder provides a complete case management solution for detectives and supervisors in local, state and federal law enforcement agencies.
We reconfigured and integrated the product to create the ability to use gunfire incident data from ShotSpotter Respond to populate cases automatically and launched the solution as ShotSpotter Investigate in July 2021. The average homicide clearance rate in the United States is less than 50% in 2021, according to a report published by The Marshall Project in 2022.
We reconfigured and integrated the product to create the ability to use gunfire incident data from ShotSpotter to populate cases automatically and launched the solution in July 2021. The average homicide clearance rate in the United States was less than 50% in 2021, according to a report published by The Marshall Project in 2022.
Our website address is www.shotspotter.com. The information contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K, and you should not consider any information contained on, or that can be accessed through, our website as part of this Annual Report on Form 10-K.
The information contained on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K, and you should not consider any information contained on, or that can be accessed through, our website as part of this Annual Report on Form 10-K.
With only two currently deployed ShotSpotter Respond customers outside of the United States in South Africa and the Bahamas, we believe that we have a significant opportunity to expand internationally.
With only three currently deployed ShotSpotter customers outside of the United States in South Africa, the Bahamas and Uruguay, we believe that we have a significant opportunity to expand internationally.
Our total attrition rate in 2022 was less than 18%, we have not experienced work stoppages, and we believe our employee relations are good. We have been designated a Great Place to Work® Company for the last five years. Diversity, Equity and Inclusion Our vision is to advance diversity, equity and inclusion across the company.
Our total attrition rate in 2023 was less than 20%, we have not experienced work stoppages, and we believe our employee relations are good. We have been designated a Great Place to Work® Company for the last six years. Diversity, Equity and Inclusion Our vision is to advance diversity, equity and inclusion across the company.
We estimate that the market outside the United States for our public safety solutions includes approximately 200 cities in Central America, the Caribbean, South America and southern Africa that have at least 500,000 residents. In addition, we believe that there is a market for our security solution, ShotSpotter Connect and ShotSpotter Investigate outside the United States.
We estimate that the market outside the United States for our public safety solutions includes approximately 200 cities in Central America, the Caribbean, South America and southern Africa that have at least 500,000 residents. In addition, we believe that there is a market for our security solutions, ResourceRouter and CaseBuilder outside the United States.
ShotSpotter Connect crime forecasting uses machine learning and has led to additional investment in data science resources. As of December 31, 2022, we had 56 employees in our research and development organization. In addition, we engage in research and development activities with manufacturing partners and outsource certain activities to engineering firms to further supplement our internal team.
ResourceRouter crime forecasting uses machine learning and has led to additional investment in data science resources. As of December 31, 2023, we had 53 employees in our research and development organization. In addition, we engage in research and development activities with manufacturing partners and outsource certain activities to engineering firms to further supplement our internal team.
Further, COPLINK X is integrated with the Thomson Reuters CLEAR TM platform for CLEAR and COPLINK X subscribers, allowing access to billions of additional public data records in a seamless experience. ShotSpotter GCM Competitors There are many competitors in the market for investigative case management.
Further, CrimeTracer is integrated with the Thomson Reuters CLEAR TM platform for CLEAR and CrimeTracer subscribers, allowing access to billions of additional public data records in a seamless experience. CaseBuilder Competitors There are many competitors in the market for investigative case management.
Since our founding 26 years ago, ShotSpotter has been and continues to be a purpose-led company. We are a mission-driven organization that is focused on improving public safety outcomes.
Since our founding over 27 years ago, SoundThinking has been and continues to be a purpose-led company. We are a mission-driven organization that is focused on improving public safety outcomes.
As of December 31, 2022, 43% of our board members were women and 71% of our board members were from underrepresented communities. Compensation, Benefits and Well-being We strive to offer fair, competitive compensation and benefits that support our employees’ overall well-being.
As of December 31, 2023, 50% of our board members were women and 50% of our board members were from underrepresented communities. Compensation, Benefits and Well-being We strive to offer fair, competitive compensation and benefits that support our employees’ overall well-being.
For example, of our ShotSpotter Respond customers, approximately 43% have expanded their coverage areas from their original deployment areas by an average of almost nine square miles as of December 31, 2022. Our overall revenue retention rate was 124% for 2022, 125% for 2021 and was 107% for 2020. 16 • Expand Our International Footprint.
For example, of our ShotSpotter customers, approximately 39% have expanded their coverage areas from their original deployment areas by an average of almost eight square miles as of December 31, 2023. Our overall revenue retention rate was 107% for 2023, 124% for 2022 and was 125% for 2021. • Expand Our International Footprint.
Members of the media have access to a self-serve, comprehensive media kit to easily capture video and photos that depict the service and its benefits in a compelling fashion to enhance broadcast TV segments and print/online articles. This exposure creates awareness for our solutions and lends credibility to our market leadership position.
Members of the media have access to a self-serve, comprehensive media kit to easily capture video and photos that depict the service and its benefits in a compelling fashion to enhance broadcast TV segments and print/online articles. This exposure creates awareness for ShotSpotter, both positive and potentially negative, and can lend credibility to our market leadership position.
As of December 31, 2022, women represented 32% of our employees, and underrepresented minorities, defined as those who identify as Black/African American, Hispanic/Latinx, Native American, Pacific Islander and/or two or more races, represented 44% of our employees.
As of December 31, 2023, women represented 40% of our employees, and underrepresented minorities, defined as those who identify as Black/African American, Hispanic/Latinx, Native American, Pacific Islander and/or two or more races, represented 51% of our employees.
Key elements of our strategy include: • Accelerate Our Acquisition of Public Safety Customers. We believe that we continue to be in the early stages of penetrating the markets for our public safety solutions. We serve law enforcement agencies in three of the ten largest U.S. cities as ShotSpotter Respond customers.
We believe that we continue to be in the early stages of penetrating the markets for our public safety solutions. We serve law enforcement agencies in three of the ten largest U.S. cities as ShotSpotter customers.
COPLINK X was added to our investigative tools portfolio in January 2022 through the acquisition of Forensic Logic, LLC ("Forensic Logic"). ShotSpotter Investigate We acquired the CrimeCenter investigative case management solution in November 2020.
CrimeTracer was added to our investigative tools portfolio in January 2022 through the acquisition of Forensic Logic, LLC ("Forensic Logic"). CaseBuilder (formerly ShotSpotter Investigate) We acquired the CaseBuilder investigative case management solution in November 2020.
Customer Revenue Model We generate annual subscription revenues from the deployment of ShotSpotter Respond on a per-square-mile basis. Our security solutions, ShotSpotter SecureCampus and ShotSpotter SiteSecure are typically sold on a subscription basis, each with a customized deployment plan.
Customer Revenue Model We generate annual subscription revenues from the deployment of ShotSpotter on a per-square-mile basis. Our security solutions, ShotSpotter for Campus, ShotSpotter for Corporate and ShotSpotter for Highways are typically sold on a subscription basis, each with a customized deployment plan.
We believe that in areas with significant levels of gun activity, ShotSpotter Respond is uniquely positioned to assist customers in interrupting, detecting and preventing gun violence. ShotSpotter SiteSecure and ShotSpotter SecureCampus Competitors Our security solutions operate in a highly competitive environment.
We believe that in areas with significant levels of gun activity, SoundThinking is uniquely positioned to assist customers in interrupting, detecting and preventing gun violence. ShotSpotter for Campus, ShotSpotter for Corporate and ShotSpotter for Highways Competitors Our security solutions operate in a highly competitive environment.
We have also developed ShotSpotter SiteSecure for customers such as corporations trying to safeguard their employees, customers, brand and profits, and public agencies focused on protecting citizens on highways. As of December 31, 2022, we had 19 ShotSpotter SecureCampus and ShotSpotter SiteSecure customers.
We have also developed ShotSpotter for Corporate (formerly ShotSpotter SiteSecure) for customers such as corporations trying to safeguard their employees, customers, brand and profits, and ShotSpotter for Highways for public agencies focused on protecting citizens on highways. As of December 31, 2023, we had 19 ShotSpotter for Campus and ShotSpotter for Corporate customers under contract.
We estimate that a customer in this market could invest an average of approximately $400,000 per year for ShotSpotter Respond. In 2021, we also started focusing on smaller cities that may not be included in the 1,400 cities list and expect this could add another several hundred potential customers.
In 2021, we also started focusing on smaller cities that may not be included in the 1,400 cities list and expect this could add another several hundred potential customers. We believe these smaller cities could invest an average of approximately $50,000 to $100,000 per year for ShotSpotter.
For the year ended December 31, 2022, our two largest customers, the City of New York and the City of Chicago accounted for 30% and 10% of our revenues, respectively. For the year ended December 31, 2021, our two largest customers, the City of New York and the City of Chicago accounted for 28% and 14% of our revenues, respectively.
For the year ended December 31, 2023, our two largest customers, the City of New York and the City of Chicago accounted for 25% and 9% of our revenues, respectively. For the year ended December 31, 2022, our two largest customers, the City of New York and the City of Chicago accounted for 30% and 10% of our revenues, respectively.
In 2021, we expanded our strategic communications capacity in response to false assertions made by certain media outlets and other organizations about our gunshot detection product.
In 2021, we expanded our strategic communications capacity in response to specious, misleading, and false assertions made by certain media outlets and other organizations about ShotSpotter.
For the year ended December 31, 2020, our two largest customers, the City of Chicago and the City of New York accounted for 18% and 15% of our revenues, respectively. Delivery of ShotSpotter Investigate in the City of New York will add additional professional services requirements and revenue.
For the year ended December 31, 2021, our two largest customers, the City of New York and the City of Chicago accounted for 28% and 14% of our revenues, respectively. Delivery of CaseBuilder in the City of New York will add additional professional services requirements and revenue.
For example, our solutions can be used in connection with computer-aided dispatch systems, video surveillance cameras, National Integrated Ballistic Information Network (“NIBIN”), and automated license plate 9 readers used by law enforcement to improve the effectiveness of police response and investigation efforts.
For example, our solutions can be used in connection with computer-aided dispatch systems, video surveillance cameras, National Integrated Ballistic Information Network (“NIBIN”), and automated license plate readers used by law enforcement to improve the effectiveness of police response and investigation efforts. We continue to evaluate new technologies that may integrate with our solutions to generate additional value for our customers.
The direct competitors to our Connect solution include Geolitica, Inc. and may include CAD providers and other third-party solutions providers, such as CentralSquare Technologies, Mark 43, Genetec, Inc., and Motorola Solutions, Inc. In addition, we may face competition from companies offering alternative solutions as well as solutions developed internally by our customers.
However, competitors may include computer-aided dispatch providers and other third-party solutions providers, such as CentralSquare Technologies, Mark 43, Genetec, Inc., and Motorola Solutions, Inc. In addition, we may face competition from companies offering alternative solutions as well as solutions developed internally by our customers.
The study concluded: • In Minneapolis, each additional gun homicide in a given year was statistically correlated with 80 fewer jobs. • In Oakland, every additional gun homicide in a given year was statistically associated with five fewer job opportunities in contracting businesses in the next year. • In Washington, D.C., every additional gun homicide in a given year was statistically associated with two fewer retail and service establishments the next year.
The study concluded: • In Minneapolis, each additional gun homicide in a given year was statistically correlated with 80 fewer jobs. • In Oakland, every additional gun homicide in a given year was statistically associated with five fewer job opportunities in contracting businesses in the next year. • In Washington, D.C., every additional gun homicide in a given year was statistically associated with two fewer retail and service establishments the next year. 4 In addition, several studies have suggested that property values are inversely correlated with violent crime.
How ShotSpotter Investigate Works 14 ShotSpotter GCM (Gun Crime Management) ShotSpotter GCM is a first-of-its-kind digital case management solution that focuses specifically on gun crime and was launched in June 2022. This is a new offering subset of ShotSpotter Investigate focused on gun violence.
How CaseBuilder works 16 CaseBuilder Crime Gun CaseBuilder includes a first-of-its-kind digital case management solution that focuses specifically on gun crime and was launched in June 2022. This offering subset of CaseBuilder focuses on gun violence.
The Uniform Crime Report includes information reported directly to the FBI by 18,000 city, university and college, county, state, tribal and federal law enforcement agencies. We believe that four or more homicides per 100,000 residents represents a significant gun violence problem.
The Uniform Crime Report includes information reported directly to the FBI by 18,000 city, university and college, county, state, tribal and federal law enforcement agencies.] We believe that four or more homicides per 100,000 residents represents a significant gun violence problem. We estimate that a customer in this market could invest an average of approximately $400,000 per year for ShotSpotter.
Our security solutions, ShotSpotter SecureCampus and ShotSpotter SiteSecure, are typically smaller-scale deployments of ShotSpotter Respond vertically marketed to universities, corporate campuses, highways and key infrastructure centers to mitigate risk and enhance security by notifying authorities of outdoor gunfire incidents, saving critical minutes for first responders to arrive.
