Owlet(OWLT) - 2020 Q4 - Annual Report

Part I Business Sandbridge Acquisition Corporation, a SPAC, completed its IPO in September 2020 and entered a definitive business combination agreement with Owlet Baby Care Inc. on February 15, 2021, focusing on differentiated consumer brands benefiting from digital acceleration Introduction Sandbridge Acquisition Corporation, a Delaware blank check company, entered a business combination agreement with Owlet Baby Care Inc. on February 15, 2021, which will result in Sandbridge being renamed "Owlet, Inc." - The company is a blank check company formed to effect a merger, asset acquisition, or similar business combination[14] - On February 15, 2021, Sandbridge entered into a business combination agreement with Owlet Baby Care Inc. Upon closing, Sandbridge will be renamed "Owlet, Inc."[14] Business Strategy The company's strategy targets modern, purpose-driven consumer brands in sectors like digital platforms, beauty, luxury, and health and wellness, capitalizing on accelerated digital adoption and shifting consumer behaviors - The company's strategy focuses on the acceleration of category disruption, the growth of modern "2.0 brands," and heightened adoption of digital and e-commerce[25] - Target sectors are well-positioned to benefit from shifts in consumer behavior and include: "2.0" consumer digital platforms, beauty and personal care, luxury, and health and wellness[28] - The company leverages the networks of the Sandbridge fund and PIMCO private funds for proprietary deal sourcing and strategic opportunities[39] Acquisition Criteria and Process The company targets consumer segments including modern brands, disruptive technologies, beauty, luxury, and health and wellness, evaluating opportunities based on thematic alignment, digital transformation benefits, differentiated offerings, strong brands, solid leadership, and attractive risk/reward profiles - Key acquisition criteria include: - Thematically aligned modern business model - Beneficiary of accelerated digital and omni-channel transformation - Importantly differentiated offering - Strong enduring brand positioned for growth - Solid leadership team - Attractive risk/reward return opportunity[46] - The evaluation process for a prospective target involves a thorough due diligence review, including meetings with management, document reviews, and inspection of facilities[43] Initial Business Combination The initial business combination must have a fair market value of at least 80% of the trust account's net assets, with funding from IPO proceeds, private placements like the $130 million PIPE for Owlet, and potential debt or equity securities - The initial business combination must have an aggregate fair market value of at least 80% of the net assets held in the trust account (excluding deferred underwriting commissions and taxes payable)[47][58] - The company will only complete a business combination if the post-transaction entity owns 50% or more of the target's outstanding voting securities or otherwise acquires a controlling interest[49][60] - In connection with the proposed Owlet combination, the company entered into subscription agreements for a PIPE investment of $130 million from the sale of 13,000,000 shares of Class A common stock at $10.00 per share[57] Stockholder Redemption Rights and Procedures Public stockholders can redeem Class A common stock for a pro-rata share of the trust account upon business combination completion, subject to restrictions like a 15% limit on shares sold in the IPO and a net tangible assets threshold of $5,000,001 - Public stockholders are provided the opportunity to redeem all or a portion of their Class A common stock upon the completion of the initial business combination[74] - Redemption is restricted for any stockholder or group holding more than 15% of the shares sold in the IPO (the "Excess Shares")[84] - To exercise redemption rights, stockholders may be required to tender their certificates or deliver their shares electronically to the transfer agent prior to the vote on the business combination[86] Liquidation if No Initial Business Combination If no business combination is completed within 24 months of its IPO, the company will liquidate, redeeming all public shares for a pro-rata portion of the trust account, with the sponsor indemnifying against certain third-party claims - The company has 24 months from the closing of its IPO to complete an initial business combination; otherwise, it will redeem public shares and liquidate[93] - In a liquidation scenario, public shares will be redeemed at a per-share price equal to the aggregate amount in the trust account (including interest, less taxes and up to $100,000 for dissolution expenses) divided by the number of outstanding public shares[93] - The company's sponsor has agreed to indemnify the company for certain claims by third parties or prospective target businesses that could reduce the funds in the trust account below $10.00 per public share[99] Risk Factors This section details significant investment risks, including the company's lack of operating history, potential conflicts of interest, challenges in completing a business combination within 24 months, and risks related to stockholder redemptions, competition, the proposed Owlet merger, COVID-19, and potential securities delisting Risks Relating to Business and Business Combination The company faces risks as a