00
014
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
Commission File Number:
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 5, 2023 the registrant had
Table of Contents
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PART I. |
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Item 1. |
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2 |
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3 |
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Condensed Consolidated Statements of Comprehensive Income (Loss) |
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6 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. |
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Item 1A. |
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Item 2. |
56 |
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Item 6. |
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58 |
1
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
SoundThinking, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
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March 31, |
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December 31, |
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2023 |
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2022 |
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Unaudited |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable and contract asset, net |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Goodwill |
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Intangible assets, net |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders' Equity |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Deferred revenue, short-term |
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Accrued expenses and other current liabilities |
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Total current liabilities |
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Deferred revenue, long-term |
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Deferred tax liability |
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Other liabilities |
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Total liabilities |
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Stockholders' equity |
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Preferred stock: $ |
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Common stock: $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Accumulated other comprehensive loss |
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( |
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( |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements.
2
SoundThinking, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Revenues |
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$ |
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$ |
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Costs |
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Cost of revenues |
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Impairment of property and equipment |
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— |
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Total costs |
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Gross profit |
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Operating expenses |
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Sales and marketing |
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Research and development |
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General and administrative |
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Change in fair value of contingent consideration |
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( |
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— |
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Total operating expenses |
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Operating income (loss) |
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( | ) |
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Other income (expense), net |
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Interest income, net |
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Other expense, net |
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Total other income (expense), net |
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( |
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Income (loss) before income taxes |
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( |
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Provision for income taxes |
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— |
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— |
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Net income (loss) |
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$ |
( |
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$ |
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Net income (loss) per share, basic |
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$ |
( |
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$ |
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Net income (loss) per share, diluted |
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$ |
( |
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$ |
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Weighted-average shares used in computing net income (loss) per share, basic |
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Weighted-average shares used in computing net income (loss) per share, diluted |
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See accompanying notes to condensed consolidated financial statements.
3
SoundThinking, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
(Unaudited)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Net income (loss) |
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$ |
( |
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$ |
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Other comprehensive income (loss): |
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Change in foreign currency translation adjustment, net of taxes |
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( |
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Comprehensive income (loss) |
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$ |
( |
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$ |
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See accompanying notes to condensed consolidated financial statements.
4
SoundThinking, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(In thousands, except share data)
(Unaudited)
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Par Value |
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Capital |
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Deficit |
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Loss |
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Equity |
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Balance at January 1, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Exercise of stock options |
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— |
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— |
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— |
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Repurchase of common stock |
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( |
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— |
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( |
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— |
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— |
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( |
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Issuance of common stock from RSUs vested |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Foreign currency translation loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Balance at March 31, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Par Value |
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Capital |
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Deficit |
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Loss |
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Equity |
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Balance at January 1, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Exercise of stock options |
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— |
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— |
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— |
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Repurchase of common stock |
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( |
) |
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— |
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( |
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— |
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— |
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( |
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Issuance of common stock from RSUs vested |
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— |
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— |
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— |
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— |
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— |
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Issuance of common stock from acquisition |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Foreign currency translation loss |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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Balance at March 31, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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See accompanying notes to condensed consolidated financial statements.
5
SoundThinking, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Cash flows from operating activities: |
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Net income (loss) |
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$ |
( |
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$ |
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Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: |
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Depreciation of property and equipment |
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Amortization of intangible assets |
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Impairment of property and equipment |
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— |
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Stock-based compensation |
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Change in fair value of contingent consideration |
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( |
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— |
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Provision for accounts receivable |
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Changes in operating assets and liabilities: |
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Accounts receivable and contract asset, net |
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( |
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Prepaid expenses and other assets |
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( |
) |
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( |
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Accounts payable |
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— |
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Accrued expenses and other current liabilities |
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( | ) |
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( | ) |
Deferred revenue |
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( |
) |
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Net cash (used in) provided by operating activities |
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( |
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Cash flows from investing activities: |
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Purchase of property and equipment |
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( |
) |
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( |
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Investment in intangible and other assets |
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( |
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( |
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Business acquisition, net of cash acquired |
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— |
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( |
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Net cash used in investing activities |
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( |
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( |
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Cash flows from financing activities: |
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Payment of contingent consideration liability |
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( |
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— |
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Proceeds from exercise of stock options |
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Repurchases of common stock |
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( |
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( |
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Net cash used in financing activities |
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( |
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( |
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Change in cash, cash equivalents and restricted cash |
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( |
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( |
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Effect of exchange rate on cash and cash equivalents |
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( |
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Cash, cash equivalents and restricted cash at beginning of year |
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Cash, cash equivalents and restricted cash at end of year |
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$ |
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$ |
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Supplemental disclosure of non-cash financing activities: |
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Property and equipment purchases included in accounts payable |
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$ |
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$ |
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Estimated fair value of contingent consideration |
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$ |
— |
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$ |
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Fair value of common stock issued as consideration for business acquisition |
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$ |
— |
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$ |
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See accompanying notes to condensed consolidated financial statements.
6
SoundThinking, Inc.
