# Owlet, Inc.: Form 10-Q for the period ended Mar 31, 2025

- Company: [Owlet, Inc.](/companies/owlt.md) (CIK 1816708)
- Form: 10-Q
- Filed: 2025-05-08
- Accepted by EDGAR: May 8, 2025, 21:06 ET
- Period: 2025-03-31
- Accession: 0001628280-25-023909
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1816708/000162828025023909/owlt-20250331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1816708/000162828025023909/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-01-01 to 2025-03-31 | $21.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2025-01-01 to 2025-03-31 | $9.8m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2025-01-01 to 2025-03-31 | $11.3m | us-gaap:GrossProfit |
| Research and development | 3 months, 2025-01-01 to 2025-03-31 | $2.9m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2025-01-01 to 2025-03-31 | −$2.7m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2025-01-01 to 2025-03-31 | $12.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | $3.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | $0.11 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | $0.11 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 15,383,287 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | −$5.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-01-01 to 2025-03-31 | $4.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2025-03-31 | $16.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-03-31 | $48.4m | us-gaap:AssetsCurrent |
| Total assets | at 2025-03-31 | $51.4m | us-gaap:Assets |
| Current liabilities | at 2025-03-31 | $40.7m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-03-31 | $63.4m | us-gaap:Liabilities |
| Long-term debt | at 2025-03-31 | $3.8m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2025-03-31 | $10.1m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2025-03-31 | −$25.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 41,578 characters.

*The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Report and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K and Form 10-K/A. Certain statements we make under the following discussion and analysis constitute “forward-looking statements” under the Reform Act. See “Cautionary Note Regarding Forward-Looking Statements” in this Report. You should consider our forward-looking statements in light of the risks discussed in our unaudited condensed consolidated financial statements, related notes and other financial information appearing elsewhere in this Report, the section entitled “Risk Factors” in our Form 10–K, Form 10-K/A and this Report, and our other filings with the SEC. Note that amounts included in the following discussion and analysis are presented in thousands and may not sum due to rounding.*

### Overview

Our mission is to empower parents with the right information at the right time, to give them more peace of mind and help them find more joy in the journey of parenting. Our digital parenting platform aims to give parents real-time data and insights to help parents feel calmer and more confident. We believe that every parent deserves peace of mind and the opportunity to feel their well-rested best. We also believe that every child deserves to live a long, happy, and healthy life, and we are working to develop products to help facilitate that belief.

### Components of Operating Results

### Revenues

We recognize revenue primarily from products and the associated mobile applications. Revenues are recognized when control of goods and services is transferred to customers in an amount that reflects the consideration expected to be received by us in exchange for those goods and services. Substantially all of our revenues were derived from product sales.

### Cost of Revenues

Cost of revenues consists of product costs, including contract manufacturing, shipping and handling, depreciation and amortization relating to tooling and manufacturing equipment and software, warranty replacement, fulfillment costs, warehousing, hosting and platform costs, and reserves for excess and obsolete inventory.

### Operating Expenses

*General and Administrative.* General and administrative expenses consist primarily of salaries, benefits, stock-based compensation, and bonuses for finance and accounting, legal, human resources, operations, quality and administrative executives and employees; third-party legal, accounting, customer service, software, and other professional services; corporate travel and entertainment; depreciation and amortization of property and equipment, asset impairment charges, legal settlements, and facilities rent.

*Sales and Marketing.* Sales and marketing expenses consist primarily of salaries, commissions, benefits, stock-based compensation, and bonuses for sales and marketing employees and contractors; third-party marketing expenses such as social media and search engine marketing, retail marketing, email marketing, and print marketing.

*Research and Development.* Research and development expenses consist primarily of salaries, benefits, stock-based compensation, and bonuses for employees and contractors engaged in the design, development, maintenance, and testing of our products and platforms, including clinical testing.

### Other Income (Expense)

*Interest Income (Expense), Net.* Interest income (expense), net consists of interest incurred on our outstanding borrowings and amortization of issuance costs. Interest income consists of interest earned on our money market account.

*Common Stock Warrant Liability Adjustment.* Mark to market adjustment to recognize the change in fair value of common stock warrant liabilities.

*Other Income (Expense), Net.* Other income (expense), net includes our net gain (loss) on foreign exchange transactions.

*Income Tax Provision.* Income tax provision consists primarily of U.S. federal and state income taxes related to the tax jurisdictions in which we conduct business.