We also offer other security solutions within our flagship product offering ShotSpotter, including ShotSpotter for Highways, ShotSpotter for Campus and ShotSpotter for Corporate, that are typically smaller-scale deployments of ShotSpotter vertically marketed to universities, corporate campuses, highways, and key infrastructure centers to mitigate risk and enhance security by notifying authorities of outdoor gunfire incidents, saving critical minutes for first responders to arrive.
Gunshot Detection Alerts Our alerts are delivered in the following forms: Real-Time Alerts Our IRC sends real-time notifications of outdoor gunfire incidents to the ShotSpotter Dispatch application, which is specifically designed for emergency communications centers, dispatch centers, and other public safety answering points.
During the COVID-19 pandemic, IRC personnel performed their job function from our IRC facilities and/or remote locations. Gunshot Detection Alerts Our alerts are delivered in the following forms: Real-Time Alerts Our IRC sends real-time notifications of outdoor gunfire incidents to the ShotSpotter application, which is specifically designed for emergency communications centers, dispatch centers, and other public safety answering points.
We believe these smaller cities could invest an average of approximately $50,000 to $100,000 per year for ShotSpotter Respond. Based on data made available by the National Center for Education Statistics and the Federal Aviation Administration, we believe that the domestic market for our security solutions includes approximately 5,000 college campuses and airports.
Based on data made available by the National Center for Education Statistics and the Federal Aviation Administration, we believe that the domestic market for our security solutions includes approximately 5,000 college campuses and airports. We estimate that, on average, a customer in this market could invest approximately $50,000-$75,000 per year for one of our security solutions.
A comprehensive audit trail of all changes to the incident is maintained that includes the time the alert was received and acknowledged by the dispatcher. These data may be used to measure KPIs by dispatch personnel.
A comprehensive audit trail of all changes to the incident is maintained that includes the time the alert was received and acknowledged by the dispatcher.
As of December 31, 2022, we had 38 issued patents, 31 in the United States, two in Brazil, and one each in Israel, Mexico, the United Kingdom, France and Germany. The issued patents expire on various dates from 2023 to 2034. We also license one patent from a third party, which expires in 2023.
As of December 31, 2023, we had 34 issued patents, 27 in the United States, two in Brazil, and one each in Israel, Mexico, the United Kingdom, France and Germany. The issued patents expire on various dates from 2024 to 2034.
Our Markets We believe there is significant demand for advanced gunfire detection and location notification solutions that accurately and quickly report instances of gunfire, based on two primary use cases: • Law enforcement — for domestic and international law enforcement serving communities plagued by persistent, localized gun violence, in order to identify, locate and deter gun violence; and • Security — for security personnel (which may include law enforcement personnel) serving universities, corporate campuses, key infrastructure, transportation centers and other areas in which authorities desire to prepare for and mitigate risks related to an active-shooter event, and desire to provide a zone of detection coverage surrounding the respective campus or secured area.
The reviewed alert is then pushed to the customer through the cloud-based software in a variety of delivery options; email, text, mobile app, or browser notification. 17 Our Markets We believe there is significant demand for advanced gunfire detection and location notification solutions that accurately and quickly report instances of gunfire, based on three primary use cases: • Law enforcement — for domestic and international law enforcement serving communities plagued by persistent, localized gun violence, in order to identify, locate and deter gun violence; and • Security — for security personnel (which may include law enforcement personnel) serving universities, corporate campuses, key infrastructure, transportation centers and other areas in which authorities desire to prepare for and mitigate risks related to an active-shooter event, and desire to provide a zone of detection coverage surrounding the respective campus or secured area. • Corporate/Other — for security personnel (which may include law enforcement personnel) serving large enterprise businesses, hospitals, casinos, hotels, and other areas in which authorities desire to know if and when weapons are being brought onto their property.
In general, due to the high visibility of shootings, the media’s interest in covering them, and ShotSpotter’s key role in alerting police for a quick response to these events to save lives, we benefit from significant broadcast, online and print press that is generated at little to no cost.
In general, due to the high visibility of gunfire incidents, the media’s interest in covering them, and SoundThinking’s key role in alerting police for a quick response to these events to save lives, we attract significant attention from broadcast, online and print press.
We pride ourselves on our execution of customer on-boarding as well as ongoing consulting and customer support, all of which are critical to ensure not only high customer retention rates, but new customer acquisitions.
Given the specialized nature of our market, a key component of our strategy is to maintain our passionate focus on customer success and satisfaction. We pride ourselves on our execution of customer on-boarding as well as ongoing consulting and customer support, all of which are critical to ensure not only high customer retention rates, but new customer acquisitions.
We also plan to leverage our large and growing installed base of customers with high net promoter attributes that consider ShotSpotter a trusted partner, to grow adoption of our newer products ShotSpotter Connect, ShotSpotter Investigate, ShotSpotter GCM and COPLINK X not only within the installed base, but outside of it.
We also plan to leverage our large and growing installed base of customers with high net promoter attributes that consider SoundThinking a trusted partner, to grow adoption of our newer products ResourceRouter, CaseBuilder, and CrimeTracer not only within the installed base, but outside of it. Key elements of our strategy include: • Accelerate Our Acquisition of Public Safety Customers.
ShotSpotter Respond ShotSpotter Respond, our acoustic gunshot detection technology serves cities and municipalities seeking to identify, locate and deter persistent, localized gun violence by incorporating a real-time gunshot detection system into their policing systems.
In August 2023, we acquired SafePointe, LLC ("SafePointe") and added their AI-based weapons detection system to our SafetySmart platform. 5 6 ShotSpotter ShotSpotter (formerly ShotSpotter Respond), our acoustic gunshot detection technology serves cities and municipalities seeking to identify, locate and deter persistent, localized gun violence by incorporating a real-time gunshot detection system into their policing systems.
With ShotSpotter Connect, analysts and supervisors review pre-generated directed patrol assignments that ensure officers are at the right place at the right time to maximize crime prevention while also guarding against over- and under-policing.
With ResourceRouter, analysts and supervisors review pre-generated directed patrol assignments that ensure officers are at the right place at the right time to maximize crime prevention while also guarding against over- and under-policing. Pre-patrol briefings provide situational awareness to officers and recommend patrol tactics, facilitating optimal outcomes even with limited staffing and resources.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Further, the allocation of and prioritization of stimulus funds or earnings is uncertain and may change. There is no guarantee that additional funding will be made available to fund our solutions.
Further, the allocation and prioritization of stimulus funds or earnings is uncertain and may change. There is no guarantee that additional funding will be made available to fund our solutions.
Further, our insurance policies may not adequately compensate us for any losses that we may incur in the event of damage or interruption, and therefore the occurrence of any of the foregoing could subject us to liability, cause us to issue credits to customers or cause customers not to renew their subscriptions for our applications, any of which could materially adversely affect our business.
Further, our insurance policies may not adequately compensate us for any losses that we may incur in the event of damage or interruption, and therefore the occurrence of any of the foregoing could subject us to liability, cause us to issue credits to customers or cause customers not to renew their subscriptions for our applications, any of which could materially and adversely affect our business.
If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms.
If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may experience adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal information); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms.
In addition, non-affiliates have the ability to sell shares of our common stock in the open market or through block trades without being subject to volume restrictions under Rule 144 of the Securities Act. In addition, in the future we may issue common stock or other securities if we need to raise additional capital.
Non-affiliates have the ability to sell shares of our common stock in the open market or through block trades without being subject to volume restrictions under Rule 144 of the Securities Act. In addition, in the future we may issue common stock or other securities if we need to raise additional capital.
Acquisitions in the future that we complete will give rise to risks, including: • incurring higher than anticipated capital expenditures and operating expenses; • failing to assimilate the operations and personnel or failing to retain the key personnel of the acquired company or business; • failing to integrate the acquired technologies, or incurring significant expense to integrate acquired technologies, into our platform and applications; • disrupting our ongoing business; • diverting our management’s attention and other company resources; • failing to maintain uniform standards, controls and policies; • incurring significant accounting charges; • impairing relationships with our customers and employees; • finding that the acquired technology, asset or business does not further our business strategy, that we overpaid for the technology, asset or business or that we may be required to write off acquired assets or investments partially or entirely; • failing to realize the expected synergies of the transaction; • being exposed to unforeseen liabilities and contingencies that were not identified prior to acquiring the company; and • being unable to generate sufficient revenues and profits from acquisitions to offset the associated acquisition costs.
Acquisitions in the future that we complete will give rise to risks, including: • incurring higher than anticipated capital expenditures and operating expenses; • failing to assimilate the operations and personnel or failing to retain the key personnel of the acquired company or business; • failing to integrate the acquired technologies, or incurring significant expense to integrate acquired technologies, into our platform and applications; • disrupting our ongoing business; • diverting our management’s attention and other company resources; • failing to maintain uniform standards, controls and policies; • incurring significant accounting charges; • impairing relationships with our customers and employees; 37 • finding that the acquired technology, asset or business does not further our business strategy, that we overpaid for the technology, asset or business or that we may be required to write off acquired assets or investments partially or entirely; • failing to realize the expected synergies of the transaction; • being exposed to unforeseen liabilities and contingencies that were not identified prior to acquiring the company; and • being unable to generate sufficient revenues and profits from acquisitions to offset the associated acquisition costs.
Our certificate of incorporation and bylaws include provisions that: • establish a classified board of directors so that not all members of our board of directors are elected at one time; • permit the board of directors to establish the number of directors and fill any vacancies and newly-created directorships; • provide that directors may only be removed for cause; • require super-majority voting to amend some provisions in our certificate of incorporation and bylaws; • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • eliminate the ability of our stockholders to call special meetings of stockholders; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; 50 • provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
Our certificate of incorporation and bylaws include provisions that: • establish a classified board of directors so that not all members of our board of directors are elected at one time; • permit the board of directors to establish the number of directors and fill any vacancies and newly-created directorships; • provide that directors may only be removed for cause; • require super-majority voting to amend some provisions in our certificate of incorporation and bylaws; • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • eliminate the ability of our stockholders to call special meetings of stockholders; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
While the Delaware courts have determined that such choice of forum provisions are facially valid and several state trial courts have enforced such provisions and required that suits asserting Securities Act claims be filed in federal court, there is no guarantee that courts of appeal will affirm the enforceability of such provisions and a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions.
While the Delaware courts have determined that such choice of forum 54 provisions are facially valid and several state trial courts have enforced such provisions and required that suits asserting Securities Act claims be filed in federal court, there is no guarantee that courts of appeal will affirm the enforceability of such provisions and a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions.
Any security compromise in our industry, whether actual or perceived, could harm our reputation, erode customer confidence in the effectiveness of our security measures, negatively impact our ability to attract new customers, cause existing customers to elect not to renew their subscriptions or subject us to third-party lawsuits, regulatory fines or other action or liability, which could materially and adversely affect our business and operating results.
Any security compromise , whether actual or perceived, could harm our reputation, erode customer confidence in the effectiveness of our security measures, negatively impact our ability to attract new customers, cause existing customers to elect not to renew their subscriptions or subject us to third-party lawsuits, regulatory fines or other action or liability, which could materially and adversely affect our business and operating results.
Our operations involve the collection, receipt, store, storage processing, generation, use, transfer, disclosure, protection, disposal of, transmission, and sharing (collectively, “processing”) of proprietary, confidential, and sensitive data, including personal data, intellectual property, trade secrets and other sensitive information such as gunfire incident data, including date, time, address and GPS coordinates, occurring in our customer’s coverage area (collectively, “sensitive information”).
Our operations involve the collection, receipt, storage, storage processing, generation, use, transfer, disclosure, protection, disposal of, transmission, and sharing (collectively, “processing”) of proprietary, confidential, and sensitive data, including personal information, intellectual property, trade secrets and other sensitive information such as gunfire incident data, including date, time, address and GPS coordinates, occurring in our customer’s coverage area (collectively, “sensitive information”).
If we are unable to attract, integrate and retain suitably qualified individuals who are capable of meeting our growing technical, operational and managerial requirements, on a timely basis or at all, our business will be adversely affected. Volatility or lack of positive performance in our stock price may also affect our ability to attract and retain our key employees.
If we are unable to attract, integrate and retain suitably qualified individuals who are capable of meeting our growing technical, operational and managerial requirements, on a timely basis or at all, our business will be adversely affected. 45 Volatility or lack of positive performance in our stock price may also affect our ability to attract and retain our key employees.
In addition, the facilities of significant vendors, including the manufacturer of our proprietary acoustic sensor, may be harmed or rendered inoperable by such natural or man-made disasters, which may cause disruptions, difficulties or material adverse effects on our business. 33 The incurrence of debt may impact our financial position and subject us to additional financial and operating restrictions.
In addition, the facilities of significant vendors, including the manufacturer of our proprietary acoustic sensor, may be harmed or rendered inoperable by such natural or man-made disasters, which may cause disruptions, difficulties or material adverse effects on our business. The incurrence of debt may impact our financial position and subject us to additional financial and operating restrictions.
In addition, difficulties in transitioning from an existing supplier to a new supplier could create delays in component availability that would have a significant impact on our ability to fulfill orders for our products. Many of the key components used to manufacture our proprietary ShotSpotter sensors also come from limited or sole sources of supply.
