[10-Q] Owlet, Inc. Quarterly Earnings Report
Filing Impact
Filing Sentiment
Form Type
10-Q
Rhea-AI Filing Summary
Owlet, Inc. filed its Q3 2025 10‑Q reporting stronger top‑line and improved profitability. Revenue reached $31,988 thousand versus $22,122 thousand a year ago, lifting gross profit to $16,200 thousand. Operating income was $1,216 thousand, compared with a loss last year, and net income totaled $4,134 thousand, aided by a common stock warrant liability adjustment.
Cash and cash equivalents were $23,760 thousand. The company reported $18,616 thousand outstanding under its asset‑based line of credit and $7,500 thousand drawn on its WTI term loan. Total liabilities were $113,464 thousand and stockholders’ deficit was $54,143 thousand as of September 30, 2025. As a subsequent event, the company completed an offering of 4,825,400 shares at $7.15 per share, yielding net proceeds of $32,109 thousand. Shares outstanding were 27,580,607 as of November 10, 2025.
The filing states conditions that raise substantial doubt about the company’s ability to continue as a going concern, despite a profitable quarter and the October equity raise.
Positive
- None.
Negative
- Going concern uncertainty: filing cites substantial doubt about ability to continue as a going concern within one year.
- Leverage and deficit: total liabilities of $113,464 thousand and stockholders’ deficit of $54,143 thousand as of September 30, 2025.
Insights
Profit in Q3, but liquidity and leverage keep risk elevated.
Owlet delivered Q3 revenue of
Balance sheet pressure remains. Cash was
The filing explicitly notes “substantial doubt” about continuing as a going concern. Actual outcomes will depend on cash generation, borrowing base availability under the ABL, and expense control. Subsequent filings may detail the post‑offering liquidity trajectory.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
____________________________________________________________________________
FORM 10-Q
____________________________________________________________________________
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended September 30, 2025
OR
| 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
_____________________________________________
(Exact Name of Registrant as Specified in its Charter)
_____________________________________________
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
| (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 | ||||||||||||
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 | ||||||||
| x | Smaller reporting company | ||||||||||
| Emerging growth company | |||||||||||
1
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 November 10, 2025, the registrant had 27,580,607 shares of common stock, $0.0001 par value per share, outstanding.
2
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 Changes in Mezzanine Equity and Stockholders’ Deficit (Unaudited) | 5 | |||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) | 7 | |||||||
Notes to Condensed Consolidated Financial Statements (Unaudited) | 9 | |||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 31 | ||||||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 40 | ||||||
Item 4. | Controls and Procedures | 40 | ||||||
| PART II. | ||||||||
Item 1. | Legal Proceedings | 42 | ||||||
Item 1A. | Risk Factors | 42 | ||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 44 | ||||||
Item 3. | Defaults Upon Senior Securities | 44 | ||||||
Item 4. | Mine Safety Disclosures | 44 | ||||||
Item 5. | Other Information | 44 | ||||||
Item 6. | Exhibits | 45 | ||||||
Signatures | 46 | |||||||
3
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, our liquidity, capital resources, runway, compliance with covenants, and our ability to continue as a going concern, our ability to remediate our material weaknesses, 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 in the sections entitled “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Report, our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “Form 10-K”) and Amendment No. 1 to our Annual Report on Form 10-K/A for the fiscal year ended December 31, 2024 (the “Form 10-K/A”). These forward-looking statements are subject to numerous risks, including, without limitation, the following:
•We have a limited operating history.
•We have a history of losses and may not sustain profitability. 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 actions and/or be 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 from 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 Dream Sock, Smart Sock, and BabySat 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, delays, or increased costs, we may be unable to promptly transition to alternative manufacturers and our ability to generate revenue may be limited.
•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.
•Development, maintenance, and use of artificial intelligence technologies may not be beneficial to our business, and may result in the poor performance of our products, services and business, as well as damage our reputation and the reputations of our customers, or cause us to incur liability resulting from the violation of laws or contracts to which we are a party.
•Increases in tariffs, trade restrictions or taxes on our products could have an adverse impact on our operations.
•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 we hold 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.
1
•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.
•We may need to raise additional capital in the future in order to support our operations and strategic plans, which may not be available to us when needed, on acceptable terms, 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 the Class A common stock of Owlet, Inc.
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Owlet, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)
| September 30, 2025 | December 31, 2024 | |||||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Restricted cash | ||||||||||||||
Accounts receivable, net of allowance for credit losses of $ | ||||||||||||||
| Inventory | ||||||||||||||
| Prepaid expenses and other current assets | ||||||||||||||
| Total current assets | ||||||||||||||
| Property and equipment, net | ||||||||||||||
| Right of use assets, net | ||||||||||||||
| Intangible assets, net | ||||||||||||||
| Other assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| Liabilities, Mezzanine Equity, and Stockholders’ Deficit | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | $ | ||||||||||||
| Accrued and other expenses | ||||||||||||||
| Current portion of deferred revenues | ||||||||||||||
| Line of credit | ||||||||||||||
| Current portion of long-term and other debt | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Long-term debt, net | ||||||||||||||
| Common stock warrant liabilities | ||||||||||||||
| Other long-term liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
Commitments and contingencies (Note 5) | ||||||||||||||
| Mezzanine equity: | ||||||||||||||
Series A convertible preferred stock, $ | ||||||||||||||
Series B convertible preferred stock, $ | ||||||||||||||
Redeemable common stock, | ||||||||||||||
| Total mezzanine equity | ||||||||||||||
| Stockholders’ deficit: | ||||||||||||||
Common stock, $ | ||||||||||||||
| Additional paid-in capital | ||||||||||||||
| Accumulated deficit | ( | ( | ||||||||||||
| Total stockholders’ deficit | ( | ( | ||||||||||||
| Total liabilities, mezzanine equity, and stockholders' deficit | $ | $ | ||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
Owlet, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(in thousands, except share and per share amounts)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenues | $ | $ | $ | $ | |||||||||||||||||||
| Cost of revenues | |||||||||||||||||||||||
| Gross profit | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Total operating expenses | |||||||||||||||||||||||
| Operating income (loss) | ( | ( | ( | ||||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest income (expense), net | ( | ( | ( | ( | |||||||||||||||||||
| Common stock warrant liability adjustment | ( | ( | |||||||||||||||||||||
| Other income (expense), net | ( | ( | ( | ||||||||||||||||||||
| Total other income (expense), net | ( | ( | |||||||||||||||||||||
| Income (loss) before income tax provision | ( | ( | ( | ||||||||||||||||||||
| Income tax provision | ( | ( | ( | ||||||||||||||||||||
| Net income (loss) and comprehensive income (loss) | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Accretion on convertible preferred stock | ( | ( | ( | ( | |||||||||||||||||||
| Allocation of net income to participating securities | ( | ||||||||||||||||||||||
| Allocation of accretion on convertible preferred stock to redeemable common stock | |||||||||||||||||||||||
| Accretion on redeemable common stock | ( | ( | ( | ( | |||||||||||||||||||
| Allocation of net income to participating securities to redeemable common stockholders | |||||||||||||||||||||||
| Allocation of net income (loss) attributable to redeemable common stockholders | ( | ||||||||||||||||||||||
| Net income (loss) attributable to redeemable common stockholders | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Net income (loss) attributable to common stockholders | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
Net income (loss) per share attributable to redeemable common stockholders | |||||||||||||||||||||||
Basic | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
Diluted | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
Weighted-average number of shares outstanding used to compute net income (loss) per share attributable to redeemable common stockholders | |||||||||||||||||||||||
| Basic | |||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||
Net income (loss) per share attributable to common stockholders | |||||||||||||||||||||||
Basic | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
Diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Weighted-average number of shares outstanding used to compute net income (loss) per share attributable to common stockholders | |||||||||||||||||||||||
Basic | |||||||||||||||||||||||
Diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
Owlet, Inc.
Condensed Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Deficit
(in thousands, except share and per share amounts)
(unaudited)
| Series A Convertible Preferred Stock | Series B Convertible Preferred Stock | Redeemable Common Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Deficit | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of convertible preferred stock | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Preferred stock issuance costs | — | — | — | ( | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accretion on convertible preferred stock | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of preferred stock | ( | ( | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for restricted stock units vesting | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for employee stock purchase plan | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | $ | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accretion on convertible preferred stock | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of preferred stock | ( | ( | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for restricted stock units vesting | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2024 | $ | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accretion on convertible preferred stock | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accretion on redeemable common stock | — | — | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Conversion of preferred stock | ( | ( | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock related to offering | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issuance costs | — | — | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of warrants to underwriter | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU to RSA conversion | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for restricted stock units vesting | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of redeemable common stock | — | — | — | — | 0 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for employee stock purchase plan | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of options | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2024 | $ | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
Owlet, Inc.
Condensed Consolidated Statements of Changes in Mezzanine Equity and Stockholders’ Deficit (continued)
(in thousands, except share and per share amounts)
(unaudited)
| Series A Convertible Preferred Stock | Series B Convertible Preferred Stock | Redeemable Common Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders' Deficit | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2024 | $ | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accretion on convertible preferred stock | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accretion on redeemable common stock | — | — | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issuance costs | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Forfeiture of redeemable common stock | — | — | — | — | ( | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for restricted stock units vesting | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for employee stock purchase plan | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2025 | $ | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accretion on convertible preferred stock | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accretion on redeemable common stock | — | — | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for restricted stock units vesting | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of common stock warrants | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2025 | $ | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accretion on convertible preferred stock | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accretion on redeemable common stock | — | — | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for restricted stock units vesting | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of common stock warrants | — | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for employee stock purchase plan | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Exercise of options | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance as of September 30, 2025 | $ | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
Owlet, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Cash flows from operating activities | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Stock-based compensation | |||||||||||
| Provision for credit losses | ( | ||||||||||
| Common stock warrant liability adjustment | ( | ||||||||||
| Impairment of intangible and other assets | |||||||||||
| Amortization of right of use assets | |||||||||||
| Amortization of debt financing costs | |||||||||||
| Accrued warrant exchange transaction costs | |||||||||||
| (Gain)/loss on extinguishment of debt | |||||||||||
| (Gain)/loss on forgiveness on interest accrued | ( | ||||||||||
| Write-off of prepaid deposit | |||||||||||
| Other adjustments, net | |||||||||||
| Changes in assets and liabilities: | |||||||||||
| Accounts receivable | ( | ( | |||||||||
| Prepaid expenses and other assets | ( | ||||||||||
| Inventory | ( | ( | |||||||||
| Accounts payable and accrued and other expenses | ( | ||||||||||
| Lease liabilities | ( | ( | |||||||||
| Other liabilities | ( | ||||||||||
| Deferred revenue | |||||||||||
| Other, net | |||||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Cash flows from investing activities | |||||||||||
| Purchase of property and equipment | ( | ( | |||||||||
| Purchase of intangible assets | ( | ( | |||||||||
| Capitalized internal-use software development costs | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
| Cash flows from financing activities | |||||||||||
Proceeds from issuance of preferred stock, net of $ | |||||||||||
Proceeds from issuance of common stock, net of $ | |||||||||||
| Proceeds from short-term borrowings | |||||||||||
| Payments of short-term borrowings | ( | ( | |||||||||
| Proceeds from long-term borrowings | |||||||||||
| Payments of long-term borrowings | ( | ||||||||||
| Payments related to debt extinguishment costs | ( | ||||||||||
| Employee taxes paid related to the net share settlement of stock-based awards | ( | ( | |||||||||
| Proceeds related to the issuance of common stock under stock plans | |||||||||||
| Debt financing costs paid | ( | ( | |||||||||
| Issuance costs paid related to 2024 common stock and warrants | ( | ||||||||||
| Issuance costs paid related to 2023 preferred stock and warrants | ( | ||||||||||
| Warrant exchange transaction costs paid | ( | ||||||||||
| Proceeds from exercise of common stock warrants | |||||||||||
| Other, net | |||||||||||
| Net cash provided by financing activities | |||||||||||
| Net change in cash, cash equivalents, and restricted cash | |||||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | |||||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | $ | |||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
Owlet, Inc.
Condensed Consolidated Statements of Cash Flows (continued)
(in thousands)
(unaudited)
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Supplemental disclosure of cash flow information: | |||||||||||
| Cash paid for income taxes | $ | $ | |||||||||
| Cash paid for interest | |||||||||||
| Supplemental disclosure of non-cash investing and financing activities: | |||||||||||
| Purchases of property and equipment included in accounts payable | $ | $ | |||||||||
| Purchases of intangible assets included in accounts payable | |||||||||||
| Conversion of preferred stock | |||||||||||
| Accretion on preferred stock and redeemable common stock | |||||||||||
| Issuance of common stock warrants to underwriter | |||||||||||
| Equity issuance costs included in accounts payable and accrued liabilities | |||||||||||
| Debt issuance costs included in accounts payable and accrued liabilities | |||||||||||
| Reclassification from long-term to current debt | |||||||||||
| Stock-based compensation for software development | |||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
Owlet, Inc.
Notes to Condensed Consolidated Financial Statements
(in thousands, except share and per share amounts)
(unaudited)
Note 1. Basis of Presentation
As used in these financial statements, 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 the Class A common stock of Owlet, Inc.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP” or "GAAP") for interim financial information and applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. The condensed consolidated balance sheet as of December 31, 2024, included herein, was derived from the audited consolidated financial statements as of that date, but does not include all disclosures including certain notes required by U.S. GAAP on an annual reporting basis. All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary for the fair statement of the Company’s financial position, results of operations, and cash flows for the interim periods presented. All dollar amounts, except per share amounts, in the notes are presented in thousands, unless otherwise specified.
Certain prior year amounts have been reclassified to conform to the current period presentation.
Risks and Uncertainties
In accordance with ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the unaudited condensed consolidated financial statements included in this quarterly report on Form 10-Q are issued.
The Company has historically experienced recurring operating losses, with the exception of the third quarter of 2025, and has generated negative cash flows from operations. The Company had an accumulated deficit of $298,683 as of September 30, 2025, and during the nine months ended September 30, 2025 and 2024, the Company had negative cash flows from operations of $10,340 and $14,215 , respectively. As of September 30, 2025, the Company had $23,760 of cash on hand.
