owlt-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

____________________________________________________________________________

FORM 10-Q

____________________________________________________________________________

(Mark One)


x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission File Number: 001-39516

_____________________________________________

OWLET, INC.

(Exact Name of Registrant as Specified in its Charter)

_____________________________________________


Delaware			85-1615012
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
3300 North Ashton Boulevard, Suite 300 Lehi, Utah			84043
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (844) 334-5330

_____________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Class A Common Stock, $0.0001 par value per share

OWLT

New York Stock Exchange

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. Yes x No o

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). Yes x No o

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	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	x
Emerging growth company	x

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 August 12, 2024, the registrant had 9,412,953 shares of common stock, $0.0001 par value per share, outstanding.

Table of Contents


		Page

PART I.
	Cautionary Note Regarding Forward-Looking Statements	1
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets (Unaudited)	3
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)	4
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows (Unaudited)	7
	Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28
Item 4.	Controls and Procedures	28

PART II.
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	35
Item 5.	Other Information	35
Item 6.	Exhibits	36
	Signatures	37

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Report”) contains certain statements that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). All statements other than statements of historical facts contained in this Report, including statements concerning possible or assumed future actions, business strategies, events or results of operations, and any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Report and are subject to a number of risks, uncertainties and assumptions described under the sections in this Report and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the "Form 10-K") entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Report and our Form 10-K. These forward-looking statements are subject to numerous risks, including, without limitation, the following:

•We have a limited operating history.

•We have not been profitable to date, and operating losses could continue, which could materially and adversely affect our business, financial condition and results of operations, including our ability to continue as a going concern.

•We have experienced fluctuations in the growth of our business and anticipate this will continue. If we fail to manage our growth effectively, our business could be materially and adversely affected.

•If any governmental authority or notified body were to require marketing authorization or similar certification for any product that we sell for which we have not obtained such marketing authorization or certification, we could be subject to regulatory enforcement action and/or required to cease selling or recall the product pending receipt of marketing authorization or similar certification from such other governmental authority or notified body, which can be a lengthy and time-consuming process, harm financial results and have long-term negative effects on our operations.

•Our products rely on mobile applications to function and we rely on Apple’s App Store and the Google Play Store for distribution of our mobile applications.

•A substantial portion of our sales comes through a limited number of retailers.

•We are required to obtain and maintain marketing authorizations or certifications from the FDA, foreign regulatory authorities or notified bodies for medical device products in the U.S. or in foreign jurisdictions, which can be a lengthy and time-consuming process, and a failure to do so on a timely basis, or at all, could severely harm our business.

•We currently rely on a single manufacturer for the assembly of our Smart Sock and Dream Sock products and a single manufacturer for the assembly of our Owlet Cam. We will likely rely on single manufacturers for future products we may develop. If we encounter manufacturing problems or delays, we may be unable to promptly transition to alternative manufacturers and our ability to generate revenue will be limited.

•If we are unable to obtain key materials and components from sole or limited source suppliers, we will not be able to deliver our products to customers.

•Our success depends in part on our proprietary technology, and if we are unable to obtain, maintain or successfully enforce our intellectual property rights, the commercial value of our products and services will be adversely affected, our competitive position may be harmed and we may be unable to operate our business profitably.

•Our business and operations may suffer in the event of IT system failures, cyberattacks or deficiencies in our cybersecurity.

•We are involved, and may become involved in the future, in disputes and other legal or regulatory proceedings that, if adversely decided or settled, could materially and adversely affect our business, financial condition and results of operations.

•We face the risk of product liability claims and the amount of insurance coverage held now or in the future may not be adequate to cover all liabilities we might incur.

•Operations in international markets will expose us to additional business, political, regulatory, operational, financial and economic risks.

•Our success depends substantially on our reputation and brand.

•Some of our products and services are in development or have been recently introduced into the market and may not achieve market acceptance, which could limit our growth and adversely affect our business, financial condition and results of operations.

•We have identified material weaknesses in our internal control over financial reporting and we may identify additional material weaknesses in the future or otherwise fail to maintain effective internal control over financial reporting, which may result in material misstatements of our consolidated financial statements, cause us to fail to meet our periodic reporting obligations or cause our access to the capital markets to be impaired.

•Our failure to meet the NYSE’s continued listing requirements could result in a delisting of our common stock.

•We may need to raise additional capital in the future in order to execute our strategic plan, which may not be available on terms acceptable to us, or at all.

These risks and other important factors, including those discussed in this Report, may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. Moreover, we operate in an evolving environment. Given these risks and uncertainties, you are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included elsewhere in this Report are not guarantees of future performance and our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from the forward-looking statements included elsewhere in this Report. In addition, even if our results of operations, financial condition and liquidity, and events in the industry in which we operate, are consistent with the forward-looking statements included elsewhere in this Report, they may not be predictive of results or developments in future periods.

Any forward-looking statement that we make in this Report speaks only as of the date of such statement. Except as required by law, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Report. For all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Reform Act.

As used in this Report, unless otherwise stated or the context otherwise requires: “we,” “us,” “our,” “Owlet,” the “Company,” and similar references refer to Owlet, Inc. and its subsidiaries, “common stock” refers to our Class A common stock.

