UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.WASHINGTON, DC 20549

FORM 10-Q

(Mark One)
☒
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20202022

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 No.Number: 001-39516


SANDBRIDGE ACQUISITION CORPORATIONOwlet, Inc.
(Exact nameName of registrantRegistrant as specifiedSpecified in its charter)Charter)



Delaware85-1615012
Delaware85-1615012
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
3300 North Ashton Boulevard, Suite 300
Lehi, Utah
84043
(Address of principal executive offices)(Zip Code)

1999 Avenue of the Stars, Suite 2088
Los Angeles, CA 90067
(Address of Principal Executive Offices, including zip code)
(424) 221-5743
(Registrant’s telephone number, including area code)code: (844) 334-5330

N/A
(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class
Trading
Symbol(s)
Name of each exchange
on which registered
Units, each consisting of one share of Class A commonCommon stock, $0.0001 par value and one-half of one redeemable warrantper shareSBG.UOWLTNew York Stock Exchange LLC
Shares of Class AWarrants to purchase common stock included as part of the unitsSBGOWLT WSNew York Stock Exchange LLC
Redeemable warrants included as part of the units, each whole warrant exercisable for one share of Class A common stock at an exercise price of $11.50SBG WSNew York Stock Exchange LLC
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, a 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☐oAccelerated filer☐o
Non-accelerated filer☒xSmaller reporting company☒x
Emerging growth companyx☒

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 13, 2020, 23,000,000August 12, 2022, the registrant had 114,377,722 shares of Class A common stock, $0.0001 par value and 5,750,000 shares of Class B common stock, $0.0001 par value, were issued andper share, outstanding.


SANDBRIDGE ACQUISITION CORPORATION

Quarterly Report on Form 10-Q
TABLE OF CONTENTS

Table of Contents


Page
PART I.
PART 1 – FINANCIAL INFORMATIONItem 1.
3
3
Item 1.1
4
5
1
2
3
4
6
5
7
14
20
16
Item 4.
Control and Procedures27
16
PART II – OTHER INFORMATIONItem 4.
28
PART II.
17
30
17
30
17
31
17
31
17
31
17
Item 6.
Exhibits31
17
19

Exhibits
PART 1 – FINANCIAL INFORMATION

ITEM 1.
32CONDENSED FINANCIAL STATEMENTS
33


SANDBRIDGE ACQUISITION CORPORATION

CONDENSED BALANCE SHEETCAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
SEPTEMBER 30, 2020This Quarterly Report on Form 10-Q and oral statements made from time to time by representatives of Owlet, Inc. (together with its subsidiaries, the "Company," "Owlet," "we," "us" or "our") may contain or incorporate by reference certain statements that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). Generally, forward-looking statements include the words “may,” “believes,” “plans,” “expects,” “anticipates,” “intends,” “estimate,” “goal,” “potential,” “upcoming,” “outlook,” “guidance,” or the negation thereof, or similar expressions. In addition, all statements (including any underlying assumptions) that address projected or future operating, financial or business performance, strategies or initiatives, future efficiencies or savings, anticipated costs or charges, future capitalization, anticipated impacts of recent or pending investments or transactions, and statements expressing general views about our future results, performance, operations or business are forward-looking statements within the meaning of the Reform Act. Forward-looking statements are based on our expectations at the time such statements are made, speak only as of the dates they are made and are susceptible to a number of risks, uncertainties and other factors. For all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Reform Act. Our actual results, performance or achievements may differ materially from any future results, performance or achievements expressed or implied by our forward-looking statements. Such factors include, but are not limited to, the following:
(Unaudited)

•the impact of the Warning Letter (defined below), dated October 1, 2021 and corrected in an amendment dated October 5, 2021, from the U.S. Food and Drug Administration (the “FDA”), and our ability to obtain marketing authorization for the medical device functionality of the former Owlet Smart Sock or to fully realize the commercial success of the Owlet Dream Sock, which replaced the Owlet Smart Sock in the U.S. market;
ASSETS   
Current assets   
Cash 
$
1,438,624
 
Prepaid expenses  
302,955
 
Total Current Assets  
1,741,579
 
     
Cash and marketable securities held in trust account  
230,006,152
 
Total Assets $231,747,731 
     
LIABILITIES AND STOCKHOLDERS’ EQUITY    
Current liabilities    
Accrued expenses 
$
16,667
 
Accrued offering costs  
35,025
 
Total Current Liabilities  
51,692
 
     
Deferred underwriting fee payable  
8,050,000
 
Total Liabilities  8,101,692 
     
Commitments and contingencies    
     
Class A common stock subject to possible redemption, 21,864,603 shares at $10.00 per share redemption value  
218,646,030
 
     
Stockholders’ Equity    
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding  
—
 
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 1,135,397 shares issued and outstanding (excluding 21,864,603 shares subject to possible redemption)  
114
 
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 5,750,000 shares issued and outstanding  
575
 
Additional paid-in capital  
5,029,475
 
Accumulated deficit  
(30,155
)
Total Stockholders’ Equity  5,000,009 
Total Liabilities and Stockholders’ Equity $231,747,731 

•our ability to grow and manage growth profitably, which may be affected by, among other things, inflation, recession, competition and the impact of discretionary consumer spending, retail sector and demographic trends, employee availability and other economic, business and regulatory conditions;
•our ability to enhance future operating and financial results and continue as a going concern;
•our ability to obtain additional financing in the future and risks associated with our current loan and debt agreements, including compliance with debt covenants, restrictions on our access to capital, the impact of our overall debt levels and the Company’s ability to generate sufficient future cash flows from operations to meet our debt service obligations and operate our business;
•our ability to pursue and implement our strategic initiatives, reduce costs and grow revenues, as well as innovate existing products, continue developing new products, meet evolving customer demands and adapt to changes in consumer preferences and retail trends;
•the regulatory pathway for our products and communications from regulators, including the FDA and similar regulators outside of the United States, as well as legal proceedings, regulatory disputes and governmental inquiries;
•our ability to acquire, defend and protect our intellectual property and satisfy regulatory requirements, including but not limited to laws and requirements concerning privacy and data protection, privacy or data breaches, data loss and other risks associated with our digital platform and technologies;
•any defects in new products or enhancements to existing products;
•our ability to obtain and maintain regulatory approval or certification for our products, and any related restrictions and limitations of any approved or certified product;
•expectations regarding developments with regulatory bodies, and the timeline for related submissions by us and decisions by the regulatory bodies and notified bodies;
•our ability to hire, retain, manage and motivate employees, including key personnel;
•our ability to upgrade and maintain our information technology systems;
•changes in and our compliance with laws and regulations applicable to our business; and
•the impact and disruption to our business, financial condition, results of operations, supply chain constraints and logistics due to economic and other conditions beyond our control, such as health epidemics or pandemics, social unrest, hostilities, natural disasters or other catastrophic events.

All future written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. Moreover, we operate in an evolving environment. In addition to the factors described above, new risk factors and uncertainties may emerge from time to time, and factors that the Company currently deems immaterial may become material, and it is impossible for us to predict such events or how they may affect us.
1


Except as required by federal securities laws, we assume no obligation to update any forward-looking statements after the date of this Quarterly Report on Form 10-Q, whether as a result of new information, future events or otherwise, although we may do so from time to time. We do not endorse any projections regarding future performance that may be made by third parties.

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Owlet, Inc.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share amounts)
(unaudited)

AssetsJune 30, 2022December 31, 2021
Current assets:
Cash and cash equivalents$37,256 $95,054 
Accounts receivable, net of allowance for doubtful accounts of $804 and $403, respectively23,989 10,468 
Inventory29,387 17,980 
Prepaid expenses and other current assets3,294 12,313 
Total current assets93,926 135,815 
Property and equipment, net1,713 1,870 
Right of use assets, net2,912 — 
Intangible assets, net2,403 1,696 
Other assets929 666 
Total assets$101,883 $140,047 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$27,589 $27,765 
Accrued and other expenses28,704 31,730 
Current portion of deferred revenues1,146 1,061 
Line of credit4,339— 
Current portion of long-term debt11,0858,534 
Total current liabilities72,863 69,090 
Long-term debt, net— 7,993 
Noncurrent lease liabilities2,110 — 
Common stock warrant liability5,126 7,061 
Other long-term liabilities246 712 
Total liabilities80,345 84,856 
Commitments and contingencies (Note 6)00
Stockholders’ equity:
Common stock, $0.0001 par value, 1,000,000,000 shares authorized as of June 30, 2022 and December 31, 2021; 114,054,961 and 112,996,568 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively.11 11 
Additional paid-in capital205,425 198,602 
Accumulated deficit(183,898)(143,422)
Total stockholders’ equity21,538 55,191 
Total liabilities and stockholders’ equity$101,883 $140,047 
The accompanying notes are an integral part of thethese unaudited condensed consolidated financial statements.




1
3
SANDBRIDGE ACQUISITION CORPORATION

CONDENSED STATEMENTS OF OPERATIONSOwlet, Inc.
(Unaudited)Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)
  
Three Months
Ended
September 30,
  
For the Period
from June 23,
2020
(Inception)
Through
September 30,
 
  2020  2020 
General and administrative expenses 
$
36,307
  
$
36,307
 
Loss from operations  (36,307)  (36,307)
         
Other income:        
Interest earned on marketable securities held in trust account  
6,152
   
6,152
 
         
Loss before provision for income taxes  
(30,155
)
  
(30,155
)
Provision for income taxes  
—
   
—
 
Net loss $(30,155
)
 $(30,155)
         
Weighted average shares outstanding of Class A redeemable common stock  
23,000,000
   
23,000,000
 
Basic and diluted income per share, Class A 
$
—
  
$
—
 
         
Weighted average shares outstanding of Class B non-redeemable common stock  
5,750,000
   
5,750,000
 
Basic and diluted net loss per share, Class B $(0.01) $(0.01)

(unaudited)

For the Three Months EndedFor the Six Months Ended
June 30, 2022June 30, 2021June 30, 2022June 30, 2021
Revenues$18,348 $24,938 $39,887 $46,849 
Cost of revenues11,726 11,420 24,507 20,648 
Gross profit6,622 13,518 15,380 26,201 
Operating expenses:
General and administrative9,492 7,285 19,769 13,266 
Sales and marketing9,723 7,568 21,354 13,687 
Research and development7,770 4,518 16,315 7,949 
Total operating expenses26,985 19,371 57,438 34,902 
Operating loss(20,363)(5,853)(42,058)(8,701)
Other income (expense):
Interest expense, net(203)(484)(429)(901)
Preferred stock warrant liability adjustment— (970)— (5,578)
Common stock warrant liability adjustment8,811 — 1,935 — 
Gain on loan forgiveness— 2,098 — 2,098 
Other income (expense), net63 (124)109 (103)
Total other income (expense), net8,671 520 1,615 (4,484)
Loss before income tax provision(11,692)(5,333)(40,443)(13,185)
Income tax provision(26)(2)(33)(7)
Net loss and comprehensive loss$(11,718)$(5,335)$(40,476)$(13,192)
Net loss per share attributable to common stockholders, basic and diluted$(0.11)$(0.24)$(0.37)$(0.59)
Weighted-average number of shares outstanding used to compute net loss per share attributable to common stockholders, basic and diluted110,812,198 22,531,185 110,599,437 22,383,324 
The accompanying notes are an integral part of thethese unaudited condensed consolidated financial statements.