As the Company continues to address these financial conditions, management has undertaken the following actions:
•As described in Note 12, Subsequent Events, in October 2025 the Company completed an offering for the sale of 4,825,400 shares of its common stock at an offering price to the public of $7.15 per share. From this offering, the Company received net proceeds of $32,109 after deducting underwriting discounts and commissions. The Company intends to use the net proceeds of this offering to support continued commercialization and research and development, and for general corporate purposes.
•As described further in Note 7, Common Stock Issuance, Redeemable Common Stock, Common Stock Warrants, and Convertible Preferred Stock, in September 2024, the Company issued 3,135,136 shares of its 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 its common stock for a gross purchase price of $9,250 .
•As described in Note 4, Debt and Other Financing Arrangements, in September 2024, the Company 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”). In July 2025, WTI granted a 90-day extension, making the Second Tranche Commitment available through November 13, 2025, which was previously available through August 15, 2025. On September 11, 2024, the Company entered into a credit and security agreement (the “Credit Agreement”) for an asset-based revolving credit facility (the “ABL Line of Credit”) 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 (in such capacity, the “Administrative Agent”), with a maximum revolving commitment amount of up to $15,000 , with an additional $5,000 revolving commitment available on September 11, 2025. On June 11, 2025, the Company entered into a First Amendment to the Credit Agreement (the “First Amendment”) to, among other things, (i) modify certain financial covenants required to be maintained by the Company's wholly-owned subsidiary, Owlet Baby Care, Inc., a Delaware corporation (“OBCI”), (ii) increase the amount of capital expenditures that may be incurred by OBCI during certain fiscal years, and (iii) expand the eligibility of certain accounts receivable that OBCI can borrow against. As of September 30, 2025, the Company has borrowings of $7,500 under the WTI Loan Facility and $18,616 under the ABL Line of Credit.
9
The Company's historical operating and cash flow results, as well as the Company's September 30, 2025 cash balance in relation to its obligations, are considerations that raise substantial doubt about the Company’s 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 the Company be unable to continue as a going concern.
The Company has not generated sufficient cash flows from operations to satisfy its capital requirements. There can be no assurance that the Company will generate sufficient future cash flows from operations due to potential factors, including but not limited to inflation, recession, or reduced demand for the Company’s products. If revenues decrease from current levels, the Company may be unable to further reduce costs, or such reductions may limit its ability to pursue strategic initiatives and grow revenues in the future.
Though the Company obtained equity financing through its public offering in October 2025, there can be no assurance that the Company will be able to obtain additional financing on terms acceptable to it, if at all. Failure to secure additional funding may require the Company to modify, delay or abandon some of its planned future development, or to otherwise enact further operating cost reductions, which could have a material adverse effect on its business, operating results, financial condition and ability to achieve its intended business objectives.
The Company maintains its cash in bank deposit accounts which, at times, exceed federally insured limits. As of September 30, 2025, substantially all of the Company’s cash was held with Silicon Valley Bank and Citibank, and exceeded federally insured limits.
Although the Company’s sales and accounts receivable are derived from sales contracts with a large number of customers, its top several customers account for a significant amount of its total sales and make up a correspondingly large portion of its accounts receivable. During the three months ended September 30, 2025, there were three customers who individually represented 10% or more of total net revenues, accounting for 37 %, 10 %, and 10 % of total net revenues. During the nine months ended September 30, 2025, one customer accounted for 46 % of total net revenues, with no other customers exceeding 10% of total net revenues during that period. This same customer accounted for 40 % of the accounts receivable, net balance as of September 30, 2025. During the three months ended September 30, 2024, one customer accounted for 50 % of total net revenues with no other customers exceeding 10% of total net revenues. During the nine months ended September 30, 2024, there were two customers who individually represented 10% or more of total net revenues, accounting for 40 % and 12 % of total net revenues.
The Company’s largest customers by total net accounts receivable consisted of the following:
| September 30, 2025 | December 31, 2024 | ||||||||||
| Three largest customers by total net accounts receivable | % | % | |||||||||
Revisions to Previously Issued Condensed Consolidated Financial Statements and Financial Information
In connection with the preparation of its 2024 financial statements, the Company identified errors in the unaudited condensed consolidated statements of cash flows for the interim period ended September 30, 2024. Specifically, the Company’s historical proceeds from short-term borrowings and payments of short-term borrowings were overstated by the same amount with no net impact to total cash flows from financing activities in its unaudited condensed consolidated statements of cash flows for the interim period ended September 30, 2024. Additionally, the Company also identified and corrected for immaterial classification errors between cash flows from operating activities and investing activities for the interim period ended September 30, 2024. The Company also identified and corrected for immaterial classification errors within the line items in the cash flows from operating activities and for an immaterial classification error between cash flows from operating activities and financing activities for the interim period ended September 30, 2024.
The Company assessed the effect of the errors on prior periods under the guidance of Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 99, “Materiality,” codified in ASC 250, Accounting Changes and Error Corrections (“ASC 250”). Based on its assessment, the Company determined that the errors were not material to any previously issued financial statements; however, the Company has elected to revise the Company's unaudited condensed consolidated statements of cash flows. These corrections have no impact on the Company's previously reported consolidated net income (loss), financial position, net change in cash, cash equivalents, and restricted cash, or total cash, cash equivalents, and restricted cash as previously reported on the Company's unaudited condensed consolidated statements of cash flows. The Company's unaudited condensed consolidated statements of cash flows for the interim period ended September 30, 2024, have been revised and disclosed in Note 11, Revision of Previously Issued Quarterly Information (Unaudited) below.
Recently Adopted Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. The Company adopted ASU 2023-07 as of January 1,
10
2024 on a retrospective basis. While the adoption of this standard did not have a material impact on the Company's unaudited condensed consolidated financial statements, additional disclosures are included in Note 10.
Recently Issued Accounting Guidance
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires, among other things, additional disclosures primarily related to the income tax rate reconciliation and income taxes paid. The expanded annual disclosures are effective for our year ending December 31, 2025. The Company is currently evaluating the impact that ASU 2023-09 will have on its consolidated financial statements and whether the Company will apply the standard prospectively or retrospectively.
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses. The standard is intended to require more detailed disclosures about specified categories of expenses (including employee compensation, depreciation, and amortization) included in certain expense captions presented on the face of the income statement. This ASU is effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to all prior periods presented in the financial statements. The Company is currently assessing the impact this standard will have on its consolidated financial statements.
In July 2025, the FASB issued ASU 2025-05, which amended the guidance in ASC 326 to simplify the estimation of credit losses on accounts receivable and contract assets from revenue transactions. The amended guidance allows companies to elect a practical expedient to assume that conditions as of the balance sheet date will remain unchanged for the remaining life of the asset when estimating the expected credit losses of the asset. This update is effective for annual periods beginning after December 15, 2025 and interim periods within those annual periods. Early adoption of this guidance is permitted. Companies that elect the practical expedient are required to apply the amendments prospectively. We are currently assessing the impact and timing of adopting this amended guidance on our condensed consolidated financial statements.
In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The amended guidance modernizes the accounting for costs related to internal-use software to more closely align with current software development methods. The guidance removes references to project stages and clarifies when we are required to start capitalizing eligible costs. The new guidance is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years, with early adoption permitted. The guidance can be applied on a prospective basis, a modified basis for in-process projects, or a retrospective basis. We are evaluating the impact this amended guidance may have on our condensed consolidated financial statements.
Recent Tax Legislation
The One Big Beautiful Bill Act of 2025 (the “OBBBA”) was signed into law on July 4, 2025. The OBBBA makes changes to the U.S. corporate income tax, including reinstating the option to claim 100% accelerated depreciation deductions on qualified property, with retroactive application beginning January 20, 2025, and immediate expensing of domestic research and development costs, with retroactive application beginning January 1, 2025. The Company has evaluated the OBBBA enacted during the quarter and determined there was no material impact on the Company’s income tax provision for the three and nine months ended September 30, 2025.
11
Note 2. Certain Balance Sheet Accounts
Restricted Cash
The Company’s restricted cash consists of cash collateral that is held by the Company’s financial institutions to secure its financing arrangements. Specifically, restricted cash that is classified within current assets in the unaudited condensed consolidated balance sheets consists of cash collateral to secure its current credit card borrowings. Cash as reported on the unaudited condensed consolidated statements of cash flows includes the aggregate amounts of cash, cash equivalents, and restricted cash as shown on the unaudited condensed consolidated balance sheets and consists of the following (in thousands):
| September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Reconciliation of cash, cash equivalents, and restricted cash reported in the condensed consolidated balance sheets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Total cash, cash equivalents, and restricted cash | $ | $ | |||||||||
Allowance for Credit and Other Losses
The Company records its accounts receivable at sales value and maintains an allowance for its current estimate of expected credit losses from customers. Provisions for expected credit losses are estimated based on historical experience, assessment of specific risk, review of outstanding invoices, and forecasts about the future. The Company establishes specific reserves for customers in an adverse financial condition and adjusts for its expectations of changes in conditions that may impact the collectability of outstanding receivables.
Changes in the Company's allowance for credit and other losses were as follows (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | |||||||||||||||||||
| Charges to expense | ( | ||||||||||||||||||||||
| Charges to revenue | ( | ||||||||||||||||||||||
| Write-offs | ( | ( | ( | ( | |||||||||||||||||||
| Ending balance | $ | $ | $ | $ | |||||||||||||||||||
Write-offs for the nine months ended September 30, 2024 related to a settlement agreement with a former retailer for past due receivables which had previously been charged to the provision for credit losses in a prior period. A benefit was recognized to charges to expense during the nine months ended September 30, 2024, which represented a partial recovery of the past due receivables in connection with the settlement.
Inventory
Details of inventory were as follows (in thousands):
| September 30, 2025 | December 31, 2024 | ||||||||||
| Raw materials | $ | $ | |||||||||
| Finished goods | |||||||||||
| Total inventory | $ | $ | |||||||||
12
Prepaid expenses and other current assets
For the nine months ended September 30, 2025, a write-off of $347 related to a prepaid deposit for materials determined to have no alternative future use in our research and development efforts was recorded within research and development expenses.
Property and Equipment, net
Property and equipment consisted of the following (in thousands):
| September 30, 2025 | December 31, 2024 | ||||||||||
| Tooling and manufacturing equipment | $ | $ | |||||||||
| Computer equipment | |||||||||||
| Furniture and fixtures | |||||||||||
| Software | |||||||||||
| Leasehold improvements | |||||||||||
| Total property and equipment | |||||||||||
| Less: accumulated depreciation and amortization | ( | ( | |||||||||
| Property and equipment, net | $ | $ | |||||||||
Depreciation and amortization expense on property and equipment was $32 and $72 for the three months ended September 30, 2025 and September 30, 2024, respectively. For the three months ended September 30, 2025 and September 30, 2024, the Company allocated $14 and $67 , respectively, of depreciation and amortization expense related to tooling and manufacturing equipment within cost of revenues on the unaudited condensed consolidated statements of operations and comprehensive income (loss). The remaining depreciation and amortization expense related to property and equipment was recorded within general and administrative expenses.
Depreciation and amortization expense on property and equipment was $86 and $256 for the nine months ended September 30, 2025 and September 30, 2024, respectively. For the nine months ended September 30, 2025 and September 30, 2024, the Company allocated $58 and $235 , respectively, of depreciation and amortization expense related to tooling and manufacturing equipment within cost of revenues on the unaudited condensed consolidated statements of operations and comprehensive income (loss). The remaining depreciation and amortization expense related to property and equipment was recorded within general and administrative expenses.
Intangible Assets, net
The carrying amounts of intangible assets consisted of the following (in thousands):
| September 30, 2025 | |||||||||||||||||
| Gross carrying amount | Accumulated amortization | Net carrying amount | |||||||||||||||
| Trademarks and patents | $ | $ | ( | $ | |||||||||||||
| Internally developed software | ( | ||||||||||||||||
| Total intangible assets | $ | $ | ( | $ | |||||||||||||
| December 31, 2024 | |||||||||||||||||
| Gross carrying amount | Accumulated amortization | Net carrying amount | |||||||||||||||
| Trademarks and patents | $ | $ | ( | $ | |||||||||||||
| Internally developed software | ( | ||||||||||||||||
| Total intangible assets | $ | $ | ( | $ | |||||||||||||
Amortization expense of intangible assets was $109 and $45 for the three months ended September 30, 2025 and 2024, respectively. For the three months ended September 30, 2025 and 2024, the Company recorded $85 and $30 , respectively, of amortization expense related to internally developed software within cost of revenues on the unaudited condensed consolidated statements of operations and comprehensive income (loss). The remaining amortization expense related to trademarks and patents was recorded within general and administrative expenses.
13
Amortization expense of intangible assets was $283 and $75 for the nine months ended September 30, 2025 and 2024, respectively. For the nine months ended September 30, 2025 and 2024, the Company recorded $221 and $30 , respectively, of amortization expense related to internally developed software within cost of revenues on the unaudited condensed consolidated statements of operations and comprehensive income (loss). The remaining amortization expense related to trademarks and patents was recorded within general and administrative expenses.