In addition, difficulties in transitioning from an existing supplier to a new supplier could create delays in component availability that would have a significant impact on our ability to fulfill orders for our products. 42 Many of the key components used to manufacture our proprietary ShotSpotter sensors also come from limited or sole sources of supply.
Government entities often impose compliance requirements that are complicated, require preferential pricing or “most favored nation” terms and conditions, or are otherwise time-consuming and expensive to satisfy. Compliance with these special standards or satisfaction of such requirements could complicate our efforts to obtain business or increase the cost of doing so.
Government entities often impose compliance requirements that are complicated, require preferential pricing or “most favored nation” terms and conditions, or are otherwise 29 time-consuming and expensive to satisfy. Compliance with these special standards or satisfaction of such requirements could complicate our efforts to obtain business or increase the cost of doing so.
In addition, like many companies, at the beginning of the COVID-19 pandemic, we implemented a work from home policy. We expect to work in a hybrid work model for the foreseeable future. This policy may negatively impact productivity of our employees. Any disruptions in our operations could negatively impact our business and operating results and harm our reputation.
In addition, like many companies, at the beginning of the COVID-19 pandemic, we implemented a work from home 35 policy. We expect to work in a hybrid work model for the foreseeable future. This policy may negatively impact productivity of our employees. Any disruptions in our operations could negatively impact our business and operating results and harm our reputation.
To increase total customers and customer coverage areas and to achieve broader market acceptance of our solutions, we will need to expand our sales and marketing organization and increase our business development 34 resources, including the vertical and geographic distribution of our sales force and our teams of account executives focused on new accounts and responsible for renewal and growth of existing accounts.
To increase total customers and customer coverage areas and to achieve broader market acceptance of our solutions, we will need to expand our sales and marketing organization and increase our business development resources, including the vertical and geographic distribution of our sales force and our teams of account executives focused on new accounts and responsible for renewal and growth of existing accounts.
Third parties also may seek access to our trade secrets, proprietary know-how and other confidential information through legal measures (for example, public-records requests or subpoenas to provide information or to 46 testify in court) and it could be expensive to defend against those requests. Disclosure of our trade secrets, proprietary know-how and other confidential information could negatively impact our business.
Third parties also may seek access to our trade secrets, proprietary know-how and other confidential information through legal measures (for example, public-records requests or subpoenas to provide information or to testify in court) and it could be expensive to defend against those requests. Disclosure of our trade secrets, proprietary know-how and other confidential information could negatively impact our business.
If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business, operating results, financial condition and cash flows. 48 Substantial future sales of shares of our common stock could cause the market price of our common stock to decline.
If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business and adversely affect our business, operating results, financial condition and cash flows. Substantial future sales of shares of our common stock could cause the market price of our common stock to decline.
In order to maintain and, if required, improve our disclosure controls and procedures and internal 49 control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results.
In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results.
Any such damages, penalties, disruptions or limitations in our ability to do business with government entities could have a material adverse effect on our business, operating results and financial condition. 27 Government entities often require highly specialized contract terms that may differ from our standard arrangements.
Any such damages, penalties, disruptions or limitations in our ability to do business with government entities could have a material adverse effect on our business, operating results and financial condition. Government entities often require highly specialized contract terms that may differ from our standard arrangements.
We take steps to detect and remediate vulnerabilities, but we may not be able to detect and remediate all vulnerabilities because the threats and techniques used to exploit the vulnerability change frequently and are often sophisticated in nature. Therefore, such vulnerabilities could be exploited but may not be detected until after a security incident has occurred.
We take steps to detect and remediate vulnerabilities, but we may not be able to detect and remediate all vulnerabilities because the threats and techniques used to exploit the vulnerability 40 change frequently and are often sophisticated in nature. Therefore, such vulnerabilities could be exploited but may not be detected until after a security incident has occurred.
To the extent that required consents delay our ability to deploy our solutions or facility owners do not grant permission to use their facilities, revoke previously granted permissions, or require us to pay a site license fee in order to install our sensors, our business may be harmed.
To the extent that required consents delay our ability to deploy our solutions or facility owners do not grant permission to use their facilities, revoke previously granted permissions, or require us to pay a site license fee in order to install our sensors or bollards, our business may be harmed.
The accounting rules and regulations that we must comply with are complex and subject to interpretation by the Financial Accounting Standards Board, the Securities and Exchange Commission and various bodies formed to promulgate and interpret appropriate accounting principles. In addition, many companies’ accounting disclosures are 45 being subjected to heightened scrutiny by regulators and the public.
The accounting rules and regulations that we must comply with are complex and subject to interpretation by the Financial Accounting Standards Board, the Securities and Exchange Commission and various bodies formed to promulgate and interpret appropriate accounting principles. In addition, many companies’ accounting disclosures are being subjected to heightened scrutiny by regulators and the public.
Employees may be more likely to leave us if the shares they own or the shares underlying their vested options have significantly appreciated in value relative to the 42 original purchase prices of the shares or the exercise prices of the options, or, conversely, if the exercise prices of the options that they hold are significantly above the market price of our common stock.
Employees may be more likely to leave us if the shares they own or the shares underlying their vested options have significantly appreciated in value relative to the original purchase prices of the shares or the exercise prices of the options, or, conversely, if the exercise prices of the options that they hold are significantly above the market price of our common stock.
To date, substantially all of our revenues have been derived from contracts with local governments and their agencies, in particular the police departments of major cities in the United States. To a lesser extent, we also generate revenues from federal agencies, foreign governments and higher education institutions.
To date, substantially all of our revenues have been derived from contracts with local governments and their agencies, in particular the police departments of major cities in the United States. To a lesser extent, we also generate 28 revenues from federal agencies, foreign governments and higher education institutions.
To the extent that we do not successfully avoid or overcome the risks or problems related to any such acquisitions, our results of operations and financial condition 35 could be harmed. Acquisitions also could impact our financial position and capital requirements or could cause fluctuations in our quarterly and annual results of operations.
To the extent that we do not successfully avoid or overcome the risks or problems related to any such acquisitions, our results of operations and financial condition could be harmed. Acquisitions also could impact our financial position and capital requirements or could cause fluctuations in our quarterly and annual results of operations.
If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, 26 preferences and privileges superior to those of holders of our common stock.
If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock.
This may result in delayed notifications to our customers and as a result, we could experience a decline in customer satisfaction with our solutions and our reputation and growth prospects could be harmed. 32 We expect to continue to make significant investments to maintain and improve the performance of our solutions.
This may result in delayed notifications to our customers and as a result, we could experience a decline in customer satisfaction with our solutions and our reputation and growth prospects could be harmed. We expect to continue to make significant investments to maintain and improve the performance of our solutions.
Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property. We rely in part on trade secrets, proprietary know-how and other confidential information to maintain our competitive position.
Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon or misappropriating our intellectual property. 49 We rely in part on trade secrets, proprietary know-how and other confidential information to maintain our competitive position.
In addition, we face and will continue to face risks in doing business internationally that could adversely affect our business, including: • the potential impact of currency exchange fluctuations; • the need to comply with local data residency requirements; • the availability and reliability of local data centers and internet bandwidth providers; • the difficulty of staffing and managing international operations and the increased operations, travel, shipping and compliance costs associated with having customers in numerous international locations; • potentially greater difficulty collecting accounts receivable and longer payment cycles; • the availability and cost of coverage by wireless carriers in international markets; • higher or more variable costs associated with wireless carriers and other service providers; • the need to offer customer support in various languages; • challenges in understanding and complying with local laws, regulations and customs in foreign jurisdictions, including laws regarding privacy and government surveillance; • export controls and economic sanctions administered by the Department of Commerce Bureau of Industry and Security and the Treasury Department’s Office of Foreign Assets Control; • compliance with various anti-bribery and anti-corruption laws such as the Foreign Corrupt Practices Act and United Kingdom Bribery Act of 2010; • tariffs and other non-tariff barriers, such as quotas and local content rules; 41 • more limited protection for our intellectual property in some countries; • adverse or uncertain tax consequences as a result of international operations; • currency control regulations, which might restrict or prohibit our conversion of other currencies into U.S. dollars; • restrictions on the transfer of funds; • deterioration of political relations between the United States and other countries; and • political or social unrest, global pandemics such as the COVID-19 pandemic or economic instability in a specific country or region in which we operate, which could have an adverse impact on our operations in that location.
In addition, we face and will continue to face risks in doing business internationally that could adversely affect our business, including: • the potential impact of currency exchange fluctuations; • the need to comply with local data residency requirements; • the availability and reliability of local data centers and internet bandwidth providers; • the difficulty of staffing and managing international operations and the increased operations, travel, shipping and compliance costs associated with having customers in numerous international locations; • potentially greater difficulty collecting accounts receivable and longer payment cycles; • the availability and cost of coverage by wireless carriers in international markets; • higher or more variable costs associated with wireless carriers and other service providers; • the need to offer customer support in various languages; • challenges in understanding and complying with local laws, regulations and customs in foreign jurisdictions, including laws regarding privacy and government surveillance; • export controls and economic sanctions administered by the Department of Commerce Bureau of Industry and Security and the Treasury Department’s Office of Foreign Assets Control; 44 • compliance with various anti-bribery and anti-corruption laws such as the Foreign Corrupt Practices Act and United Kingdom Bribery Act of 2010; • tariffs and other non-tariff barriers, such as quotas and local content rules; • more limited protection for our intellectual property in some countries; • adverse or uncertain tax consequences as a result of international operations; • currency control regulations, which might restrict or prohibit our conversion of other currencies into U.S. dollars; • restrictions on the transfer of funds; • deterioration of political relations between the United States and other countries; and • political or social unrest, global pandemics, or economic instability in a specific country or region in which we operate, which could have an adverse impact on our operations in that location.
In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. In addition, our IRC department personnel operate either remotely or out of our offices.
In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time. 34 In addition, our IRC department personnel operate either remotely or out of our offices.
The ShotSpotter sensors are mounted on city facilities and third-party buildings, and occasionally on city or utility-owned light poles, and installing the sensors requires the consent of the property owners, which can be time-consuming to obtain and can delay deployment.
The ShotSpotter sensors are 41 mounted on city facilities and third-party buildings, and occasionally on city or utility-owned light poles, and installing the sensors requires the consent of the property owners, which can be time-consuming to obtain and can delay deployment.
If we do not help our customers use 39 applications within our solutions and provide effective ongoing support, our ability to sell additional applications to, or to retain, existing customers may suffer and our reputation with existing or potential customers may be harmed.
If we do not help our customers use applications within our solutions and provide effective ongoing support, our ability to sell additional applications to, or to retain, existing customers may suffer and our reputation with existing or potential customers may be harmed.
We, or our customers, may be subject to requests for our data or information concerning our techniques and processes, pursuant to state or federal law (for example, public-records requests or subpoenas to provide information or to testify in court).
We, or our customers, may be subject to requests for our data or information concerning our techniques and processes, pursuant to state or federal law (for example, public-records requests or subpoenas to provide information 48 or to testify in court).
Similarly, the future announcement of the termination or suspension of the stock repurchase program, or our decision not to utilize the full authorized repurchase amount under the stock repurchase program, could result in a decrease in the trading price of our stock.
Similarly, the future announcement of the termination or suspension 52 of the stock repurchase program, or our decision not to utilize the full authorized repurchase amount under the stock repurchase program, could result in a decrease in the trading price of our stock.
Some actors now engage and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities.
Some actors now engage and are expected to continue to engage in 39 cyber-attacks, including without limitation nation-state actors for geopolitical reasons and in conjunction with military conflicts and defense activities.
Economic uncertainties or downturns, or political changes, could limit the availability of funds available to our customers and potential customers, which could materially adversely affect our business. Economic uncertainties or downturns could adversely affect our business and operating results.
Economic uncertainties or downturns, or political changes, could limit the availability of funds available to our existing and potential customers, which could materially and adversely affect our business. Economic uncertainties or downturns could adversely affect our business and operating results.
If a court were to find either exclusive forum provision in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with litigating Securities Act claims in state court, or both state and federal court, which could seriously harm our business, financial condition, results of operations, and prospects. 51 Item 1B.
If a court were to find either exclusive forum provision in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur further significant additional costs associated with litigating Securities Act claims in state court, or both state and federal court, which could seriously harm our business, financial condition, results of operations, and prospects. 55 Item 1B.
Our ShotSpotter Respond solution requires us to deploy ShotSpotter sensors in our customer coverage areas, which typically entails the installation of approximately 15 to 25 sensors per square mile.
Our ShotSpotter solution requires us to deploy ShotSpotter sensors in our customer coverage areas, which typically entails the installation of approximately 15 to 25 sensors per square mile.
We do not intend to pay dividends for the foreseeable future. We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable future.
We do not intend to pay dividends for the foreseeable future. 53 We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable future.
Real or perceived errors, failures or bugs in our software could adversely affect our operating results and growth prospects. Because our software is complex, undetected errors, failures or bugs may occur.
Real or perceived errors, failures, vulnerabilities, or bugs in our software could adversely affect our operating results and growth prospects. Because our software is complex, undetected errors, failures or bugs may occur.