2
4
SANDBRIDGE ACQUISITION CORPORATION

CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITYOwlet, Inc.
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020 ANDCondensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)
FOR THE PERIOD JUNE 23, 2020 (INCEPTION) THROUGH SEPTEMBER 30, 2020(in thousands, except share and per share amounts)
(Unaudited)(unaudited)


  
Class A
Common Stock
  
Class B
Common Stock
  
Additional
Paid-in
  Accumulated  
Total
Stockholders’
 
  Shares  Amount  Shares  Amount  Capital  Deficit  Equity 
Balance – June 23, 2020 (Inception)  
—
  
$
—
   
—
  
$
—
  
$
—
  
$
—
  
$
—
 
                             
Net loss  
—
   
—
   
—
   
—
   
—
   
—
   
—
 
                             
Balance – June 30, 2020  
—
   
—
   
—
   
—
   
—
   
—
   
—
 
                             
Issuance of Class B common stock to Sponsor  
—
   
—
   
5,750,000
   
575
   
24,425
   
—
   
25,000
 
                             
Sale of 23,000,000 Units, net of underwriting discounts  
23,000,000
   
2,300
   
—
   
—
   
217,048,894
   
—
   
217,051,194
 
                             
Sale of 6,600,000 Private Placement Warrants  
—
   
—
   
—
   
—
   
6,600,000
   
—
   
6,600,000
 
                             
Common stock subject to possible redemption  
(21,864,603
)
  
(2,186
)
  
—
   
—
   
(218,643,844
)
  
—
   
(218,646,030
)
                             
Net loss  
—
   
—
   
—
   
—
   
—
   
(30,155
)
  
(30,155
)
                             
Balance – September 30, 2020  1,135,397  $114   5,750,000  $575  $5,029,475  $(30,155
)
 $5,000,009 

Preferred Stock
Series A (1)		Preferred Stock
Series A-1 (1)		Preferred Stock
Series B (1)		Preferred Stock
Series B-1 (1)		Common Stock (1)
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmountAdditional Paid-in
Capital		Accumulated
Deficit		Total Stockholders'
 Equity (Deficit)
Balance as of December 31, 2021— $— — $— — $— — $— 112,996,568 $11 $198,602 $(143,422)$55,191 
Issuance of common stock upon exercise of stock options— — — — — — — — 88,808 —48 —48
Issuance of common stock for restricted stock units vesting— — — — — — — — 321,098 — — — — 
Share-based compensation— — — — — — — — — — 3,336 — 3,336 
Net loss— — — — — — — — — ——(28,758)(28,758)
Balance as of March 31, 2022— $— — $— — $— — $— 113,406,474 $11 $201,986 $(172,180)$29,817 
Issuance of common stock upon exercise of stock options— — — — — — — — 418,126 —166 —166
Issuance of common stock for restricted stock units vesting— — — — — — — — 230,361 — — — — 
Share-based compensation— — — — — — — — — — 3,273 — 3,273 
Net loss— — — — — — — — — —(11,718)(11,718)
Balance as of June 30, 2022— $— — $— — $— — — 114,054,961 $11 $205,425 $(183,898)$21,538 
Balance as of December 31, 202026,157,622 $9,569 20,238,201 $14,083 12,366,306 $18,854 3,047,183 $4,682 22,118,619 $2 $3,707 $(71,718)$(68,009)
Issuance of common stock upon exercise of stock options— — — — — — — — 367,432 —244—244
Share-based compensation— — — — — — — — — —828—828
Net loss— — — — — — — — — —— (7,857)(7,857)
Balance as of March 31, 202126,157,622 $9,569 20,238,201 $14,083 12,366,306 $18,854 3,047,183 $4,682 22,486,051 $2 $4,779 $(79,575)$(74,794)
Issuance of common stock upon exercise of stock options— — — — — — — — 63,004 — 24 — 24 
Stock-based compensation— — — — — — — — — — 785 — 785 
Net loss— — — — — — — — — — — (5,335)(5,335)
Balance as of June 30, 202126,157,622 $9,569 20,238,201 $14,083 12,366,306 $18,854 3,047,183 $4,682 22,549,055 $2 $5,588 $(84,910)$(79,320)
(1) The shares of the Company’s common and redeemable convertible preferred stock, prior to the merger with Sandbridge Acquisition Corporation on July 15, 2021 have been retrospectively adjusted as shares reflecting the exchange ratio of approximately 2.053 established in the Merger.

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

35
SANDBRIDGE ACQUISITION CORPORATION

CONDENSED STATEMENT OF CASH FLOWSOwlet, Inc.
FOR THE PERIOD JUNE 23, 2020 (INCEPTION) THROUGH SEPTEMBER 30, 2020Condensed Consolidated Statements of Cash Flows
(Unaudited)(in thousands)

(unaudited)
Cash Flows from Operating Activities:   
Net loss 
$
(30,155
)
Adjustments to reconcile net loss to net cash used in operating activities:    
Interest earned on marketable securities held in trust account  
(6,152
)
Changes in operating assets and liabilities:    
Prepaid expenses  
(302,955
)
Accrued expenses  
16,667
 
Net cash used in operating activities  (322,595)
     
Cash Flows from Investing Activities:    
Investment of cash into Trust Account  
(230,000,000
)
Net cash used in investing activities  (230,000,000
)
     
Cash Flows from Financing Activities:    
Proceeds from issuance of Class B common stock to Sponsor  
25,000
 
Proceeds from sale of Units, net of underwriting discounts paid  
225,796,000
 
Proceeds from sale of Private Placement Warrants  
6,600,000
 
Proceeds from promissory note—related party  
250,000
 
Repayment of promissory note – related party  
(250,000
)
Payment of offering costs  
(659,781
)
Net cash provided by financing activities  231,761,219 
     
Net Change in Cash  1,438,624 
Cash – Beginning of period  
—
 
Cash – End of period $1,438,624 
     
Non-Cash financing activities:    
Initial classification of common stock subject to possible redemption 
$
218,674,370
 
Change in value of common stock subject to possible redemption 
$
(28,340
)
Deferred underwriting fee payable 
$
8,050,000
 
Deferred offering costs included in accrued offering costs 
$
35,025
 

For the Six Months Ended June 30,
20222021
Cash flows from operating activities:
Net loss$(40,476)$(13,192)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization707 509 
Share-based compensation6,575 1,613 
Preferred stock warrant liability adjustment— 5,578 
Common stock warrant liability adjustment(1,935)— 
Gain on loan forgiveness— (2,098)
Other adjustments, net1,114 693 
Changes in assets and liabilities:
Accounts receivable(13,922)(7,289)
Prepaid expenses and other assets8,756 (3,181)
Inventory(11,392)(3,213)
Accounts payable and accrued and other expenses(4,499)4,816 
Other, net(588)156 
Net cash used in operating activities(55,660)(15,608)
Cash flows from investing activities
Purchase of property and equipment(419)(475)
Purchase of intangible assets(824)(234)
Net cash used in investing activities(1,243)(709)
Cash flows from financing activities
Proceeds from short-term borrowings22,583 8,182 
Payments of short-term borrowings(20,693)(1,915)
Proceeds from long-term borrowings— 5,000 
Payments of long-term borrowings(3,000)— 
Other, net215 259 
Net cash (used in) provided by financing activities(895)11,526 
Net change in cash and cash equivalents(57,798)(4,791)
Cash and cash equivalents at beginning of period95,054 17,009 
Cash and cash equivalents at end of period$37,256 $12,218 
The accompanying notes are an integral part of thethese unaudited condensed consolidated financial statements.


4
6
SANDBRIDGE ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)


NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONSOwlet, Inc.

Notes to Condensed Consolidated Financial Statements
Sandbridge Acquisition Corporation (the “Company”) was incorporated (in Delaware on June 23, 2020. The Company was formed for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “Business Combination”).

The Company is not limited to a particular industry or sector for purposes of consummating a Business Combination. The Company is an early stagethousands, except share and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

As of September 30, 2020, the Company had not commenced any operations. All activity for the period from June 23, 2020 (inception) through September 30, 2020 related to the Company’s formation, the initial public offering (“Initial Public Offering”), which is described below and, subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.

The registration statement for the Company’s Initial Public Offering was declared effective on September 14, 2020. On September 17, 2020 the Company completed the Initial Public Offering of 23,000,000 units (the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public Shares”), which includes the full exercise by the underwriters of their over-allotment option in the amount of 3,000,000 Units, at $10.00 per Unit, generating gross proceeds of $230,000,000, which is described in Note 3.

Simultaneously with the closing of the Initial Public Offering, the Company completed the sale of 6,600,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to Sandbridge Acquisition Holdings LLC (the “Sponsor”), generating gross proceeds of $6,600,000, which is described in Note 4.

Transaction costs amounted to $12,948,806, consisting of $4,204,000 in cash underwriting fees, $8,050,000 of deferred underwriting fees and $694,806 of other offering costs. In addition, as of September 30, 2020, cash of $1,438,624 was held outside of the Trust Account (as defined below) and is available for working capital purposes.

Following the closing of the Initial Public Offering on September 17, 2020, an amount of $230,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”) located in the United States. The funds in the Trust Account will be invested only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in any open-ended investment company that holds itself out as a money market fund meeting certain conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below.

 Substantially all of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants are intended to be applied generally toward consummating a Business Combination, and the Company’s management has broad discretion to identify targets for such a potential Business Combination and over the specific application of the funds held in the Trust Account if and when such funds are properly released from the Trust Account. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete a Business Combination with one or more operating businesses or assets that together have an aggregate fair market value equal to at least 80% of the net assets held in the Trust Account (excluding the deferred underwriting commissions and taxes payable on the income earned on the Trust Account) at the time of the Company’s signing a definitive agreement in connection with its initial Business Combination. The Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires an interest in the target business or assets sufficient for it not to be required to register as an investment company under the Investment Company Act.

The Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.

SANDBRIDGE ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)

The Company will only proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 either prior to or upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by applicable law or stock exchange rules and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by applicable law or stock exchange rules, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5), and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction or do not vote at all.

Notwithstanding the above, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company.

The Sponsor has agreed (a) to waive its redemption rights with respect to its Founder Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s initial Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.

The Company will have until September 17, 2022, or such later date as a result of a stockholder vote to amend the Amended and Restated Certificate of Incorporation, to complete a Business Combination (the “Combination Period”). If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.

The Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share valueamounts)
(unaudited)
Note 1. Basis of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).Presentation

In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a written letter of intent, confidentiality or similar agreement or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (1) $10.00 per Public Share and (2) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable. This liability will not apply with respect to claims by a third party who executed a waiver of any and all rights to the monies held in the Trust Account nor will it apply to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses and other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

SANDBRIDGE ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Basis of Presentation and Principles of Consolidation


The accompanying unaudited condensed consolidated financial statements of Owlet, Inc. (together with its subsidiaries, the "Company," "Owlet," "we," "us" or "our") and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”("GAAP") for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to theapplicable rules and regulations of the SEC forU.S. Securities and Exchange Commission (the "SEC") regarding interim financial reporting. Accordingly, they doThe condensed consolidated balance sheet as of December 31, 2021, included herein, was derived from the audited consolidated financial statements as of that date, but does not include all the informationdisclosures including certain notes required by U.S. GAAP on an annual reporting basis. All intercompany transactions and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows.balances have been eliminated in consolidation. In the opinion of management, the accompanying unaudited condensed consolidated financial statements includereflect all adjustments, consisting of a normal recurring nature, which areadjustments necessary for athe fair presentationstatement of the Company’s financial position, operating 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.


As a result of the merger completed with Sandbridge Acquisition Corporation on July 15, 2021 (the "Merger"), prior period share and per share amounts presented in the accompanying consolidated financial statements and these related notes have been retrospectively adjusted. See Part II, Item 8 "Financial Statements and Supplementary Data - Note 3 to the Consolidated Financial Statements - Merger" in the 2021 Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the "Form 10-K") for more information.

The accompanyingCompany adopted Accounting Standards Update ("ASU") No. 2016-02, Leases (Topic 842) on January 1, 2022 using the modified retrospective transition method. Prior periods were not retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods, as further discussed in Note 3.

Certain prior year amounts have been reclassified to conform to the current period presentation.

Food and Drug Administration Letter

On October 1, 2021, the Company received a Warning Letter, later corrected in an amendment to the letter dated October 5, 2021 (the “Warning Letter”), from the U.S. Food and Drug Administration (the “FDA”) regarding the Owlet Smart Sock. During the fourth quarter of 2021, the Company agreed with certain customers and retailers to accept returns of the Owlet Smart Sock and Owlet Monitor Duo.

A refund liability of $13,013 and $20,145 has been accrued as of June 30, 2022 and December 31, 2021, respectively, in accrued and other expenses and represents the amount due to customers.

Risks and Uncertainties

In accordance with Accounting Standards Update 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 are issued.
Since inception, the Company has experienced recurring operating losses and generated negative cash flows from operations, resulting in an accumulated deficit of $183,898 as of June 30, 2022. During the year ended December 31, 2021 and the six months ended June 30, 2022, we had negative cash flows from operations of $40,556 and $55,660, respectively. As of June 30, 2022, we had $37,256 of cash on hand.

Year over year declines in revenue, the current cash balance, recurring operating losses, and negative cash flows from operations since inception, in addition to the noncompliance with its revenue covenant (see Note 5), raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. The accompanying 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.

As the Company continues to address these financial conditions, management has undertaken the following actions:
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•As described further in Note 5, the Company has entered into a waiver agreement with Silicon Valley Bank ("SVB") related to the covenant violation and maintains access to a line of credit, with reduced capacity, during this period. The Company is actively engaged with SVB to come to terms on a further restructured financing arrangement, including revised financial covenants for future periods.

•As described further in Note 13, we have undertaken restructuring actions, which significantly reduced employee headcount and will reduce operating spend. This includes the reduction of consulting and outside services, the reduction of marketing programs, and the prioritization of and sequencing of researching and development projects.

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 or recession or reduced demand for the Company’s products. If revenues further decrease from current levels, the Company may be unable to further reduce costs, or such reductions may limit our ability to pursue strategic initiatives and grow revenues in the future. Should the Company be unable to come to terms on an amendment of its loan and security agreement, or require further funding in the future, there can be no assurance that we will be able to obtain additional debt or equity financing on terms acceptable to us, if at all.

The Company maintains its cash in bank deposit accounts which, at times, exceed federally insured limits. As of June 30, 2022, substantially all of the Company's cash was held with Silicon Valley Bank and exceeded federally insured limits. To date, the Company has not experienced a loss or lack of access to its invested cash; however, no assurance can be provided that access to the Company’s invested cash and cash equivalents will not be impacted by adverse conditions in the financial markets.
Note 2. Certain Balance Sheet Accounts

Inventory

Substantially all of the Company's inventory consisted of finished goods as of June 30, 2022 and December 31, 2021.

Property and Equipment, net

Property and equipment consisted of the following as of:

June 30, 2022December 31, 2021
Tooling and manufacturing equipment$2,665 $2,333 
Furniture and fixtures639 579 
Computer equipment701 625 
Software213 213 
Leasehold improvements29 26 
Total property and equipment4,247 3,776 
Less accumulated depreciation and amortization(2,534)(1,906)
Property and equipment, net$1,713 $1,870 

Depreciation and amortization expense on property and equipment was $320 and $223 for the three months ended June 30, 2022 and June 30, 2021, respectively. For the three months ended June 30, 2022 and June 30, 2021, the Company allocated $208 and $147, respectively, of depreciation expense related to tooling and manufacturing equipment to cost of revenues.

Depreciation and amortization expense on property and equipment was $629 and $438 for the six months ended June 30, 2022 and June 30, 2021, respectively. For the six months ended June 30, 2022 and June 30, 2021, the Company allocated $398 and $297, respectively, of depreciation expense related to tooling and manufacturing equipment to cost of revenues.

Intangible Assets Subject to Amortization

Intangible assets were $2,403, net of accumulated amortization of $407 as of June 30, 2022 and $1,696, net of accumulated amortization of $329, as of December 31, 2021.
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Capitalized software development costs were $1,886 and $1,101 as of June 30, 2022 and December 31, 2021, respectively. The Company's internally developed software capitalized within intangible assets on the balance sheet is still in development and not ready for general release. As such, the Company has not recognized any amortization for the six months ended June 30, 2022.

The Company did not recognize any impairment charges for intangible assets during the six months ended June 30, 2022 or 2021.

Accrued and Other Expenses

Accrued and other expenses, among other things, included accrued sales returns of $15,251 and $21,179 as of June 30, 2022 and December 31, 2021, respectively. As described in Note 1, $13,013 and $20,145 of the accrued sales returns as of June 30, 2022 and December 31, 2021, respectively, was attributable to returns resulting from the Warning Letter.

Changes in accrued warranty were as follows:

For the Three Months Ended June 30,
20222021
Accrued warranty, beginning of period$725 $922 
Provision for warranties issued during the period193 262 
Settlements of warranty claims during the period(143)(192)
Accrued warranty, end of period$775 $992 

For the Six Months Ended June 30,
20222021
Accrued warranty, beginning of period$661 $924 
Provision for warranties issued during the period394 504 
Settlements of warranty claims during the period(280)(436)
Accrued warranty, end of period$775 $992 

Stockholders' Equity

The Company is authorized to issue up to 100,000,000 shares of $0.0001 par value preferred stock, of which none is currently outstanding.
Note 3. Leases

The new lease standard was adopted on January 1, 2022 using the modified retrospective transition method. Prior periods were not retrospectively adjusted and continue to be reported under the accounting standards in effect for those periods. The Company elected the package of practical expedients permitted under the transition guidance and did not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs. The Company also elected the practical expedients to exclude right-of-use ("ROU") assets and lease liabilities for leases with an initial term of 12 months or less from the balance sheet, and to combine lease and non-lease components for property leases, which primarily relate to ancillary expenses such as common area maintenance charges and management fees.

Leases are determined at inception by assessing whether the arrangement conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Owlet's leases consist of leases for corporate offices and office equipment, and have remaining lease terms of 2 to 5 years, with options for renewal. Renewal and termination options have not been included in the lease terms, as it is not reasonably certain that such options will be exercised. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

Leases typically contain rent escalations over the lease term. The Company recognizes expense for these leases on a straight-line basis over the lease term. Certain leases require the Company to pay taxes, insurance, maintenance and
9

other operating expenses associated with the leased asset. Such amounts are not included in the measurement of the ROU assets and lease liabilities to the extent they are variable in nature. These variable lease costs are recognized as a variable lease expense when incurred.

ROU assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. Owlet uses its incremental borrowing rate, based on the information available at the lease commencement date, to determine the present value of lease payments. Upon adoption, Owlet recorded lease assets and lease liabilities of approximately $3,003 and $3,764, respectively, which did not have a net impact on the condensed consolidated statements of cash flows. The lease assets were adjusted for deferred rent, lease incentives, and prepaid rent, which were recorded as a decrease to accrued and other expenses and other long-term liabilities for the amounts of $234 and $527, respectively. There were no finance leases as of adoption or during the six months ended June 30, 2022.

Income from subleased properties is recognized on a straight-line basis and presented as a reduction of costs, allocated among operating expense line items in the Company’s Consolidated Statements of Operations and Comprehensive Loss. In addition to sublease rent, variable non-lease costs such as common area maintenance and utilities are charged to subtenants over the duration of the lease for their proportionate share of these costs. These variable non-lease income receipts are recognized in operating expenses as a reduction to costs incurred by the Company in relation to the head lease.

The impact of the new lease standard on the June 30, 2022 consolidated balance sheet was as follows:

June 30, 2022
Right of use assets, net$2,912
Accrued and other expenses$1,490
Noncurrent lease liabilities2,110
Total lease liabilities, net$3,600
Weighted average remaining lease term2.2 years
Weighted average discount rate6.3%
Operating lease costs are recognized on a straight-line basis over the lease term. Total operating lease costs were $353 for the three months ended June 30, 2022, which included an immaterial offset related to short-term and variable lease costs. Total operating lease costs were $699 for the six months ended June 30, 2022, which included an immaterial offset related to short-term and variable lease costs.

Supplemental cash flow information related to leases was as follows:
Three Months Ended June 30, 2022Six Months Ended June 30, 2022
Cash paid for amounts included in the measurement of lease liabilities$409$794
Right-of-use assets obtained in exchange for new operating lease liabilities$530$530

The following table shows the future maturities of lease liabilities for leases in effect as of June 30, 2022:

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Years Ending December 31,Lease Liabilities
2022 (excluding the six months ended June 30, 2022)$874
20231,798
20241,170
Total lease payments3,842
Less: imputed interest(242)
Total$3,600

0As of June 30, 2022, the Company had 4 sublease arrangements which are noncancellable and have remaining lease terms of 0.3 to 2.1 years. These subleases do not contain any options to renew or terminate the sublease agreement. The following table shows the expected future sublease receipts as of June 30, 2022:

Years Ending December 31,Sublease Receipts
2022 (excluding the six months ended June 30, 2022)$661
20231,178
2024679
Total expected sublease receipts$2,518

The Company received sublease income of $286 and $62 for the three months ended June 30, 2022 and June 30, 2021, respectively. The Company received sublease income of $399 and $85 for the six months ended June 30, 2022 and June 30, 2021, respectively.