As of September 30, 2025, the estimated future amortization expenses and reconciliation to total intangible assets consisted of the following (in thousands):
| For the years ended December 31, | Amount | ||||
| Remaining three months of 2025 | $ | ||||
| 2026 | |||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| Thereafter | |||||
| Total future amortization expenses | $ | ||||
| Intangible assets not yet subject to amortization | |||||
| Total intangible assets | $ | ||||
In 2021, the Company began work on an internally developed software project and during 2021 and 2022 total costs of $1,873 were capitalized within intangible assets on the balance sheet. Due to financial constraints the Company was experiencing in 2022, work on the project was paused and each subsequent period the Company reconsidered the probability that the project would be resumed when the Company’s financial condition allowed and whether any technological developments had changed the prospects for the project's eventual success and recovery of the carrying amount of the asset. Because the software was still in development and not ready for general release the Company did not
In September of 2024, the Company made the decision to extend the pause of this particular software development project indefinitely, indicating that the carrying amount of the asset was unlikely to be recoverable. The Company recognized $1,873 immaterial
Accrued and Other Expenses
Accrued and other expenses consisted of the following (in thousands):
| September 30, 2025 | December 31, 2024 | ||||||||||
| Accrued payroll | $ | $ | |||||||||
| Accrued sales discounts | |||||||||||
| Accrued sales returns | |||||||||||
| Accrued legal settlements | |||||||||||
| Other | |||||||||||
| Total accrued and other expenses | $ | $ | |||||||||
Changes in accrued warranty were as follows (in thousands):
14
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Accrued warranty, beginning of period | $ | $ | $ | $ | |||||||||||||||||||
| Settlements of warranty claims during the period | ( | ( | ( | ( | |||||||||||||||||||
| Provision for warranties issued during the period | |||||||||||||||||||||||
| Changes in provision for pre-existing warranties | ( | ( | |||||||||||||||||||||
| Accrued warranty, end of period | $ | $ | $ | $ | |||||||||||||||||||
Note 3. Deferred Revenues
Deferred revenues relate to performance obligations for which payments are received from customers prior to the satisfaction of the Company’s obligations to its customers. Deferred revenues primarily consist of amounts allocated to the mobile application, unspecified upgrade rights, added features, bug fixes, content, and subscription services, and are recognized over the service period of the performance obligations, which range from 1 to 27 months.
Changes in the total deferred revenues balance were as follows (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | |||||||||||||||||||
| Deferral of revenues | |||||||||||||||||||||||
| Recognition of deferred revenues | ( | ( | ( | ( | |||||||||||||||||||
| Ending balance | $ | $ | $ | $ | |||||||||||||||||||
The Company recognized $783 and $533 of revenue during the three months ended September 30, 2025 and 2024, respectively, that was included in the deferred revenue balance at the beginning of the respective period.
The Company recognized $1,274 and $1,540 of revenue during the nine months ended September 30, 2025 and 2024, respectively, that was included in the deferred revenue balance at the beginning of the respective period. Revenue for the nine months ended September 30, 2025 included a reduction of revenue of $451 relating to the correction of immaterial misstatements from previous periods. Revenue for the nine months ended September 30, 2024 included $330 relating to the correction of immaterial misstatements from previous periods.
Note 4. Debt and Other Financing Arrangements
The Company’s indebtedness consisted of the following (in thousands):
| September 30, 2025 | December 31, 2024 | ||||||||||
| Term loan facility payable to WTI, net | $ | $ | |||||||||
| Line of credit | |||||||||||
| Financed insurance premium | |||||||||||
| Total debt | |||||||||||
| Less: current portion | ( | ( | |||||||||
| Total long-term debt, net | $ | $ | |||||||||
The carrying value of the Company’s long-term debt, net approximate its fair value.
WTI Loan Facility
On September 11, 2024, (the "Effective Date"), OBCI, 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”).
15
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”). The second tranche of $5,000 (the “Second Tranche Commitment,” or together with the First Tranche Commitment, the “Loan Commitments”) per the initial Loan Facility Agreement was available through August 15, 2025 and 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 the Company 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 the Company’s then-current, board-approved operating and financing plan to WTI's satisfaction, as well as compliance with certain reporting conditions. In July 2025, WTI granted a 90-day extension, making the Second Tranche Commitment available through November 13, 2025. The terms of the Loan Facility Agreement were otherwise not modified in tandem with the extension. As of September 30, 2025, the Company was in compliance with all covenants under the WTI Loan Facility.
The Company initiated its first drawdown under the WTI Loan Facility of $7,500 (the “Initial Loan”) shortly after finalizing the Loan Facility Agreement in September 2024. WTI and the Company agreed to extend the remaining $2,500 of the First Tranche Commitment until March 31, 2025. The Company 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, the Company cannot reborrow from the WTI Loan Facility.
The interest rate on the outstanding principal amounts of any borrowing under the WTI Loan Facility for the three months ended September 30, 2025 was 12 %. Accrued coupon interest and accrued payment-in-kind interest (“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 $201 as of September 30, 2025.
As partial consideration for the availability and funding of the WTI Loan Facility, the Company 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, the Company 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 the Company does not draw on the remaining portion of the outstanding Loan Commitment. To the extent the Company does exercise its 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 the Company 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 the Company's 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.
The Company allocated the lender fees (including the fair value of the vested shares) and third-party debt financing 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 the Company’s intent to access the Loan Commitment. The unamortized portion of the loan commitment assets was $47 as of September 30, 2025 and is recorded within other assets on the unaudited condensed consolidated balance sheets.
The Company recognized $293 and $43 of interest expense related to the amortization of debt financing costs of the WTI Loan Facility and $95 and $136 of interest expense related to the amortization of the loan commitment assets during the three months ended September 30, 2025 and September 30, 2024, respectively.
The Company recognized $773 and $43 of interest expense related to the amortization of debt financing costs of the WTI Loan Facility and $762 and $136 of interest expense related to the amortization of the loan commitment assets during the nine months ended September 30, 2025 and September 30, 2024, respectively.
16
As of September 30, 2025, details of the WTI Loan Facility were as follows (in thousands):
| Amount | ||||||||
| Principal outstanding | $ | |||||||
| Unamortized debt financing costs | ( | |||||||
| Accrued PIK Interest | ||||||||
| Net carrying value | $ | |||||||
ABL Line of Credit
On September 11, 2024, OBCI, as borrower, entered into 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 (in such capacity, the “Administrative Agent”).
The Credit Agreement provided for an ABL Line of Credit with an initial maximum principal amount of up to $15,000 , which increased to $20,000 on September 11, 2025 (the “Revolving Commitment”). The ABL Line of Credit is collateralized by substantially all of the Company's assets.
The ABL Line of Credit matures on September 10, 2027 (the “Maturity Date”). The Credit Agreement contains representations, warranties, covenants, and events of default customary for agreements of this type. As of September 30, 2025, the Company was in compliance with all covenants under the Credit Agreement.
On September 30, 2025, there was $18,616 of outstanding borrowings, which is recorded as a current liability on the unaudited condensed consolidated balance sheet based on the Company's intent and ability to repay the outstanding borrowings in the near term. The remaining borrowing base availability under the Credit Agreement was $725 as of September 30, 2025.
On June 11, 2025, the Company and OBCI, entered into a First Amendment to the Credit Agreement (the “First Amendment”) with the Lenders and the Administrative Agent. The First Amendment amends the Credit Agreement to (among other things) (i) modify certain financial covenants, including EBITDA covenants, required to be maintained by OBCI, (ii) increase the amount of capital expenditures that may be incurred by OBCI during certain fiscal years, and (iii) expand the eligibility of certain accounts receivable that OBCI can borrow against. Apart from the aforementioned changes, no modifications were made to other covenants, including the liquidity covenant as fully described in Part II, Item 8 “Financial Statements and Supplementary Data - Note 6 to the Consolidated Financial Statements - Debt and Other Financing Arrangements” in its 2024 Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended December 31, 2024.
The unamortized portion of debt financing costs related to the Credit Agreement as of September 30, 2025 was $603 and is recorded as a loan commitment asset within other assets on the unaudited condensed consolidated balance sheets. These costs are amortized straight-line over the term of the Credit Agreement and recorded within interest income (expense), net on the unaudited condensed consolidated statement of operations and comprehensive income (loss).
The Company recognized $70 and $12 of interest expense related to the amortization of the loan commitment assets during the three months ended September 30, 2025 and September 30, 2024, respectively.
The Company recognized $181 and $12 of interest expense related to the amortization of the loan commitment assets during the nine months ended September 30, 2025 and September 30, 2024, respectively.
Financed Insurance Premiums
In 2024 and 2025, the Company financed a number of its insurance policies through short-term commercial premium finance agreements with First Insurance Funding totaling $1,064 8.6 596 .
17
Future Aggregate Maturities
As of September 30, 2025, future aggregate maturities of the WTI Loan Facility and Financed Insurance Premium payables were as follows (in thousands):
| For the years ended December 31, | Amount | |||||||
| Remaining three months of 2025 | $ | |||||||
| 2026 | ||||||||
| 2027 | ||||||||
| 2028 | ||||||||
| Total | $ | |||||||
Note 5. Commitments and Contingencies
Purchase and Other Obligations
The Company entered into a services and license agreement for cloud platform services in June 2024. The Company has a purchase obligation of $6,739 to be paid over a 48 -month period beginning in June 2024 and $3,945 remains to be paid at September 30, 2025.
Litigation
The Company is involved in legal proceedings from time to time arising in the normal course of business. While any outcome related to such legal proceedings cannot be predicted with certainty, other than the matters discussed below, the Company believes that the outcome of these proceedings will not have a material impact on the Company’s financial position, results of operations, or liquidity.
In November 2021, two putative class action complaints were filed against the Company in the U.S. District Court for the Central District of California, the first captioned Butala v. Owlet, Inc., Case No. 2:21-cv-09016, and the second captioned Cherian v. Owlet, Inc., Case No. 2:21-cv-09293. Both complaints alleged violations of the Securities Exchange Act of 1934 (“Exchange Act”) against the Company and certain of its officers and directors on behalf of a putative class of investors who: (a) purchased the Company’s common stock between March 31, 2021 and October 4, 2021 (“Section 10(b) Claims”); or (b) held common stock in Sandbridge Acquisition Corporation (“SBG”) as of June 1, 2021, and were eligible to vote at SBG's special meeting held on July 14, 2021 (“Section 14(a) Claims”). Both complaints allege, among other things, that the Company and certain of its officers and directors made false and/or misleading statements and failed to disclose certain information regarding the FDA’s likely classification of Smart Sock as a medical device requiring marketing authorization.
On September 8, 2023, the Court ruled that while the Butala and Cherian cases were consolidated, there would be two distinct and separate classes to represent the Section 10(b) Claims and Section 14(a) Claims, respectively, and appointed lead plaintiffs and lead counsel for each class. Amended complaints were filed for each class on November 21, 2023, and then further amended in consolidated filings on December 22, 2023. The Company filed motions to dismiss the complaints on February 9, 2024 on behalf of itself and the named officers and directors. The plaintiffs filed oppositions to the motions to dismiss on March 24, 2024, and the Company filed replies in support of the motions to dismiss on May 10, 2024. On August 5, 2024, the Court denied Owlet’s and its officers’ motions to dismiss the Section 10(b) Claims and the Section 14(a) Claims. On September 24, 2024, the Court entered a scheduling order in the case, setting trial to begin on February 17, 2026. On September 26, 2024, the Court granted Owlet’s and its officers’ motion for reconsideration regarding the Section 10(b) Claims and dismissed all claims arising out of statements made prior to the merger.
Following mediation, the parties to the Butala action reached agreements in principle to settle both the Section 10(b) Claims and the Section 14(a) Claims. The Section 10(b) Claims would be resolved for $3,500 and the Section 14(a) Claims would be resolved for $1,750 . On January 31, 2025, the plaintiffs filed motions seeking preliminary approval of the settlements of the Section 10(b) Claims and Section 14(a) Claims. On September 15, 2025, the Court granted preliminary approval of the settlement of the Section 14(a) Claims. On September 29, 2025, the Court granted preliminary approval of the settlement of the Section 10(b) Claims. A final fairness hearing on both settlements has been scheduled for February 6, 2026. In accordance with ASC 450, as these amounts have become probable and estimable, the Company recognized $5,250 of general and administrative expense in the consolidated statement of operations and comprehensive income (loss) for the year ended December 31, 2024. The related liability is recorded in accrued and other expenses on the unaudited condensed consolidated balance sheet as of September 30, 2025. Additionally, in September 2025 the Company received confirmation from Company legal counsel and insurance providers that insurance would be contributing $1,159 to settling the 14(a) Claims. As the this insurance contribution was deemed probable, the Company recorded an insurance loss recovery of $1,159 in general and administrative expense on the unaudited condensed consolidated statement of operations and comprehensive income (loss) for the three months ended September 30,2025. The related asset is recorded in prepaid expenses and other current assets on the unaudited condensed consolidated balance sheet as of September 30, 2025.
18
In October 2025, the Company fully settled both Section 14(a) Claims and Section 10(b) Claims as reported above. See Note 12 for further discussion of the settlement.
Further, on August 26, 2024 and October 3, 2024, investors filed in the U.S. District Court for the Central District of California, derivatively on behalf of the Company, complaints asserting claims for violations of Section 14(a) of the Exchange Act, as well as state law claims, including breach of fiduciary duty, unjust enrichment and waste of corporate assets. One complaint (captioned Janet Vargas, Derivatively on Behalf of Nominal Defendant Owlet, Inc., Case No. 2:24 cv-07258-FLA-PVC) asserts claims against twelve of the Company’s current or former directors and officers and six current or former directors and officers of Sandbridge Acquisition Corporation. The other (captioned Nathan Capleton, Derivatively on Behalf of Nominal Defendant Owlet, Inc., Case No. 2:24 cv-08536-JAK-MAA) asserts claims against eleven of the Company’s current or former directors. Both complaints leverage the allegations made in one of the securities class action complaints. Neither complaint specifies the damages claimed in the action.
On December 13, 2024, these two complaints were consolidated into a single action captioned Vargas v. Workman, et al., No. 2:24-cv-07258-FLA (C.D. Cal.) On February 7, 2025, the plaintiffs filed an amended consolidated complaint asserting the claims previously made in the two derivative complaints. The parties in the Vargas action reached agreements in principle to settle, and plaintiffs filed a joint Notice of Settlement with the Court on March 3, 2025. On March 6, 2025, the Court vacated deadlines in the Vargas action in light of the plaintiffs’ settlement notice, and set April 2, 2025 as the deadline for plaintiffs to file a motion for preliminary approval of the settlement. On March 31, 2025, the plaintiffs filed a joint stipulation with the Court to extend that deadline to April 9, 2025. The Court so ordered the stipulation on April 2, 2025, and the plaintiffs filed the motion for preliminary approval of the settlement on April 9, 2025. On September 10, 2025, the Court granted preliminary approval of the settlement. A final fairness hearing on the settlement has been scheduled for February 6, 2026. The parties have agreed to specific corporate governance reforms Owlet would implement and to an unopposed request to the Court for $675 in attorneys’ fees for securing such reforms.