Any reduction in federal funding for local law enforcement efforts could result in our customers having less access to funds required to continue, renew, expand or pay for our solutions. Social unrest, protests against racial inequality, protests against police brutality and movements such as “Defund the Police” have increased in recent years.
Any reduction in federal funding for local law enforcement efforts could result in our customers having less access to funds required to continue, renew, expand or pay for our solutions. Social unrest, protests against racial inequality, protests against police brutality and movements such as “Defund the Police” have increased in past years.
Item 1A. RIS K FACTORS Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this report, including our consolidated financial statements and related notes, before deciding whether to purchase shares of our common stock.
Item 1A. RISK FACTORS Investing in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this report, including our consolidated financial statements and related notes, before deciding whether to purchase shares of our common stock.
Once we enter into a contract with a customer, there is a delay until we begin recognizing revenues while we survey the coverage areas, obtain any 25 required consents for installation, and install our sensors, which together can take up to several months or more.
Once we enter into a ShotSpotter contract with a customer, there is a delay until we begin recognizing revenues while we survey the coverage areas, obtain any required consents for installation, and install our sensors, which together can take up to several months or more.
Our ability to successfully face these challenges depends on several factors, including increasing the awareness of our solutions and their benefits; the effectiveness of our marketing programs; the costs of our solutions; our ability 31 to attract, retain and effectively train sales and marketing personnel; and our ability to develop relationships with communication carriers and other partners.
Our ability to successfully face these challenges depends on several factors, including increasing the awareness of our solutions and their benefits; the effectiveness of our marketing programs; the costs of our solutions; our ability 33 to attract, retain and effectively train sales and marketing personnel; and our ability to develop relationships with communication carriers and other partners.
If we lose access to their data sets because of a technical problem, such as a ransomware attack, or other issues that arise through no fault of our own that makes that data set inaccessible, this may result in the loss of a customer to a competitor, subscriptions not being renewed and may make it more difficult to sell COPLINK X in that geographic region and to the federal market.
If we lose access to their data sets because of a technical problem, such as a ransomware attack, or other issues that arise through no fault of our own that makes that data set inaccessible, this may result in the loss of a customer to a competitor, subscriptions not being renewed and may make it more difficult to sell CrimeTracer in that geographic region and to the federal market.
For example, the City of Toronto, Canada decided against using ShotSpotter solutions because the Ministry of the Attorney General of Ontario indicated that it may compromise Section 8 of Canada’s Charter of Rights and Freedoms, which relates to unreasonable search and seizure.
For example, the City of Toronto, Canada decided against using SoundThinking solutions because the Ministry of the Attorney General of Ontario indicated that it may compromise Section 8 of Canada’s Charter of Rights and Freedoms, which relates to unreasonable search and seizure.
A failure to alert law 29 enforcement or security personnel of actual gunfire (false negative) could result in a less rapid or no response by police officers and first responders, increasing the probability of injury or loss of life.
A failure to alert law enforcement or security personnel of actual gunfire or security threats (false negative) could result in a less rapid or no response by police officers and first responders, increasing the probability of injury or loss of life.
In addition, deployment of our software into computing environments may expose undetected errors, compatibility issues, failures or bugs in our software. Despite our testing, errors, failures or bugs may not be found in our software until it is released to our customers.
In addition, deployment of our software into computing environments may expose undetected errors, compatibility issues, failures or bugs in our software. Despite our testing, errors, failures, vulnerabilities, or 38 bugs may not be found in our software until it is released to our customers.
As part of the process of implementing ShotSpotter Investigate for a customer, we will have to complete a rigorous application process to become an approved CJIS compliant vendor. While this CJIS compliant vendor approval process is based upon the FBI’s CJIS Security Policy, a separate process will have to be completed in each state where ShotSpotter Investigate will be implemented.
As part of the process of implementing CaseBuilder for a customer, we will have to complete a rigorous application process to become an approved CJIS compliant vendor. While this CJIS compliant vendor approval process is based upon the FBI’s CJIS Security Policy, a separate process will have to be completed in each state where CaseBuilder will be implemented.
Both false positive alerts and the failure to generate alerts of actual gunfire (false negative) may result in customer dissatisfaction, potential loss of confidence in our solutions, and potential liabilities to customers or other third parties, any of which could harm our reputation and adversely impact our business and operating results.
Both false positive alerts and the failure to generate alerts of actual 31 gunfire or security threats (false negative) may result in customer dissatisfaction, potential loss of confidence in our solutions, and potential liabilities to customers or other third parties, any of which could harm our reputation and adversely impact our business and operating results.
Interruptions or delays in service from our third-party providers could impair our ability to make our solutions available to our customers, resulting in customer dissatisfaction, damage to our reputation, loss of customers, limited growth and reduction in revenues. We currently use third-party data center hosting facilities to host certain components of our solutions.
Any interruptions or delays in service from our third-party providers could impair our ability to make our solutions available to our customers, resulting in customer dissatisfaction, damage to our reputation, loss of customers, limited growth and reduction in revenue. We currently use third-party data center hosting facilities to host certain components of our solutions.
If the economic conditions of the general economy 30 or industries in which we operate worsen from present levels, or if recent political changes result in less funding being available to purchase our solutions, our business, operating results, financial condition and cash flows could be adversely affected. New competitors may enter the market for our public safety solution.
If the economic conditions of the general economy or industries in which we operate worsen from present levels, or if past political changes result in less funding being 32 available to purchase our solutions, our business, operating results, financial condition and cash flows could be adversely affected. New competitors may enter the market for our public safety solution.
If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims); additional reporting requirements and/or oversight; bans on processing personal data; orders to destroy or not use personal data; and imprisonment of company officials.
If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims and mass arbitration demands); additional reporting requirements and/or oversight; bans 47 on processing personal information; orders to destroy or not use personal information; and imprisonment of company officials.
For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR”), and Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) (Law No. 13,709/2018) impose strict requirements for processing personal data.
For example, the European Union’s General Data Protection Regulation (“EU GDPR”), the United Kingdom’s GDPR (“UK GDPR”), Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) (Law No. 13,709/2018), and China’s Personal Information Protection Law (“PIPL”) impose strict requirements for processing personal information.
If we were required to pay a site license fee in order to install sensors, our deployment expenses would increase, which would impact our gross margins.
If we were required to pay a site license fee in order to install sensors or bollards, our deployment expenses would increase, which would impact our gross margins.
If we lose our ability to share a significant agency’s dataset in our COPLINK X platform, our ability to sell that product may be adversely affected. Agencies typically share their private CJIS data sets with us through subscription agreements.
If we lose our ability to share a significant agency’s dataset in our CrimeTracer platform, our ability to sell that product may be adversely affected. Agencies typically share their private CJIS data sets with us through subscription agreements.
If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, our solutions may be perceived as not being secure, our customers may be harmed and we could experience adverse consequences, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences.
If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, our solutions may be perceived as not being secure, our customers may be harmed and we could experience adverse consequences, including but not limited to regulatory investigations or actions; litigation or mass arbitration demands; fines and penalties; disruptions of our business operations; reputation harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences.
The market price of our common stock has fluctuated and may continue to fluctuate significantly in response to numerous factors, many of which are beyond our control, including the factors listed below and other factors described in this “Risk Factors” section: • actual or anticipated fluctuations in our operating results; • the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; • failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • ratings changes by any securities analysts who follow our company; • changes in the availability of federal funding to support local law enforcement efforts, or local budgets; • announcements by us of significant technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; • changes in operating performance and stock market valuations of other software companies generally; • price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; • changes in our board of directors or management; • sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders; • lawsuits threatened or filed against us; • novel and unforeseen market forces and trading strategies, as well as short sales, hedging and other derivative transactions involving our capital stock; • the impact of the COVID-19 pandemic and other macroeconomic pressures; • general economic conditions in the United States and abroad; • other events or factors, including those resulting from pandemics, protests against racial inequality, protests against police brutality and movements such as “Defund the Police”, war, incidents of terrorism or responses to these events; and • negative publicity, including false information, regarding our solutions.
The market price of our common stock has fluctuated and may continue to fluctuate significantly in response to numerous factors, many of which are beyond our control, including the factors listed below and other factors described in this “Risk Factors” section: • actual or anticipated fluctuations in our operating results; • the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; • failure of securities analysts to initiate or maintain coverage of our company, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • ratings changes by any securities analysts who follow our company; • changes in the availability of federal funding to support local law enforcement efforts, or local budgets; • announcements by us of significant technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; 51 • changes in operating performance and stock market valuations of other software companies generally; • price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; • changes in our board of directors or management; • sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders; • lawsuits threatened or filed against us; • novel and unforeseen market forces and trading strategies, as well as short sales, hedging and other derivative transactions involving our capital stock; • the impact of past and potential future disruptions in access to bank deposits and lending commitments due to bank failures, and other macroeconomic pressures; • general economic conditions in the United States and abroad; • other events or factors, including those resulting from pandemics, protests against racial inequality, protests against police brutality and movements such as “Defund the Police,” war, incidents of terrorism or responses to these events; and • negative publicity, including false information, regarding our solutions.
Real or perceived false positive gunshot alerts or failure or perceived failure to generate alerts for actual gunfire could adversely affect our customers and their operations, damage our brand and reputation and adversely affect our growth prospects and results of operations.
Real or perceived false positive gunshot alerts or false positive security threat detection, or failure or perceived failure to generate alerts for actual gunfire could adversely affect our customers and their operations, damage our brand and reputation and adversely affect our growth prospects and results of operations.
Moreover, new employees, especially those who work from home, may not be or become as productive as we expect, as we may face challenges in adequately or appropriately integrating them into our workforce and culture.
Moreover, new employees, especially those who work remotely, may not be or become as productive as we expect, as we may face challenges in adequately or appropriately integrating them into our workforce and culture.
As a result, protracted regional crises, issues with manufacturing facilities, or the COVID-19 pandemic, could lead to eventual shortages of necessary components. It could be difficult, costly and time consuming to obtain alternative sources for these components, or to change product designs to make use of alternative components.
As a result, protracted regional crises, or issues with manufacturing facilities could lead to eventual shortages of necessary components. It could be difficult, costly and time consuming to obtain alternative sources for these components, or to change product designs to make use of alternative components.
If we fail to protect our intellectual property rights adequately, our competitors might gain access to our technology and our business might be adversely affected. As of December 31, 2022, we had 38 issued patents directed to our technologies, 31 in the United States, two in Brazil, one each in Israel, Mexico, the United Kingdom, France and Germany.
If we fail to protect our intellectual property rights adequately, our competitors might gain access to our technology and our business might be adversely affected. As of December 31, 2023, we had 34 issued patents directed to our technologies, 27 in the United States, two in Brazil, one each in Israel, Mexico, the United Kingdom, France and Germany.
In particular, we expect to continue to expend substantial financial and other resources on: • higher costs to procure the sensors required for our solutions due to supply chain pressures; • sales and marketing, including a significant expansion of our sales organization, both domestically and internationally; • research and development related to our solutions, including investments in our engineering and technical teams; • acquisition of complementary technologies or businesses, such as our acquisition of HunchLab technology in October 2018, our acquisition of LEEDS in November 2020 and our acquisition of Forensic Logic in January 2022; • continued international expansion of our business; and • general and administrative expenses.
In particular, we expect to continue to expend substantial financial and other resources on: • higher costs to procure the sensors required for our solutions due to inflationary pressures; • sales and marketing, including a significant expansion of our sales organization, both domestically and internationally; • research and development related to our solutions, including investments in our engineering and technical teams; • acquisition of complementary technologies or businesses, such as our acquisition of HunchLab technology in October 2018, our acquisition of Technologic in November 2020, our acquisition of Forensic Logic in January 2022 and our acquisition of SafePointe in August 2023; • continued international expansion of our business; and • general and administrative expenses.
Ongoing social unrest may result in a material adverse effect on our business, the future magnitude or duration of which we cannot predict with accuracy.
Ongoing social unrest may have a material adverse effect on our business, the future magnitude or duration of which we cannot predict with accuracy.
Rising inflation rates may result in decreased demand for our products and services and increase our operating costs. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays and other unknown factors that may result in losses in future periods.
Rising inflation rates have resulted in decreased demand for our products and services and have increased our operating costs. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays and other unknown factors that may result in losses in future periods.
Fully integrating an acquired technology, asset or business into our operations may take a significant amount of time. We may not be successful in overcoming these risks or any other problems encountered with the acquisition of and integration of LEEDS, Forensic Logic or any future acquisitions.
Fully integrating an acquired technology, asset or business into our operations may take a significant amount of time. We may not be successful in overcoming these risks or any other problems encountered with the acquisition of and integration of Technologic, Forensic Logic and SafePointe, intellectual property assets acquired or any future acquisitions.
Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program.
Furthermore, we may not have adequate visibility into security issues of such acquired or integrated entities, may discover security issues that were not found during due diligence of such entities, and it may be difficult to integrate companies and their products into our information technology environment and security program.
The issued patents expire on various dates from 2023 to 2034. We also license one patent from a third party, which expires in 2023. We have patent applications pending for examination in the United States, Europe, Mexico and Brazil, but we cannot guarantee that these patent applications will be granted.