As previously disclosed in our 2021 Annual Report on Form 10-K and under the previous lease standard (Topic ASC 840), future minimum lease payments under non-cancelable operating leases at December 31, 2021 were as follows:

Years Ending December 31,Amount
2022$1,541 
20231,587 
2024953 
Total$4,081 

Rental expense under operating leases was approximately $368 and $740 for the three and six months ended June 30, 2021, respectively.
Note 4. 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, and content, and are recognized over the service period of the performance obligations, which range from 5 to 27 months.

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Changes in the total deferred revenues balance were as follows:

For the Three Months Ended June 30,
20222021
Beginning balance$1,312 $1,725 
Deferral of revenues687 1,199 
Recognition of deferred revenues(620)(1,093)
Ending balance$1,379 $1,831 

The Company recognized $498 and $750 of revenue during the three months ended June 30, 2022 and 2021, respectively, that was included in the deferred revenue balance at the beginning of the respective period.

For the Six Months Ended June 30,
20222021
Beginning balance$1,235 $1,802 
Deferral of revenues1,430 2,017 
Recognition of deferred revenues(1,286)(1,988)
Ending balance$1,379 $1,831 

The Company recognized $838 and $1,192 of revenue during the six months ended June 30, 2022 and 2021, respectively, that was included in the deferred revenue balance at the beginning of the respective period.


Note 5. Long-Term Debt and Other Financing Arrangements

The following is a summary of the Company’s long-term indebtedness as of:

June 30, 2022December 31, 2021
Term note payable to SVB, maturing on April 1, 2024$11,000 $14,000 
Financed insurance premium852,534
Total debt11,085 16,534 
Less: current portion(11,085)(8,534)
Less: debt discount and debt issuance costs— (7)
Total long-term debt, net$— $7,993 

As of June 30, 2022, the Company was in violation of its minimum net revenue requirement for the three months ended June 30, 2022 under the amended and restated loan and security agreement, which governs both the Company’s term loan and its line of credit. On August 10, 2022, the Company executed a waiver agreement with SVB. This agreement waives the minimum net revenue covenant violation for the three months ended June 30, 2022, lowers the minimum liquidity covenant from $30,000 to $22,500, and reduces the line of credit capacity from $17,500 to $5,000.

The Company does not currently expect that it will be in compliance with the minimum net revenue covenant for the third and fourth quarter of 2022, which were not amended under the waiver agreement. As a result, the $11,000 term note and the Company’s line of credit with $4,339 of outstanding borrowings is presented as a current liability.
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Future Aggregate Maturities

As of June 30, 2022, future aggregate maturities of the Term Note and Financed Insurance Premium payables were as follows:

Years Ending December 31,Amount
2022 (excluding the six months ended June 30, 2022)$3,085 
20236,000 
20242,000 
Total$11,085 

The maturities shown in the table above represent the contractual maturities of the Term Note and Financed Insurance Premium payables as of June 30, 2022. The Company is actively engaged with SVB to come to terms on a further restructured financing arrangement, including revised financial covenants for future periods. If the Company is unable to come to terms regarding an amendment, and the Company is in violation of its covenants in future periods, SVB can elect to take certain actions, including terminating the line of credit and declaring the principal amount of the term note and line of credit as immediately due and payable.

Term Note

The Company has an amended and restated loan and security agreement (the "A&R LSA") with SVB which was entered into on April 22, 2020, and which replaced the loan and security agreement previously in place (the ‘‘Original LSA’’). These agreements provided the Company with both a line of credit (the ‘‘SVB Revolver’’) and a term loan (the ‘‘Term Note’’).

On January 31, 2022, the Company further amended the A&R LSA, which modified the SVB Revolver annual interest rate, decreased the advance rate for borrowing base assets, and increased the cash and cash availability streamline threshold. The amendment also modified the Term Note annual interest rates, replaced the existing EBITDA covenant for 2022 and beyond with a net revenue covenant, and increased the minimum liquidity threshold from $5,000 to $30,000.

As of June 30, 2022, the Term Note had an aggregate principal balance of $11,000, bore interest at a rate equal to the greater of the bank's prime rate plus 2.50%, or 5.75%, required 30 consecutive equal monthly payments of principal and matures on April 1, 2024.

Prior to January 31, 2022, the Term Note bore interest at a rate equal to the greater of the bank's prime rate plus 3.50%, or 6.50%.

The Company's borrowings under the A&R LSA are secured by substantially all of its current and future assets.

Financed Insurance Premium

During the year ended December 31, 2021, the Company renewed its corporate liability policies and entered into several new short-term commercial premium finance agreements with AFCO Credit Corporation totaling $4,699 to be paid in 10 equal monthly payments, all of which accrue interest at a rate of 3.59%. As of June 30, 2022, the remaining principal balance on the financed insurance premium was $85.

In July 2022, the company renewed its corporate liability policies and entered into a new short-term commercial premium finance agreement with First Insurance Funding totaling $3,041 to be paid in 11 equal monthly payments, accruing interest at a rate of 4.40%.

Line of Credit

As of June 30, 2022, our borrowing capacity under the SVB Revolver was $17,500 and bore interest at an annual rate equal to (i) the greater of the bank’s prime rate plus 0.75%, or 5.00% when a streamline period is in effect and (ii) the greater of the bank’s prime rate plus 1.25%, or 5.00% at all other times. The SVB Revolver is an asset based lending facility subject to borrowing base availability which is limited by specified percentages of eligible accounts receivable and eligible inventory. Borrowing base availability can be impacted based upon the period's eligible accounts receivable and eligible inventory, and may be significantly lower than borrowing base capacity.

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Prior to January 31, 2022, the SVB Revolver bore interest at an annual rate equal to (i) the greater of the bank’s prime rate plus 0.75%, or 5.50% when a streamline period is in effect and (ii) the greater of the bank’s prime rate plus 1.25%, or 6.00% at all other times.

Each streamline period commences the first day of the month following a written report of our liquidity and ends the first day after we fail to maintain a required cash and cash availability streamline threshold, provided no event of default has occurred and is continuing. If an event of default has occurred and is continuing, SVB may maintain our streamline status at its discretion. The required cash and cash availability streamline threshold was $50,000 as of June 30, 2022, which the Company did not maintain and was therefore not within a streamline period. The actual interest rate on the SVB Revolver was 6.00% as of June 30, 2022. The SVB Revolver is subject to renewal and is scheduled to mature on April 22, 2024. As of June 30, 2022, there was $4,339 of outstanding borrowings under the SVB Revolver.

Note 6. Commitments and Contingencies

Litigation

The Company is involved in legal proceedings from time to time arising in the normal course of business. Management, after consultation with legal counsel, 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, 2 putative class action complaints were filed against us in the U.S. District Court for the Central District of California, Butala v. Owlet, Inc., et al., Case No. 2:21-cv-09016, and Cherian v. Owlet, Inc., et al., Case No. 2:21-cv-09293. Both complaints allege violations of the Securities Exchange Act of 1934 against the Company and certain of its officers and directors on behalf of a putative class of investors who (i) purchased the Company’s common stock between March 31, 2021 and October 4, 2021 or (ii) 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. 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 the Owlet Smart Sock product as a medical device requiring marketing authorization. The Court has pending before it motions to consolidate the Butala and Cherian cases and appoint a lead plaintiff. The Company intends to vigorously defend itself against these claims, including by filing a motion to dismiss on behalf of itself and the named officers and directors. A reasonable estimate of the amount of any possible loss or range of loss cannot be made at this time.

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 reduces its exposure and enables the Company to recover a portion of any future amounts paid. The Company believes the estimated fair value of these indemnification agreements in excess of applicable insurance coverage is immaterial.

Note 7. Share-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 9 to the Consolidated Financial Statements - Share-based Compensation" in the 2021 Annual Report on Form 10-K. Under the 2021 Incentive Award Plan, the Company has the ability to grant options, stock appreciation rights, restricted stock, restricted stock units, performance stock units, dividend equivalents, or other stock or cash-based awards to employees, directors, or consultants.

During the six months ended June 30, 2022, the Company granted 1,842,105 performance restricted stock units ("PRSU"), which represents the number of shares that may be issued should all performance measures be met. The PRSU awards function in the same manner as restricted stock units except that vesting terms are based on achievement of performance measures, such as the achievement of net revenue targets and obtaining certain FDA
14

regulatory approval. PRSUs are recognized as expense following a graded vesting schedule with their performance re-assessed and updated on a quarterly basis, or more frequently as changes in facts and circumstances warrant.

On January 1, 2022, the Company began offering an Employee Stock Purchase Plan ("ESPP"). The ESPP allows eligible employees to contribute a portion of their eligible earnings toward the semi-annual purchase of our shares of common stock at a discounted price, subject to an annual maximum dollar amount. Employees can purchase stock at a 15% discount applied to the lower closing stock price on the first or last day of the six-month purchase period.

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, RSU, and PRSU awards generally vest over a period of four years.

Stock-based Compensation Expense

Total stock-based compensation was recognized as follows (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
General and administrative$1,864 $349 $3,408 $747 
Sales and marketing673 1681,413 362
Research and development720 2681,754 504
Total stock-based compensation$3,257 $785 $6,575 $1,613 

During the three and six months ended June 30, 2022, the Company capitalized $16 and $33, respectively, of share-based compensation attributable to internally developed software.

As of June 30, 2022, the Company had $5,777 of unrecognized stock-based compensation costs related to non-vested options that will be recognized over a weighted-average period of 2.4 years, $19,925 of unrecognized stock-based compensation costs related to unvested RSUs that will be recognized over a weighted-average period of 3.2 years, and $3,353 of unrecognized stock-based compensation costs related to unvested PRSUs that will be recognized over a weighted-average period of 2.3 years.

Note 8.  Fair Value Measurements

The following table presents information about the Company's assets and liabilities measured and reported in the financial statements at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

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June 30, 2022
Level 1Level 2Level 3Balance
Assets:
Money market funds$37,208$—$—$37,208
Total assets$37,208$—$—$37,208
Liabilities:
Common stock warrant liability - public warrants$3,257 $— $— $3,257 
Common stock warrant liability - private placement warrants— 1,869 — 1,869 
Total liabilities$3,257$1,869$—$5,126
December 31, 2021
Level 1Level 2Level 3Balance
Assets:
Money market funds$94,973 $— $— $94,973 
Total assets$94,973$—$—$94,973
Liabilities:
Common stock warrant liability - public warrants$4,486 $— $— $4,486 
Common stock warrant liability - private placement warrants02,57502,575
Total liabilities$4,486$2,575$—$7,061
Money market funds are included within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The common stock warrant liability for the public warrants as of June 30, 2022 is also included within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The private placement warrants are included within Level 2 of the fair value hierarchy as the Company determined that the private placement warrants are economically equivalent to the public warrants and estimated the fair value of the private placement warrants based on the quoted market price of the public warrants. See Part II, Item 8 "Financial Statements and Supplementary Data - Note 10 to the Consolidated Financial Statements - Common Stock Warrants and Earnout Shares" in the Form 10-K for more information on the common stock warrants.