### Results of Operations

The following table sets forth our results of operations for the periods, indicated in thousands:

|  | Three Months Ended March 31, 2025 |  | 2024 |
| --- | ---: | ---: | ---: |
| Revenues | $21,104 |  | $14,750 |
| Cost of revenues | 9,778 |  | 8,203 |
| Gross profit | 11,326 |  | 6,547 |
| Operating expenses: |  |  |  |
| General and administrative | 7,092 |  | 6,050 |
| Sales and marketing | 4,002 |  | 3,896 |
| Research and development | 2,903 |  | 2,347 |
| Total operating expenses | 13,997 |  | 12,293 |
| Operating loss | (2,671) |  | (5,746) |
| Other income (expense): |  |  |  |
| Interest expense, net | (991) |  | (161) |
| Common stock warrant liability adjustment | 6,687 |  | 9,179 |
| Other income (expense), net | 12 |  | 2 |
| Total other income (expense), net | 5,708 |  | 9,020 |
| Income before income tax provision | 3,037 |  | 3,274 |
| Income tax provision | (12) | — | — |
| Net income and comprehensive income | 3,025 |  | 3,274 |
| Accretion on convertible preferred stock | (847) |  | (1,328) |
| Allocation of net income to participating securities | (344) |  | (661) |
| Accretion on redeemable common stock | (21) |  | — |
| Allocation of net income to participating securities to redeemable common stockholders | 14 |  | — |
| Allocation of net income attributable to redeemable common stockholders | (79) |  | — |
| Net income attributable to redeemable common stockholders | 86 |  | — |
| Net income attributable to common stockholders | $1,748 |  | $1,285 |
| Net income per share attributable to common stockholders, basic | $0.11 |  | $0.15 |
| Weighted-average number of shares outstanding used to compute net income per share attributable to common stockholders, basic | 15,383,287 |  | 8,740,059 |
| Net income (loss) per share attributable to common stockholders, diluted | $0.11 |  | $(0.51) |
| Weighted-average number of shares outstanding used to compute net income (loss) per share attributable to common stockholders, diluted | 15,383,287 |  | 9,617,825 |
| Net income per share attributable to redeemable common stockholders, basic | $0.15 |  | $— |
| Weighted-average number of shares outstanding used to compute net income per share attributable to redeemable common stockholders, basic | 562,500 |  | — |
| Net income per share attributable to redeemable common stockholders, diluted | $0.15 |  | $— |
| Weighted-average number of shares outstanding used to compute net income per share attributable to redeemable common stockholders, diluted | 687,500 |  | — |

### Revenues

*(dollars in thousands)*

|  | Three Months Ended March 31, 2025 | 2024 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Revenues | $21,104 | $14,750 | $6,354 | 43.1% |

33

Revenues increased by $6,354, or 43.1%, from $14,750 for the three months ended March 31, 2024 to $21,104 for the three months ended March 31, 2025. The increase was primarily due to higher sales of Dream Sock and Dream Duo products. The higher sales of Dream Sock and Dream Duo products reflects an increase in consumer demand as compared to the same period in the prior year.

### Cost of Revenues and Gross Profit

*(dollars in thousands)*

|  | Three Months Ended March 31, 2025 | 2024 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Cost of revenues | $9,778 | $8,203 | $1,575 | 19.2% |
| Gross profit | $11,326 | $6,547 | $4,779 | 73.0% |
| Gross margin | 53.7% | 44.4% |  |  |

Cost of revenues increased by $1,575, or 19.2%, from $8,203 for the three months ended March 31, 2024 to $9,778 for the three months ended March 31, 2025. The increase was primarily due to the increase in product sales. Gross margin increased from 44.4% for the three months ended March 31, 2024 to 53.7% for the three months ended March 31, 2025 primarily due to higher revenue, favorable product mix, lower returns, improved fixed cost absorption, and lower direct product and fulfillment costs.

### General and Administrative

*(dollars in thousands)*

|  | Three Months Ended March 31, 2025 | 2024 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| General and administrative | $7,092 | $6,050 | $1,042 | 17.2% |

General and administrative expense increased by $1,042, or 17.2%, from $6,050 for the three months ended March 31, 2024 to $7,092 for the three months ended March 31, 2025. The increase was driven primarily by litigation settlements and higher compensation expense, including accrued bonuses, the absence of a bad debt recovery, and an increase in headcount, partially offset by lower stock-based compensation expense as compared to the same period in the prior year.

### Sales and Marketing

*(dollars in thousands)*

|  | Three Months Ended March 31, 2025 | 2024 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Sales and marketing | $4,002 | $3,896 | $106 | 2.7% |

Sales and marketing expense increased by $106, or 2.7%, from $3,896 for the three months ended March 31, 2024 to $4,002 for the three months ended March 31, 2025. The increase was driven primarily by higher compensation expense due to accrued bonuses as compared to the same period in the prior year.

### Research and Development

*(dollars in thousands)*

|  | Three Months Ended March 31, 2025 | 2024 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Research and development | $2,903 | $2,347 | $556 | 23.7% |

Research and development expense increased by $556, or 23.7%, from $2,347 for the three months ended March 31, 2024 to $2,903 for the three months ended March 31, 2025. The increase was driven primarily by higher compensation expense, including accrued bonuses, an increase in headcount, and increased investment in research & development, as compared to the same period in the prior year.