The issued patents expire on various dates from 2023 to 2034. We have patent applications pending for examination in the United States, Europe, Mexico and Brazil, but we cannot guarantee that these patent applications will be granted. We also license one other U.S. patent from one third party.
Problems faced by these network providers, or with the systems by which they allocate capacity among their customers, including us, could adversely affect the experience of our customers. The COVID-19 pandemic and people continuing to work from home may increase the likelihood of these problems with such network providers and their capacity allocation systems.
Problems faced by these network providers, or with the systems by which they allocate capacity among their customers, including us, could adversely affect the experience of our customers. People continuing to work remotely may increase the likelihood of these problems with such network providers and their capacity allocation systems.
We rely on the cooperation of customers and third parties to permit us to install our ShotSpotter sensors on their facilities, and failure to obtain these rights could increase our costs or limit the effectiveness of our ShotSpotter Respond solution.
We rely on the cooperation of customers and third parties to permit us to install our ShotSpotter sensors and SafePointe bollards on their facilities, and failure to obtain these rights could increase our costs or limit the effectiveness of our ShotSpotter and SafePointe solutions.
Our revenues and results of operations could vary significantly from quarter to quarter as a result of various factors, many of which are outside of our control, including: • the expansion or contraction of our customer base; • the renewal or nonrenewal of subscription agreements with, and expansion of coverage areas by, existing customers; • the size, timing, terms and deployment schedules of our sales to both existing and new customers; • the introduction of products or services that may compete with us for the limited funds available to our customers, and changes in the cost of such products or services; • changes in our customers’ and potential customers’ budgets; • our ability to control costs, including our operating expenses; • our ability to hire, train and maintain our direct sales force; • the timing of satisfying revenues recognition criteria in connection with initial deployment and renewals; • fluctuations in our effective tax rate; • the concentration of our revenue in a small number of large contracts with the potential for fluctuations and delays; and • general economic factors, such as inflation and rising interest rates, political conditions, both domestically and internationally, and continuing effects of the COVID-19 pandemic.
Our revenues and results of operations could vary significantly from quarter to quarter as a result of various factors, many of which are outside of our control, including: • the expansion or contraction of our customer base; • the renewal or non-renewal of subscription agreements with, and expansion of coverage areas by, existing customers; • the size, timing, terms and deployment schedules of our sales to both existing and new customers; • the introduction of products or services that may compete with us for the limited funds available to our customers, and changes in the cost of such products or services; • changes in our customers’ and potential customers’ budgets; • our ability to control costs, including our operating expenses; • our ability to hire, train and maintain our direct sales force; • the timing of satisfying revenues recognition criteria in connection with initial deployment and renewals; • fluctuations in our effective tax rate; • the concentration of our revenue in a small number of large contracts with the potential for fluctuations and delays; and 26 • general economic factors, such as inflation, rising interest rates, past and potential future disruptions in access to bank deposits and lending commitments due to bank failures, and political conditions, both domestically and internationally.
These initiatives require fiscal and time investments. Failure to obtain a SOC2 Type 2 audit report or to be compliant with the CJIS standard could adversely affect our reputation and sales, as well as the availability of our solutions in certain markets.
Failure to obtain a SOC2 Type 2 audit report or to be compliant with the CJIS standard could adversely affect our reputation and sales, as well as the availability of our solutions in certain markets.
Our ability to successfully grow our business depends on a number of factors including our ability to: • accelerate our acquisition of new customers; • further sell expansions of coverage areas to our existing customers; • expand our international footprint; • expand into new vertical markets, such as precision policing, and security solutions; • increase awareness of the benefits that our solutions offer; • maintain our competitive and technology leadership position; and • manage our business successfully through macroeconomic pressures, such as inflation and rising interest rates, and any resulting impact on economic conditions, including conditions impacting the availability of funding for our public safety solution.
Our ability to successfully grow our business depends on a number of factors including our ability to: • accelerate our acquisition of new customers; • further sell expansions of coverage areas to our existing customers; • expand our international footprint; 25 • expand into new vertical markets, such as precision policing, and security solutions; • increase awareness of the benefits that our solutions offer; • maintain our competitive and technology leadership position; and • manage our business successfully through macroeconomic pressures, such as inflation, rising interest rates, and past and potential future disruptions in access to bank deposits and lending commitments due to bank failures, and any resulting impact on economic conditions, including conditions impacting the availability of funding for our public safety solution.
For example, our ability to have our ShotSpotter Respond customers renew their annual subscriptions and expand their mileage coverage or purchase and implement our new products such as ShotSpotter Connect and ultimately ShotSpotter Investigate drives our ability to increase our revenues. Most of our ShotSpotter Respond customers begin using our solution in a limited coverage area.
For example, our ability to have our ShotSpotter customers renew their annual subscriptions and expand their mileage coverage or purchase and implement our other products, such as CaseBuilder (formerly ShotSpotter Investigate) and ResourceRouter (formerly ShotSpotter Connect), drives our ability to increase our revenues. Most of our ShotSpotter customers begin using our solution in a limited coverage area.
Any of our facilities or operations may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, tornadoes, hurricanes, wildfires, floods, nuclear disasters, acts of terrorism or other criminal activities, infectious disease outbreaks, such as COVID-19, and power outages, which may render it difficult or impossible for us to operate our business for some period of time or decrease productivity.
Any of our facilities or operations may be harmed or rendered inoperable by natural or man-made disasters, including earthquakes, tornadoes, hurricanes, wildfires, floods, nuclear disasters, acts of terrorism or other criminal activities, global pandemics, and power outages, which may render it difficult or impossible for us to operate our business for some period of time or decrease productivity.
In particular, ransomware attacks are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversion of funds.
In particular, ransomware attacks are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, ability to provide our products or services, loss of data and income, reputational harm, and diversion of funds.
In November 2022, our board of directors approved a new stock repurchase program for up to $25 million of our common stock, none of which was utilized as of December 31, 2022.
In November 2022, our board of directors approved a new stock repurchase program for up to $25.0 million of our common stock, of which $5.6 million was utilized as of December 31, 2023.
A number of factors could cause current and/or potential customers to: delay or refrain from purchasing our solutions, prevent expansion of, or reduce coverage areas and/ or terminate use of our solutions, including: • decreases or changes in available funding, including tax revenues, budgetary allocations, government grants and other government funding programs; • potential delays or changes in appropriations or other funding authorization processes; • changes in fiscal or contracting policies; • macro-and/or local economic changes that may affect customer funding; • changes in elected or appointed officials; • changes in public perception of the accuracy of our solutions and the appropriate use of our solutions by law enforcement, including as a result of negative publicity; and • changes in laws or public sentiment regarding privacy or surveillance.
A number of factors could cause current and/or potential customers to delay or refrain from purchasing our solutions, prevent expansion of, or reduce coverage areas and/or terminate use of our solutions, including: • decreases or changes in available funding, including tax revenues, budgetary allocations, government grants and other government funding programs; • potential delays or changes in appropriations or other funding authorization processes; • changes in fiscal or contracting policies; • macro- and/or local economic changes, such as inflation, rising interest rates, and past and potential future disruptions in access to bank deposits and lending commitments due to bank failures, that may affect customer funding; • changes in elected or appointed officials; • changes in public perception of the accuracy of our solutions and the appropriate use of our solutions by law enforcement, including as a result of negative publicity; and • changes in laws or public sentiment regarding privacy or surveillance.
We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, personnel misconduct or error, and supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.
We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing, credential harvesting, personnel misconduct or error, and supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, attacks enhanced or facilitated by artificial intelligence (“AI”), telecommunications failures, earthquakes, fires, floods, and other similar threats.
The remaining net operating losses of $4.9 million can be carried forward indefinitely under the Tax Cuts and Jobs Act. As of December 31, 2022, we also had state NOLs of approximately $43.8 million, which began expiring in 2022. These federal and state NOLs may be available to reduce future income subject to income taxes.
The remaining net operating losses of $4.9 million can be carried forward indefinitely under the Tax Cuts and Jobs Act. As of December 31, 2023, we also had state NOLs of approximately $42.7 million, which begin expiring in 2024. These federal and state NOLs may be available to reduce future income subject to income taxes.

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Item 2. Properties

Properties — owned and leased real estate

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Item 2. P ROPERTIES Our principal facilities consist of office space for our corporate headquarters in Fremont, California. We also have offices in Washington D.C., Newark, New Jersey, Walnut Creek, California and Tucson, Arizona. We lease our facilities and do not own any real property. We may procure additional space as we add employees and expand geographically.
Item 2. P ROPERTIES Our principal facilities consist of office space for our corporate headquarters in Fremont, California. We also have offices in Washington D.C., Newark, New Jersey, Walnut Creek, California, Eustis, Florida and Tucson, Arizona. We lease our facilities and do not own any real property. We may procure additional space as we add employees and expand geographically.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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On the basis of the allegations, the Plaintiff has petitioned for compensatory and punitive damages and other costs and expenses, including attorney’s fees. We believe that the Plaintiff’s claims are without merit and are disputing them vigorously.
On the basis of the allegations, the 57 Plaintiff has petitioned for compensatory and punitive damages and other costs and expenses, including attorney’s fees. We believe that the Plaintiff’s claims are without merit and are disputing them vigorously.
As a result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters or legal proceedings could have a material adverse effect on our business, operating results, financial condition and cash flows. Item 4. MINE SAF ETY DISCLOSURES Not Applicable. 52 PART II
As a result, a settlement of, or an unfavorable outcome on, any of the matters referenced above or other litigation matters or legal proceedings could have a material adverse effect on our business, operating results, financial condition and cash flows. Item 4. MINE SAF ETY DISCLOSURES Not Applicable. 58 PART II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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On November 24, 2020, we used $14.6 million of our IPO proceeds to fund the acquisition of LEEDS. Securities Authorized for Issuance under Equity Compensation Plans Information about securities authorized for issuance under our equity compensation plan is incorporated herein by reference to Item 12 of Part III of this Annual Report on Form 10-K. Item 6. [ Reserved] 54
On November 24, 2020, we used $14.6 million of our IPO proceeds to fund the acquisition of LEEDS. Securities Authorized for Issuance under Equity Compensation Plans Information about securities authorized for issuance under our equity compensation plan is incorporated herein by reference to Item 12 of Part III of this Annual Report on Form 10-K. Item 6. [ Reserved] 60
We used $13.7 million of the net proceeds from our IPO to repay outstanding indebtedness of $13.5 million, including early termination fees of $0.2 million, during the quarter ending September 30, 2017. On October 3, 2018, 53 we used $1.7 million of our IPO proceeds to fund the acquisition of HunchLab.
We used $13.7 million of the net proceeds from our IPO to repay outstanding indebtedness of $13.5 million, including early termination fees of $0.2 million, during the quarter ending September 30, 2017. On October 3, 2018, 59 we used $1.7 million of our IPO proceeds to fund the acquisition of HunchLab.
The stock repurchase program does not obligate us to purchase any particular amount of common stock and may be suspended or discontinued at any time. We did not repurchase any common stock during the quarter ended December 31, 2022.
The stock repurchase program does not obligate us to purchase any particular amount of common stock and may be suspended or discontinued at any time. We did not repurchase any common stock during the quarter ended December 31, 2023.
On March 7 2023, the last reported sale price of our common stock as reported on the Nasdaq Capital Market was $36.45 per share. As of March 7, 2023, we had approximately 61 holders of record of our common stock.
On March 26, 2024, the last reported sale price of our common stock as reported on the Nasdaq Capital Market was $15.05 per share. As of March 26, 2024, we had approximately 66 holders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Substantially all of our sales are to governmental agencies and universities, which often undertake a prolonged contract evaluation process that affects the size or the timing of our sales contracts and may likewise increase our customer acquisition costs. We rely on a limited number of suppliers and contract manufacturers to produce components of our solutions.
Substantially all of our sales are to governmental agencies and universities, which often undertake a prolonged contract evaluation process that affects the size or the timing of our sales contracts and may likewise increase our customer acquisition costs. 62 We rely on a limited number of suppliers and contract manufacturers to produce components of our solutions.
Use of Funds Our historical uses of cash have primarily consisted of cash used for operating activities, such as expansion of our sales and marketing operations, research and development activities and other working capital needs, and cash used in investing activities, such as property and equipment expenditures to install infrastructure in customer cities in order to deliver our solutions.
Use of Funds Our historical uses of cash have primarily consisted of cash used for operating activities, such as expansion of our sales and marketing operations, research and development activities and other working capital needs, and cash used in investing activities, such as property and equipment expenditures to install infrastructure in customer cities in order to deliver our solutions and acquisitions.
We have focused on rapidly growing our business and believe that our future growth is dependent on many factors, including our ability to increase our customer base, expand the coverage of our solutions among our existing customers, expand our international presence, and increase sales of our security solutions.
We have focused on rapidly growing our business and believe that our future growth is dependent on many factors, including our ability to increase our customer base, expand the coverage of our solutions among our existing customers, expand our international presence, increase sales of our security solutions and retain our customers.