In accordance with ASC 450, as these amounts have become probable and estimable, the Company recorded $675 of general and administrative expense in the unaudited condensed consolidated statements of operations and comprehensive income (loss) for the three months ended March 31, 2025. The related liability is recorded in accrued and other expenses on the unaudited condensed consolidated balance sheet as of September 30, 2025. The Company expects to pay this expense in the first quarter of 2026.
Indemnification
In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless, and defend an indemnified party for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by Delaware corporate law. The Company currently has directors’ and officers’ insurance coverage that may reduce its exposure and enables the Company to recover a portion of any future amounts paid.
Note 6. Stock-based Compensation
The Company has various stock compensation plans, which are more fully described in Part II, Item 8 “Financial Statements and Supplementary Data - Note 8 to the Consolidated Financial Statements - Stock-based Compensation” in its 2024 Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended December 31, 2024.
Stock-based Compensation Expense
Total stock-based compensation was recognized as follows (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| General and administrative | $ | $ | $ | $ | |||||||||||||||||||
| Sales and marketing | |||||||||||||||||||||||
| Research and development | |||||||||||||||||||||||
| Total stock-based compensation | $ | $ | $ | $ | |||||||||||||||||||
19
The Company capitalized stock-based compensation attributable to internally developed software of $35 and $62 for the three and nine months ended September 30, 2025, respectively, compared to $45 and $45 for the same periods in 2024.
As of September 30, 2025, the Company had $11,092 of unrecognized stock-based compensation costs related to unvested RSUs that will be recognized over a weighted-average period of 1.2 years.
Equity Incentive Plan
Under the 2021 Incentive Award Plan, the Company has the ability to grant options, stock appreciation rights, restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance stock units (“PSUs”), dividend equivalents, or other stock or cash-based awards to employees, directors, or consultants. Option awards are generally granted with an exercise price equal to the fair value of the Company’s common stock at the date of grant. Options and PSU awards generally vest over a period of four years 25 % vesting after one year and quarterly thereafter, or on a year vesting term with 50 % after one year and the remaining after the second year, or a year vesting term with 100 % after one year, depending on grant reason. RSU grants to directors typically vest at the earlier of one year from the date of grant or the next annual shareholder meeting and, in certain circumstances, vest immediately. RSAs generally vest over less than one year .
RSU activity was as follows:
| Number of Shares | Weighted Average Grant Date Fair Value | ||||||||||
| Outstanding as of December 31, 2024 | $ | ||||||||||
| Granted | $ | ||||||||||
| Vested | ( | $ | |||||||||
| Forfeited | ( | $ | |||||||||
| Outstanding as of March 31, 2025 | $ | ||||||||||
| Granted | $ | ||||||||||
| Vested | ( | $ | |||||||||
| Forfeited | ( | $ | |||||||||
| Outstanding as of June 30, 2025 | $ | ||||||||||
| Granted | $ | ||||||||||
| Vested | ( | $ | |||||||||
| Forfeited | $ | ||||||||||
| Outstanding as of September 30, 2025 | $ | ||||||||||
Note 7. Common Stock Issuance, Redeemable Common Stock, Common Stock Warrants, and Convertible Preferred Stock
September 2024 Offering
On September 11, 2024, the Company entered into an underwriting agreement and issued 3,135,136 shares of its common stock at a price to the public of $3.70 per share, less underwriting discounts and commissions. The net proceeds received by the Company were $10,590 . The shares were issued pursuant to the Company’s registration statement on Form S-3 (File No. 333-281556), filed by the Company with the SEC on August 14, 2024, which was declared effective on August 23, 2024. The Company 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 $0 in issuance costs that were unpaid as of September 30, 2025. The Company 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, the Company also issued, as a portion of the underwriting compensation payable to the underwriter, a warrant to purchase up to 125,405 shares of 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. As of September 30, 2025, 25,081 of the Titan Warrants have been exercised.
20
Redeemable Common Stock
As discussed in Note 4, in September 2024 as partial consideration for the availability and funding of the WTI Loan Facility, the Company issued to the WTI Funds an aggregate of 750,000 shares of common stock. The Company also granted the WTI Funds the Redeemable Option discussed in Note 4. The vested shares are recorded in mezzanine equity on the unaudited condensed consolidated balance sheets and are being accreted to the redemption value at the date the redemption feature first becomes exercisable. As discussed in Note 4, 62,500 unvested shares of redeemable common stock were forfeited on March 31, 2025.
The Company initiated its first drawdown under the WTI Loan Facility of $7,500 (the “Initial Loan”) shortly after finalizing the Loan Facility Agreement in September 2024. WTI and the Company agreed to extend the remaining $2,500 of the First Tranche Commitment until March 31, 2025. The Company 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, the Company cannot reborrow from the WTI Loan Facility.
August 2024 Exchange
On August 20, 2024, holders of the Series A convertible preferred stock (“Series A Preferred Stock”) of the Company 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 the Company’s common stock, all as in accordance with the terms of the Certificate of Designation relating to the Series A Preferred Stock. As of September 30, 2025, the redemption value for the remaining Series A convertible preferred stock is $11,479 .
February 2024 Offering
On February 25, 2024, the Company entered into a private placement investment agreement with certain investors, pursuant to which the Company issued and sold to the investors (i) an aggregate of 9,250 shares of the Company’s Series B convertible preferred stock, par value $0.0001 per share and (ii) warrants to purchase an aggregate of 1,799,021 shares of the Company's common stock, par value $0.0001 per share (the “Series B Warrants”), for an aggregate gross purchase price of $9,250 .
As of September 30, 2025, the redemption value for Series B convertible preferred stock is $9,250 . 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. None of the Series B convertible preferred stock had been converted as of September 30, 2025. None of the Series B Warrants have been exercised as of September 30, 2025. As previously reported, on August 7, 2025 the Company entered into a privately negotiated Exchange Agreement (the “Exchange Agreement”) with certain holders of the Company’s Series A Warrants and Series B Warrants to exchange Series A Warrants or Series B Warrants for newly issued shares of the Company's common stock. See the Exchange Agreement - Series A and Series B Warrants section below, as well as Note 12 Subsequent Events for additional details regarding the warrant exchange.
February 2023 Offering
On February 17, 2023 the Company entered into private placement investment agreements with certain investors, pursuant to which the Company issued and sold to the investors (i) an aggregate of 30,000 shares of the Company’s Series A convertible preferred stock, par value $0.0001 per share and (ii) warrants to purchase an aggregate of 7,871,712 shares of the Company’s common stock (“Series A Warrants”) for an aggregate purchase price of $30,000 .
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. 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 of September 30, 2025, 390,378 of the Series A Warrants have been exercised. The Series A Warrants that were exercised were marked to market based on the liability classification of the warrants, and the Company subsequently received $1,822 of cash proceeds during the nine months ended September 30, 2025 from the exercise of the Series A Warrants. See the Exchange Agreement - Series A and Series B Warrants section below, as well as Note 12 Subsequent Events for additional details regarding the warrant exchange.
SBG Common Stock Warrants
As a result of the merger completed with SBG on July 15, 2021 (the “Merger”), the Company continues to record liabilities for warrants issued by SBG prior to the Merger.
Pursuant to the SBG initial public offering, SBG sold warrants to purchase an aggregate of 821,428 shares of the Company’s common stock at a price of $161.00 per share (“SBG Public Warrants”). Following the closing of the Initial Public Offering on September 17, 2020, the Company completed the sale of warrants to purchase an aggregate of 471,428 shares of the Company’s common stock at a price of $161.00 per share in a private placement to Sandbridge Acquisition Holdings LLC (the “SBG Private Placement Warrants”). Together, the SBG Public Warrants and SBG Private Placement Warrants are referred to as the “SBG Common Stock Warrants.” The SBG Public Warrants became exercisable 12 months from the closing of the Initial Public Offering. The SBG Common Stock
21
Warrants will expire five years after the completion of the Merger or earlier upon redemption or liquidation. None of the SBG Common Stock Warrants have been exercised as of September 30, 2025.
SVB Warrants
In March 2023, the Company granted Silicon Valley Bank, now a division of First Citizens Bank and Trust Company (“SVB”) a warrant to purchase 10,714 shares of the Company’s common stock at a price of $5.32 per share, expiring on March 27, 2035 (the “SVB Warrants”) in connection with the first amendment to the Third Amended and Restated Loan and Security Agreement (as amended) between the Company and SVB (as amended, the “LSA”). On September 11, 2024, the LSA was terminated with no obligations outstanding thereunder. The SVB Warrants, which were valued at $43 , are classified as equity and included within additional paid-in capital on the unaudited condensed consolidated balance sheets. None of the SVB Warrants have been exercised as of September 30, 2025.
Common Stock Warrants
The following table summarizes issuable shares of the Company’s common stock based on warrant activity for the nine months ended September 30, 2025:
| December 31, 2024 | Shares Issuable by New Warrants | Shares Purchased by Exercise | Shares No Longer Issuable per Exchange Agreement | September 30, 2025 | |||||||||||||||||||||||||
| SBG Public Warrants | |||||||||||||||||||||||||||||
| SBG Private Placement Warrants | |||||||||||||||||||||||||||||
| Series A Warrants | ( | ( | |||||||||||||||||||||||||||
| Series B Warrants | ( | ||||||||||||||||||||||||||||
| SVB Warrants | |||||||||||||||||||||||||||||
| Titan Warrants | ( | ||||||||||||||||||||||||||||
| Total | ( | ( | |||||||||||||||||||||||||||
Exchange Agreement - Series A and Series B Warrants
On August 7, 2025, the Company and certain holders (the “Holders”) of the Company’s Series A Warrants and Series B Warrants entered into an Exchange Agreement, in which the Holders agreed to exchange with the Company their Series A Warrants relating to an aggregate of 7,215,737 shares of common stock and, if applicable, their Series B Warrants relating to an aggregate of 1,799,021 shares of common stock, for an aggregate of 5,426,429 newly issued shares (collectively, the “Exchange Shares”) of common stock (collectively, the “Exchanges”). This Exchange Agreement is a modification to the original warrant agreements for Series A and Series B Warrants and is considered a firm commitment to issue a fixed number of shares as of the modification date. As of September 30, 2025, the Company has adjusted the fair value of the warrants to reflect the fair value of Exchange Shares to be issued upon execution of the Exchange Agreement (see Note 8). The Exchange Agreement was consummated in October 2025 (see Note 12).
As part of the Exchange Agreement, the Black-Scholes Model was used to value the Series A and Series B Warrants subject to that agreement, and derive the number of common shares that would ultimately be exchanged for those warrants upon execution of the agreement. A number of key inputs were used in the Black-Scholes valuation, including the following: (1) the maturity dates for each of the Series A Warrants and the Series B Warrants, which were February 17, 2028 and March 1, 2029, respectively, and were determined by reference to the terms of the Series A Warrants and the Series B Warrants; (2) the per share exercise prices for each of the Series A Warrants and the Series B Warrants, which were $4.662 and $7.713 , respectively, and were determined by reference to the terms of the Series A Warrants and the Series B Warrants; (3) a stock price reference price of $7.26 , which represented the 60 -day volume-weighted average price of the Company's common stock as of August 1, 2025; (4) a realized term volatility of 80 0 %, which was determined to be appropriate because the Company does not currently pay dividends; and (6) risk-free rates for the Series A Warrants and the Series B Warrants of 3.41 % and 3.37 %, respectively, which represent the Secured Overnight Funding Rates, as published by Bloomberg and interpolated for the remaining term of the Series A Warrants and Series B Warrants.
As a result of the inputs provided above, the Black-Scholes Model indicated (1) a valuation for the Series A Warrants of $4.44 per each share of common stock issuable under the Series A Warrants and (2) a valuation for the Series B Warrants of $4.09 per share of common stock issuable under the Series B Warrants. This valuation also implied an approximate exchange ratio of 0.61 shares of common stock for each share of common stock issuable under the Series A Warrants and an approximate exchange ratio of 0.56 shares of common stock for each share of common stock issuable under the Series B Warrants. Based on the indicated valuation produced by the Black-Scholes Model and the aggregate ownership of the participating holders of the Series A Warrants and the Series B Warrants
22
(which information was provided by the Company), it was calculated that an aggregate of 4,412,930 and 1,013,499 shares of common stock would be issued to the participating holders of the Series A Warrants and Series B Warrants, respectively, in exchange for such Warrants.
Apart from the aggregate 4,412,930 common shares to be issued to Series A Warrant holders as part of the Exchange Agreement, as of September 30, 2025 there were 265,597 Series A Warrants that were not subject to the terms of the Exchange Agreement and, as of September 30, 2025, represented 265,597 shares of issuable common stock according to the original terms of the Series A Warrants.
Note 8. Fair Value Measurements
The Company’s assets and liabilities measured and reported in the financial statements at fair value on a recurring basis were as follows (in thousands):
| September 30, 2025 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Balance | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | |||||||||||||||||||
| Total assets | $ | $ | $ | $ | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| SBG Public Warrants | $ | $ | $ | $ | |||||||||||||||||||
| SBG Private Placement Warrants | |||||||||||||||||||||||
| Series A Warrants | |||||||||||||||||||||||
| Series B Warrants | |||||||||||||||||||||||
| Total liabilities | $ | $ | $ | $ | |||||||||||||||||||
| December 31, 2024 | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Balance | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | |||||||||||||||||||
| Total assets | $ | $ | $ | $ | |||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| SBG Public Warrants | $ | $ | $ | $ | |||||||||||||||||||
| SBG Private Placement Warrants | |||||||||||||||||||||||
| Series A Warrants | |||||||||||||||||||||||
| Series B Warrants | |||||||||||||||||||||||
| Total liabilities | $ | $ | $ | $ | |||||||||||||||||||
Money market funds are included within Level 1 of the fair value hierarchy because they are valued using quoted market prices.