newly formed entity with no operating history, including challenges in completing a business combination within 24 months, potential difficulties due to stockholder redemption rights, significant competition, and uncertainties from the COVID-19 pandemic - The company is a newly formed entity with no operating history or revenues, providing no basis for investors to evaluate its ability to achieve its business objective[112] - The company may not be able to complete its initial business combination within the prescribed 24-month timeframe, which would result in liquidation and the expiration of its warrants[130] - The company faces significant competition from other blank check companies (including the affiliated Sandbridge 2), private equity groups, and other entities seeking business combinations[136] - The ongoing COVID-19 pandemic may materially adversely affect the search for a business combination and the operations of any target business[171] Risks Relating to Management and Personnel The company's operations are highly dependent on its officers and directors, whose involvement in other businesses, including another SPAC, creates potential conflicts of interest regarding time allocation and business opportunities - The company's operations are dependent on a small group of individuals, particularly its officers and directors, and the loss of their services could be detrimental[180] - Officers and directors are not required to commit their full time to the company's affairs and are involved in other business endeavors, including another SPAC (Sandbridge 2), which creates potential conflicts of interest[189][191] - The company's amended and restated certificate of incorporation provides that it renounces interest in any corporate opportunity offered to a director or officer unless it is expressly offered to them in their capacity as a director or officer of the company[193] Risks Relating to Ownership of Our Securities Investors face risks including potential delisting, warrant redemption at disadvantageous times, per-share redemption amounts below $10.00 due to third-party claims or negative interest rates, dilution from additional stock issuance, and reduced disclosure requirements as an emerging growth company - If the company fails to complete a business combination within 24 months, public stockholders may be forced to wait beyond that period before receiving redemption proceeds from the trust account[202] - The company has the ability to redeem outstanding warrants at any time after they become exercisable at a price of $0.01 per warrant, provided the stock price equals or exceeds $18.00 for a specified period, which could make the warrants worthless[210] - Third-party claims could reduce the proceeds held in the trust account, resulting in a per-share redemption amount of less than $10.00[223] - As an emerging growth company, the company may take advantage of certain exemptions from disclosure requirements, which could make its securities less attractive to investors[245] Risks Relating to Litigation The company may face securities class action and derivative lawsuits, common for public companies entering business combination agreements, which could incur substantial costs and potentially delay or prevent the transaction, with limited funds outside the trust account for indemnification obligations - The company may be targeted by securities class action and derivative lawsuits, which could lead to substantial costs and potentially delay or prevent the initial business combination[256] - The company has agreed to indemnify its officers and directors, but this can only be satisfied by funds outside the trust account or after a business combination is consummated[257] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[263] Properties The company's executive offices are located in Los Angeles, CA, with costs covered by a $10,000 monthly fee paid to an affiliate of the Sponsor for office space, utilities, and administrative support - The company's executive offices are located in Los Angeles, CA. The cost is included in a $10,000 monthly fee paid to an affiliate of the Sponsor for office space and administrative services[264] Legal Proceedings The company reports no legal proceedings - There are no legal proceedings[265] Mine Safety Disclosures This item is not applicable to the company - Not applicable[266] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities This section details the company's NYSE listings (SBG.U, SBG, SBG WS), confirms no cash dividends paid or intended before a business combination, and outlines the use of $230 million from its September 2020 IPO and private placement placed in a trust account - The company's units, Class A common stock, and public warrants are traded on the NYSE under the symbols "SBG.U," "SBG," and "SBG WS," respectively[269] - The company has not paid any cash dividends and does not intend to do so prior to the completion of its initial business combination[271] - On September 17, 2020, the company consummated its IPO of 23,000,000 units at $10.00 per unit, generating gross proceeds of $230,000,000[272] - Simultaneously with the IPO, the company sold 6,600,000 private placement warrants at $1.00 per warrant, generating proceeds of $6,600,000[273] - Of the gross proceeds from the IPO and private placement, $230,000,000 was placed in the Trust Account[274] Management's Discussion and Analysis of Financial