Net New “Go-Live” Square Miles Net new “go-live” square miles represent the square miles covered by deployments of our gunshot detection solutions that were formally approved by customers during the year, both from initial and expanded customer deployments, net of square miles that ceased to be “live” during the year due to customer cancellations.
Net New “Go-Live” Square Miles 64 Net new “go-live” square miles represent the square miles covered by deployments of our gunshot detection solutions that were formally approved by customers during the year, both from initial and expanded customer deployments, net of square miles that ceased to be “live” during the year due to customer cancellations.
The fees paid to the sales channel intermediary are expensed as incurred as it relates to a period of performance of one year, and the sales channel intermediary is paid the same rate of commission on any license term renewals or additional professional services that are sold to the customer.
The fees paid to the sales channel intermediary are expensed as incurred as it relates to a period of performance of one year, and the sales channel intermediary is paid the same rate of commission on license term renewals or additional professional services that are sold to the customer.
We generate substantially all of our revenues from the sale of ShotSpotter Respond subscription services, in which gunshot data generated by company-owned sensors and software is sold to our customers through a cloud-based 66 hosting application for a specified contract period. Typically, the initial contract period is one to three years in length.
We generate substantially all of our revenues from the sale of ShotSpotter subscription services, in which gunshot data generated by company-owned sensors and software is sold to our customers through a cloud-based hosting application for a specified contract period. Typically, the initial contract period is one to three years in length.
Our trained incident review specialists can supplement alerts with additional tactical information, such as the potential presence of multiple shooters or the use of high-capacity weapons. 55 Gunshot incidents reviewed by our IRC result in alerts typically sent within approximately 45 seconds of the receipt of the gunfire incident.
Our trained incident review specialists can supplement alerts with additional tactical information, such as the potential presence of multiple shooters or the use of high-capacity weapons. 61 Gunshot incidents reviewed by our IRC result in alerts typically sent within approximately 45 seconds of the receipt of the gunfire incident.
When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing such intangible assets include, but not limited to, future expected cash flows from customer relationships and developed technology and discount rates.
When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets and contingent consideration liabilities. Critical estimates in valuing such intangible assets include, but not limited to, future expected cash flows from customer relationships and developed technology and discount rates.
Off-Balance Sheet Arrangements As of December 31, 2022, we did not have any relationships, material commitments or obligations with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements. We do not engage in off-balance sheet financing arrangements.
Off-Balance Sheet Arrangements As of December 31, 2023, we did not have any relationships, material commitments or obligations with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements. We do not engage in off-balance sheet financing arrangements.
We may also seek additional capital to fund our operations, including through the sale of equity or debt financings.
We may also seek additional capital to fund our 70 operations, including through the sale of equity or debt financings.
Stock-Based Compensation We recognize stock-based compensation expense for equity awards granted to our employees, directors, and consultants that can be settled in shares of our common stock. Stock-based compensation expense is based on the 68 grant date fair value estimate for each award as determined by our board of directors.
Stock-Based Compensation We recognize stock-based compensation expense for equity awards granted to our employees, directors, and consultants that can be settled in shares of our common stock. Stock-based compensation expense is based on the 75 grant date fair value estimate for each award as determined by our board of directors.
Comparison of the Years Ended December 31, 2021 and 2020 A discussion of changes in our cash flows from the year ended December 31, 2020 to the year ended December 31, 2021 can be found in Part II, Item 7, "Management's Discussion and Analysis of Financial Conditions and Results of Operations" of the 2021 Form 10-K.
Comparison of the Years Ended December 31, 2022 and 2021 A discussion of changes in our cash flows from the year ended December 31, 2021 to the year ended December 31, 2022 can be found in Part II, Item 7, "Management's Discussion and Analysis of Financial Conditions and Results of Operations" of the 2022 Form 10-K.
We acquired LEEDS, LLC (“LEEDS”) in November 2020 to expand our suite of solutions and introduce ShotSpotter Investigate. ShotSpotter Investigate is our case management solution that helps automate investigative work and improve case clearance rates – addressing an inefficiency problem for many agencies that have had to rely on multiple disparate systems to work cases.
We acquired LEEDS, LLC (“LEEDS”) in November 2020 to expand our suite of solutions and introduce CaseBuilder. CaseBuilder is our case management solution that helps automate investigative work and improve case clearance rates – addressing an inefficiency problem for many agencies that have had to rely on multiple disparate systems to work cases.
Substantially all of our revenues for the years ended December 31, 2022, 2021, and 2020 were derived from customers within the United States (including Puerto Rico and the U.S. Virgin Islands).
Substantially all of our revenues for the years ended December 31, 2023, 2022, and 2021 were derived from customers within the United States (including Puerto Rico and the U.S. Virgin Islands).
In assessing the need for or release of a valuation allowance, we consider all available evidence including past operating results and estimates of future taxable income. 69
In assessing the need for or release of a valuation allowance, we consider all available evidence including past operating results and estimates of future taxable income. 76
For ShotSpotter Respond, we generally invoice customers for 50% of the total contract value when the contract is fully executed and for the remaining 50% when the subscription service is operational and ready to go live – that is, when the customer has acknowledged the completion of all the deliverables in the signed customer acceptance form.
For ShotSpotter sales to cities, we generally invoice customers for 50% of the total contract value when the contract is fully executed and for the remaining 50% when the subscription service is operational and ready to go live – that is, when the customer has acknowledged the completion of all the deliverables in the signed customer acceptance form.
Comparison of the Years Ended December 31, 2021 and 2020 For discussion of our 2021 results and a comparison with 2020 results please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Conditions and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 that was filed with the SEC on March 29, 2022 (the "2021 Form 10-K").
Comparison of the Years Ended December 31, 2022 and 2021 For discussion of our 2022 results and a comparison with 2021 results please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Conditions and Results of Operations" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 that was filed with the SEC on March 14, 2023 (the "2022 Form 10-K").
In January 2022, we acquired Forensic Logic for purchase consideration of $31.6 million, consisting of $4.9 million in cash, subject to working capital adjustments, 464,540 shares of our common stock that were were valued at $14.3 million at the time of the acquisition.
In January 2022, we acquired Forensic Logic for purchase consideration of $31.6 million, consisting of $4.9 million in cash, subject to working capital adjustments, 464,540 shares of our common stock that were valued at $14.3 million at the time of the acquisition. The purchase consideration also included an earnout.
Liquidity and Capital Resources Sources of Funds Our operations have been financed primarily through net proceeds from the sale of equity, debt financing arrangements and cash from operating activities. Our principal source of liquidity is cash and cash equivalents totaling $10.5 million as of December 31, 2022.
Liquidity and Capital Resources Sources of Funds Our operations have been financed primarily through net proceeds from the sale of equity, debt financing arrangements and cash from operating activities. Our principal source of liquidity is cash and cash equivalents totaling $5.7 million as of December 31, 2023.
In January 2022, we acquired Forensic Logic, a leading provider of cloud-based data services to U.S. law enforcement and public safety to enable powering the industry's most advanced search and analysis technology. We believe combining lead generation from Forensic Logic with our ShotSpotter Investigate case management solution, and utilizing COPLINK X, can accelerate crime solving solutions and improve clearance rates.
In January 2022, we acquired Forensic Logic, a leading provider of cloud-based data services to U.S. law enforcement and public safety to enable powering the industry's most advanced search and analysis technology. We believe combining lead generation from Forensic Logic with our CaseBuilder case management solution, and utilizing CrimeTracer, can accelerate crime solving solutions and improve clearance rates.
In November 2020, we completed the acquisition of LEEDS for purchase consideration of $21.6 million in cash, subject to working capital adjustments, and the issuance of 63,901 shares of ShotSpotter common stock that were valued at $2.0 million at the time of the acquisition.
In November 2020, we completed the acquisition of Technologic for purchase consideration of $21.6 million in cash, subject to working capital adjustments, and the issuance of 63,901 shares of our common stock that were valued at $2.0 million at the time of the acquisition.
Our expected material cash requirements are similar to our historical uses of cash as well as in connection with earnout payment obligations, our stock repurchase program and repayment of any outstanding debt obligations under our credit facility, each as described below.
Our expected material cash requirements are similar to our historical uses of cash as well as in connection with contingent earnouts, our stock repurchase program and repayment of any outstanding debt obligations under our credit facility, each as described below.
The contract also provides for the procurement of professional services, such as for software development and testing for product feature enhancements, by executing supplementary work orders We recognize revenue from the license of our software license and related maintenance and support services revenues upon the satisfaction of performance obligations.
The sales channel intermediary contract includes software licensing and related maintenance and support services. The contract also provides for the procurement of professional services, such as for software development and testing for product feature enhancements, by executing supplementary work orders. We recognize revenue from the software license and related maintenance and support services revenues upon the satisfaction of performance obligations.
If a customer declines to renew its subscription prior to the end of the contract term, remaining setup fees, if any, are immediately recognized. With the acquisition of Forensic Logic, we also generate revenues from subscriptions of COPLINK X, cloud-based data services for advanced search and analysis tools.
If a customer declines to renew its subscription prior to the end of the contract term, remaining setup fees, if any, are immediately recognized. Through Forensic Logic, we generate revenues from subscriptions of CrimeTracer, cloud-based data services for advanced search and analysis tools.
Contractually, we provide continuous access to the software, maintenance and support services, helpdesk and technical support over the contract term, hence a time-elapsed method is used to recognize revenue.
Contractually, we provide continuous access to the software, maintenance and support services, helpdesk, and 74 technical support over the contract term, hence a time-elapsed method is used to recognize revenue. There is a fixed and variable component to the maintenance and support services.
We had net income of $6.4 million for the year ended December 31, 2022, net loss of $4.4 million for the year ended December 31, 2021, and net income of $1.2 million for the year ended December 31, 2020. Our accumulated deficit was $92.4 million and $98.8 million as of December 31, 2022 and 2021, respectively.
We had net loss of $2.7 million for the year ended December 31, 2023, net income of $6.4 million for the year ended December 31, 2022, and net loss of $4.4 million for the year ended December 31, 2021. Our accumulated deficit was $95.1 million and $92.4 million as of December 31, 2023 and 2022, respectively.
You should not rely upon forward-looking statements as predictions of future events. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
The purchase consideration also included an earnout payable based on LEEDS’ revenues generated during the years ended December 31, 2021 and 2022. The earnout for 2021 was not earned, so no amounts were paid in respect of this earnout in 2022.
The purchase consideration also included an earnout payable based on Technologic's revenues generated during the years ended December 31, 2021 and 2022. The earnout for 2021 was not earned, so no amounts were paid in respect of this earnout in 2022. The $1.5 million contingent earnout for 2022 was earned and paid in March 2023.
Income Taxes Our income taxes are based on the amount of our taxable income and enacted federal, state and foreign tax rates, adjusted for allowable credits, deductions and the valuations allowance against deferred tax assets, as applicable.
Income Taxes Our income taxes are based on the amount of our taxable income and enacted federal, state, and foreign tax rates, adjusted for allowable credits, deductions and the valuations allowance against deferred tax assets, as applicable. Our provision for state income taxes did not increase materially from the prior year.
Using the software, investigators benefit from a single digital case folder that includes all elements related to a case. Analytical and collaboration tools help investigators connect the dots and share information faster while reporting helps package cases for command staff and prosecutors.
Using the software, investigators benefit from a single digital case folder that includes all elements related to a case. Analytical and collaboration tools help investigators connect the dots and share information faster while reporting helps package cases for command staff and prosecutors. In May 2023, we renamed LEEDS to Technologic Solutions, LLC (“Technologic”).
The City of New York and the City of Chicago each accounted for 28% and 14%, respectively, of our total revenues for the year ended December 31, 2021. The City of Chicago and the City of New York each accounted for 18% and 15%, respectively, of our total revenues for the year ended December 31, 2020.
The City of New York and the City of Chicago each accounted for 30% and 10%, respectively, of our total revenues for the year ended December 31, 2022. The City of New York and the City of Chicago each accounted for 28% and 14%, respectively, of our total revenues for the year ended December 31, 2021.
Cash Flows Comparison of Years Ended December 31, 2022 and 2021 The following table presents a summary of our cash flows for the years ended December 31, 2022 and 2021 (in thousands): Year Ended December 31, 2022 2021 Net cash provided by (used in): Operating activities $ 12,184 $ 9,822 Investing activities (15,539 ) (7,884 ) Financing activities (1,749 ) (2,266 ) Net change in cash and cash equivalents $ (5,104 ) $ (328 ) As of December 31, 2022 and 2021, $0.9 million and $1.0 million in cash was held by our consolidated foreign subsidiaries, respectively.
Cash Flows Comparison of Years Ended December 31, 2023 and 2022 The following table presents a summary of our cash flows for the years ended December 31, 2023 and 2022 (in thousands): Year Ended December 31, 2023 2022 Net cash provided by (used in): Operating activities $ 10,951 $ 12,184 Investing activities (16,485 ) (15,539 ) Financing activities 795 (1,749 ) Net change in cash and cash equivalents $ (4,739 ) $ (5,104 ) As of December 31, 2023 and 2022, $0.5 million and $0.9 million in cash was held by our consolidated foreign subsidiaries, respectively.