The SBG Public Warrants and SBG Private Placement Warrants as of September 30, 2025 and December 31, 2024 are presented as Level 3 measurements, relying on unobservable inputs reflecting the Company’s own assumptions. Level 3 measurements, which are not based on quoted prices in active markets, introduce a higher degree of subjectivity and may be more sensitive to fluctuations in stock price, volatility rates, and U.S. Treasury Bond rates.
In June 2023, NYSE Regulation had determined to commence proceedings to delist the SBG Public Warrants and that such warrants were no longer suitable for listing based on “abnormally low” price levels. As such, these instruments are no longer valued using quoted market prices and, correspondingly, the SBG Private Placement Warrants can no longer be valued based on a quoted market price of the SBG Public Warrants.
The Company measured the fair value of both the SBG Public Warrants and the SBG Private Placement Warrants as of September 30, 2025 and December 31, 2024 using the Black-Scholes option pricing model with the following assumptions:
23
| SBG Common Stock Warrants - Black-Scholes Inputs | September 30, 2025 | December 31, 2024 | |||||||||
| OWLT stock price | $ | $ | |||||||||
| Exercise price of warrants | $ | $ | |||||||||
| Term in years | |||||||||||
| Risk-free interest rate | % | % | |||||||||
| Volatility | % | % | |||||||||
The Series A Warrants presented as Level 3 measurements rely on unobservable inputs reflecting the Company’s own assumptions.
The Series A Warrants presented as Level 3 measurements at September 30, 2025 include 7,215,737 warrants that are subject to the Exchange Agreement, and represent a liability for 4,412,930 common shares to be contingently issued as part of that agreement, and 265,597 warrants that are not subject to the Exchange Agreement (see Note 7 and Note 12).
Prior to the execution of the Exchange Agreement, the Series A warrants were valued using the Black-Scholes option pricing model. Due to the terms of the Exchange Agreement and the modification of the warrants to a liability to be settled in a fixed number of shares, the Company determined that the value of those shares covered by the agreement should represent the fair value of the shares to be issued as of the date of the exchange and subsequently remeasured to fair value at the end of each reporting period. The value of the shares was determined using a probability-weighted model whose primary inputs were the number of shares to be issued under the Exchange Agreement, or 4,412,930 shares, the price of the Company's publicly traded shares at September 30, 2025, or $8.47 , and the Company's assessment of the probability that the exchange would be approved by the Company's shareholders. Due to 44 % of the voting shares being contractually obligated to vote in favor of the agreement, and due to the significant economic conditions favoring the approval for other shareholders, the Company assessed that at September 30, 2025 the probability that the Exchange Agreement would be approved was effectively 100 %.
As noted above, the Company continued to measure the fair value of the 265,597 Series A Warrants not subject to the Exchange Agreement as of September 30, 2025 and all Series A Warrants as of December 31, 2024, using the Black-Scholes option pricing model with the following assumptions:
| Series A Warrants - Black-Scholes Inputs | September 30, 2025 | December 31, 2024 | |||||||||
| OWLT stock price | $ | $ | |||||||||
| Exercise price of warrants | $ | $ | |||||||||
| Term in years | |||||||||||
| Risk-free interest rate | % | % | |||||||||
| Volatility | % | % | |||||||||
The value of the Series A warrant liability as of September 30, 2025 was $38,802 , with a total decrease in fair value of $2,824 being recorded in the common stock warrant liability adjustment for the three months ended September 30, 2025.
The Series B Warrants presented as Level 3 measurements rely on unobservable inputs reflecting the Company’s own assumptions.
All of the Series B Warrants outstanding at September 30, 2025 were subject to the Exchange Agreement, and represent a liability to 1,013,499 common shares to be contingently issued as part of that agreement (see Note 7 and Note 12).
Prior to the execution of the Exchange Agreement, the Series B warrants were valued using the Black-Scholes option pricing model. Due to the terms of the Exchange Agreement and the modification of the warrants to a liability to be settled in a fixed number of shares, the Company determined that the value of those shares covered by the agreement should represent the fair value of the shares to be issued as of the date of the exchange and subsequently remeasured to fair value at the end of each reporting period. The value of the shares was determined using a probability-weighted model whose primary inputs were the number of shares to be issued under the Exchange Agreement, or 1,013,499 shares, the price of the Company's publicly traded shares at September 30, 2025, or $8.47 , and the Company's assessment of the probability that the exchange would be approved by the Company's shareholders, which as discussed in Series A Warrant section above was deemed to be effectively 100 %.
The value of the Series B warrant liability as of September 30, 2025 was $8,584 , with a total decrease in fair value of $1,442 being recorded in the common stock warrant liability adjustment for the three months ended September 30, 2025.
The Company measured the fair value of the Series B Warrants as of December 31, 2024 using the Black-Scholes option pricing model with the following assumptions:
24
| Series B Warrants - Black-Scholes Inputs | December 31, 2024 | |||||||
| OWLT stock price | $ | |||||||
| Exercise price of warrants | $ | |||||||
| Term in years | ||||||||
| Risk-free interest rate | % | |||||||
| Volatility | % | |||||||
The following table presents a reconciliation of the Company’s SBG Public Warrants, SBG Private Placement Warrants, Series A Warrants, and Series B Warrants (together, the “Level 3 Warrants”) measured at fair value on a recurring basis as of September 30, 2025 (in thousands):
| Level 3 Warrants | |||||
| Balance as of December 31, 2024 | $ | ||||
| Change in fair value included within common stock warrant liability adjustment | |||||
| Exercise of common stock warrants | ( | ||||
| Balance as of September 30, 2025 | $ | ||||
There were no transfers between Level 1 and Level 2 in the periods reported. The SBG Public Warrants and SBG Private Placement Warrants were transferred into Level 3 in 2023, as discussed above.
Equity-Classified Warrants
The fair value of the Titan Warrants on September 11, 2024 was $382 . The Company measured the fair value of the Titan Warrants at issuance on September 11, 2024, using the Black-Scholes option pricing model with the following assumptions:
| Titan Warrants - Black-Scholes Inputs | September 11, 2024 | ||||
| OWLT stock price | $ | ||||
| Exercise price of warrants | $ | ||||
| Term in years | |||||
| Risk-free interest rate | % | ||||
| Volatility | % | ||||
Mezzanine-Classified Redeemable Common Stock
As described in Note 4, the vested shares issued to WTI are contingently redeemable at the option of the holder during the put period and are recorded in mezzanine equity on the unaudited condensed consolidated balance sheets. The vested redeemable common shares were 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 the Company's 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. The valuation model used the following assumptions:
| Redeemable Common Stock - Valuation Inputs | September 11, 2024 | ||||
| Common stock value per share | $ | ||||
| Put price | $ | ||||
| Term in years | |||||
| Risk-free interest rate | % | ||||
| Volatility | % | ||||
| Credit spread | % | ||||
| Present value discount | % | ||||
Note 9. Net Income (Loss) Per Share
25
Basic and diluted net income (loss) per share of common stock and redeemable common stock is presented in conformity with the two-class method required for participating securities. Under the two-class method, net income (loss) is allocated to each class of common stock and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income (loss) available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.
The Company considers its convertible preferred stock and unvested redeemable common stock to be participating securities. Under the two-class method, the net loss attributable to common stockholders is not allocated to the convertible preferred stock as the holders of the Company’s convertible preferred stock do not have a contractual obligation to share in the Company’s losses.
The following tables present the calculation of basic and diluted net income (loss) per share (in thousands, except share and per share amounts):
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2025 | 2024 | 2024 | ||||||||||||||||||||
| Redeemable Common Stock | Common Stock | Redeemable Common Stock | Common Stock | ||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Allocation of net income (loss) attributable to common stockholders | $ | $ | $ | ( | $ | ( | |||||||||||||||||
| Accretion on convertible preferred stock | ( | ( | ( | ( | |||||||||||||||||||
| Accretion on redeemable common stock | ( | ( | |||||||||||||||||||||
| Allocation of net income to participating securities | ( | ( | |||||||||||||||||||||
| Allocated net income (loss) attributable to common stockholders, basic | $ | $ | $ | ( | $ | ( | |||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted average common shares outstanding, basic | |||||||||||||||||||||||
| Net income (loss) per share attributable to common stockholders, basic | $ | $ | $ | ( | $ | ( | |||||||||||||||||
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2025 | 2024 | 2024 | ||||||||||||||||||||
| Redeemable Common Stock | Common Stock | Redeemable Common Stock | Common Stock | ||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Allocation of net income (loss) attributable to common stockholders | $ | $ | $ | ( | $ | ( | |||||||||||||||||
| Accretion on convertible preferred stock | ( | ( | ( | ( | |||||||||||||||||||
| Accretion on redeemable common stock | ( | ( | |||||||||||||||||||||
| Effect of dilutive securities | ( | ||||||||||||||||||||||
| Allocated net income (loss) attributable to common stockholders, diluted | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted average common shares outstanding, basic | |||||||||||||||||||||||
| Effect of dilutive securities | |||||||||||||||||||||||
| Weighted average common shares outstanding, diluted | |||||||||||||||||||||||
| Net income (loss) per share attributable to common stockholders, diluted | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||
26
| Nine Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2025 | 2024 | 2024 | ||||||||||||||||||||
| Redeemable Common Stock | Common Stock | Redeemable Common Stock | Common Stock | ||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Allocation of net income (loss) attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Accretion on convertible preferred stock | ( | ( | ( | ( | |||||||||||||||||||
| Accretion on redeemable common stock | ( | ( | |||||||||||||||||||||
| Allocation of net income to participating securities | |||||||||||||||||||||||
| Allocated net income (loss) attributable to common stockholders, basic | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted average common shares outstanding, basic | |||||||||||||||||||||||
| Net income (loss) per share attributable to common stockholders, basic | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Nine Months Ended September 30, | |||||||||||||||||||||||
| 2025 | 2025 | 2024 | 2024 | ||||||||||||||||||||
| Redeemable Common Stock | Common Stock | Redeemable Common Stock | Common Stock | ||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Allocation of net income (loss) attributable to common stockholders | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Accretion on convertible preferred stock | ( | ( | ( | ( | |||||||||||||||||||
| Accretion on redeemable common stock | ( | ( | |||||||||||||||||||||
| Effect of dilutive securities | |||||||||||||||||||||||
| Allocated net income (loss) attributable to common stockholders, diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted average common shares outstanding, basic | |||||||||||||||||||||||
| Effect of dilutive securities | |||||||||||||||||||||||
| Weighted average common shares outstanding, diluted | |||||||||||||||||||||||
| Net income (loss) per share attributable to common stockholders, diluted | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
The following table summarizes the common stock equivalents of potentially dilutive outstanding securities excluded from the computation of diluted net loss per share due to their anti-dilutive effect:
27
| September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Stock options | |||||||||||
| RSUs | |||||||||||
| RSAs | |||||||||||
| PSUs | |||||||||||
| ESPP shares committed | |||||||||||
| Common stock warrants | |||||||||||
| Preferred stock | |||||||||||
| Total | |||||||||||
Note 10. Segments
The Company operates as a single operating segment. The Company’s Chief Operating Decision Maker ("CODM") is its Chief Executive Officer. All significant operating decisions are based upon analysis of the Company as one
The CODM considers consolidated net income (loss) to be the financial measure of segment profit and loss for monitoring budget versus actual results, perform variance analysis, and forecast future performance.
The CODM considers the impact of the significant segment expenses on net income, which are the same expenses presented on the unaudited condensed consolidated statements of operations and comprehensive income (loss), with the impact of stock-based compensation removed from the operating expense categories and presented separately when making operating decisions.
The measure of segment assets is reported on the unaudited condensed consolidated balance sheets as total assets. The CODM does not review segment assets at a level other than that presented in the Company's unaudited condensed consolidated balance sheets.
Revenue by geographic area is based on the delivery address of the customer and is summarized as follows (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| United States | $ | $ | $ | $ | |||||||||||||||||||
| United Kingdom | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total revenues | $ | $ | $ | $ | |||||||||||||||||||
Other than the United States and United Kingdom, no individual country exceeded 10% of total revenues for the three or nine months ended September 30, 2025 and September 30, 2024.
The Company’s long-lived assets are composed of property and equipment and right of use assets, net, and are summarized by geographic area as follows (in thousands):
| September 30, 2025 | December 31, 2024 | ||||||||||
| United States | $ | $ | |||||||||
| International | |||||||||||
| Total long-lived assets, net | $ | $ | |||||||||
Note 11. Revision of Previously Issued Quarterly Information (Unaudited)
28
The unaudited condensed consolidated statements of cash flows for the interim period September 30, 2024 have been revised to correct for prior period errors as discussed in Note 1. Basis of Presentation. The effect on the unaudited condensed consolidated statements of cash flows for the affected period is as follows (in thousands):
| Nine Months Ended September 30, 2024 | |||||||||||||||||
| (unaudited) | As Reported | Adjustments | As Revised | ||||||||||||||
| Cash flows from operating activities | |||||||||||||||||
Other adjustments, net (1) | $ | ( | $ | $ | |||||||||||||
| Accounts payable and accrued and other expenses | ( | ( | ( | ||||||||||||||
Other, net (2) | ( | ( | ( | ||||||||||||||
| Net cash used in operating activities | $ | ( | $ | $ | ( | ||||||||||||
| Cash flows from investing activities | |||||||||||||||||
| Purchase of intangible assets | $ | ( | $ | $ | ( | ||||||||||||
| Net cash used in investing activities | $ | ( | $ | $ | ( | ||||||||||||
| Cash flows from financing activities | |||||||||||||||||
| Proceeds from short-term borrowings | $ | $ | ( | $ | |||||||||||||
| Payments of short-term borrowings | ( | ( | |||||||||||||||
| Issuance costs paid related to 2023 preferred stock and warrants | ( | ( | |||||||||||||||
| Net cash provided by financing activities | $ | $ | ( | $ | |||||||||||||
(1) For the nine months ended September 30, 2024 this line item has been further disaggregated on the unaudited condensed consolidated statements of cash flows within this Form 10-Q as Amortization of debt financing costs, (Gain)/loss on extinguishment of debt, (Gain)/loss on forgiveness on interest accrued, $232 within Accounts receivable, and Other adjustments, net.