The Company has previously presented the fair value measurement of the preferred stock warrant liability as a Level 3 measurement, 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.

The preferred stock warrants were settled immediately prior to the Merger. The Company re-measured the preferred stock warrant liability to its estimated fair value as of June 30, 2021, using the Black-Scholes option pricing model with the following assumptions:

June 30, 2021
Series A preferred stock value per share$20.48 
Exercise price of warrants$0.76 
Term in years5.25
Risk-free interest rate0.91 %
Volatility66.00 %
Dividend yield0.00 %

The following table presents a reconciliation of the Company’s preferred stock warrant liability measured at fair value on a recurring basis using significant unobservable inputs (Level 3) as of June 30, 2021:
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Preferred Stock Warrant Liability
Balance as of December 31, 2020$2,993 
Change in fair value included in other income5,578 
Balance as of June 30, 2021$8,571 

There were no transfers between Level 1 and Level 2 in the periods reported. There were no transfers into or out of Level 3 in the period reported.


Note 9.  Income Taxes

In order to determine the quarterly provision for income taxes, the Company uses an estimated annual effective tax rate, which is based on expected annual income and statutory tax rates in the various jurisdictions in which the Company operates. To the extent that application of the estimated annual effective tax rate is not representative of the quarterly portion of actual tax expense expected to be recorded for the year, the Company determines the quarterly provision for income taxes based on actual year-to-date income. Certain significant or unusual items are separately recognized in the quarter during which they occur and can be a source of variability in the effective tax rates from quarter to quarter.

The provision for income taxes was $26 and $2 for the three months ended June 30, 2022 and June 30, 2021, respectively. The provision for income taxes was $33 and $7 for the six months ended June 30, 2022 and June 30, 2021, respectively.

Significant judgment is required in determining the Company’s provision for income taxes, recording valuation allowances against deferred tax assets, and evaluating the Company’s uncertain tax positions. In evaluating the ability to realize its deferred tax assets, in full or in part, the Company considers all available positive and negative evidence, including past operating results, forecasted future earnings, and prudent and feasible tax planning strategies. Due to historical net losses incurred and the uncertainty of realizing the deferred tax assets, for all the periods presented, the Company maintains a valuation allowance against the net U.S. deferred tax assets. The Company files U.S. and state income tax returns in jurisdictions with various statutes of limitations. The Company’s federal and state tax returns are not currently under examination.


Note 10.  Net Loss Per Share Attributable to Common Stockholders

The following table presents the calculation of basic and diluted net loss per share attributable to common stockholders (in thousands, except share and per share amounts):


Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Numerator:
Net loss attributable to common stockholders (1)
$(11,718)$(5,335)$(40,476)$(13,192)
Denominator:
Weighted-average common shares used in computed net loss per share attributable to common stockholders basic and diluted110,812,19822,531,185110,599,43722,383,324
Net loss per share attributable to common stockholders basic and diluted$(0.11)$(0.24)$(0.37)$(0.59)

17

(1) For the three and six months ended June 30, 2021, the Company did not allocate its net loss to participating redeemable convertible preferred stock as those shares are not obligated to share in the losses of the Company. As of June 30, 2022, the Company no longer has participating redeemable convertible preferred stock.

The following potentially dilutive outstanding securities were excluded from the computation of diluted net loss per share due to their anti-dilutive effect:

As of June 30,
2022
Stock options9,311,638 
RSUs6,761,820 
PRSUs1,842,105 
ESPP shares committed249,889 
Common stock warrants18,100,000 
Total36,265,452 

The Company’s 2,807,500 unvested earnout shares were excluded from the calculation of basic and diluted per share calculations as the vesting conditions have not yet been met as of June 30, 2022.

As of June 30,
 2021
Stock options10,903,309 
Common stock warrants942,623 
Convertible notes4,626,183 
Preferred stock61,809,312 
Preferred stock warrants889,765 
Total (1)
79,171,192 

(1) Securities shown as of June 30, 2021 have been retrospectively adjusted reflecting the exchange ratio of approximately 2.053 established in the Merger. See Part II, Item 8 "Financial Statements and Supplementary Data - Note 3 to the Consolidated Financial Statements - Merger" in the 2021 Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the "Form 10-K") for more information.

Note 11.  Segments

The Company operates as a single operating segment. The Company’s chief operating decision maker manages the Company's operations on a consolidated basis for purposes of allocating resources, making operating decisions, and evaluating financial performance. Since the Company operates in 1 operating segment, all required financial segment information can be found in these consolidated financial statements.

Revenue by geographic area is based on the delivery address of the customer and is summarized as follows (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
United States$15,876 $23,215 $34,589 $43,746 
International2,4721,7235,2983,103
Total revenues$18,348 $24,938 $39,887 $46,849 


Other than the United States, no individual country exceeded 10% of total revenues for either of the three months ended June 30, 2022 and June 30, 2021.

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The Company’s property and equipment, net, by geographic area are summarized as follows as of (in thousands):
June 30, 2022December 31, 2021
United States$605 $705 
International1,108 1,165 
Total property and equipment, net$1,713 $1,870 

Note 12. New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets obtained in exchange for lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company adopted the new guidance as of January 1, 2022. See Note 3 for the impact of adoption on these condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as the elimination of exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, the recognition of deferred tax liabilities for outside basis differences, ownership changes in investments, and tax basis step-up in goodwill obtained in a transaction that is not a business combination. The guidance will be effective for annual reporting periods beginning after December 15, 2021. The Company adopted ASU 2019-12 in the first quarter of 2022. The adoption of this standard does not currently have a material impact on the Company's consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging Contracts in Entity’s Own Equity (Subtopic 815-40), which simplifies the accounting for convertible instruments by removing major separation models required under current guidance. ASU 2020-06 also removes certain settlement conditions that are required for equity contracts to qualify for derivative scope exception and simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for annual reporting periods beginning after December 15, 2021, including interim periods. The Company adopted ASU 2020-06 on January 1, 2022. The adoption of this standard does not currently have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and has since released various amendments including ASU No. 2019-04. The guidance modifies the measurement of expected credit losses on certain financial instruments. This guidance will be effective for annual reporting periods beginning after December 15, 2022. Early adoption is permitted. The Company is currently assessing the impact of the guidance on its consolidated financial statements and disclosures.


Note 13.   Subsequent Events

On July 21, 2022, the Company implemented a restructuring program to streamline the Company’s organizational structure in response to current business conditions, reduce the Company’s operating expenses and manage and conserve the Company’s cash resources. The Company is undertaking the restructuring program primarily to increase cost-efficiencies across the organization and strive for profitability.

As part of the restructuring program implementation, the Company commenced a workforce reduction of approximately 74 employees that is expected to be substantially completed in the third quarter of 2022. In connection with the restructuring program, the Company expects to incur an estimated total amount of approximately $1.1 million in the third quarter of 2022, consisting primarily of severance, one-time termination and other related costs, all of which will result in future cash expenditures.
19


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 Company’s final prospectus for its Initial Public Offering as filed with the SEC on September 16, 2020, as well as the Company’s Current Report on Form 8-K filed with the SEC on September 18, 2020. The interim results for the three months ended September 30, 2020 and for the period from June 23, 2020 (inception) through September 30, 2020 are not necessarily indicative of the results to be expected for the period ending December 31, 2020 or for any future annual or interim periods.

Emerging Growth Company

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Use of Estimates

The preparation ofunaudited condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of theconsolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future events. Accordingly, the actual results could differ significantly from those estimates.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2020.

SANDBRIDGE ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)

Class A Common Stock Subject to Possible Redemption

The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at September 30, 2020, Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheet.

Offering Costs

Offering costs consist of underwriting, legal, accounting and other costs incurred through the Initial Public Offering that are directly related to the Initial Public Offering. Offering costs amounting to $12,948,806 were charged to stockholders’ equity upon the completion of the Initial Public Offering.

Income Taxes

The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. As of September 30, 2020, the Company had a deferred tax asset of approximately $7,600, which had a full valuation allowance recorded against it of approximately $7,600.

The Company’s currently taxable income primarily consists of interest income on the Trust Account. The Company’s general and administrative costs are generally considered start-up costs and are not currently deductible. During the three months ended September 30, 2020 and for the period from June 23, 2020 (inception) through September 30, 2020, the Company recorded no income tax expense. The Company’s effective tax rate for three months ended September 30, 2020 and for the period from June 23, 2020 (inception) through September 30, 2020 was approximately 0%.

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2020. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

Net Income (Loss) per Common Share

Net income (loss) per common share is computed by dividing net income by the weighted average number of common shares outstanding for the period. The Company has not considered the effect of warrants sold in the Initial Public Offering and private placement to purchase 18,100,000 shares of Class A common stock in the calculation of diluted income per share, since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.

The Company’s condensed statement of operations includes a presentation of income per share for common shares subject to possible redemption in a manner similar to the two-class method of income per share. Net income per common share, basic and diluted, for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account of $6,152 for the three months ended September 30, 2020 and for the period from June 23, 2020 (inception) through September 30, 2020 (net of applicable franchise and income taxes, limited to interest income, of approximately $6,000 for the three months ended September 30, 2020 and for the period from June 23, 2020 (inception) through September 30, 2020), by the weighted average number of Class A redeemable common stock since original issuance. Net loss per common share, basic and diluted, for Class B non-redeemable common stock is calculated by dividing the net income, less income attributable to Class A redeemable common stock, by the weighted average number of Class B non-redeemable common stock outstanding for the period. Class B non-redeemable common stock includes the Founder Shares as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.

SANDBRIDGE ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.

Fair Value of Financial Instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheet, primarily due to their short-term nature.

Recent Accounting Standards

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed financial statements.

NOTE 3. INITIAL PUBLIC OFFERING

Pursuant to the Initial Public Offering, the Company sold 23,000,000 Units, which includes the full exercise by the underwriters of their over-allotment option in the amount of 3,000,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one share of Class A common stock and one-half of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).

NOTE 4. PRIVATE PLACEMENT

Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 6,600,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, for an aggregate purchase price of $6,600,000. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at an exercise price of $11.50 per share, subject to adjustment (see Note 7). A portion of the proceeds from the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Placement Warrants will expire worthless.