Our ShotSpotter Connect solution, ShotSpotter GCM, an offering of ShotSpotter Investigate focused on gun violence, and COPLINK X are also sold on a subscription basis generally customized based on the number of sworn officers in a particular city.
Our ResourceRouter solution, CaseBuilder Crime Gun (formerly ShotSpotter GCM™) an offering of CaseBuilder focused on gun violence, and CrimeTracer are also sold on a subscription basis generally customized based on the number of sworn officers in a particular city.
If a customer does not renew prior to the contract term expiring, we stop recognizing subscription revenues at the end of the current contract term, even though services may continue to be provided for a period of time until the renewal process is completed.
This approach results in revenue recognition as we perform the services and incurs the costs. If this customer does not renew prior to the contract term expiring, we stop recognizing revenues at the end of the current contract term, even though services may continue to be provided for a period of time until the renewal process is completed.
We have concluded there is only one reporting unit for purposes of performing the goodwill impairment test. The fair value of each reporting unit is estimated primarily through the use of a discounted cash flow methodology.
We have concluded there is only one reporting unit for purposes of performing the goodwill impairment test. The fair value of each reporting unit is estimated primarily through the use of market capitalization as a key input.
Our security solutions, ShotSpotter SecureCampus and ShotSpotter SiteSecure, are typically smaller-scale deployments of ShotSpotter Respond vertically marketed to universities, corporate campuses, highways and key infrastructure centers to mitigate risk and enhance security by notifying authorities of outdoor gunfire incidents, saving critical minutes for first responders to arrive.
We also offer other security solutions within our flagship product offering ShotSpotter, including ShotSpotter for Highways, ShotSpotter for Campus and ShotSpotter for Corporate that are typically smaller-scale deployments of ShotSpotter vertically marketed to universities, corporate campuses, highways, and key infrastructure centers to mitigate risk and enhance security by notifying authorities of outdoor gunfire incidents, saving critical minutes for first responders to arrive.
The focus of this effort will be in the areas of data science modeling, user experience, core application functionality and backend infrastructure improvements, including integration of ShotSpotter gunshot data to enhance forecasting of gun violence. We are also investing in research and development resources in conjunction with our ShotSpotter Labs projects and initiatives.
We are investing in engineering resources to support further development of ResourceRouter, CrimeTracer, CaseBuilder and SafePointe. The focus of this effort will be in the areas of data science modeling, user experience, core application functionality and backend infrastructure improvements, including integration of ShotSpotter gunshot data to enhance forecasting of gun violence.
Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, those discussed in the subsection titled "Impact of COVID-19 and Social Unrest on our Business" below, as well as the section titled “Risk Factors” set forth in Part I, Item 1A of this Annual Report on Form 10-K and in our other SEC filings.
Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, those discussed in the section titled “Risk Factors” set forth in Part I, Item 1A of this Annual Report on Form 10-K and in our other SEC filings. You should not rely upon forward-looking statements as predictions of future events.
When they are revenue-producing, they will generally be sold on a cost-plus basis. As such, ShotSpotter Labs projects will normally produce gross margins significantly lower than most of our other solutions.
SoundThinking Labs projects are generally conducted in coordination with a sponsoring charitable organization and may or may not be revenue-producing. When they are revenue-producing, they will generally be sold on a cost-plus basis. As such, SoundThinking Labs projects will normally produce gross margins significantly lower than most of our other solutions.
Sales and marketing expense will increase in the near-term in absolute dollars as we continue to grow our organization and may fluctuate from quarter to quarter based on the timing of commission expense, marketing campaigns and tradeshows. Research and Development Research and development expenses primarily consist of personnel-related costs, consulting fees and allocated overhead.
We expect sales and marketing expense will increase in the near-term in absolute dollars as we continue to grow our organization and may fluctuate from quarter to quarter based on the timing of commission expense, marketing campaigns and tradeshows.
In 2019, we created a technology innovation unit, ShotSpotter Labs, to expand our efforts supporting innovative uses of our technology to help protect wildlife and the environment. Our gunshot detection solutions consist of highly-specialized, cloud-based software integrated with proprietary, internet-enabled sensors designed to detect outdoor gunfire.
SoundThinking Labs supports innovative uses of the Company's technology to help protect wildlife and the environment. Our gunshot detection solutions consist of highly-specialized, cloud-based software integrated with proprietary, internet-enabled sensors designed to detect outdoor gunfire.
Financing Activities Cash generated by financing activities includes net proceeds from the exercise of stock options and warrants and proceeds from the employee stock purchase plan (“ESPP”) purchases, offset by payments for repurchases of our common stock and debt issuance and financing costs. Financing activities used $1.7 million in cash during the year ended December 31, 2022.
We completed our acquisition of Forensic Logic for approximately $4.6 million in cash, net of $0.3 million cash acquired at closing during the year ended December 31, 2022. 72 Financing Activities Cash generated by financing activities includes net proceeds from the exercise of stock options and warrants and proceeds from the employee stock purchase plan (“ESPP”) purchases, offset by payments for repurchases of our common stock and debt issuance and financing costs.
If the set-up fees are deemed to be a material right, they are recognized ratably over three to five years depending on the contract term. Training and third-party integration license fees are recognized upon delivery.
If the set-up fees are deemed to be a material right, they are recognized ratably over three to five years depending on the contract term. Training and third-party integration license fees are recognized upon delivery. We also generate revenues through sales to two customers through sales channel intermediaries that include enhanced services.
The timing of when new miles go live can be uncertain and, as a result, can have a significant impact on the levels of revenues and deferred revenue from quarter to quarter. For ShotSpotter Respond, our pricing model is based on a per-square-mile basis. For ShotSpotter SecureCampus, ShotSpotter SiteSecure and ShotSpotter Investigate, our pricing model is on a customized-site basis.
All fees billed in advance of services being delivered are recorded as deferred revenue. The timing of when new miles go live can be uncertain and, as a result, can have a significant impact on the levels of revenues and deferred revenue from quarter to quarter. 65 For ShotSpotter, our pricing model is based on a per-square-mile basis.
We performed our annual test for goodwill impairment as of October 1, 2022 and concluded that no impairment charge was necessary. Income Taxes We account for income taxes under the asset and liability approach.
Changes in these estimates and assumptions could materially affect the determination of fair value and goodwill impairment. We performed our annual test for goodwill impairment as of October 1, 2023 and concluded that no impairment charge was necessary. Income Taxes We account for income taxes under the asset and liability approach.
We also generate revenues through the sale to a single customer of (i) a software license for our proprietary software technology and related maintenance and support services and (ii) professional software development services through a sales channel intermediary. The sales channel intermediary contract includes a renewable subscription for software and related maintenance and support services.
Revenue Recognition – Software License, Maintenance and Support, and Professional Services We also generate revenues from the sale of (i) a software license and related maintenance and support services of our proprietary software technology and (ii) professional software development services to a single customer, through a sales channel intermediary. We have been serving this customer for more than ten years.
Both of our security solutions, ShotSpotter SecureCampus and ShotSpotter SiteSecure, as well as ShotSpotter Investigate are typically sold on a subscription basis, each with a customized deployment plan. Our ShotSpotter Connect solution, ShotSpotter GCM and COPLINK X are also sold on a subscription basis generally customized based on the number of sworn officers in a particular city.
Our security solutions, ShotSpotter for Highways, ShotSpotter for Campus, ShotSpotter for Corporate as well as CaseBuilder are typically sold on a subscription basis, each with a customized deployment plan. Our ResourceRouter solution, CaseBuilder Crime Gun (formerly ShotSpotter GCM™) and CrimeTracer are also sold on a subscription basis generally customized based on the number of sworn officers in a particular city.
We generate annual subscription revenues from the deployment of ShotSpotter Respond on a per-square-mile basis. Our security solutions, ShotSpotter SecureCampus, ShotSpotter SiteSecure, and ShotSpotter Investigate are typically sold on a subscription basis, each with a customized deployment plan.
We offer our solutions on a software-as-a-service subscription model to our customers. We generate annual subscription revenues from the deployment of ShotSpotter on a per-square-mile basis. Our security solutions, ShotSpotter for Highways, ShotSpotter for Campus, and ShotSpotter for Corporate are typically sold on a subscription basis, each with a customized deployment plan.
See Note 2, Summary of Significant Accounting Policies , to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of our other significant accounting policies. Revenue Recognition Revenue Recognition We generate annual subscription revenues from the deployment of ShotSpotter Respond on a per-square-mile basis.
See Note 2, Summary of Significant Accounting Policies , to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of our other significant accounting policies.
Other Income (Expense), Net Other income (expense), net, consisted primarily of interest income and local and franchise tax expenses. 61 Income Taxes Our income taxes are based on the amount of our income before tax and enacted federal, state and foreign tax rates, adjusted for allowable credits and deductions, as applicable.
Income Taxes Our income taxes are based on the amount of our income before tax and enacted federal, state and foreign tax rates, adjusted for allowable credits and deductions, as applicable. Historically, our income tax expense has been at the state level.
In addition, we believe that entering into strategic partnerships with other service providers to cities and municipalities offers another potential avenue for expansion. We will also focus on expanding our business by introducing new products and services, such as ShotSpotter Connect, to existing customers and gaining new customers for ShotSpotter Labs.
In addition, we believe that entering into strategic partnerships with other service providers to cities and municipalities offers another potential avenue for expansion. 63 We will also focus on expanding our business by introducing new products and services to existing customers, such as ResourceRouter, CrimeTracer and as a result of our acquisition of SafePointe, an AI-driven weapon detection system and acquiring intellectual property assets.
The purchase consideration also included an earnout of up to $20.0 million payable in cash based on Forensic Logic's revenues generated during the years ended December 31, 2022 and 2023. The earnout for 2022 was not earned, so no amounts will be paid in respect of this earnout in 2023.
The acquisition date fair value of the contingent earnout was $12.4 million, payable in cash based on Forensic Logic's revenues generated during the years ended December 31, 2022 and 2023. The earnout for 2022 and 2023 was not earned, so no amounts will be paid.
Consultants, salaries, bonuses, stock-based compensation expense and other personnel costs are the most significant components of each of these expense categories. We include stock-based compensation expense incurred in connection with the grant of stock options and restricted stock units to the applicable operating expense category based on the equity award recipient’s functional area.
We include stock-based compensation expense incurred in connection with the grant of stock options and restricted stock units to the applicable operating expense category based on the equity award recipient’s functional area. We are focused on executing on our growth strategy.
Moreover, we anticipate that different political and regulatory considerations that vary across different jurisdictions could extend or make more difficult to predict the length of what is already a lengthy sales cycle. 57 Key Business Metrics December 31, 2022 2021 Revenue retention rate 124 % 125 % Sales and marketing spend per $1.00 of new annualized contract value $ 0.40 $ 0.37 Net new "go-live" square miles 102 101 Net new "go-live" cities 16 11 Annual recurring revenue (in millions) $ 79.7 $ 63.2 Revenue Retention Rate We calculate our revenue retention rate annually by dividing the (a) total revenues for such year from those customers who were customers during the corresponding prior year by (b) the total revenues from all customers in the corresponding prior year.
Key Business Metrics December 31, 2023 2022 Revenue retention rate 107 % 124 % Sales and marketing spend per $1.00 of new annualized contract value $ 0.52 $ 0.40 Net new "go-live" square miles 155 102 Net new "go-live" cities 25 16 Annual recurring revenue (in millions) $ 95.4 $ 79.7 Revenue Retention Rate We calculate our revenue retention rate annually by dividing the (a) total revenues for such year from those customers who were customers during the corresponding prior year by (b) the total revenues from all customers in the corresponding prior year.
For ShotSpotter Connect, ShotSpotter GCM and COPLINK X, pricing is currently customized, generally tied to the number of sworn police officers in a particular city. We may also offer discounts or other incentives in conjunction with all ShotSpotter sales in an effort to introduce the product, accelerate sales or extend renewals for a longer contract term.
We may also offer discounts or other incentives in conjunction with all ShotSpotter sales in an effort to introduce the product, accelerate sales or extend renewals for a longer contract term.
We generate revenues from subscriptions for ShotSpotter GCM, with revenue recognition being similar to our Respond and COPLINK X products. It is likely that international deployments may have different payment and billing terms due to their local laws, restrictions or other customary terms and conditions. ShotSpotter Labs projects may or may not be revenue-producing.
With the acquisition of SafePointe, we generate revenues from subscriptions of our AI-based weapons detection system based on the number of entryways, or lanes, being covered. It is likely that international deployments may have different payment and billing terms due to their local laws, restrictions or other customary terms and conditions. SoundThinking Labs projects may or may not be revenue-producing.
We believe that developing and acquiring products for law enforcement in adjacent categories is a path for additional growth given our large and growing installed base of police departments who trust ShotSpotter’s products, support, and way of doing business. The ability to cross-sell new products provides an opportunity to grow revenues per customer and lifetime value.
We believe that developing and acquiring products for law enforcement in adjacent categories is a path for additional growth. We believe our large and growing installed base of police departments who trust SoundThinking’s products, support, and way of doing business provide revenue growth opportunities.
