Owlet(US:OWLT)2025-08-08 20:25PART I. FINANCIAL INFORMATION Financial Statements The unaudited condensed consolidated financial statements for Owlet, Inc. as of June 30, 2025, show a significant increase in total liabilities, primarily due to a rise in common stock warrant liabilities and line of credit borrowings, resulting in a net loss of $34.6 million for the first six months of 2025, and raising substantial doubt about the company's ability to continue as a going concern Condensed Consolidated Balance Sheets Balance Sheet Summary (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $63,543 | $49,515 | | Total Current Assets | $60,743 | $46,113 | | Total Liabilities | $108,024 | $66,329 | | Common stock warrant liabilities | $51,652 | $25,343 | | Line of credit | $14,876 | $6,263 | | Total Stockholders' Deficit | ($59,156) | ($29,751) | - Total liabilities increased significantly from $66.3 million at year-end 2024 to $108.0 million as of June 30, 2025, widening the total stockholders' deficit to $59.2 million21 Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Statement of Operations Summary (in thousands, except per share data) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Revenues | $47,167 | $35,449 | | Gross Profit | $24,706 | $16,799 | | Operating Loss | ($4,590) | ($7,990) | | Common stock warrant liability adjustment | ($28,066) | $10,207 | | Net Income (Loss) | ($34,622) | $2,127 | | Net Loss Per Share | ($2.26) | ($0.08) | - Revenue grew 33% year-over-year for the six months ended June 30, 2025, but a significant non-cash loss of $28.1 million from the common stock warrant liability adjustment resulted in a substantial net loss of $34.6 million23 Condensed Consolidated Statements of Cash Flows Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($8,170) | ($6,721) | | Net cash used in investing activities | ($199) | ($74) | | Net cash provided by financing activities | $9,865 | $5,601 | | Net change in cash | $1,496 | ($1,194) | - Cash used in operations increased to $8.2 million in the first half of 2025, with the company's cash position bolstered by $9.9 million in net cash from financing activities, primarily from short-term borrowings and warrant exercises32 Notes to Condensed Consolidated Financial Statements - The company has experienced recurring operating losses and negative cash flows, resulting in an accumulated deficit of $302.8 million, which raises substantial doubt about its ability to continue as a going concern4144 - Customer concentration risk is high, with one customer accounting for 52% of net revenues and 68% of net accounts receivable for the six months ended June 30, 202549 - The company has secured a term loan facility for up to $15.0 million and an asset-based revolving credit facility for up to $15.0 million (increasing to $20.0 million in September 2025) to provide liquidity7688 - Agreements in principle have been reached to settle class action lawsuits, recognizing expenses of $5.25 million in 2024 and an additional $675 thousand in Q1 2025 related to these matters101104 - Subsequent to the quarter end, on August 7, 2025, the company entered into an agreement to exchange certain outstanding warrants for an aggregate of 5,426,429 newly issued shares of common stock, subject to stockholder approval147 Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported a 33.1% increase in revenue for the first six months of 2025, driven by higher sales of Dream Sock products and the new Owlet360 subscription service, with gross margin improving from 47.4% to 52.4%, despite rising operating expenses and ongoing liquidity concerns that raise substantial doubt about the company's ability to continue as a going concern Results of Operations Revenue Performance (in thousands) | Period | 2025 | 2024 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $26,063 | $20,699 | $5,364 | 25.9% | | Six Months Ended June 30 | $47,167 | $35,449 | $11,718 | 33.1% | - Revenue growth was primarily driven by higher sales of Dream Sock and Dream Duo products and the launch of the Owlet360 subscription service in January 2025162 Gross Margin Performance | Period | 2025 | 2024 | | :--- | :--- | :--- | | Three Months Ended June 30 | 51.3% | 49.5% | | Six Months Ended June 30 | 52.4% | 47.4% | - Operating expenses increased for the six months ended June 30, 2025, compared to the prior year: General & Administrative rose 16.0% to $14.3 million, Sales & Marketing rose 7.4% to $8.3 million, and Research & Development rose 41.6% to $6.7 million166168170 - Non-GAAP Adjusted EBITDA turned positive, reaching $320 thousand for the first six months of 2025, compared to a loss of $3.0 million in the same period of 2024177 Liquidity and Capital Resources - As of June 30, 2025, the company had cash and cash equivalents of $21.8 million178 - The company has experienced recurring operating losses and negative cash flows from operations, resulting in an accumulated deficit of $302.8 million as of June 30, 2025, raising substantial doubt about its ability to continue as a going concern205206 - Recent financing activities include a September 2024 common stock offering with net proceeds of $10.6 million, a $15.0 million term loan facility (of which $7.5 million was drawn), and a $15.0 million ABL line of credit (of which $14.9 million was outstanding)183189200 Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($8,170) | ($6,721) | | Net cash provided by financing activities | $9,865 | $5,601 | Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Owlet, Inc. is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company defined by Rule 12b-2 of the Exchange Act, Owlet, Inc. is not required to provide quantitative and qualitative disclosures about market risk217 Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2025, due to several ongoing material weaknesses in internal control over financial reporting, despite the remediation of one previously identified material weakness related to accrued sales tax, with a remediation plan currently in progress - Management concluded that disclosure controls and procedures were not effective as of June 30, 2025, due to material weaknesses in internal control over financial reporting220 - The company successfully remediated a previously identified material weakness related to the completeness and accuracy of accrued sales tax as of June 30, 2025221223 - Multiple material weaknesses persist, including issues with the overall control environment, segregation of duties for journal entries, controls over inventory and accrued liabilities, accounting for complex debt and equity arrangements, and review of the statement of cash flows224229 - A remediation plan is underway, which includes hiring additional accounting personnel and implementing enhanced policies, procedures, and controls226 PART II. OTHER INFORMATION Legal Proceedings The company is involved in putative class action and derivative lawsuits alleging violations of the Securities Exchange Act of 1934, with agreements in principle to settle these claims having been reached and motions for preliminary approval currently pending - The company is involved in legal proceedings, including class action complaints filed in November 2021 alleging violations of the Securities Exchange Act related to misleading statements about the FDA's classification of its Smart Sock product9799 - Following mediation, the company reached agreements in principle to settle the claims for a total of $5.25 million, with motions for preliminary approval of the settlements pending as of January 31, 2025101 Risk Factors The company highlights new and updated risks, including potential adverse impacts from changes in U.S. and international tax laws, such as the One Big Beautiful Bill Act of 2025 (OBBBA), and significant risk from increases in tariffs and trade restrictions on products sourced from Thailand and Vietnam - Changes in tax laws, such as the recently enacted One Big Beautiful Bill Act of 2025 (OBBBA), could adversely affect the company's financial performance238 - The company faces risks from increased tariffs on its products sourced from Thailand (19% tariff) and Vietnam (20% tariff), which could increase costs, reduce profitability, and make products less competitive240241 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities for the three months ended June 30, 2025 - There were no unregistered sales of equity securities during the three-month period ending June 30, 2025244 Other Information The company announced that because its 2025 annual meeting will be more than 30 days after the anniversary of the 2024 meeting, the new deadline for submitting stockholder proposals under Rule 14a-8 is August 18, 2025 - The deadline for submitting stockholder proposals for the 2025 annual meeting pursuant to Rule 14a-8 has been changed to August 18, 2025247