NOTE 5. RELATED PARTY TRANSACTIONS

Founder Shares

On July 3, 2020, the Sponsor purchased 5,750,000 shares of the Company’s Class B common stock (the “Founder Shares”) for an aggregate purchase price of $25,000. In August 2020, the Sponsor transferred 40,000 Founder Shares to independent director Mr. De Sole, 25,000 Founder Shares to independent director Mr. Toubassy and 30,000 Founder Shares to advisor Mr. Hilfiger at their original per share purchase price. The Founder Shares included an aggregate of up to 750,000 shares subject to forfeiture by the Sponsor to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the number of Founder Shares would collectively represent approximately 20% of the Company’s issued and outstanding shares after the Initial Public Offering. As a result of the underwriters’ election to fully exercise their over-allotment option, 750,000 Founder Shares are no longer subject to forfeiture.

The Sponsor has agreed, subject to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier of (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Class A common stock for cash, securities or other property.

SANDBRIDGE ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)

Administrative Support Agreement

The Company entered into an agreement, commencing on September 14, 2020, to pay an affiliate of the Sponsor up to $10,000 per month for office space, utilities and secretarial and administrative services. Upon completion of a Business Combination or its liquidation, the Company will cease paying these monthly fees. For the three months ended September 30, 2020 and for the period from June 23, 2020 (inception) through September 30, 2020, the Company incurred and paid $10,000 in fees for these services.

Promissory Note – Related Party

On July 3, 2020, the Sponsor issued an unsecured promissory note to the Company (the “Promissory Note”), pursuant to which the Company could borrow up to an aggregate principal amount of $250,000. The Promissory Note was non-interest bearing and payable on the earlier of March 31, 2021 and the consummation of the Initial Public Offering. The outstanding balance under the Promissory Note of $250,000 was repaid at the closing of the Initial Public Offering on September 17, 2020.

Related Party Loans

In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or certain of the Company’s officers and directors or their affiliates may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be converted into warrants, at a price of $1.00 per warrant, of the post Business Combination entity. The warrants would be identical to the Private Placement Warrants. As of September 30, 2020, no Working Capital Loans were outstanding.
NOTE 6. COMMITMENTS AND CONTINGENCIES

Risks and Uncertainties

Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Registration Rights

Pursuant to a registration and stockholder rights agreement entered into on September 14, 2020, holders of the Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights, requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to shares of Class A common stock). Any holder of at least 20% of the outstanding registrable securities owned by these holders will be entitled to make up to two demands, excluding short form demands, that the Company register such securities. In addition, the holders will have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. However, the registration and stockholder rights agreement provides that the Company will not permit any registration statement filed under the Securities Act. The Company will bear certain expenses incurred in connection with the filing of any such registration statements.

In addition, pursuant to the registration and stockholder rights agreement, upon consummation of a Business Combination, the Sponsor and the future holders of Founder Shares (or securities into which the Founder Shares convert) held by the Sponsor will be entitled to designate three individuals for nomination for election to the Company’s board of directors for so long as they continue to hold, collectively, at least 50% of the Founder Shares (or the securities into which such Founder Shares convert) held by such persons on the date of this prospectus. Thereafter, such initial stockholders will be entitled to designate (i) two individuals for nomination for election to the Company’s board of directors for so long they continue to hold, collectively, at least 30% of the Founder Shares (or the securities into which such Founder Shares convert) held by such persons on the date of this prospectus and (ii) one individual for nomination for election to the Company’s board of directors for so long they continue to hold, collectively, at least 20% of the Founder Shares (or the securities into which such Founder Shares convert) held by such persons on the date of this prospectus.

SANDBRIDGE ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)

Underwriting Agreement

Certain of the underwriters of the Initial Public Offering are entitled to a deferred fee of $0.35 per Unit, or $8,050,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement. The underwriters did not receive any upfront underwriting discount or commissions on the 1,980,000 Units purchased by the PIMCO private funds or their respective affiliates but will receive deferred underwriting commissions with respect to such Units.

NOTE 7. STOCKHOLDERS’ EQUITY

Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Company’s board of directors. At September 30, 2020, there were no shares of preferred stock issued or outstanding.

Class A Common Stock — The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of Class A common stock are entitled to one vote for each share. At September 30, 2020, there were 1,135,397 shares of Class A common stock issued and outstanding, excluding 21,864,603 shares of Class A common stock subject to possible redemption.

Class B Common Stock — The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001 per share. At September 30, 2020, there were 5,750,000 shares of Class B common stock issued and outstanding. Holders of Class B common stock are entitled to one vote for each share. Prior to the Business Combination, only holders of shares of Class B common stock have the right to vote on the election of directors.

Holders of Class A common stock and Class B common stock will vote together as a single class on all matters submitted to a vote of stockholders except as required by law.

The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of a Business Combination on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in the Initial Public Offering and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with a Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in a Business Combination, and any private placement-equivalent warrants issued to the Sponsor or its affiliates upon conversion of loans made to the Company).

Warrants — Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable on the later of (a) 12 months from the closing of the Initial Public Offering and (b) 30 days after the completion of a Business Combination. The Public Warrants will expire five years after the completion of a Business Combination or earlier upon redemption or liquidation.

The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue any shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants.

The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, it will use its commercially reasonable efforts to file with the SEC a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants, to cause such registration statement to become effective within 60 business days after the closing of the Business Combination and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement; provided that if shares of the Class A common stock are at the time of any exercise of a public warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but it will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption.

SANDBRIDGE ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)

Redemption of warrants when the price per Class A common stock equals or exceeds $18.00. Once the Public Warrants become exercisable, the Company may redeem the Public Warrants:

•in whole and not in part;
•at a price of $0.01 per warrant;
•upon a minimum of 30 days’ prior written notice of redemption to each warrant holder; and
•if, and only if, the closing price of the Class A common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders.

If and when the Public Warrants become redeemable by the Company, it may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

Redemption of warrants when the price per Class A common stock equals or exceeds $10.00. Once the Public Warrants become exercisable, the Company may redeem the Public Warrants:

•in whole and not in part;
•at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares based on the redemption date and the fair market value of the Class A common stock;
•if, and only if, the closing price of the Class A common stock equals or exceeds $10.00 per share for any 20 trading days within the 30-trading day period ending three trading days before the Company send the notice of redemption to the warrant holders; and
•if the closing price of the Class A common stock for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders is less than $18.00 per share, the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above.

The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, the warrants will not be adjusted for issuance of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.

In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per Class A common (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsors or its affiliates, without taking into account any Founder Shares held by the Sponsors or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates a Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger prices will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.

SANDBRIDGE ACQUISITION CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)

The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants and the shares of Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or saleable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

NOTE 8. FAIR VALUE MEASUREMENTS

The Company classifies its U.S. Treasury and equivalent securities as held-to-maturity in accordance with ASC 320 “Investments—Debt and Equity Securities.” Held-to-maturity securities are those securities which the Company has the ability and intent to hold until maturity. Held-to-maturity treasury securities are recorded at amortized cost on the accompanying condensed balance sheet and adjusted for the amortization or accretion of premiums or discounts.

At September 30, 2020, assets held in the Trust Account were comprised of $138 in cash and $230,006,014 in U.S. Treasury Bills. During the period from June 23, 2020 (inception) through September 30, 2020, the Company did not withdraw any interest income from the trust account to pay its franchise taxes.

The gross holding losses and fair value of held-to-maturity securities at September 30, 2020 are as follows:


 Held-To-Maturity 
Amortized
Cost
  
Gross
Holding
Losses
  Fair Value 
September 30, 2020U.S. Treasury Securities (Mature on 12/17/2020) 
$
230,006,014
  
$
(6,023
)
 
$
229,999,991
 

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

Level 1:Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2:Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
Level 3:Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

NOTE 9. SUBSEQUENT EVENTS

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.

ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Sandbridge Acquisition Corporation.  References to our “management” or our “management team” refer to our officers and directors, references to the “Sponsor” refer to Sandbridge Acquisition Holdings LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto containedincluded elsewhere in this Quarterly Report. Certain information containedReport and in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s“Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations” regardingof our Annual Report on Form 10-K for the Company’sfiscal year ended December 31, 2021 (the “Form 10-K”). Certain statements we make under this Item 2 constitute “forward-looking statements” under the Reform Act. See “Cautionary Note Regarding Forward-Looking Statements” before Part I of this Report. You should consider our forward-looking statements in light of the risks discussed under “Item 1A. Risk Factors” in Part II of this Report and our unaudited condensed consolidated financial position, business strategystatements, related notes and other financial information appearing elsewhere in this Report, the Form 10–K and our other filings with the SEC.
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 plansopportunity to feel their well-rested best. We also believe that every child deserves to live a long, happy, and objectiveshealthy life, and we are working to develop products to help facilitate that belief.


Impact of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intendedCOVID-19

There continues to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materiallybe worldwide impact from the events, performancenovel coronavirus (“COVID-19”) pandemic. The impact of COVID-19 includes changes in consumer and results discussedbusiness behavior, pandemic fears, market downturns, and restrictions on business and individual activities, which have created significant volatility in the forward-looking statements. For information identifying important factorsglobal economy that could cause actualhas led to reduced economic activity. The full extent to which the COVID-19 pandemic will directly or indirectly impact our cash flow, business, financial condition, results to differ materially from those anticipated in the forward-looking statements, please refer to the “Risk Factors” section of the Company’s final prospectus for its initial public offering filed with the U.S. Securitiesoperations and Exchange Commission (the “SEC”). The Company’s filings pursuant to the Securities Act and the Exchange Act can be accessedprospects will depend on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether asfuture developments that are uncertain.

As a result of new information, future events or otherwise.

Overview

We arethe COVID-19 pandemic, we have safety procedures in place at our headquarters and encourage our employees and contractors to work remotely, where possible, in accordance with local public health recommendations, each of which represented a blank check company formed under the lawssignificant change in how we operate our business. In light of the State of Delaware on June 23, 2020 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses (the “Business Combination”). We intend to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants (as defined below), our capital stock, debt or a combination of cash, stock and debt.

Wepandemic, we expect to continue to incur significant coststake actions as may be required or recommended by government authorities or as we determine are in the pursuitbest interest of our acquisition plans. employees.

We cannot assure youhave experienced relatively minor operational impacts on our inventory availability and delivery capacity since the outbreak, neither of which has materially impacted our ability to service our customers. We continue to work with our existing manufacturing, logistics and other supply chain partners to build key processes to ensure that our ability to service our customers is not significantly disrupted. Ongoing actions to bolster key aspects of the supply chain to support our continued growth include geographically diversifying manufacturing operations to ensure adequate manufacturing capacity and to shorten transit times, implementing alternative order fulfillment options to reduce warehousing costs, developing contingency plans for unexpected third-party manufacturing disruptions, and increasing headcount dedicated to completemanaging and optimizing supply chain processes. We have experienced cost inflation resulting from the increased demand for raw materials and distribution services associated with the impact of COVID-19.