### Other Income (Expense), Net

*(dollars in thousands)*

|  | Three Months Ended March 31, 2025 | 2024 | Change $% |  |
| --- | ---: | ---: | ---: | ---: |
| Interest expense, net | $(991) | $(161) | $(830) | 515.5% |
| Common stock warrant liability adjustment | $6,687 | $9,179 | $(2,492) | (27.1%) |
| Other income (expense), net | $12 | $2 | $10 | 500.0% |

Interest expense increased by $830, from $161 for the three months ended March 31, 2024 to $991 for the three months ended March 31, 2025. The increase was driven primarily by interest and amortization of issuance costs related to the Company's term loan facility and asset-based revolving credit facility, which were entered into in September 2024.

For the three months ended March 31, 2025, we recognized a gain of $6,687 as compared to a gain of $9,179 for the same period in the prior year resulting from a smaller decrease in the fair value of common stock warrants outstanding. Additionally, the gain recognized for the three months ended March 31, 2025 included the decrease in fair value of the Series B Warrants that were issued in February 2024, which were not outstanding for the full period in the prior year.

### Liquidity and Capital Resources

We fund our operations primarily with proceeds from issuances of our convertible preferred stock, issuances of our common stock, borrowings under our loan facilities, issuances of convertible promissory notes, and sales of our products and services. As of March 31, 2025, we had cash and cash equivalents of $16,310.

On February 17, 2023 we entered into private placement investment agreements with certain investors, pursuant to which we issued and sold to the investors (i) an aggregate of 30,000 shares of our Series A convertible preferred stock, par value $0.0001 per share and (ii) warrants to purchase an aggregate of 7,871,712 shares of our common stock, par value $0.0001 per share, (“Series A Warrants”) for an aggregate purchase price of $30,000.

The Series A convertible preferred stock is convertible into common stock at the option of the holder at any time after February 17, 2023 and ranks, with respect to dividend rights, rights of redemption and rights upon a liquidation event, (i) senior to the common stock and all other classes or series of our equity securities established after February 17, 2023, unless such shares or equity securities expressly provide that they rank in parity with or senior to the Series A convertible preferred stock with respect to dividend rights, rights of redemption or rights upon a liquidation event, (ii) on parity with each class or series of our equity securities established after February 17, 2023, the terms of which expressly provide that it ranks on parity with the Series A convertible preferred stock with respect to dividend rights, rights of redemption and rights upon a liquidation event and (iii) junior to each class or series of our equity securities established after February 17, 2023, the terms of which expressly provide that it ranks senior to the Series A convertible preferred stock with respect to dividend rights, rights of redemption and rights upon a liquidation event. On August 20, 2024, holders of the Series A Preferred Stock elected to convert an aggregate of 15,721 shares of Series A Preferred Stock in exchange for an aggregate of 2,291,686 shares of common stock. Except as otherwise provided in the certificate of designation relating to the Series A convertible preferred stock or as required by law, holders of shares of Series A convertible preferred stock are entitled to vote with the holders of shares of common stock (and any other class or series that may similarly be entitled to vote with the holders of common stock) on an as-converted to common stock basis at any annual or special meeting of our stockholders, and not as a separate class.

At any time from and after February 17, 2028, the holders of at least a majority of the then outstanding shares of Series A convertible preferred stock may specify a date and time or the occurrence of an event by vote or written consent that all, and not less than all, of the outstanding shares of Series A preferred stock will automatically be: (i) converted into shares of common stock at a conversion rate of 145.7726 per share (the "Conversion Rate"), (ii) subject to certain exceptions and limitations, redeemed for an amount per share of Series A preferred stock equal to the liquidation preference of one thousand dollars per share, plus all accrued or declared but unpaid dividends as of the redemption date and time or (iii) a combination of the foregoing.

Subject to certain exceptions, upon the occurrence of a fundamental change, voluntary or involuntary liquidation, dissolution or winding-up of the Company, we will be required to pay an amount per share of Series A convertible preferred stock equal to the greater of (i) one thousand dollars per share or (ii) the consideration per share of Series A convertible preferred stock as would have been payable had all such shares been converted to common stock immediately prior to the liquidation event, plus, in each case, the aggregate amount of all declared but unpaid dividends thereon to the date of final distribution to the holders of Series A convertible preferred stock.

Each of the Series A Warrants sold in the private placement offering is exercisable for one share of common stock at an exercise price of $4.66 per share, is immediately exercisable, and will expire on February 17, 2028. As the Series A Warrants could require cash settlement in certain scenarios, the warrants were classified as liabilities upon issuance and were initially recorded at an aggregate estimated fair value of $26,133 The total proceeds from the offering were first allocated to the liability classified warrants, based on their fair values, with the residual $3,867 allocated to the Series A convertible preferred stock. The Series A convertible stock is accreting to its redemption value, starting from the issuance date to the date at which the shares become redeemable on February 17, 2028. Accretion will be recorded as a deemed dividend. None of the Series A Warrants have been exercised as of March 31, 2025.

On February 25, 2024 we entered into a private placement investment agreement with certain investors, pursuant to which we issued and sold to the investors (i) an aggregate of 9,250 shares of our Series B convertible preferred stock, par value $0.0001 per share and (ii) warrants to purchase an aggregate of 1,799,021 shares of our common stock, par value $0.0001 per share (the “February 2024 Warrants”), for an aggregate gross purchase price of $9,250.