(2) For the nine months ended September 30, 2024 this line item has been further disaggregated on the unaudited condensed consolidated statements of cash flows within this Form 10-Q as Other liabilities, Deferred revenue, and Other, net.
29
Note 12. Subsequent Events
Exchange Warrants
On October 10, 2025 the Company consummated the Exchange Agreement and the issuance of the Exchange Shares (see Note 7). Upon completing the Exchange, the Company recorded a common stock warrant liability adjustment expense of $922 related to the warrants exchanged, a decrease in the common stock warrant liabilities of $46,884 , an increase in common stock, par value $0.0001 of $1 , and an increase in additional paid-in capital of $46,883 .
As of October 10, 2025, after giving effect to the Exchanges, the Company had 22,788,420 shares of common stock outstanding.
Underwriting Agreement
On October 21, 2025, the Company entered into an underwriting agreement and on October 23, 2025, the Company completed an offering for the sale of 4,196,000 shares of its common stock at an offering price to the public of $7.15 per share, less underwriting discounts and commissions. Subsequently, the underwriters exercised their over-allotment option for an additional 629,400 shares, which settled after the initial closing and increased the total shares issued in the offering to 4,825,400 . From this offering, the Company received net proceeds of $32,109 after deducting underwriting discounts and commissions. The shares were issued pursuant to the Company's registration statement on Form S-3 (File No. 333-281556) filed by the Company with the SEC on August 14, 2024, which was declared effective on August 23, 2024. A final prospectus relating to the offering was filed with the SEC on October 22, 2025.
Legal Proceedings
In October 2025, the Company paid out the amounts required for resolution on both Section 14(a) Claims and Section 10(b) Claims in the Butala action as reported in Note 5. Commitments and Contingencies. The Company paid $591 in cash, while the Company's insurance provider contributed the other $1,159 , in full settlement of the Section 14(a) Claims. The insurance portion of this settlement was recorded as an insurance loss recovery in the third quarter ended September 30, 2025 as reported above in Note 5. Commitments and Contingencies. The Company also paid $3,500 cash in full settlement of the Section 10(b) Claims.
30
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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, with a growing minority portion of revenues being generated by our Owlet360 subscription service.
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, insurance loss recovery, 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 and transaction costs.
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.
31
Results of Operations
The following table sets forth our results of operations for the periods, indicated in thousands:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||||||||||
| Revenues | $ | 31,988 | $ | 22,122 | $ | 79,155 | $ | 57,571 | |||||||||||||||
| Cost of revenues | 15,788 | 10,576 | 38,249 | 29,226 | |||||||||||||||||||
| Gross profit | 16,200 | 11,546 | 40,906 | 28,345 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| General and administrative | 6,273 | 9,787 | 20,593 | 22,127 | |||||||||||||||||||
| Sales and marketing | 4,926 | 4,022 | 13,246 | 11,770 | |||||||||||||||||||
| Research and development | 3,785 | 2,559 | 10,441 | 7,260 | |||||||||||||||||||
| Total operating expenses | 14,984 | 16,368 | 44,280 | 41,157 | |||||||||||||||||||
| Operating income (loss) | 1,216 | (4,822) | (3,374) | (12,812) | |||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest income (expense), net | (860) | (112) | (2,830) | (253) | |||||||||||||||||||
| Common stock warrant liability adjustment | 4,266 | (673) | (23,800) | 9,534 | |||||||||||||||||||
| Other income (expense), net | (479) | (4) | (430) | 69 | |||||||||||||||||||
| Total other income (expense), net | 2,927 | (789) | (27,060) | 9,350 | |||||||||||||||||||
| Income (loss) before income tax provision | 4,143 | (5,611) | (30,434) | (3,462) | |||||||||||||||||||
| Income tax provision | (9) | — | (54) | (22) | |||||||||||||||||||
| Net income (loss) and comprehensive income (loss) | $ | 4,134 | $ | (5,611) | $ | (30,488) | $ | (3,484) | |||||||||||||||
| Accretion on convertible preferred stock | (848) | (1,215) | (2,544) | (4,078) | |||||||||||||||||||
| Allocation of net income to participating securities | (499) | — | — | — | |||||||||||||||||||
| Allocation of accretion on convertible preferred stock to redeemable common stock | 28 | 14 | 88 | 17 | |||||||||||||||||||
| Accretion on redeemable common stock | (21) | (5) | (63) | (5) | |||||||||||||||||||
| Allocation of net income to participating securities to redeemable common stockholders | 21 | — | — | — | |||||||||||||||||||
| Allocation of net income (loss) attributable to redeemable common stockholders | (139) | 61 | 1,050 | 15 | |||||||||||||||||||
| Net income (loss) attributable to redeemable common stockholders | 111 | (70) | (1,075) | (27) | |||||||||||||||||||
| Net income (loss) attributable to common stockholders | $ | 2,676 | $ | (6,756) | $ | (31,957) | $ | (7,535) | |||||||||||||||
Net income (loss) per share attributable to redeemable common stockholders | |||||||||||||||||||||||
Basic | $ | 0.20 | $ | (0.57) | $ | (1.91) | $ | (0.66) | |||||||||||||||
Diluted | $ | 0.19 | $ | (0.57) | $ | (1.91) | $ | (0.66) | |||||||||||||||
Weighted-average number of shares outstanding used to compute net income (loss) per share attributable to redeemable common stockholders | |||||||||||||||||||||||
| Basic | 562,500 | 122,283 | 562,500 | 41,058 | |||||||||||||||||||
| Diluted | 687,500 | 122,283 | 562,500 | 41,058 | |||||||||||||||||||
Net income (loss) per share attributable to common stockholders | |||||||||||||||||||||||
Basic | $ | 0.17 | $ | (0.61) | $ | (2.03) | $ | (0.79) | |||||||||||||||
32
Diluted | $ | (0.06) | $ | (0.61) | $ | (2.03) | $ | (0.79) | |||||||||||||||
Weighted-average number of shares outstanding used to compute net income (loss) per share attributable to common stockholders | |||||||||||||||||||||||
Basic | 16,198,439 | 11,042,602 | 15,769,020 | 9,555,467 | |||||||||||||||||||
Diluted | 19,313,512 | 11,042,602 | 15,769,020 | 9,555,467 | |||||||||||||||||||
Revenues
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | |||||||||||||||||||||||||||||||||||||||
| Revenues | $ | 31,988 | $ | 22,122 | $ | 9,866 | 44.6 | % | $ | 79,155 | $ | 57,571 | $ | 21,584 | 37.5 | % | |||||||||||||||||||||||||||||||
Revenues increased by $9,866, or 44.6%, from $22,122 for the three months ended September 30, 2024 to $31,988 for the three months ended September 30, 2025. Revenues increased by $21,584, or 37.5%, from $57,571 for the nine months ended September 30, 2024 to $79,155 for the nine months ended September 30, 2025. For both the three month and nine month periods ended September 30, 2025, the increase in revenues was primarily due to higher sales of Dream Sock and Dream Duo products, reflecting an increase in consumer demand as compared to the same periods in the prior year. The increase in revenues to a lesser extent was also attributed to the growth in revenue for our Owlet360 subscription service, which launched in January 2025.
Cost of Revenues and Gross Margin
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | |||||||||||||||||||||||||||||||||||||||
| Cost of revenues | $ | 15,788 | $ | 10,576 | $ | 5,212 | 49.3 | % | $ | 38,249 | $ | 29,226 | $ | 9,023 | 30.9 | % | |||||||||||||||||||||||||||||||
| Gross margin | 50.6 | % | 52.2 | % | (1.5) | % | 51.7 | % | 49.2 | % | 2.4 | % | |||||||||||||||||||||||||||||||||||
Cost of revenues increased by $5,212, or 49.3%, from $10,576 for the three months ended September 30, 2024 to $15,788 for the three months ended September 30, 2025. The increase in cost of revenues was primarily due to the increase in product sales. Gross margin decreased from 52.2% for the three months ended September 30, 2024 to 50.6% for the three months ended September 30, 2025. The decrease in gross margin was largely due to tariffs, partially offset by a favorable product mix, improved fixed cost absorption, lower direct product and fulfillment costs, and growth in revenue for our Owlet360 subscription service.
Cost of revenues increased by $9,023, or 30.9%, from $29,226 for the nine months ended September 30, 2024 to $38,249 for the nine months ended September 30, 2025. The increase in cost of revenues was primarily due to the increase in product sales. Gross margin increased from 49.2% for the nine months ended September 30, 2024 to 51.7% for the nine months ended September 30, 2025. The increase in gross margin was primarily due to higher revenue, favorable product mix, improved fixed cost absorption, and lower direct product and fulfillment costs. The increase in gross margin to a lesser extent was also attributed to the growth in revenue for our Owlet360 subscription service. These contributions to gross margin expansion were partially offset by tariffs, particularly in the third quarter of 2025.
General and Administrative
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | |||||||||||||||||||||||||||||||||||||||
| General and administrative | $ | 6,273 | $ | 9,787 | $ | (3,514) | (35.9 | %) | $ | 20,593 | $ | 22,127 | $ | (1,534) | (6.9 | %) | |||||||||||||||||||||||||||||||
General and administrative expenses decreased by $3,514, or 35.9%, from $9,787 for the three months ended September 30, 2024 to $6,273 for the three months ended September 30, 2025. The decrease in general and administrative expenses was driven primarily by the absence of impairment charges related to intangible assets, an insurance loss recovery, and lower stock-based compensation partially offset by higher compensation expense mostly due to an increase in headcount and bonus accrual, as compared to the same period in the prior year.
General and administrative expenses decreased by $1,534, or 6.9%, from $22,127 for the nine months ended September 30, 2024 to $20,593 for the nine months ended September 30, 2025. The decrease in general and administrative expenses was driven primarily by the absence of impairment charges related to intangible assets, lower stock-based compensation, and an insurance loss recovery,
33
partially offset by higher compensation expense mostly due to an increase in headcount and bonus accrual and an increase in litigation settlements as compared to the same period in the prior year.
Sales and Marketing
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | |||||||||||||||||||||||||||||||||||||||
| Sales and marketing | $ | 4,926 | $ | 4,022 | $ | 904 | 22.5 | % | $ | 13,246 | $ | 11,770 | $ | 1,476 | 12.5 | % | |||||||||||||||||||||||||||||||
Sales and marketing expenses increased by $904, or 22.5%, from $4,022 for the three months ended September 30, 2024 to $4,926 for the three months ended September 30, 2025. The increase in sales and marketing expenses was driven primarily by higher marketing spend and an increase in compensation expense due to accrued bonuses as compared to the same period in the prior year.
Sales and marketing expenses increased by $1,476, or 12.5%, from $11,770 for the nine months ended September 30, 2024 to $13,246 for the nine months ended September 30, 2025. The increase in sales and marketing expenses was driven primarily by higher marketing spend and an increase in compensation expense due to accrued bonuses as compared to the same period in the prior year.
Research and Development
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | |||||||||||||||||||||||||||||||||||||||
| Research and development | $ | 3,785 | $ | 2,559 | $ | 1,226 | 47.9 | % | $ | 10,441 | $ | 7,260 | $ | 3,181 | 43.8 | % | |||||||||||||||||||||||||||||||
Research and development expenses increased by $1,226, or 47.9%, from $2,559 for the three months ended September 30, 2024 to $3,785 for the three months ended September 30, 2025. The increase in research and development expenses was driven primarily by increased investment in research and development and higher compensation expense, including accrued bonuses, as compared to the same period in the prior year.
Research and development expenses increased by $3,181, or 43.8%, from $7,260 for the nine months ended September 30, 2024 to $10,441 for the nine months ended September 30, 2025. The increase in research and development expenses was driven primarily by increased investment in research and development and higher compensation expense, including accrued bonuses, as compared to the same period in the prior year.
Other Income (Expense), Net
| Three Months Ended September 30, | Change | Nine Months Ended September 30, | Change | ||||||||||||||||||||||||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | $ | % | 2025 | 2024 | $ | % | |||||||||||||||||||||||||||||||||||||||
| Interest income (expense), net | $ | (860) | $ | (112) | $ | (748) | 667.9 | % | $ | (2,830) | $ | (253) | $ | (2,577) | 1018.6 | % | |||||||||||||||||||||||||||||||
| Common stock warrant liability adjustment | $ | 4,266 | $ | (673) | $ | 4,939 | (733.9 | %) | $ | (23,800) | $ | 9,534 | $ | (33,334) | (349.6 | %) | |||||||||||||||||||||||||||||||
| Other income (expense), net | $ | (479) | $ | (4) | $ | (475) | 11875.0 | % | $ | (430) | $ | 69 | $ | (499) | (723.2 | %) | |||||||||||||||||||||||||||||||
Interest expense increased by $748, from $112 of interest expense for the three months ended September 30, 2024 to $860 of interest expense for the three months ended September 30, 2025. Interest expense increased by $2,577, from $253 for the nine months ended September 30, 2024 to $2,830 for the nine months ended September 30, 2025. For both the three and nine month periods ended September 30, 2025, the increase in interest expense was driven primarily by interest and amortization of issuance costs related to the Company's current term loan facility and asset-based revolving credit facility, which were entered into in September 2024 as well as the absence of a gain on interest for forgiveness of interest accrued related to an arrangement with a significant vendor that was fully settled in September 2024, partially offset by the absence of termination fees related to the SVB term loan.
For the three months ended September 30, 2025, we recognized a gain of $4,266 as compared to a loss of $673 for the same period in the prior year resulting from a decrease in the fair value of common stock warrants outstanding for the three months ended September 30, 2025, as compared to an increase in the fair value of common stock warrants outstanding for the same period in the prior year.
For the nine months ended September 30, 2025, we recognized a loss of $23,800 as compared to a gain of $9,534 for the same period in the prior year resulting from an increase in the fair value of common stock warrants outstanding for the nine months ended
34
September 30, 2025, as compared to a decrease in the fair value of common stock warrants outstanding for the same period in the prior year. Additionally, the loss recognized for the nine months ended September 30, 2025 included the increase 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.