Change in Fair Value of Contingent Consideration Change in fair value of contingent consideration primarily consists of increases or decreases in our contingent consideration liabilities that were recorded following our acquisition of Forensic Logic and LEEDS.
Change in Fair Value of Contingent Consideration Change in fair value of contingent consideration primarily consists of increases or decreases in our contingent consideration liabilities recorded for potential earnouts from our acquisitions of Forensic Logic, Technologic and SafePointe.
Once the renewal is complete, we recognize subscription revenues for the period between the expiration of the original term of the agreement and the completion of the renewal process in the month in which the renewal is executed.
Once the renewal is complete, we recognize subscription revenues for the period between the expiration of the original term of the agreement and the completion of the renewal process in the month in which the renewal is executed. If a customer declines to renew its subscription, the remaining fees from material rights, if any, are immediately recognized.
All, and any part of the output, of our professional services towards such product feature enhancements, belong to the customer. Accordingly, we satisfy the performance obligations over time as the performance of work typically creates or enhances an asset that the customer controls as the asset is created or enhanced.
We satisfy the performance obligations for these professional services over time as the performance of work typically creates or enhances an asset that the customer controls as the asset is created or enhanced.
We focus on net new “go-live” cities as a key business metric to measure our operational performance and market penetration Annual Recurring Revenue We calculate our annual recurring revenue for a year based on the expected GAAP revenue for the year from contracts that are in effect on January 1st of such year, assuming all such contracts that are due for renewal during the year renew as expected on or near their renewal date, and including contracts executed during the year after January 1st, but for which GAAP revenue recognition starts January 1st of the year. 58 Components of Results of Operations Revenues We generate annual subscription revenues from the deployment of ShotSpotter Respond on a per-square-mile basis.
Annual Recurring Revenue We calculate our annual recurring revenue for a year based on the expected GAAP revenue for the year from contracts that are in effect on January 1st of such year, assuming all such contracts that are due for renewal during the year renew as expected on or near their renewal date, and including contracts executed during the year after January 1st, but for which GAAP revenue recognition starts January 1st of the year.
Although we use a limited number of suppliers and contract manufacturers, we believe that we could find alternate suppliers or manufacturers if circumstances required us to do so, in part because a portion of the components required by our solutions are available off the shelf. 56 We generated revenues of $81.0 million, $58.2 million and $45.7 million for the years ended December 31, 2022, 2021, and 2020, respectively, representing year-over-year increases of 39% and 27%.
Although we use a limited number of suppliers and contract manufacturers, we believe that we could find alternate suppliers or manufacturers if circumstances required us to do so, in part because a portion of the components required by our solutions are available off the shelf.
We recently introduced ShotSpotter GCM, an offering of ShotSpotter Investigate focused on gun 59 violence, and a first-of-its-kind digital case management solution that automates the process by which key information is input, captured and used to identify associated gun crime cases leading to the identification of persons of interest.
We also generate revenues from CaseBuilder Crime Gun, a first-of-its-kind digital case management solution that automates the process by which key information is input, captured and used to identify associated gun crime cases leading to the identification of persons of interest. Subscriptions for CaseBuilder Crime Gun recognize revenue similar to our ShotSpotter and CrimeTracer products.
During the year ended December 31, 2022, the fair value of the contingent consideration that we recorded in connection with our acquisition of Forensic Logic, was decreased by $9.2 million, based upon revised estimated 2022 and 2023 revenue targets that were utilized in our fair value methodology.
During the year ended December 31, 2023, the fair value of the contingent consideration that we recorded in connection with our acquisition of SafePointe decreased by $2.4 million. This adjustment was prompted by revised revenue estimates for 2024 and 2025, which were incorporated into our fair value methodology.
This was primarily due to $3.6 million in payments for repurchases of our common stock and $0.4 million in payments for contingent consideration, partially offset by $0.9 million in proceeds from the exercise of stock options and $0.8 million in proceeds from ESPP purchases.
This was primarily due to $7.0 million in proceeds from our line of credit which was primarily used to fund our acquisition of SafePointe, approximately $0.2 million in proceeds from the exercise of stock options and $0.7 million in proceeds from ESPP purchases, offset by $5.6 million in payments for repurchases of our common stock, and $1.5 million in contingent liability payments.
In the near term, we expect our research and development expenses to increase in absolute dollars and as a percentage of revenues as we increase our research and development headcount to further strengthen our software and invest in the development of our services.
In the near term, we expect our general and administrative expenses to increase in both absolute dollars and as a percentage of revenues as we grow our business.
Although our operating expenses will fluctuate, we expect that over time, they will generally decrease as a percentage of revenues. 60 Sales and Marketing Sales and marketing expenses primarily consist of personnel-related costs attributable to our sales and marketing personnel, commissions earned by our sales personnel, marketing expenses for trade shows and lead generation programs, consulting fees, travel and facility-related costs and allocated overhead.
Sales and Marketing Sales and marketing expenses primarily consist of personnel-related costs attributable to our sales and marketing personnel, commissions earned by our sales personnel, marketing expenses for trade shows and lead generation programs, consulting fees and travel and facility-related costs.
Management uses significant judgement in making these estimates, which affect the timing of revenue recognition, including how much revenue to recognize in each period, and in estimating the timing of revenue recognition for remaining performance obligations.
Management uses significant judgment in making these estimates, which affect the timing of revenue recognition, including how much revenue to recognize in each period, and in estimating the timing of revenue recognition for remaining performance obligations. Gross Versus Net Presentation Our single software license and related service agreement was facilitated through a sales channel intermediary.
Revenues from the software license and maintenance and support services are recognized ratably over the term of the contract because our obligation to provide the license and related support services is uniform over the license term. We generally invoice for these services a month in arrears.
Revenues from the software license and fixed maintenance and support services are recognized ratably over the term of the contract because our obligation to provide the license and related support services is uniform over the license term. The variable portion is based on time and materials provided for higher-level technical support.
For the years ended December 31, 2022, 2021, and 2020, revenues from ShotSpotter Respond represented approximately 69%, 82% and 94% of total revenues, respectively. Our two current largest customers, the City of New York and the City of Chicago each accounted for 30% and 10%, respectively, of our total revenues for the year ended December 31, 2022.
Our two current largest customers, the City of New York, and the City of Chicago each accounted for 25% and 9%, respectively, of our total revenues for the year ended December 31, 2023.
Operating Expenses Sales and Marketing Expense Sales and marketing expense increased by $6.9 million and was primarily due to a $3.1 million increase in personnel costs, a $1.6 million increase in consulting and commission expenses, a $1.1 million increase in amortization of customer relationship and tradename assets related to Forensic Logic, a $0.6 million increase in travel expenses due to continued growth in our customer base, a $0.3 million increase in marketing and a $0.2 million increase in other costs.
Operating Expenses Sales and Marketing Expense Sales and marketing expense increased by $4.5 million and was primarily due to a $1.4 million increase in personnel costs, a $0.8 million increase in tradename asset amortization related to our Forensic Logic acquisition, $0.8 million increase in marketing expense, a $0.7 million increase in consulting and commission expenses, a $0.3 million increase in credit loss expense, and a $0.5 million increase in other costs. 69 Research and Development Expense Research and development expense increased by $2.1 million and was primarily due to a $1.7 million increase in personnel-related costs due to increased headcount and a $0.4 million increase in consulting and outside services expense and other costs.
The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations.
The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. Additionally, there is no guarantee that debt or equity financing will be available to us on terms that are favorable to us, or at all.
In November 2022, our board of directors approved a new stock repurchase program for up to $25.0 million of the our common stock. The shares may be repurchased from time to time in open market transactions, in privately negotiated transactions or by other methods in accordance with federal securities laws.
The shares may be repurchased from time to time in open market transactions, in privately negotiated transactions or by other methods in accordance with federal securities laws.
Challenges we face in this area include ensuring our new products are reliable, integrated well with other ShotSpotter solutions, and priced and serviced appropriately. In some cases, we will need to bring in new skill sets to properly develop, market, sell or service these new products depending on the categories they represent.
In some cases, we will need to bring in new skill sets to properly develop, market, sell or service these new products depending on the categories they represent. Consistent with this strategy, we expanded our suite of solutions with the acquisitions of Technologic, Forensic Logic and SafePointe.
The initial focus of these efforts is to develop innovative sensor applications as well as to test and expand the functionality of our outdoor sensors in challenging environmental conditions.
The initial focus of these efforts is to develop innovative sensor applications as well as to test and expand the functionality of our outdoor sensors in challenging environmental conditions. 67 In the near term, we expect our research and development expenses to increase in absolute dollars and as a percentage of revenues as we increase our research and development headcount to further strengthen our software and invest in the development of our services.
We generally invoice customers for 50% of the total contract value when the contract is fully executed and for the remaining 50% when the subscription service is operational and ready to go live – that is, when the customer has acknowledged the completion of all the deliverables in the signed customer acceptance form.
A small portion of our revenues are generated from the delivery of setup services to install company-owned sensors in the customer’s coverage area and other services including training and licenses to integrate with third-party applications. 73 We generally invoice customers for 50% of the total contract value when the contract is fully executed and for the remaining 50% when the subscription service is operational and ready to go live – that is, when the customer has acknowledged the completion of all the deliverables in the signed customer acceptance form.
In the near term, we expect our cost of revenues to increase in absolute dollars as our installed base increases, although certain of our costs of revenues are fixed and do not need to increase commensurate with increases in revenues. In addition, depreciation expense associated with deployed equipment is recognized over the first five years from the go-live date.
In addition, depreciation expense associated with deployed equipment is recognized over the first five years from the go live date. We also expect cost of revenues to increase in absolute dollars as we continue to invest in our customer success capabilities to drive growth and value for our customers.
We are focused on executing on our growth strategy. As a result, in the near term we expect our total operating expenses to increase in absolute dollars as we incur additional expenses due to growth.
As a result, in the near term we expect our total operating expenses to increase in absolute dollars as we incur additional expenses due to growth. Although our operating expenses will fluctuate, we expect that over time, they will generally decrease as a percentage of revenues.
While we intend to continue to devote resources to increase sales of our solutions, we expect that revenues from ShotSpotter Respond will continue to comprise a majority of our revenues for the foreseeable future. ShotSpotter Labs projects are generally conducted in coordination with a sponsoring charitable organization and may or may not be revenue-producing.
Most of our revenues are attributable to customers based in the United States. While we intend to continue to devote resources to increase sales of our solutions, we expect that revenues from ShotSpotter will continue to comprise a majority of our revenues for the foreseeable future.
Consistent with this strategy, we expanded our suite of solutions with the acquisitions of LEEDS and Forensic Logic. With respect to international sales, we believe that we have the potential to expand our coverage within existing areas, and to pursue opportunities in Latin America and other regions of the world.
With respect to international sales, we believe that we have the potential to expand our coverage within existing areas, and to pursue opportunities in Latin America and other regions of the world. By adding additional sales resources in strategic locations, we believe we will be better positioned to reach these markets.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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However, if the average value of the South African Rand had been 10% higher relative to the U.S. dollar during 2022, 2021 or 2020, it would not have resulted in a significant impact to our results of operations for the years ended December 31, 2022, 2021 or 2020. To date, we have not engaged in any hedging strategies.
However, if the average value of the South African Rand had been 10% higher relative to the U.S. dollar during 2023, 2022 or 2021, it would not have resulted in a significant impact to our results of operations for the years ended December 31, 2023, 2022 or 2021. To date, we have not engaged in any hedging strategies.
If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations. 70
If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and results of operations. 77
Foreign Currency Exchange Risk We have foreign currency risks related to our revenues and operating expenses denominated in currencies other than our functional currency, the U.S. dollar, principally the South African Rand. Movements in foreign currencies in which we transact business could significantly affect future net earnings.
We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. Foreign Currency Exchange Risk We have foreign currency risks related to our revenues and operating expenses denominated in currencies other than our functional currency, the U.S. dollar, principally the South African Rand.
Interest Rate Risk We are exposed to interest rate risk in the ordinary course of our business. Our cash includes cash in readily available checking and money market accounts. These securities are not dependent on interest rate fluctuations that may cause the principal amount of these assets to fluctuate.
These securities are not dependent on interest rate fluctuations that may cause the principal amount of these assets to fluctuate. We had cash and cash equivalents of $5.7 million as of December 31, 2023, which consists entirely of bank deposits.
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We had cash and cash equivalents of $10.5 million as of December 31, 2022, which consists entirely of bank deposits. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.
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Interest Rate Risk We are exposed to interest rate risk in the ordinary course of our business. At December 31, 2023, the outstanding balance of our Credit Agreement was $7.0 million, which bears interest at a variable rate. At December 31, 2023, the rate in effect was approximately 7.3%.
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Based on the outstanding balance of our Credit Agreement at December 31, 2023, a 100 basis point increase in the interest rate would increase interest expense by $0.1 million annually. Our cash includes cash in readily available checking and money market accounts.
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Movements in foreign currencies in which we transact business could significantly affect future net earnings.

Other SSTI 10-K year-over-year comparisons