The Series B convertible preferred stock is convertible into common stock at the option of the holder at any time after February 29, 2024 and ranks, with respect to dividend rights, rights of redemption and rights upon a liquidation event, (i) equal to our Series A convertible preferred stock, (ii) senior to the common stock and all other classes or series of our equity securities established after February 29, 2024, unless such shares or equity securities expressly provide that they rank in parity with or senior to the Series B convertible preferred stock with respect to dividend rights, rights of redemption or rights upon a liquidation event, (iii) on parity with each class or series of our equity securities established after February 29, 2024, the terms of which expressly provide that it ranks on parity with the Series B convertible preferred stock with respect to dividend rights, rights of redemption and rights upon a liquidation event and (iv) junior to each class or series of our equity securities established after February 29, 2024, the terms of which expressly provide that it ranks senior to the Series B convertible preferred stock with respect to dividend rights, rights of redemption and rights upon a liquidation event. Except as otherwise provided in the certificate of designation relating to the Series B convertible preferred stock or as required by law, holders of shares of Series B convertible preferred stock are entitled to vote with the holders of shares of common stock (and any other class or series that may similarly be entitled to vote with the holders of common stock) on an as-converted to common stock basis at any annual or special meeting of our stockholders, and not as a separate class.

At any time from and after March 1, 2029, the holders of at least a majority of the then outstanding shares of Series B convertible preferred stock may specify a date and time or the occurrence of an event by vote or written consent that all, and not less than all, of the outstanding shares of Series B convertible preferred stock will automatically be: (i) converted into shares of common stock at a conversion rate of 129.6596 per share, (ii) subject to certain exceptions and limitations, redeemed for an amount per share of Series B preferred stock equal to the liquidation preference of one thousand dollars per share, plus all accrued or declared but unpaid dividends as of the redemption date and time or (iii) a combination of the foregoing.

Subject to certain exceptions, upon the occurrence of a fundamental change, voluntary or involuntary liquidation, dissolution or winding-up of the Company, we will be required to pay an amount per share of Series B convertible preferred stock equal to the greater of (i) one thousand dollars per share or (ii) the consideration per share of Series B convertible preferred stock as would have been payable had all such shares been converted to common stock immediately prior to the liquidation event, plus, in each case, the aggregate amount of all declared but unpaid dividends thereon to the date of final distribution to the holders of Series B convertible preferred stock. As of March 31, 2025, the redemption value for Series B convertible preferred stock is $9,250. None of the Series B convertible preferred stock had been converted as of March 31, 2025.

Each of the February 2024 Warrants sold in the private placement offering is exercisable for one share of common stock at an exercise price of $7.7125 per share, is immediately exercisable, and will expire on March 1, 2029. As the February 2024 Warrants could require cash settlement in certain scenarios, the February 2024 warrants were classified as liabilities upon issuance and were initially recorded at an aggregate estimated fair value of $6,856. The total proceeds from the offering were first allocated to the liability classified warrants, based on their fair values, with the residual $2,394 allocated to the Series B convertible preferred stock. The Series B convertible stock will accrete to its redemption value, starting from the issuance date to the date at which the shares become redeemable on March 1, 2029. Accretion will be recorded as a deemed dividend. None of the February 2024 Warrants have been exercised as of March 31, 2025.

We incurred $394 of issuance costs related to the offering. Issuance costs allocated to the preferred stock of $102 were recorded as a reduction to the Series B convertible preferred stock. Issuance costs allocated to the liability classified warrants of $292 were recorded as an expense within general and administrative expenses on the unaudited condensed consolidated statements of operations and comprehensive income (loss).

On September 11, 2024, we entered into the underwriting agreement and issued 3,135,136 shares of our common stock at a price to the public of $3.70 per share, less underwriting discounts and commissions. The net proceeds we received were $10,590. We provided the underwriter a discount of 7% off the offering price. In addition to the underwriter discount, the offering expenses with third parties were $863, of which $260 in issuance costs that were unpaid as of March 31, 2025. We also reimbursed the underwriters for $198 in fees and expenses, including legal expenses, out-of-pocket expenses, and clearing expenses. The issuance costs associated with the

September 2024 Offering were recorded as a reduction to additional paid-in capital on the unaudited condensed consolidated balance sheets.

Pursuant to the underwriting agreement, we also issued, as a portion of the underwriting compensation payable to the underwriter, a warrant to purchase up to 125,405 shares of our common stock (which was subsequently transferred to certain affiliates of the underwriter, the “Titan Warrants”). The Titan Warrants are initially exercisable on March 13, 2025 at an exercise price of $4.63 and have a term of five years from such initial exercise date. None of the Titan Warrants have been exercised as of March 31, 2025.

### WTI Loan Facility

On September 11, 2024 (the “Effective Date”), we, as guarantor, and our wholly-owned subsidiary, Owlet Baby Care, Inc., a Delaware corporation (“OBCI,” and together with us, collectively, the “Loan Parties”), as the borrower, entered into a Loan Facility Agreement (the “Loan Facility Agreement”) with WTI Fund X, Inc. and WTI Fund XI, Inc. (collectively “WTI” for a term loan facility of up to $15,000 (the “WTI Loan Facility”).