Other income (expense) increased by $475, from $4 of other expense for the three months ended September 30, 2024 to $479 of other expense for the three months ended September 30, 2025. Other income (expense) increased by $499, from $69 of income for the nine months ended September 30, 2024 to $430 of expense for the nine months ended September 30, 2025. For both the three and nine month periods ended September 30, 2025, the increase in expense was driven primarily by transaction costs related to the Warrant Exchange as discussed in Note 7. Common Stock Issuance, Redeemable Common Stock, Common Stock Warrants, and Convertible Preferred Stock and Note 12. Subsequent Events, within the Notes to Condensed Consolidated Financial Statements included elsewhere in this Report.
Non-GAAP Adjusted EBITDA
To supplement our unaudited consolidated financial statements, which are prepared in conformity with U.S. GAAP, we use adjusted EBITDA, a non-GAAP financial measure, to enhance our understanding of U.S. GAAP financial measures, as an internal measure of business operating performance, and as a performance measure for benchmarking against our peers and competitors. We believe our presentation of adjusted EBITDA provides a meaningful perspective of the underlying operating performance of our current business and enables investors to better understand and evaluate our historical and prospective operating performance. We believe that this non-GAAP financial measure is an important supplemental measure of operating performance because it excludes items that vary from period to period without correlation to our core operating performance and highlight trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures. Due to the nature of the items being excluded, such items do not reflect future gains, losses, expenses or benefits and are not indicative of our future operating performance. We believe investors, analysts and other interested parties use adjusted EBITDA in evaluating issuers, and the presentation of these measures facilitates a comparative assessment of our operating performance in addition to our performance based on GAAP results.
Non-GAAP financial measures should not be considered as an alternative to net loss as a measure of financial performance or any other performance measure derived in accordance with GAAP, and should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
Adjusted EBITDA is defined as net income (loss) adjusted for income tax provision, interest expense, net, depreciation and amortization, impairment of intangible assets, common stock warrant liability adjustment, stock-based compensation, transaction costs, insurance loss recovery related to certain legal matters, net of charges related to certain legal matters, and restructuring costs.
Adjusted EBITDA is not a recognized term under GAAP, and our presentation of this non-GAAP measure does not replace the presentation of our financial results in accordance with GAAP. Because all companies do not use adjusted EBITDA (and similarly titled financial measures) in the same way, those measures as used by other companies may not be consistent with the way we calculate such measures. The non-GAAP financial measure included in this report should not be construed as a substitute for or better indicator of the Company’s performance than the most directly comparable GAAP financial measure. See the reconciliation table below for additional information regarding the non-GAAP financial measure included herein (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| (dollars in thousands) | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||
| GAAP net income (loss) | $ | 4,134 | $ | (5,611) | $ | (30,488) | $ | (3,484) | |||||||||||||||
| Income tax provision | 9 | — | 54 | 22 | |||||||||||||||||||
| Interest expense, net | 860 | 112 | 2,830 | 253 | |||||||||||||||||||
| Depreciation and amortization | 141 | 117 | 369 | 330 | |||||||||||||||||||
| Impairment of intangible assets | 16 | 1,880 | 36 | 1,892 | |||||||||||||||||||
| Common stock warrant liability adjustment | (4,266) | 673 | 23,800 | (9,534) | |||||||||||||||||||
| Stock-based compensation | 1,271 | 2,715 | 4,516 | 7,046 | |||||||||||||||||||
| Transaction costs | 472 | — | 472 | 375 | |||||||||||||||||||
| Insurance loss recovery related to certain legal matters, net of charges related to certain legal matters | (1,078) | — | 290 | — | |||||||||||||||||||
| Restructuring costs | — | 722 | — | 722 | |||||||||||||||||||
| Non-GAAP Adjusted EBITDA | $ | 1,559 | $ | 608 | $ | 1,879 | $ | (2,378) | |||||||||||||||
35
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 September 30, 2025, we had cash and cash equivalents of $23,760.
Tariffs announced in 2025 have adversely impacted our cost of good sold and gross margins and may continue to affect cash flows if elevated tariff rates persist.
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.
As of September 30, 2025, 390,378 of the Series A Warrants have been exercised. The Series A Warrants that were exercised were marked to market based on the liability classification of the warrants, and we subsequently received $1,822 of cash proceeds during the nine months ended September 30, 2025 from the exercise of the Series A Warrants.
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 “Series B Warrants”), for an aggregate gross purchase price of $9,250.
As of September 30, 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 September 30, 2025. None of the Series B Warrants have been exercised as of September 30, 2025.
On August 7, 2025, we entered into a privately negotiated Exchange Agreement with certain Holders of our Series A Warrants and Series B Warrants, in which the Holders agreed to exchange with us their Series A Warrants relating to an aggregate of 7,215,737 shares of common stock and, if applicable, their Series B Warrants relating to an aggregate of 1,799,021 shares of common stock, for an aggregate of 5,426,429 of newly issued shares of common stock. We consummated the Exchanges and the issuance of the Exchange Shares on October 10, 2025. See Note 7. Common Stock Issuance, Redeemable Common Stock, Common Stock Warrants, and Convertible Preferred Stock and Note 12. Subsequent Events, within the Notes to Condensed Consolidated Financial Statements included elsewhere in this Report, for additional details regarding this agreement.
On September 11, 2024, we entered into an 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. The shares were issued pursuant to our registration statement on Form S-3 (File No. 333-281556), filed by us with the SEC on August 14, 2024, which was declared effective on August 23, 2024. 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 $0 in issuance costs that were unpaid as of September 30, 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. As of September 30, 2025, 25,081 of the Titan Warrants have been exercised.
On October 21, 2025, the Company entered into an underwriting agreement and, on October 23, 2025, the Company completed an offering for the sale of 4,196,000 shares of its common stock at an offering price to the public of $7.15 per share, less underwriting discounts and commissions. Subsequently, the underwriters exercised their over-allotment option for an additional 629,400 shares, which settled after the initial closing and increased the total shares issued in the offering to 4,825,400. From this offering, the Company received net proceeds of $32,109 after deducting underwriting discounts and commissions. The shares were issued pursuant to the Company’s registration statement on Form S-3 (File No. 333-281556) filed by the Company with the SEC on August 14, 2024, which was declared effective on August 23, 2024. A final prospectus relating to the offering was filed with the SEC on October 22, 2025.
WTI Loan Facility
36
On September 11, 2024,(the “Effective Date”), we, as guarantor, and our wholly-owned subsidiary, Owlet Baby Care, Inc., a Delaware corporation (“OBCI”), 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”). The second tranche of $5,000 (the “Second Tranche Commitment,” or together with the First Tranche Commitment, the “Loan Commitments”) per the initial Loan Facility Agreement would be available through August 15, 2025 and 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 the our then-current, board-approved operating and financing plan to WTI's satisfaction, as well as compliance with certain reporting conditions. In July 2025, WTI granted a 90-day extension, making the Second Tranche Commitment available through November 13, 2025. The terms of the Loan Facility Agreement were otherwise not modified in tandem with the extension. As of September 30, 2025, we were in compliance with all covenants under the WTI Loan Facility.
We initiated our first drawdown under the WTI Loan Facility of $7,500 (the “Initial Loan”) shortly after finalizing the Loan Facility Agreement in September 2024. 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 interest rate on the outstanding principal amounts of any borrowing under the WTI Loan Facility for the three months ended September 30, 2025 was 12%. Accrued coupon interest and accrued payment-in-kind interest (“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 $201 as of September 30, 2025.
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 financing 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 $47 as of September 30, 2025 and is recorded within Other assets on the unaudited condensed consolidated balance sheets.
We recognized $293 and $43 of interest expense related to the amortization of debt financing costs of the WTI Loan Facility and $95 and $136 of interest expense related to the amortization of the loan commitment assets during the three months ended September 30, 2025 and September 30, 2024, respectively.
We recognized $773 and $43 of interest expense related to the amortization of debt financing costs of the WTI Loan Facility and $762 and $136 of interest expense related to the amortization of the loan commitment assets during the nine months ended September 30, 2025 and September 30, 2024, respectively.
37
ABL Line of Credit
On September 11, 2024, we, as guarantor, and our wholly-owned subsidiary, OBCI, 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 (in such capacity, the “Administrative Agent”).
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 increased to $20,000 on September 11, 2025 (the “Revolving Commitment”). The ABL Line of Credit is collateralized by substantially all of our assets.
The ABL Line of Credit matures on September 10, 2027 (the “Maturity Date”). The Credit Agreement contains representations, warranties, covenants, and events of default customary for agreements of this type. As of September 30, 2025, we were in compliance with all covenants under the Credit Agreement.
On September 30, 2025, there was $18,616 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 $725 as of September 30, 2025.
On June 11, 2025, we entered into a First Amendment to Credit and Security Agreement (the “First Amendment”) with the Lenders and ABL OPCO LLC, a Delaware limited liability company, in its capacity as administrative agent for the Lenders (in such capacity, the “Administrative Agent”). The First Amendment amends the Credit and Security Agreement, dated September 11, 2024, that was entered into by the Loan Parties, the Lenders and the Administrative Agent, to (among other things) (i) modify certain financial covenants ,including EBITDA covenants (these may be calculated differently from EBITDA as disclosed in Item 2 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in this Form 10-Q), required to be maintained by us (ii) increase the amount of capital expenditures that may be incurred by the us during certain fiscal years, and (iii) expand the eligibility of certain accounts receivable that we can borrow against. Apart from the aforementioned changes, no modifications were made to other covenants, including the liquidity covenant as fully described in Part II, Item 8 “Financial Statements and Supplementary Data - Note 6 to the Consolidated Financial Statements - Debt and Other Financing Arrangements” in its 2024 Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended December 31, 2024.
The unamortized portion of debt financing costs related to the Credit Agreement as of September 30, 2025 was $603 and is recorded as a loan commitment asset within other assets on the unaudited condensed consolidated balance sheets. These costs are amortized straight-line over the term of the Credit Agreement and recorded within interest income (expense), net on the unaudited condensed consolidated statement of operations and comprehensive income (loss).
We recognized $70 and $12 of interest expense related to the amortization of the loan commitment assets during the three months ended September 30, 2025 and September 30, 2024, respectively.
We recognized $181 and $12 of interest expense related to the amortization of the loan commitment assets during the nine months ended September 30, 2025 and September 30, 2024, respectively.
Financed Insurance Premium
In 2024 and 2025, we financed a number of our insurance policies through short-term commercial premium finance agreements with First Insurance Funding totaling $1,064 to be paid within one year, accruing interest at a weighted average rate of 8.6%. As of September 30, 2025, the remaining principal balance on the combined financed insurance premiums was $596.
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 included in this quarterly report on Form 10-Q are issued.
We have historically experienced recurring operating losses, with the exception of the third quarter of 2025, and have generated negative cash flows from operations. We had an accumulated deficit of $298,683 as of September 30, 2025 and during the nine months ended September 30, 2025 and 2024, we had negative cash flows from operations of $10,340 and $14,215, respectively. As of September 30, 2025, we had $23,760 of cash on hand.
Notwithstanding the financings obtained as described further in “--Liquidity and Capital Resources” above, our historical operating and cash flow results, as well as our September 30, 2025 cash balance in relation to our obligations are considerations which raise substantial doubt about our ability to continue as a going concern within one year after the date that the accompanying unaudited
38
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. 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.
Though we obtained equity financing through our public offering in October 2025, 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.
Cash Flows
The following table summarizes our cash flow (in thousands):
| Nine Months Ended September 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash used in operating activities | $ | (10,340) | $ | (14,215) | |||||||
| Net cash used in investing activities | (454) | (587) | |||||||||
| Net cash provided by financing activities | 14,223 | 20,127 | |||||||||
| Net change in cash, cash equivalents, and restricted cash | $ | 3,429 | $ | 5,325 | |||||||
Operating Activities
For the nine months ended September 30, 2025, net cash used in operating activities was $10,340 as compared to net cash used in operating activities of $14,215 in the prior year. The change in operating cash flows was primarily driven by an increase in accrual net loss adjusted for non-cash items (adjustments to reconcile net loss to net cash used in operating activities.)
Investing Activities
For both the nine months ended September 30, 2025 and September 30, 2024, we used $454 and $587 respectively, to invest in various projects, primarily for the development and enhancement of our new subscription app.
Financing Activities
For the nine months ended September 30, 2025 and 2024, net cash provided by financing activities was $14,223 and $20,127, respectively. The decrease is primarily driven by the fact that we received less from the net proceeds from short-term borrowings and proceeds from exercise of common stock warrants in the current period than the proceeds for the following in the prior period: net proceeds from issuance of common stock, preferred stock and warrants as well as proceeds from long-term borrowings and issuance of redeemable common stock, net of payments.
Critical Accounting Policies and Estimates
There have been no material changes from the critical accounting policies and estimates disclosed in our Form 10-K and Form 10-K/A, other than policies disclosed in this Report.
Recent Tax Legislation
The One Big Beautiful Bill Act of 2025 (the “OBBBA”) was signed into law on July 4, 2025. The OBBBA makes changes to the U.S. corporate income tax, including reinstating the option to claim 100% accelerated depreciation deductions on qualified property, with retroactive application beginning January 20, 2025, and immediate expensing of domestic research and development costs, with retroactive application beginning January 1, 2025. We are evaluating its impacts, including any potential impact in the period of enactment. See Note 1. Basis of Presentation, within the Notes to Condensed Consolidated Financial Statements included elsewhere in this Report for additional information.
39
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
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.
Item 4. Controls and Procedures.
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 September 30, 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 September 30, 2025 due to the material weaknesses in our internal control over financial reporting described below.
Remediation of a Previously Reported Material Weakness in Internal Control Over Financial Reporting
As previously reported in our Form 10-Q for the period ending June 30, 2025, we identified material weaknesses in our internal control over financial reporting. 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 our annual or interim financial statements will not be prevented or detected on a timely basis. One of the material weaknesses was previously identified related to the following:
•We did not design and maintain effective controls to verify the completeness and accuracy of sales returns.