Basis of Presentation for Reverse Stock Split

On July 7, 2023, we effected a 1-for-14 reverse stock split (the “Reverse Stock Split”) of our issued and outstanding common stock, by the filing of our Second Amended and Restated Certificate of Incorporation (the “Charter Amendment”) with the Secretary of State of the State of Delaware pursuant to the Delaware General Corporation Law. The Reverse Stock Split became effective at 5:00 p.m. Eastern Time on July 7, 2023. Our common stock began trading on the New York Stock Exchange on a split-adjusted basis on July 10, 2023. Where applicable, all information presented in this Report has been retrospectively adjusted to give effect to our 1-for-14 reverse split of our outstanding common stock and, unless otherwise indicated, all such amounts and corresponding conversion price and/or exercise price data set forth in this Report has been adjusted to give effect to such reverse stock split.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Owlet, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)


	June 30, 2024		December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	15,363	$	16,557
Accounts receivable, net of allowance for credit losses of $542 and $3,322, respectively	16,895		13,973
Inventory	8,101		6,493
Prepaid expenses and other current assets	2,171		2,921
Total current assets	42,530		39,944
Property and equipment, net	193		377
Right of use assets, net	217		937
Intangible assets, net	2,224		2,210
Other assets	731		655
Total assets	$	45,895	$	44,123
Liabilities, Convertible Preferred Stock, and Stockholders’ Deficit
Current liabilities:
Accounts payable	$	17,510	$	13,679
Accrued and other expenses	11,550		15,051
Current portion of deferred revenues	1,242		1,166
Line of credit	9,738		9,250
Current portion of long-term and other debt	2,110		5,944
Total current liabilities	42,150		45,090
Common stock warrant liabilities	24,429		27,781
Other long-term liabilities	150		928
Total liabilities	66,729		73,799
Commitments and contingencies (Note 5)
Series A convertible preferred stock, $0.0001 par value, 27,200 and 28,628 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively	9,839		7,855
Series B convertible preferred stock, $0.0001 par value; 9,250 and 0 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively	2,756		—
Stockholders’ deficit:
Common stock, $0.0001 par value, 107,142,857 shares authorized as of June 30, 2024 and December 31, 2023; 9,099,539 and 8,797,456 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively.	1		1
Additional paid-in capital	220,102		218,127
Accumulated deficit	(253,532)		(255,659)
Total stockholders’ deficit	(33,429)		(37,531)
Total liabilities, convertible preferred stock, and stockholders’ deficit	$	45,895	$	44,123

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Owlet, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except share and per share amounts)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues	$	20,699	$	13,088	$	35,449	$	23,824
Cost of revenues	10,447		7,855		18,650		14,438
Gross profit	10,252		5,233		16,799		9,386
Operating expenses:
General and administrative	6,290		6,124		12,340		14,990
Sales and marketing	3,852		3,078		7,748		6,431
Research and development	2,354		2,745		4,701		5,635
Total operating expenses	12,496		11,947		24,789		27,056
Operating loss	(2,244)		(6,714)		(7,990)		(17,670)
Other income (expense):
Interest income (expense), net	20		(52)		(141)		(2,864)
Common stock warrant liability adjustment	1,028		(1,629)		10,207		283
Other (expense) income, net	71		(67)		73		(78)
Total other (expense) income, net	1,119		(1,748)		10,139		(2,659)
Income (loss) before income tax provision	(1,125)		(8,462)		2,149		(20,329)
Income tax provision	(22)		(5)		(22)		(5)
Net income (loss) and comprehensive income (loss)	(1,147)		(8,467)		2,127		(20,334)
Accretion on convertible preferred stock	(1,535)		(1,326)		(2,863)		(1,979)
Net loss attributable to common stockholders	$	(2,682)	$	(9,793)	$	(736)	$	(22,313)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.30)	$	(1.19)	$	(0.08)	$	(2.73)
Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted	8,867,399		8,213,247		8,803,729		8,162,102

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Owlet, Inc.

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit

(in thousands, except share and per share amounts)

(unaudited)


	Series A Convertible Preferred Stock			Series B Convertible Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Shares	Amount		Additional Paid-in Capital		Accumulated Deficit		Total Stockholders' Deficit
Balance as of December 31, 2022	—	$	—	—	$	—	8,242,009	$	1	$	212,122	$	(222,758)	$	(10,635)
Issuance of preferred stock	30,000	3867		—	—		—	—		—		—		—
Preferred stock issuance costs	—	(253)		—	—		—	—		—		—		—
Accretion on Series A convertible preferred stock	—	653		—	—		—	—		(653)		—		(653)
Issuance of SVB Warrants (Note 4)	—	—		—	—		—	—		43		—		43
Issuance of common stock upon exercise of stock options	—	—		—	—		18,054	—		55		—		55
Issuance of common stock for restricted stock units vesting	—	—		—	—		115,257	—		—		—		—
Issuance of common stock for employee stock purchase plan	—	—		—	—		15,104	—		101		—		101
Stock-based compensation	—	—		—	—		—	—		2,789		—		2,789
Net loss	—	—		—	—		—	—		—		(11,867)		(11,867)
Balance as of March 31, 2023	30,000	$	4,267	—	$	—	8,390,424	$	1	$	214,457	$	(234,625)	$	(20,167)
Accretion on convertible preferred stock	—	1,326		—	—		—	—		(1,326)		—		(1,326)
Issuance of common stock for restricted stock units vesting	—	—