The WTI Loan Facility consists of two tranches. The first tranche of $10,000 was available at closing and through September 30, 2024, with $2,500 of the first tranche availability extendable until December 31, 2024 (the “First Tranche Commitment”). We initiated our first drawdown under the WTI Loan Facility of $7,500 (the “Initial Loan”) shortly after closing. We agreed with WTI to extend the remaining $2,500 of the First Tranche Commitment to March 31, 2025. We ultimately elected not to draw on the remainder of the first tranche and, as a result, 62,500 unvested shares of redeemable common stock were forfeited on March 31, 2025. Once repaid, we cannot reborrow from the WTI Loan Facility.

The second tranche of $5,000 is available through August 15, 2025 (the “Second Tranche Commitment,” or together with the First Tranche Commitment, the “Loan Commitments”) upon achievement of (a) at least $48,600 in revenue for the period that commenced October 1, 2024 and ending June 30, 2025 (the “Second Tranche Condition Period”), (b) total cash burn during the Second Tranche Condition Period not to exceed $600 for such period, (c) receipt by us of at least $6,000 of net proceeds from an equity financing during a period commencing on the closing date and ending on the second tranche borrowing date, and (d) receipt by WTI of our then-current, board-approved operating and financing plan to WTI's satisfaction, as well as compliance with certain reporting conditions.

Interest on the outstanding principal amounts of any borrowing under the WTI Loan Facility accrues at a rate per annum equal to the sum of the prime rate plus 3.5%, with a floor of 12%. The interest rate on the outstanding principal amounts of any borrowing under the WTI Loan Facility for the three months ended March 31, 2025 was 12%. Commencing on November 1, 2025 through maturity on January 1, 2028, we are required to make monthly interest and principal payments. Loans under the WTI Loan Facility also accrue 2.5% in payment-in-kind interest (“PIK Interest”) compounded monthly, and PIK Interest payments will be due and payable upon maturity of the loans. Accrued coupon interest and accrued PIK interest are recorded within accrued and other expenses and within long-term debt, net respectively on the unaudited condensed consolidated balance sheets. Accrued PIK interest was $104 as of March 31, 2025.

We have the option to prepay the outstanding loans issued under the WTI Loan Facility in whole at any time by repaying all outstanding principal and accrued interest, as well as all scheduled unpaid interest on the loan, including PIK Interest, as if the loan continued to accrue interest through its stated maturity. Provided if our fully diluted market capitalization of our common stock is greater than or equal to $250,000 for 10 consecutive Trading Days, then so long as such prepayment is made within 60 days thereafter, the redemption price will be discounted by 30% of the total amount of all scheduled but unpaid interest (but excluding any PIK Interest, which will not be discounted).

The WTI Loan Facility contains certain reporting and operational covenants that we must meet in order to borrow funds under the Loan Commitments and not cause an event of default. Upon the occurrence of an event of default, WTI could elect to force redemption of the outstanding balances under the WTI Loan Facility, requiring us to pay all outstanding principal and accrued interest, as well as all scheduled unpaid interest on the loan, including PIK interest. Upon the occurrence of an event of default, we will also be required to pay default interest on any overdue balances at a rate of 5.0%. The WTI Loan Facility and any loans and obligations issued thereunder are collateralized by substantially all of our assets, with certain exceptions as set forth in the WTI Loan Facility, and are guaranteed by Owlet, Inc. As of March 31, 2025, we were in compliance with all covenants under the WTI Loan Facility.

As partial consideration for the availability and funding of the WTI Loan Facility, we and WTI Fund X, LLC (“Fund X”) and WTI Fund XI, LLC (“Fund XI”, and together with Fund X, the “WTI Funds”) entered into a Stock Issuance Agreement (the “WTI Stock Issuance Agreement”), dated as of the Effective Date. Pursuant to the WTI Stock Issuance Agreement, we issued to the WTI Funds an aggregate of 750,000 shares of redeemable common stock on the Effective Date, of which 62,500 shares of the redeemable common stock have been forfeited and the remaining 125,000 of unvested redeemable common stock are subject to forfeiture in the event that we do not draw on the remaining portion of the outstanding Loan Commitment. To the extent we do exercise our option under the Loan Commitments to issue additional debt, a number of forfeitable shares will 'vest' and no longer be subject to forfeiture based on the pro rata portion of the outstanding Loan Commitments drawn against.