In response to this identified material weakness, our management, with the oversight of the Audit Committee of our board of directors, has been actively engaged in remediating the above material weakness. During the year ended December 31, 2024 and the nine months ended September 30, 2025, we implemented remediation measures designed to remediate this material weakness, including the following:
•A monthly review of accrued sales returns for appropriate valuation based on historical sales and return rates, and to ensure that estimated returns are appropriately reflected in revenue.
•A semi-annual analysis and update of the return rates used in the monthly review (discussed above) to ensure they are reflective of complete and accurate historical sales and customer return activity.
Management has concluded that the remediation measures described above related to the completeness and accuracy of sales returns have been designed, implemented, and operated effectively for a sufficient period of time for management to conclude, based on the results of our testing over the design and operating effectiveness of these controls, that the previously identified material weakness has been remediated as of September 30, 2025.
Material Weaknesses in Internal Control over Financial Reporting
We identified material weaknesses in our internal control over financial reporting. The material weaknesses are as follows: 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.
40
•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 periods ended March 31, 2025 and June 30, 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. 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, and immaterial adjustments for the year ended December 31, 2024 and the interim period ended September 30, 2025.
•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 previously designed and implemented the controls we believe will remediate the material weaknesses related to the accuracy and existence of inventory, the statement of cash flows, and debt and equity arrangements, including convertible preferred stock, and warrant arrangements. However, 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.
During the third quarter of 2025, we made enhancements to the design of IT general controls for information systems that are relevant to the preparation of our consolidated financial statements. We are enhancing the design of system controls that govern segregation of duties over journal entries and other financially significant systems and business processes. We initiated a segregation of duties business process analysis whereby existing compensating controls are being identified and new compensating controls are being designed to address segregation of duties conflicts. 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.
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 Plan” 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 September 30, 2025 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
41
PART II
Item 1. Legal Proceedings.
From time to time, we may become involved in various legal proceedings that arise in the ordinary course of business. We evaluate any claims and lawsuits with respect to their potential merits, our potential defenses and counterclaims, and the expected effect on us of defending the claims and a potential adverse result. However, the results of any litigation, investigations or other legal proceedings are inherently unpredictable and expensive. Any claims against us, whether meritorious or not, could be time consuming, result in costly litigation, damage to our reputation, and divert significant resources. If any legal proceedings were to be determined adversely to us, or we were to enter into a settlement agreement, we could be exposed to monetary damages or limits on our ability to operate our business, which could have an adverse effect on our business, financial condition and operating results. For a description of our legal proceedings, see Note 5, Commitments and Contingencies, within the Notes to Condensed Consolidated Financial Statements included elsewhere in this Report, which is incorporated herein by reference.
Item 1A. Risk Factors.
In addition to the information contained in this Report, you should carefully consider the risk factors described in our Form 10-K and Form 10-K/A, which are incorporated herein by reference, which could materially affect our business, financial condition or results. Other than the risk factors set forth below, there have been no material changes to the risk factors described in our Form 10-K and Form 10-K/A.
We have a history of losses and may not sustain profitability. 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 a history of losses and may not sustain profitability. Since our inception, we have incurred recurring operating losses, generated negative cash flows from operations, and financed our operations principally through equity raises and borrowings. Future profitability is difficult to predict with certainty, and failure to maintain profitability could materially and adversely affect our overall value and ability to obtain additional financing and capital. There can be no assurance that the Company will generate sufficient future cash flows from operations due to various potential factors, including but not limited to inflation, recession or decreased demand for our products. If our revenues decrease from current levels, we may be unable to further reduce costs, or such cost reductions may limit our ability to pursue and implement strategic initiatives and grow revenues in the future. We may require additional debt or equity financing in the future, and such financing may not be available when needed, on acceptable terms, or at all. Our ability to reduce operating expenses or raise capital from external sources, if at all, may have a material adverse effect on our business, financial condition and operating results. Those factors, coupled with our current cash balance and current debt obligations, continue to raise substantial doubt as to our ability to continue as a going concern.
We may need to raise additional capital in the future in order to support our operations and strategic plans, which may not be available to us when needed, on acceptable terms, or at all.
We may need to raise additional capital in the future to support our operations and strategic plans. We have a history of losses from operations and negative cash flows from operations, and we may continue to incur operating losses. Our current liquidity position, recurring operating losses, and negative cash flows from operations since inception 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 in this Report are issued.
Our ability to raise capital as we have done in recent years may not always be successful, and we may need to raise additional capital to fund our future operations in order to remain as a going concern. Though we obtained equity financing through our public offering in October 2025, there can be no assurance that we will be able to obtain additional funding when needed, on acceptable terms, or at all. To the extent that we raise additional capital through future equity offerings, the ownership interest of common stockholders will be diluted, which dilution may be significant. However, we cannot guarantee that we will be able to obtain any or sufficient additional funding or that such funding, if available, will be obtainable on terms satisfactory to us. 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.
Substantial doubt about our ability to continue as a going concern may materially and adversely affect the price per share of our common stock, and it may be more difficult for us to obtain financing. If potential investors decline to participate in any future financings due to such concerns, our ability to increase our cash position may be limited. The perception that we may not be able to continue as a going concern may cause others to choose not to deal with us due to concerns about our ability to meet our contractual obligations.
42
We have prepared our unaudited condensed consolidated financial statements on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. Our unaudited condensed consolidated financial statements included in this Report do not include any adjustments to reflect the possible inability to continue as a going concern within one year after the date of the filing of this Report. If we are unable to continue as a going concern, you could lose all or part of your investment.
In addition, we have in the past and may in the future maintain our cash in bank deposit accounts which, at times, exceed federally insured limits. In the event of failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all. Any inability to access or delay in accessing these funds could adversely affect our business and financial position.
We may still need additional funding to fund our operations, but additional funds may not be available to us on acceptable terms on a timely basis, if at all. We may seek funds through borrowings or additional rounds of financing, including private or public equity or debt offerings, or by other means. Our future capital requirements will depend on many factors, including:
•the timing, receipt and amount of sales from our current and future products and services;
•the cost and timing of manufacturing, either ourselves or through third party manufacturers, our products and services;
•the cost and timing of expanding our sales, marketing and distribution capabilities;
•the terms and timing of any other partnership, licensing and other arrangements that we may establish;
•the costs and timing of securing regulatory approvals or certifications;
•any product liability or other lawsuits related to our current or future products and services;
•the expenses needed to attract, hire and retain skilled personnel;
•the costs associated with being a public company;
•costs associated with any adverse market conditions or other macroeconomic factors;
•the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing our intellectual property portfolio; and
•the extent to which we acquire or invest in businesses, products or technologies.
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.
Changes in tax laws may impact our future financial position and results of operations.
The rules and regulations related to income, sales, use or other tax laws, statutes, rules, regulations or ordinances in the United States are subject to change and can be interpreted, changed, modified or applied adversely to us, any of which could adversely affect our business operations and financial performance. For example, OBBBA introduced a broad range of changes to the U.S. federal income tax regime, including the extension of key provisions from the Tax Cuts and Jobs Act of 2017, modifications to the international tax framework, and the restoration of favorable tax treatment for certain business provisions, including reinstating the option to claim 100% accelerated depreciation deductions on qualified property, with retroactive application beginning January 20, 2025, and immediate expensing of domestic research and development costs, with retroactive application beginning January 1, 2025, among others. We continue to evaluate the impact of the legislation on our business and our tax liability as additional guidance becomes available.
Further, any changes in regulations or policies related to taxation and importation, including as a result of increased tariffs, could adversely impact the global economy and our operating results. In addition, as we expand our business internationally, the application and implementation of existing, new or future international laws regarding indirect taxes (such as a Value Added Tax) could materially and adversely affect our business, financial condition and results of operations. To the extent that future U.S. or international tax regulatory changes have a negative impact on us, including as a result of related uncertainty, these changes could adversely impact our business, results of operations and financial position and may require changes in the manner in which we operate in order to minimize increases in our tax liability.
Increases in tariffs, trade restrictions or taxes on our products could have an adverse impact on our operations.
The commerce we conduct in the international marketplace makes us subject to tariffs, trade restrictions and other taxes when the raw materials or components we purchase, and the products we ship, cross international borders. In particular, the U.S. has imposed increased tariffs on certain countries, focusing on those with which it has the largest trade deficits. Other countries have responded, and may continue to respond, by announcing retaliatory tariffs on U.S. imports. The tariffs have disrupted, and may continue to disrupt, the global markets and escalate tensions between the U.S. and other countries.
43
We source products primarily from Thailand and Vietnam. Increases in tariffs, trade restrictions, or taxes on our products could have an adverse impact on our operations. Our camera products are currently produced in Vietnam. As of the date of this Report on Form 10-Q, imports from Vietnam are subject to a 20% tariff, with a higher 40% tariff in place for products deemed to have been “transshipped” from another country. Our Dream Sock, BabySat and Dream Duo products, primarily sourced from Thailand, are also subject a 19% tariff. To the extent these tariffs increase our costs of goods sold, it could materially adversely impact our profitability, results of operations and financial condition. To the extent we alter our pricing as a result of such tariffs, it could reduce demand for our products or make our products less competitive than those of our competitors whose inputs are not subject to these tariffs, thereby decreasing our revenues and adversely impacting our results of operations. Products we sell into certain foreign markets could also become subject to similar retaliatory tariffs, making the products we sell less competitive compared to similar products not subjected to such import tariffs. The broader macroeconomic impact of these tariffs could also pressure our business. Tariffs can contribute to inflation by increasing the cost of imported goods, which can erode consumer purchasing power and lead to less overall spending. In such an environment, demand for our products could decrease as consumers may prioritize other goods and services. Furthermore, any resulting shifts in U.S. monetary policy to combat inflation, such as interest rate hikes, could further constrain consumer spending.
Changes in U.S. trade policies, tariffs, taxes, export restrictions, or other trade barriers, have and could continue to have a material adverse effect on our business, results of operations, and financial condition. For example, the U.S. government has initiated, and may continue to initiate, investigations under Section 232 of the Trade Expansion Act of 1962, including investigations into imports of medical devices, which could lead to the imposition of substantially higher tariffs. Tariffs announced in 2025 have adversely impacted our cost of goods sold and gross margins, and any subsequent changes in U.S. trade policies, including the imposition of tariffs or restrictions on raw materials or components, may further limit our ability to produce products, increase our manufacturing costs, decrease our profit margins, reduce the competitiveness of our products, or inhibit our ability to sell products or purchase necessary raw materials or components, which would have a material adverse effect on our business, results of operations and financial condition.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
There were no unregistered sales of equity securities for the three months ended September 30, 2025 not previously reported on a Current Report on Form 8-K.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
(a) None.
(b) None.
(c) During the three months ended September 30, 2025, no directors or “officers” (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adopted terminated
44
Item 6. Exhibits
| Exhibit Number | Description | Form | File No. | Exhibit | Filing Date | ||||||||||||
3.1 | Certificate of Amendment to Owlet's Second Amended and Restated Certificate of Incorporation, as amended | 8-K | 001-39616 | 3.1 | 10/14/2025 | ||||||||||||
10.1 | Exchange Agreement, dated as of August 7, 2025, by and among Owlet, Inc. and the holders thereto. | 8-K/A | 001-39516 | 10.1 | 8/13/2025 | ||||||||||||
10.2 | Amended and Restated Non-Employee Director Compensation Program | 8-K | 001-39516 | 10.1 | 10/6/2025 | ||||||||||||
10.3 | Amended and Restated Offer Letter, dated September 30, 2025, between the Company and Jonathan Harris | 8-K | 001-39516 | 10.2 | 10/6/2025 | ||||||||||||
10.4 | Amendment No. 2 to the Owlet, Inc. 2021 Incentive Award Plan, as amended | DEF 14A | 001-39516 | Exhibit A | 10/14/2025 | ||||||||||||
| 31.1* | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||||||||||||||||
| 31.2* | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||||||||||||||||
| 32.1** | Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||||||||||||||||
| 101.INS* | Inline XBRL Instance Document-the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | ||||||||||||||||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | ||||||||||||||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | ||||||||||||||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | ||||||||||||||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | ||||||||||||||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | ||||||||||||||||
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | ||||||||||||||||
*Filed herewith
**Furnished herewith.
45
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Owlet, Inc. | ||||||||
| Date: November 13, 2025 | By: | /s/ Jonathan Harris | ||||||
| Name: | Jonathan Harris | |||||||
| Title: | Chief Executive Officer | |||||||
| (Principal Executive Officer) | ||||||||
| Date: November 13, 2025 | By: | /s/ Amanda Crawford | ||||||
| Name: | Amanda Crawford | |||||||
| Title: | Chief Financial Officer | |||||||
| (Principal Financial Officer and Principal Accounting Officer) | ||||||||
46
FAQ
What were Owlet (OWLT) Q3 2025 revenues and profits?
Revenue was $31,988 thousand; operating income was $1,216 thousand; net income was $4,134 thousand.
How much cash did OWLT have at quarter end?
Cash and cash equivalents were $23,760 thousand as of September 30, 2025.
What is Owlet’s current debt and credit usage?
Outstanding borrowings included $18,616 thousand on the ABL line and $7,500 thousand on the WTI term loan.
Did Owlet raise capital after the quarter?
Yes. In October 2025, it sold 4,825,400 shares at $7.15, raising net proceeds of $32,109 thousand.
What were total liabilities and equity position?
Total liabilities were $113,464 thousand and stockholders’ deficit was $54,143 thousand as of September 30, 2025.
How many OWLT shares were outstanding?
There were 27,580,607 common shares outstanding as of November 10, 2025.
Does the filing mention going concern issues?
Yes. It states conditions that raise substantial doubt about continuing as a going concern.
Owlet Inc
NYSE:OWLT
OWLT Rankings
OWLT Latest News
Nov 13, 2025
Owlet Reports Third Quarter 2025 Financial Results
OWLT Latest SEC Filings
Nov 13, 2025
[8-K] Owlet, Inc. Reports Material Event
Oct 22, 2025
[8-K] Owlet, Inc. Reports Material Event
Oct 15, 2025
[Form 4] Owlet, Inc. Insider Trading Activity
OWLT Stock Data
293.68M
25.78M
6.76%
54.3%
2.65%
Medical Devices
Measuring & Controlling Devices, Nec
United States
LEHI