Condition and Results of Operations This section covers the company's financial condition and operations since June 23, 2020, reporting a net loss of $427,187 for the period ending December 31, 2020, with liquidity primarily from IPO proceeds outside the trust account, and highlights the recent business combination agreement with Owlet Baby Care Inc. Recent Developments On February 15, 2021, the company entered a definitive business combination agreement with Owlet Baby Care Inc., expecting the merger to close in the second quarter of 2021, resulting in Owlet becoming a wholly owned subsidiary and the company being renamed "Owlet, Inc." - On February 15, 2021, the Company entered into a business combination agreement with Owlet Baby Care Inc. ("Owlet")[279] - The merger is expected to close in the second quarter of 2021, subject to stockholder approval and other customary closing conditions[282] Results of Operations For the period from inception (June 23, 2020) to December 31, 2020, the company, a blank check entity, reported a net loss of $427,187, primarily from operating costs offset by interest income from trust account investments Results of Operations (June 23, 2020 (inception) to Dec 31, 2020) | Metric | Amount | Period | | :--- | :--- | :--- | | Net Loss | ($427,187) | June 23, 2020 (inception) to Dec 31, 2020 | | Operating Costs | $480,436 | June 23, 2020 (inception) to Dec 31, 2020 | | Interest Income | $53,249 | June 23, 2020 (inception) to Dec 31, 2020 | Liquidity and Capital Resources The company's liquidity stems from its IPO and private placement, with $230 million in a trust account and $1,287,234 in cash outside the trust as of December 31, 2020, for working capital, supplemented by potential working capital loans up to $1.5 million from the Sponsor - Following the IPO and private placement, a total of $230,000,000 was placed in the Trust Account[288] - As of December 31, 2020, the company had $1,287,234 in cash held outside the Trust Account for working capital purposes[291] - The Sponsor or its affiliates may loan the company up to $1,500,000 for working capital, which may be converted into warrants at $1.00 per warrant[292] Quantitative and Qualitative Disclosures About Market Risk As of December 31, 2020, the company faced no material market or interest rate risk, as funds in the Trust Account are invested in short-term U.S. government treasury obligations or money market funds - The company is not subject to any material market or interest rate risk as of December 31, 2020[303] - Proceeds in the Trust Account are invested in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds, minimizing interest rate risk[303] Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of December 31, 2020, with no material changes in internal control over financial reporting during the most recent fiscal quarter - Management evaluated disclosure controls and procedures as of December 31, 2020, and concluded they were effective[306] - There were no changes in internal control over financial reporting during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, internal controls[309] Part III Directors, Executive Officers and Corporate Governance This section provides biographical information for the company's executive officers (Ken Suslow, Richard Henry, Joe Lamastra) and six-member board, detailing the audit, compensation, and nominating/corporate governance committees, along with adopted Code of Business Conduct and Ethics and Corporate Governance Guidelines - The company's executive officers are Ken Suslow (Chairman & CEO), Richard Henry (CFO), and Joe Lamastra (COO)[312] - The board of directors consists of six members and is divided into three classes, serving three-year staggered terms[329] - The board has three standing committees: an audit committee, a compensation committee, and a nominating and corporate governance committee[330] Executive Compensation No cash compensation has been paid to executive officers or directors, but an affiliate of the Sponsor receives a $10,000 monthly fee for office space and administrative support, with reimbursement for out-of-pocket expenses - No executive officers or directors have received any cash compensation for services rendered to the company[347] - An affiliate of the Sponsor receives $10,000 per month for office space, utilities, and administrative support services[347] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of March 15, 2021, the Sponsor, Sandbridge Acquisition Holdings LLC, beneficially owns 97.7% of Class B common stock (19.5% of total), with other significant Class A holders including Magnetar Financial LLC (7.8%), Aristeia Capital, L.L.C. (6.9%), and BlueCrest Capital Management Limited (5.2%) Beneficial Ownership of Common Stock (As of March 15, 2021) | Beneficial Holder | Class A Common Stock (%) | Class B Common Stock (%) | Total Common Stock (%) | | :--- | :--- | :--- | :--- | | Sandbridge Acquisition Holdings LLC | -- | 97.7% | 19.5% | | Entities affiliated with Magnetar Financial LLC | 7.8% | -- | 6.2% | | Aristeia Capital, L.L.C. | 6.9% | -- | 5.5% | | BlueCrest Capital Management Limited | 6.5% | -- | 5.2% | Certain Relationships and Related Transactions, and Director Independence This section discloses related party transactions, including the sponsor's purchase of 5,750,000 founder shares for $25,000 and 6,600,000 private placement warrants for $6.6 million, a $10,000 