The shares issued to WTI pursuant to the WTI Stock Issuance Agreement contain an embedded redemption option (the “Redemption Option”) such that WTI may elect to force us to redeem the shares that are no longer subject to forfeiture for a price of $8.40 per share. The Redemption Option may be exercised in whole or in part, at any time, from time to time, during the period commencing on the first trading day following the fifth anniversary of the Effective Date and continuing through the date which is 10 years after the Effective Date, subject to certain acceleration provisions set forth in the WTI Stock Issuance Agreement. Because the shares are redeemable at the option of the WTI Funds, the shares are recorded in mezzanine equity on the unaudited condensed consolidated balance sheets. The redeemable common shares were initially recorded at their fair value of $7.66 per share, which was an aggregate value of $4,308. The value of the redeemable common shares was determined using a combination of the value of our stock on the date of issuance and the theoretical value of a stand-alone put option valued using a Black-Scholes put option model discounted by a present value factor that considers the credit spread between an estimated Company specific discount rate and the risk-free rate of return. Because the shares are required to be redeemed at the option of WTI, based solely on the passage of time, and provided WTI did not elect to otherwise sell or transfer the shares beforehand, the carrying value of the shares will accrete to their redemption value of $8.40 per share from the issuance date through September 11, 2029, the date the Redemption Option first becomes exercisable.

We allocated the lender fees (including the fair value of the vested shares) and third-party debt issuance costs between the Initial Loan and the remaining, undrawn Loan Commitments. The costs allocated to the Initial Loan are accounted for as a discount and will be amortized across the term of the Initial Loan using the effective interest method. The costs allocated to the remaining, undrawn Loan Commitments are accounted for as loan commitment assets, which are being amortized to interest expense using the straight-line method over the commitment periods, due to uncertainty about our intent to access the Loan Commitment. The unamortized portion of the loan commitment assets was $424 as of March 31, 2025 and is recorded within Other assets on the unaudited condensed consolidated balance sheets.

We recognized $222 of interest expense related to the amortization of debt issuance costs of the WTI Loan Facility and $385 of interest expense related to the amortization of the loan commitment assets during the three months ended March 31, 2025.

### ABL Line of Credit

On September 11, 2024, we, as guarantor, and our wholly-owned subsidiary, Owlet Baby Care, Inc., a Delaware corporation (“OBCI,” and together with us, collectively, the “Loan Parties”), as borrower, entered into a Credit and Security Agreement (the “Credit Agreement”) with the financial institutions party thereto from time to time as lenders (collectively the “Lenders”) and ABL OPCO LLC, a Delaware limited liability company, in its capacity as administrative agent for the Lenders.

The Credit Agreement provides for an asset-based revolving credit facility (the “ABL Line of Credit”) in a maximum principal amount of up to $15,000, which amount shall increase to $20,000 on September 11, 2025 (the “Revolving Commitment”). The ABL Line of Credit is collateralized by substantially all of our assets. Loans and other obligations under the Credit Agreement bear interest at a rate per annum equal to the 1-month Secured Overnight Financing Rate (subject to a floor of 3.5%) plus a margin, which varies between 7.5% and 8.5% depending on our earnings before interest, taxes, depreciation and amortization (“EBITDA”), provided that the interest rate shall not exceed the maximum rate permitted under applicable law.

The ABL Line of Credit matures on September 10, 2027 (the “Maturity Date”). If for any reason the Credit Agreement is terminated or all outstanding loans and other obligations are paid in full and the ABL Line of Credit is terminated before the Maturity Date, we will be obligated to pay a prepayment fee equal to a percentage of the then-current Revolving Commitment, which percentage decreases on certain anniversary of the closing date.

The Credit Agreement contains representations, warranties, covenants, and events of default customary for agreements of this type. OBCI's obligations under the Credit Agreement are: (i) fully and unconditionally guaranteed by Owlet, Inc.; and (ii) secured by a security interest in substantially all our personal property assets, including Owlet Inc.'s pledge of the outstanding capital stock of the Company. Among these covenants is a liquidity covenant requiring the Company to maintain liquidity of $4,000. Liquidity is defined as the sum of (x) Undrawn Availability (as defined in the Credit Agreement) on the asset-based line of credit, plus (y) unrestricted cash and funds held in deposit accounts. In addition, if the liquidity falls below $9,000, the Company is then subject to a minimum trailing-twelve-months EBITDA covenant as defined in the Credit Agreement. As of March 31, 2025, we were in compliance with all covenants under the Credit Agreement.

The unamortized portion of debt issuance costs related to the Credit Agreement as of March 31, 2025 was $557 and is recorded as a loan commitment asset within other assets on the unaudited condensed consolidated balance sheets. Issuance costs are amortized straight-line over the term of the Credit Agreement and recorded within interest income (expense), net on the unaudited condensed consolidated statements of operations and comprehensive income (loss)).

On March 31, 2025, there was $8,498 of outstanding borrowings, which is recorded as a current liability on the unaudited condensed consolidated balance sheets based on our intent and ability to repay the outstanding borrowings in the near term. The remaining borrowing base availability under the Credit Agreement was $46 as of March 31, 2025.

### Financed Insurance Premium

In July 2024, we renewed our corporate directors & officers and employment liability policies and entered into several new short-term commercial premium finance agreements with First Insurance Funding totaling $941 to be paid within one year, accruing interest at a weighted average rate of 8.7%. As of March 31, 2025, the remaining principal balance on the combined financed insurance premiums was $313.

