Note 4. Business Acquisition

On January 3, 2022, the Company completed the acquisition of 100% of the membership interests in Forensic Logic, LLC (“Forensic Logic”) for purchase consideration of $4.9 million in cash, subject to working capital adjustments, and 464,540 shares of ShotSpotter common stock with a fair value of $14.3 million based on the closing price on the date of acquisition. The purchase consideration also included a contingent consideration agreement based on forecasted 2022 and 2023 Forensic Logic revenues. If 2022 Forensic Logic revenues exceeded $7.0 million, the contingent consideration payable would be $3.75 million up to a maximum of $9.5 million. An additional amount up to $10.5 million in contingent consideration may be payable based on Forensic Logic’s revenues generated during 2023. Any amounts due are payable within approximately 120 days after the end of 2022 and 2023. The estimated fair value of the contingent consideration on the date of acquisition was $12.4 million, resulting in a total estimated purchase consideration of $31.6 million. The acquisition enabled the Company to broaden its suite of precision-policing solutions and cloud-based investigative platforms to offer its customers.

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, technology lives, royalty rates, working capital rates, customer attrition rates and other estimates. The Company discounted the cash flows at 24%, reflecting the risk profile of the assets.

Acquisition-related expenses totaled $0.1 million and $0.2 million for the year ended December 31, 2022 and 2021, respectively, and are included in general and administrative expense.

The results of Forensic Logic have been included in the consolidated financial statements since the date of the acquisition. Forensic Logic’s consolidated revenue included in the consolidated financial statements since the acquisition date was $6.6 million. The Company has not disclosed net income or loss since the acquisition date as the business was integrated into the consolidated Company’s operations and therefore it was impracticable to determine this amount.

The unaudited pro forma combined revenue and net loss have been prepared as if the Company had acquired Forensic Logic on January 1, 2021. The unaudited pro forma financial information has been derived from the consolidated statements of operations of the Company and Forensic Logic for the respective periods. The historical financial information has been adjusted in the unaudited combined pro forma information based upon currently available information and certain estimates and assumptions. The actual effect of the transactions ultimately may differ from the pro forma adjustments included herein. However, management believes that the assumptions used to prepare

the pro forma adjustments provide a reasonable basis for presenting the significant effects of the transactions as currently contemplated and that the pro forma adjustments are factually supportable, give appropriate effect to the expected impact of events that are directly attributable to the transactions, and reflect those items expected to have a continuing impact on the Company. The unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place on January 1, 2021.

The unaudited pro forma combined revenue and net loss for the year ended December 31, 2021 would have been $64.5 million and $7.7 million, respectively.