monthly administrative fee to an affiliate, potential $1.5 million working capital loans from the sponsor, and PIPE financing agreements for the Owlet business combination - In July 2020, the sponsor purchased 5,750,000 founder shares for an aggregate price of $25,000[353] - The sponsor purchased 6,600,000 private placement warrants at $1.00 per warrant in a private placement[354] - The company pays an affiliate of the sponsor $10,000 per month for office space and administrative support[358] - In connection with the Owlet Business Combination Agreement, Sandbridge entered into Subscription Agreements with PIPE Investors to sell 13,000,000 shares of Class A common stock for $10.00 per share[362] Principal Accounting Fees and Services The company's independent registered public accounting firm is WithumSmith+Brown, PC, with total audit fees of approximately $61,800 for the year ended December 31, 2020, covering IPO, quarterly reviews, and the annual audit, with no other audit-related, tax, or other fees Principal Accounting Fees and Services (2020) | Fee Category | Amount (2020) | | :--- | :--- | | Audit Fees | ~$61,800 | | Audit-Related Fees | $0 | | Tax Fees | $0 | | All Other Fees | $0 | Part IV Exhibits and Financial Statement Schedules This section lists all financial statements and exhibits filed with the Form 10-K, including the Business Combination Agreement with Owlet Baby Care Inc., the Amended and Restated Certificate of Incorporation, and the Warrant Agreement - This section provides a list of all financial statements, schedules, and exhibits filed with the Form 10-K[369] - Key exhibits filed include the Business Combination Agreement with Owlet, the Warrant Agreement, and the Registration and Stockholder Rights Agreement[370][371] Financial Statements Report of Independent Registered Public Accounting Firm The independent registered public accounting firm, WithumSmith+Brown, PC, issued an unqualified opinion on the company's financial statements for the period from June 23, 2020 (inception) through December 31, 2020, affirming fair presentation in conformity with U.S. GAAP - The auditor, WithumSmith+Brown, PC, issued an unqualified opinion on the financial statements as of December 31, 2020[381] Financial Statements The financial statements for the period from inception (June 23, 2020) to December 31, 2020, show total assets of $231.6 million (primarily trust account investments), total liabilities of $8.4 million, total stockholders' equity of $5.0 million, and a net loss of $427,187, with cash flows dominated by IPO and private placement financing activities Balance Sheet As of December 31, 2020, the company reported total assets of $231.6 million, with $230.1 million in the Trust Account, total liabilities of $8.4 million, and total stockholders' equity of $5.0 million, with $218.2 million of Class A common stock subject to possible redemption Balance Sheet (As of Dec 31, 2020) | Balance Sheet (As of Dec 31, 2020) | Amount | | :--- | :--- | | Assets | | | Cash and investments held in Trust Account | $230,053,249 | | Total Assets | $231,614,335 | | Liabilities & Equity | | | Total Liabilities | $8,365,328 | | Class A common stock subject to possible redemption | $218,249,000 | | Total Stockholders' Equity | $5,000,007 | Statement of Operations For the period from inception (June 23, 2020) to December 31, 2020, the company recorded a net loss of $427,187, resulting from $480,436 in general and administrative expenses partially offset by $53,249 in interest income from trust account investments Statement of Operations (June 23, 2020 (inception) to Dec 31, 2020) | Statement of Operations | Amount | | :--- | :--- | | General and administrative expenses | $480,436 | | Interest earned on investments | $53,249 | | Net loss | ($427,187) | Statement of Cash Flows From inception to December 31, 2020, the company used $455,960 in operating activities and $230 million in investing activities, while financing activities provided $231.7 million, resulting in a cash balance of $1,287,234 Statement of Cash Flows (Inception to Dec 31, 2020) | Cash Flows (Inception to Dec 31, 2020) | Amount | | :--- | :--- | | Net cash used in operating activities | ($455,960) | | Net cash used in investing activities | ($230,000,000) | | Net cash provided by financing activities | $231,743,194 | | Net Change in Cash | $1,287,234 | Notes to Financial Statements The notes detail the company's formation as a SPAC, significant accounting policies, related party transactions including founder shares and administrative support, commitments like deferred underwriting fees, and the subsequent business combination agreement with Owlet Baby Care Inc. on February 15, 2021 - The company was incorporated on June 23, 2020, and completed its IPO of 23,000,000 units on September 17, 2020, placing $230,000,000 of the proceeds into a trust account (Note 1)[395][398][401] - The Sponsor purchased 5,750,000 Founder Shares for $25,000 and the company has an agreement to pay an affiliate of the Sponsor $10,000 per month for administrative support (Note 5)[433][435] - The underwriters of the IPO are entitled to a deferred fee of $8,050,000, payable from the Trust Account only upon completion of a Business Combination (Note 6)[441] - Subsequent to the balance sheet date, on February 15, 2021, the company entered into a definitive business combination agreement with Owlet Baby Care Inc. (Note 10)[465]