### Funding Requirements and Going Concern

In accordance with ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), we have evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements.

Since inception, we have experienced recurring operating losses and generated negative cash flows from operations, resulting in an accumulated deficit of $265,170 as of March 31, 2025. During the three months ended March 31, 2025 and 2024, we had negative cash flows from operations of $5,925 and $3,356, respectively. As of March 31, 2025, we had $16,310 of cash on hand.

As we continue to address these financial conditions, management has undertaken the following actions:

- As described further in Note 7, “Common Stock Issuance, Redeemable Common Stock, Common Stock Warrants, and Convertible Preferred Stock” included in our unaudited condensed consolidated financial statements included in this Report, in September 2024, we issued 3,135,136 shares of our common stock and received net proceeds of $10,590 and in February 2024, the Company consummated a sale of preferred stock and warrants to purchase our common stock for a gross purchase price of $9,250.
- As described in Note 4, “Debt and Other Financing Arrangements” included in our unaudited condensed consolidated financial statements included in this Report, in September 2024, we entered into a loan facility agreement with WTI Fund X, Inc. and WTI Fund XI, Inc. (collectively “WTI” or “Lenders”) for a term loan facility of up to $15,000 (the “WTI Loan Facility”) and on September 11, 2024, we entered into an asset-based revolving credit facility (the “ABL Line of Credit”) with ABL OPCO LLC, as the lender, with a maximum revolving commitment amount of up to $15,000, with an additional $5,000 revolving commitment available on September 11, 2025. In connection with these transactions, we used our then-existing cash to repay and extinguish all borrowings outstanding under the line of credit and term loan agreement with Silicon Valley Bank, now a division of First Citizens Bank and Trust Company (“SVB”). As of March 31, 2025 we have borrowings of $7,500 under the WTI Loan Facility and $8,498 under the ABL Line of Credit.

Notwithstanding the above actions, we have experienced recurring operating losses, negative cash flows from operations since inception, and a low cash balance relative to current obligations which raise substantial doubt about our ability to continue as a going concern within one year after the date that the accompanying unaudited condensed consolidated financial statements are issued. The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis and accordingly, do not include any adjustments relating to the recoverability and classification of asset carrying amounts, or the amount and classification of liabilities that might result should we be unable to continue as a going concern.

We have not generated sufficient cash flows from operations to satisfy our capital requirements for the next twelve months. There can be no assurance that we will generate sufficient future cash flows from operations to fund our ongoing operations due to potential factors, including but not limited to inflation, recession, or reduced demand for our products. If revenues decrease from current levels, we may be unable to further reduce costs, or such reductions may limit our ability to pursue strategic initiatives and grow revenues in the future.

There can be no assurance that we will be able to obtain additional financing on terms acceptable to us, if at all. Failure to secure additional funding may require us to modify, delay or abandon some of our planned future development, or to otherwise enact further operating cost reductions, which could have a material adverse effect on our business, operating results, financial condition and ability to achieve our intended business objectives.

If we raise additional funds through further 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. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to pursue our business objectives and to respond to business opportunities, challenges, or unforeseen circumstances could be significantly limited, and our business, financial condition, and results of operations could be materially adversely affected. We also could be required to seek funds through arrangements with partners or others that may require us to relinquish rights or jointly own some aspects of our technologies, products, or services that we would otherwise pursue on our own.

### Cash Flows

The following table summarizes our cash flow (in thousands):

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(5,925) | $(3,356) |
| Net cash used in investing activities | (110) | (37) |
| Net cash provided by financing activities | 2,014 | 5,233 |
| Net change in cash, cash equivalents, and restricted cash | $(4,021) | $1,840 |

#### Operating Activities

For the three months ended March 31, 2025, net cash used in operating activities was $5,925 as compared to net cash used in operating activities of $3,356 in the prior year. The change in operating cash flows was primarily driven by an increase in accounts receivable, which was $4,453 for the three months ended March 31, 2025 as compared to decrease in accounts receivable of $2,765 for the same period in the prior year.

#### Investing Activities

For the three months ended March 31, 2025, we used $110 to invest in various projects, primarily for the development of our new subscription app. For the three months ended March 31, 2024, we used substantially no cash for investing activities due to the prioritization of research and development projects that supported seeking regulatory clearances for our products.

#### Financing Activities

For the three months ended March 31, 2025 and 2024, net cash provided by financing activities was $2,014 and $5,233, respectively. The decrease is primarily driven by the proceeds raised by the Series B preferred stock offering in February 2024.

### Critical Accounting Policies and Estimates

There have been no material changes from the critical accounting policies and estimates disclosed in our Form 10-K, other than policies disclosed in this Report.

## Market risk

As filed, 163 characters.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item.

## Controls and procedures

As filed, 9,630 characters.

### Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

### Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as such terms are defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to provide reasonable assurance that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of March 31, 2025, the effectiveness of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were not effective as of March 31, 2025 due to the material weaknesses in our internal control over financial reporting described below.