Restructuring Actions

As part of a restructuring program implementation, the Company commenced a workforce reduction of approximately 74 employees that is expected to be substantially completed in the third quarter of 2022. In addition to the workforce reduction intended to increase cost-efficiencies across the organization, the Company's restructuring program includes the reduction of consulting and outside services, the reduction of marketing spend, and the prioritization and sequencing of research and development projects. In connection with the restructuring program, the Company expects to incur an estimated total amount of approximately $1.1 million in the third quarter of 2022, consisting primarily of severance, one-time termination and other related costs, all of which will result in cash expenditures primarily in the third quarter of 2022.

As a result of the restructuring actions, Owlet expects to reduce run-rate operating costs, excluding share-based compensation and incentive compensation, to approximately $15 million to $19 million per quarter exiting the fourth quarter of 2022. Owlet is unable to predict with sufficient certainty items that would be included in the corresponding GAAP measure, operating expenses, including share-based compensation and incentive compensation, due to the unpredictable nature of such items, which may have a significant impact on Owlet's GAAP measures.

20

Components of Operating Results

Revenues

We recognize revenue from the following sources: (1) products, (2) mobile applications, and (3) content. 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 the Company's revenues were derived from product sales.

Cost of Revenues

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

Operating Expenses

General and Administrative. General and administrative expenses consist primarily of salaries, benefits, share-based compensation, and bonuses for finance and accounting, legal, human resources and administrative executives and employees; third-party legal, accounting, and other professional services; corporate insurance; corporate travel and entertainment; depreciation and amortization of property and equipment; and facilities rent.

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

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

Other Income (Expense)

Interest Expense, Net.Interest expense consists of interest incurred on our outstanding borrowings and amortization of the associated deferred financing costs net of interest income earned on our money market account.

Preferred Stock Warrant Liability Adjustment.Mark to market adjustment to recognize the change in fair value of the preferred stock warrant liability in other income (expense).

Common Stock Warrant Liability Adjustment.Mark to market adjustment to recognize the change in fair value of the common stock warrant liability in other income (expense).

Gain on Loan Forgiveness.Gain on loan forgiveness consists of the gain recognized subsequent to the forgiveness of the Small Business Combination will be successful.Administration Paycheck Protection Program loan.


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

Income Tax Provision.

Income tax provision consists primarily of U.S. federal and state income taxes related to the tax jurisdictions in which we conduct business.
21


Results of Operations


We have neither engagedThe following table sets forth our results of operations for the periods indicated in any operations nor generated anymillions (note that amounts within this Item 2 shown in millions may not sum due to rounding):

For the Three Months Ended June 30,For the Six Months Ended June 30,
2022202120222021
Revenues$18.3 $24.9 $39.9 $46.8 
Cost of revenues11.7 11.4 24.5 20.6 
Gross profit6.6 13.5 15.4 26.2 
Operating expenses:
General and administrative9.5 7.3 19.8 13.3 
Sales and marketing9.7 7.6 21.4 13.7 
Research and development7.8 4.5 16.3 7.9 
Total operating expenses27.0 19.4 57.4 34.9 
Operating loss(20.4)(5.9)(42.1)(8.7)
Other income (expense):
Interest expense, net(0.2)(0.5)(0.4)(0.9)
Preferred stock warrant liability adjustment— (1.0)— (5.6)
Common stock warrant liability adjustment8.8 — 1.9 — 
Gain on loan forgiveness— 2.1 — 2.1 
Other income (expense), net0.1 (0.1)0.1 (0.1)
Total other income (expense), net8.7 0.5 1.6 (4.5)
Loss before income tax provision(11.7)(5.3)(40.4)(13.2)
Income tax provision0.0 0.0 0.0 0.0 
Net loss and comprehensive loss$(11.7)$(5.3)$(40.5)$(13.2)


Revenues
For the Three Months Ended June 30,ChangeFor the Six Months Ended June 30,Change
(dollars in millions)20222021$%20222021$%
Revenues$18.3 $24.9 $(6.6)(26.4 %)$39.9 $46.8 $(7.0)(14.9 %)

Revenues decreased by $6.6 million, or 26.4%, from $24.9 million for the three months ended June 30, 2021 to $18.3 million for the three months ended June 30, 2022. The decrease in revenues year over year was primarily due to date. Our only activitieslower sales volume of Owlet sock products, impacted by both consumer sell-through levels and retailers targeting lower inventory levels, reflecting macroeconomic conditions. Customer discounts and provisions for returns were consistent to the prior year on lower sales volume.

Revenues decreased by $7.0 million, or 14.9%, from $46.8 million for the six months ended June 23, 2020 (inception) through September 30, 20202021 to $39.9 million for the six months ended June 30, 2022. The decrease in revenues year over year was primarily due to lower sales volume, impacted by both consumer sell-through levels and retailers targeting lower inventory levels, reflecting macroeconomic conditions, and higher provisions for returns of Owlet sock products. Customer discounts were organizational activities, those necessaryconsistent to preparethe prior year on lower sales volume.


Cost of Revenues and Gross Margin
22


For the Three Months Ended June 30,ChangeFor the Six Months Ended June 30,Change
(dollars in millions)20222021$%20222021$%
Cost of revenues$11.7 $11.4 $0.3 2.7 %$24.5 $20.6 $3.9 18.7 %
Gross profit$6.6 $13.5 $(6.9)(51.0 %)$15.4 $26.2 $(10.8)(41.3 %)
Gross margin36.1 %54.2 %38.6 %55.9 %

Cost of revenues increased by $0.3 million, or 2.7%, from $11.4 million for our initial public offering (the “Initial Public Offering”)the three months ended June 30, 2021 to $11.7 million for the three months ended June 30, 2022. The increase was primarily due to cost inflation, including increased material and transportation costs. Gross margin decreased from 54.2% for the three months ended June 30, 2021 to 36.1% for the three months ended June 30, 2022 primarily due to cost inflation and provisions for returns and customer discounts which were consistent to the prior year on lower sales volume.

Cost of revenues increased by $3.9 million, or 18.7%, described below,from $20.6 million for the six months ended June 30, 2021 to $24.5 million for the six months ended June 30, 2022. The increase was primarily due to cost inflation, including increased material and the searchtransportation costs and inventory rework costs for a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account (as defined below). We incur expensesinventory returned as a result of the FDA Warning Letter. Gross margin decreased from 55.9% for the six months ended June 30, 2021 to 38.6% for the six months ended June 30, 2022, primarily due to cost inflation, higher provisions for returns, and customer discounts which were consistent to the prior year on lower sales volume.


General and Administrative

For the Three Months Ended June 30,ChangeFor the Six Months Ended June 30,Change
(dollars in millions)20222021$%20222021$%
General and administrative$9.5 $7.3 $2.2 30.3 %$19.8 $13.3 $6.5 49.0 %

General and administrative expense increased by $2.2 million, or 30.3%, from $7.3 million for the three months ended June 30, 2021 to $9.5 million for the three months ended June 30, 2022. The increase was driven primarily by increased compensation expense, including share-based compensation, from additional general and administrative headcount. Additionally, the Company incurred incremental ongoing costs of being a public company, (for legal, financial reporting, accountingincluding the increased cost of insurance.

General and auditing compliance)administrative expense increased by $6.5 million, or 49.0%, as well asfrom $13.3 million for due diligencethe six months ended June 30, 2021 to $19.8 million for the six months ended June 30, 2022. The increase was driven primarily by increased compensation expense, including share-based compensation, from additional general and administrative headcount. Additionally, the Company incurred incremental ongoing costs of being a public company, including the increased cost of insurance.


Sales and Marketing

For the Three Months Ended June 30,ChangeFor the Six Months Ended June 30,Change
(dollars in millions)20222021$%20222021$%
Sales and marketing$9.7 $7.6 $2.2 28.5 %$21.4 $13.7 $7.7 56.0 %

Sales and marketing expense increased by $2.2 million, or 28.5%, from $7.6 million for the three months ended June 30, 2021 to $9.7 million for the three months ended June 30, 2022. The increase was primarily driven by an increase in compensation expense, including share-based compensation, from additional sales and marketing headcount, and increases in digital advertising.

Sales and marketing expense increased by $7.7 million, or 56.0%, from $13.7 million for the six months ended June 30, 2021 to $21.4 million for the six months ended June 30, 2022. The increase was primarily driven by an increase in compensation expense, including share-based compensation, from additional sales and marketing headcount, and increases in digital advertising and retail channel marketing spend.


23

Research and Development

For the Three Months Ended June 30,ChangeFor the Six Months Ended June 30,Change
(dollars in millions)20222021$%20222021$%
Research and development$7.8 $4.5 $3.3 72.0 %$16.3 $7.9 $8.4 105.2 %

Research and development expense increased by $3.3 million, or 72.0%, from $4.5 million for the three months ended June 30, 2021 to $7.8 million for the three months ended June 30, 2022. These increases were primarily driven by an increase in compensation expense, including share-based compensation, from additional research and development headcount, an increase in consulting expenses, and an increase in spend associated with FDA submissions.

Research and development expense increased by $8.4 million, or 105.2%, from $7.9 million for the six months ended June 30, 2021 to $16.3 million for the six months ended June 30, 2022. These increases were primarily driven by an increase in compensation expense, including share-based compensation, from additional research and development headcount and an increase in consulting expenses.


Other Income (Expense)

For the Three Months Ended June 30,ChangeFor the Six Months Ended June 30,Change
(dollars in millions)20222021$%20222021$%
Interest expense, net$(0.2)$(0.5)$0.3 (58.1 %)$(0.4)$(0.9)$0.5 (52.4 %)
Preferred stock warrant liability adjustment$— $(1.0)$1.0 (100.0 %)$— $(5.6)$5.6 (100.0 %)
Common stock warrant liability adjustment$8.8 $— $8.8 NM$1.9 $— $1.9 NM
Gain on loan forgiveness$— $2.1 $(2.1)(100.0 %)$— $2.1 $(2.1)(100.0 %)
Other income, net$0.1 $(0.1)$0.2 (150.8 %)$0.1 $(0.1)$0.2 (205.8 %)
NM - Not meaningful

For the three months ended SeptemberJune 30, 2020 and2022, we recognized a gain of $8.8 million for the periodmark to market adjustment for common stock warrants resulting from June 23, 2020 (inception) through September 30, 2020, we had a net loss of $30,155, which consists of operating costs of $36,307, offset by interest income on marketable securities heldthe decrease in the Trust Accountfair value of $6,152.the common stock warrants.


For the six months ended June 30, 2022, we recognized a gain of $1.9 million for the mark to market adjustment for common stock warrants resulting from the decrease in the fair value of the common stock warrants.

For the three and six months ended June 30, 2021, we recognized a gain of $2.1 million on the forgiveness of our SBA PPP loan.