Notes to Condensed Consolidated Financial Statements
Note 1. Organization and Description of Business
In April 2023, ShotSpotter, Inc. changed its name to SoundThinking, Inc. (the “Company”), reflecting its broader impact on public safety through a growing set of industry-leading law enforcement tools and community-focused solutions. As part of the rebrand, the Company introduced its SafetySmart PlatformTM that includes four data-driven tools including its flagship product, ShotSpotter® (formerly ShotSpotter Respond), the leading outdoor gunshot detection, location and alerting system trusted by over
The Company’s principal executive offices are located in Fremont, California. The Company has
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated financial statements include the results of the Company and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated upon consolidation.
The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the consolidated financial statements filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 (“Annual Report”) filed with the Securities and Exchange Commission on March 14, 2023.
In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive income (loss), stockholders’ equity and cash flows for the interim periods, but are not necessarily indicative of the results of operations or cash flows to be anticipated for the full year 2023 or any future period. The Company has evaluated subsequent events occurring after the date of the condensed consolidated financial statements for events requiring recording or disclosure in the condensed consolidated financial statements.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its significant estimates, including the valuation of accounts receivable, the lives and realization of tangible and intangible assets, contingent consideration liabilities, stock-based compensation expense, customer life, accounting for revenue recognition, contingent liabilities related to legal matters, and income taxes including deferred taxes and any related valuation allowance. In particular, the Company's contingent consideration liabilities are subject to significant estimates surrounding forecasts of certain revenues and other factors. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions it believes to be reasonable under the circumstances. Actual results could
7
differ from those estimates and such differences could be material to the Company’s financial position and results of operations.
The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. In the event the Company determines that it would be able to realize its deferred assets in the future in excess of their net recorded amount, the Company makes an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
Concentrations of Risk
Credit Risk – Financial instruments that potentially subject the Company to concentration of credit risk consisted primarily of cash and cash equivalents and accounts receivable from trade customers. The Company maintains its deposits of cash and cash equivalents at
Concentration of Accounts Receivable and Contract Asset – At March 31 2023,
Concentration of Revenues – For the three months ended March 31, 2023,
Concentration of Suppliers – The Company relies on a limited number of suppliers and contract manufacturers. In particular, a single supplier is currently the sole manufacturer of the Company’s proprietary sensors.
Recent Accounting Pronouncements Adopted
In June 2016, the Financial Accounting Standards Board ("FASB”) issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments in this ASU replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects current expected credit loss and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance was effective at the beginning of the Company’s first quarter of fiscal 2023. The Company
Note 3. Revenue Related Disclosures
The changes in deferred revenue were as follows (in thousands):
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Three Months Ended March 31, |
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2023 |
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2022 |
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Beginning balance |
$ |
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$ |
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Deferred revenues acquired (Note 4 - Business Acquisitions) |
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— |
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New billings |
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Revenue recognized during the year from beginning balance |
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( |
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( |
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Revenue recognized during the year from new billings |
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( |
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( |
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Foreign currency impact |
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Ending balance |
$ |
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$ |
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8
The following table presents remaining performance obligations for contractually committed revenues as of March 31, 2023 (in thousands):
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$ |
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Total |
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$ |
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During the three months ended March 31, 2023, the Company recognized revenues of $
During the three months ended March 31, 2023, the Company recognized revenues of $
Note 4. Business Acquisition
During the first quarter of 2022, the Company completed the acquisition of
The following table summarizes the assignment of fair value to the identified assets and liabilities recorded as of the acquisition date (in thousands):
Cash and cash equivalents |
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$ |
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Accounts receivable and contract asset, net |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Software technology |
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Tradename |
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Customer relationships |
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Goodwill |
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Other assets |
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Accrued expenses and other current liabilities |
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( |
) |
Operating lease liabilities |
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( |
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Deferred revenue |
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( |
) |
Total estimated consideration |
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$ |
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Goodwill primarily represents the value of cash flows from future customers and the employee workforce. The Company expects to deduct the amortization of goodwill and intangible assets for tax purposes. A portion of the amortization deduction will commence upon settlement of contingent consideration liabilities. The Company valued the intangible assets using income-based approaches. Significant assumptions included forecasts of revenues, cost of revenues, research and development expense, sales and marketing expense, general and administrative expense,
9
technology lives, royalty rates, working capital rates, customer attrition rates and other estimates. The Company discounted the cash flows at
Acquisition-related expenses totaled $
Note 5. Fair Value Measurements
In November 2020, using a Monte Carlo Simulation approach, and Level III of the fair value hierarchy established by Accounting Standards Codification (“ASC”) 820-10-35-37, the Company estimated the fair value of the contingent consideration liability associated with its acquisition of LEEDS LLC (“LEEDS”) to be $
In January 2022, using a Monte Carlo Simulation approach and Level III of the fair value hierarchy established by ASC 820-10-35-37, the Company estimated the fair value of the contingent consideration liability associated with its acquisition of Forensic Logic to be $
The changes in the fair value of contingent consideration liabilities for the quarters ended March 31 are as follows (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Beginning balance |
|
$ |
|
|
$ |
|
||
Payment of contingent consideration liability |
|
|
( |
) |
|
|
— |
|
Change in fair value of contingent consideration |
|
|
( |
) |
|
|
|
|
Ending balance |
|
$ |
|
|
$ |
|
There were