### Material Weaknesses in Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13(a)-15(f) and 15(d)-15(f) under the Exchange Act. With the participation of the Chief Executive Officer and the Chief Financial Officer, management conducted an evaluation of the effectiveness of our internal control over financial reporting as of March 31, 2025 based on the guidelines established in the Internal Control—Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management concluded that our internal control over financial reporting was not effective as of March 31, 2025 because of the material weaknesses described below.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis.

We did not design and maintain an effective control environment commensurate with our financial reporting requirements. Specifically, we did not maintain a sufficient complement of personnel with an appropriate degree of internal controls and accounting knowledge, experience, and training commensurate with our accounting and financial reporting requirements. This material weakness contributed to the following material weaknesses:

- We did not design and maintain effective controls over the segregation of duties related to journal entries. Specifically, certain personnel have the ability to both create and post journal entries within the Company’s general ledger system. This material weakness did not result in any adjustments to the consolidated financial statements.
- We did not design and maintain effective controls over the accounting for the accuracy and existence of inventory, nor controls which verified the completeness and accuracy of accrued liabilities. Each of these material weaknesses resulted in immaterial adjustments within the year ended December 31, 2022 and the accrued liabilities material weakness resulted in immaterial adjustments within the year ended December 31, 2024, and in the interim period ended March 31,2025.
- We did not design and maintain effective controls over the accounting for debt and equity arrangements, including convertible preferred stock, warrant arrangements, and stock-based compensation modifications. Further, we did not design and maintain effective controls to verify the completeness and accuracy of sales returns and accrued sales tax. Each of these material weaknesses resulted in material adjustments to several account balances and disclosures in the consolidated financial statements as of and for the year ended December 31, 2019. The sales returns material weakness also resulted in immaterial adjustments to revenue and accrued and other expenses as of and for the year ended December 31, 2022. The convertible preferred stock and warrant arrangements material weakness and sales tax material weakness resulted in immaterial adjustments for the year ended December 31, 2024.
- We did not design and maintain effective controls related to the review of the statement of cash flows. This material weakness resulted in adjustments to various line items within the operating, investing, and financing categories of the cash flow and resulted in revisions to the previously issued consolidated statement of cash flows for the year ended December 31, 2023 and to the condensed consolidated statement of cash flows for the interim periods ended March 31, 2023, June 30, 2023, September 30, 2023, March 31, 2024, June 30, 2024, and September 30, 2024.
- We did not design and maintain effective controls over IT general controls for information systems that are relevant to the preparation of our consolidated financial statements. Specifically, we did not design and maintain (i) program change management controls to ensure that IT program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately, (ii) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs, and data to appropriate Company personnel, (iii) computer operations controls to ensure that critical batch jobs are monitored, and data backups are authorized and monitored, and (iv) testing and approval controls for program development to ensure that new software development is aligned with business and IT requirements. This material weakness did not result in any adjustments to the consolidated financial statements.

Additionally, each of the material weaknesses described above could result in a misstatement of one or more account balances or disclosures that would result in a material misstatement to the interim or annual consolidated financial statements that would not be prevented or detected.

### Remediation Plan

We have initiated a plan to remediate these material weaknesses. The remediation measures will be ongoing, and although not all inclusive, remediation measures include hiring additional accounting and financial reporting personnel and implementing additional policies, procedures and controls, all of which will result in future costs for the Company.

We have taken actions to improve our IT general controls, segregation of duties over journal entries controls, inventory controls, accrued liabilities, convertible preferred stock, warrant arrangements, sales returns and accrued sales tax controls.

During the year ended December 31, 2024, we took actions to enhance the design of the controls we believe are necessary to remediate the material weaknesses related to the accrued sales tax that we believe will remediate the material weakness. Further, we made enhancements to the design of the control over the statement of cash flows that will support the remediation of the material weakness. As we continue to make progress towards remediation of these material weaknesses, we may determine the need to make further enhancements to the design of these controls. We continue to take actions to enhance the design of the controls we believe are necessary to remediate the material weaknesses related to sales returns and the accounting for debt and equity arrangements, including convertible preferred stock and warrant arrangements. While these enhancements to the design of the controls have been implemented as of September 30, 2024, we may determine the need to make further enhancements to the design of these controls. The material weaknesses will not be considered remediated until our remediation plan has been fully implemented, the applicable controls operate for a sufficient period of time, and we have concluded, through testing, that the newly implemented and enhanced controls are operating effectively.

Notwithstanding the above, our management believes that the unaudited condensed consolidated financial statements included in this Report state fairly in all material respects our financial position, results of operations and cash flows for the periods presented.

### Changes in Internal Control over Financial Reporting

As described in the remediation efforts above, there were changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended March 31, 2025 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 280 characters.

In addition to the information contained in this Report, you should carefully consider the risk factors disclosed in our Form 10-K and Form 10-K/A, which risk factors are incorporated herein by reference, which could materially affect our business, financial condition or results.

Filed May 8, 2025.
Source: SEC EDGAR, the filing index for accession 0001628280-25-023909. Last ingested by Listed: Oct 24, 2026, 14:57 ET. No prices; not investment advice.