Liquidity and Capital Resources


UntilOwlet's operations have been funded primarily with proceeds from the consummation of the Initial Public Offering,Merger and PIPE investment, borrowings under our only source of liquidity was an initial purchase of sharesloan facilities, and sales of our Class B common stock byproducts and services. As of June 30, 2022, we had cash and cash equivalents of $37.3 million.

Funding Requirements

In accordance with Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the SponsorCompany has evaluated whether there are conditions and loansevents, 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 are issued.
Since inception, the Company has experienced recurring operating losses and generated negative cash flows from our Sponsor.

On September 17, 2020, we completedoperations, resulting in an accumulated deficit of $183.9 million as of June 30, 2022. During the Initial Public Offering of 23,000,000 Units at a price of $10.00 per Unit, which includes the full exercise by the underwriters of the over-allotment option to purchase an additional 3,000,000, generating gross proceeds of $230,000,000. Simultaneously with the closing of the Initial Public Offering, we completed the sale of 6,600,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to our Sponsor, generating gross proceeds of $6,600,000.

Following the Initial Public Offering, including the full exercise of the over-allotment option by the underwriters’year ended December 31, 2021 and the sale of the Private Placement Warrants, a total of $230,000,000 was placed in a trust account (the “Trust Account”) andsix months ended June 30, 2022, we had $1,977,519negative cash flows from operations of $40.6 million and $55.7 million, respectively. As of June 30, 2022, we had $37.3 million of cash held outsideon hand.

Year over year declines in revenue, the current cash balance, recurring operating losses, and negative cash flows from operations since inception, in addition to the noncompliance with its revenue covenant (see Note 5 to the condensed consolidated financial statements),
24

raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. The accompanying 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 Trust Account, after paymentamount and classification of certain costsliabilities that might result should the Company be unable to continue as a going concern.

As the Company continues to address these financial conditions, management has undertaken the following actions:

•As described further in Note 5 to the condensed consolidated financial statements, the Company has entered into a waiver agreement with Silicon Valley Bank ("SVB") related to the Initial Public Offering,covenant violation and availablemaintains access to a line of credit, with reduced capacity, during this period. The Company is actively engaged with SVB to come to terms on a further restructured financing arrangement, including revised financial covenants for working capital purposes. We incurred $12,948,806future periods.

•As described further in transactionNote 13 to the condensed consolidated financial statements, we have undertaken restructuring actions, which significantly reduced employee headcount and will reduce operating spend. This includes the reduction of consulting and outside services, the reduction of marketing programs, and the prioritization of and sequencing of researching and development projects.

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 or recession or reduced demand for the Company’s products. If revenues further decrease from current levels, the Company may be unable to further reduce costs, including $4,204,000or such reductions may limit our ability to pursue strategic initiatives and grow revenues in the future. Should the Company be unable to come to terms on an amendment of underwriting fees, $8,050,000its loan and security agreement, or require further funding in the future, there can be no assurance that we will be able to obtain additional debt or equity financing on terms acceptable to us, if at all.

FDA Warning Letter Returns

A refund liability of deferred underwriting fees$13.0 million has been accrued as of June 30, 2022 in accrued and $694,806other expenses and represents amounts due to customers.

Loan and Security Agreement with Silicon Valley Bank

The Company has an amended and restated loan and security agreement (the "A&R LSA") with SVB which we entered into on April 22, 2020, and which replaced the loan and security agreement previously in place (the ‘‘Original LSA’’). These agreements provided us with both a line of credit (the ‘‘SVB Revolver’’) and a term loan (the ‘‘Term Note’’).

On January 31, 2022, the Company further amended the A&R LSA, which modified the SVB Revolver annual interest rate, decreased the advance rate for borrowing base assets, and increased the cash and cash availability streamline threshold. The amendment also modified the Term Note annual interest rates, replaced the existing EBITDA covenant for 2022 and beyond with a net revenue covenant, and increased the minimum liquidity threshold from $5.0 million to $30.0 million.

Our borrowing capacity under the SVB Revolver was $17.5 million as of June 30, 2022. The SVB Revolver is an asset based lending facility subject to borrowing base availability which is limited by borrowing base calculations based on the sum of specified percentages of eligible accounts receivable and eligible inventory. Borrowing base availability can be significantly impacted based upon the period's eligible accounts receivable and eligible inventory, and may be lower than borrowing base capacity.

As of June 30, 2022, the SVB Revolver bore interest at an annual rate equal to (i) the greater of the bank’s prime rate plus 0.75%, or 5.00% when a streamline period is in effect and (ii) the greater of the bank’s prime rate plus 1.25%, or 5.00% at all other offering costs.times.

Prior to January 31, 2022, the SVB Revolver bore interest at an annual rate equal to (i) the greater of the bank’s prime rate plus 0.75%, or 5.50% when a streamline period is in effect and (ii) the greater of the bank’s prime rate plus 1.25%, or 6.00% at all other times.

Each streamline period commences the first day of the month following a written report of our liquidity and ends the first day after we fail to maintain a required cash and cash availability streamline threshold, provided no event of default has occurred and is continuing. If an event of default has occurred and is continuing, SVB may maintain our streamline status at its discretion. The required cash and cash availability streamline threshold was $50.0 million as of June 30, 2022, which the Company did not maintain and was therefore not within a streamline period. The actual interest rate on the SVB Revolver was 6.00% as of June 30, 2022. The SVB Revolver is subject to renewal and is scheduled to mature on April 22, 2024. As of June 30, 2022, there was $4.3 million of outstanding borrowings under the SVB Revolver.

Our Term Note had an aggregate principal balance of $11.0 million as of June 30, 2022. As of June 30, 2022, the Term Note bore interest at a rate equal to the greater of the bank's prime rate plus 2.50%, or 5.75%, and required 30 consecutive equal monthly payments of principal and matures on April 1, 2024.

Prior to January 31, 2022, the Term Note bore interest at a rate equal to the greater of the bank's prime rate plus 3.50%, or 6.50%.
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Our borrowings under the A&R LSA and its subsequent amendments are secured by substantially all of our current and future assets.

As of June 30, 2022, the Company was in violation of its minimum net revenue requirement for the three months ended June 30, 2022 under the amended and restated loan and security agreement, which governs both the Company’s term loan and its line of credit. On August 10, 2022, the Company received and entered into a waiver agreement with SVB. This agreement waives the minimum net revenue covenant violation for the three months ended June 30, 2022, lowers the minimum liquidity covenant from $30.0 million to $22.5 million, and reduces the line of credit capacity from $17.5 million to $5.0 million.

The Company does not currently expect that it will be in compliance with the minimum net revenue covenant for the third and fourth quarter of 2022, which were not amended under the waiver agreement. As a result, the $11.0 million term note and the Company’s line of credit with $4.3 million of outstanding borrowings is presented as a current liability.

The Company is actively engaged with SVB to come to terms on a further restructured financing arrangement, including revised financial covenants for future periods. If the Company is unable to come to terms regarding an amendment, and the Company is in violation of its covenants in future periods, SVB can elect to take certain actions, including terminating the line of credit and declaring the principal amount of the term note and line of credit as immediately due and payable.

Financed Insurance Premium

In July 2022, the Company renewed its corporate liability policies and entered into a new short-term commercial premium finance agreement with First Insurance Funding totaling $3.0 million to be paid in eleven equal monthly payments, accruing interest at a rate of 4.40%.

Cash Flows

The following table summarizes our cash flow (in millions):
Six Months Ended June 30,
20222021
Net cash used in operating activities$(55.7)$(15.6)
Net cash used in investing activities(1.2)(0.7)
Net cash (used in) provided by financing activities(0.9)11.5 
Net change in cash and cash equivalents$(57.8)$(4.8)

Operating Activities

For the period fromsix months ended June 23, 2020 (inception) through September 30, 2020,2022, net cash used in operating activities was $322,595. Net loss$55.7 million as compared to net cash used in operating activities of $30,155 was affected by interest earned on marketable securities held$15.6 million in the Trust Account of $6,152 and changesprior year. The change in operating assetscash flows was driven by a higher net loss excluding the impact of non-cash charges and liabilities, which used $286,288higher working capital usage. Working capital usage was driven by higher receivable levels, higher inventory, including the impact of cash from operating activities.

As of September 30, 2020, we had cashreturn to vendor activity, and marketable securities helda decrease in accounts payable and accrued and other expenses as compared to an increase in the Trust Account of $230,006,152. We intend to use substantially allprior year. The Company expects the settlement of the funds held inaccrued returns resulting from the Trust Account, including any amounts representing interest earned onWarning Letter to have a negative impact to cash flows from operations during the Trust Account, to complete our Business Combination. We may withdraw interest to pay franchise and income taxes. Duringfiscal year ended 2022.

Investing Activities

For the periodsix months ended SeptemberJune 30, 2020, we did not withdraw any interest earned on the Trust Account. To the extent that our capital stock or debt is2022, net cash used in whole orinvesting activities increased to $1.2 million from $0.7 million for the six months ended June 30, 2021 due to higher purchases of intangible assets.

Financing Activities

For the six months ended June 30, 2022, net cash used in part,financing activities was $0.9 million as considerationcompared to complete our Business Combination,net cash provided by financing activities of $11.5 million for the remaining proceeds heldsix months ended June 30, 2021, primarily driven by payments of long-term debt in the Trust Account will be used as working capital2022 compared to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

As of September 30, 2020, we had cash of $1,438,624 outside of the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.

In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor, an affiliate of the Sponsor, or our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants, at a price of $1.00 per warrant at the option of the lender. The warrants would be identical to the Private Placement Warrants, including as to exercise price, exercisability and exercise period. The terms of such loans by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. The loans would be repaid upon consummation of a Business Combination, without interest.

We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our public shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of September 30, 2020.

Contractual obligations

We do not have any long-term debt capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate ofduring the Sponsor a monthly fee of $10,000 for office space, utilities and secretarial and administrative support to the Company. We began incurring these fees on September 14, 2020 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and the Company’s liquidation.six months ended June 30, 2021.


Certain of the underwriters of the Initial Public Offering are entitled to a deferred fee of $0.35 per Unit, or $8,050,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement. The underwriters did not receive any upfront underwriting discount or commissions on the 1,980,000 Units purchased by the members of our Sponsor that are affiliated with Pacific Investment Management Company LLC, but will receive deferred underwriting commissions with respect to such Units.

Critical Accounting Policies and Estimates


The preparation of condensed financial statementsThere have been no material changes from the critical accounting policies and related disclosuresestimates disclosed in conformity with accounting principles generally acceptedour 2021 Annual Report on Form 10-K, other than policies disclosed in the United States of America requires management to make estimatesthis Quarterly Report on Form 10-Q.

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Item 3. Quantitative and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dateQualitative Disclosures About Market Risk.

We are a smaller reporting company as defined by Rule 12b-2 of the financial statements,Exchange Act and incomeare not required to provide the information otherwise required under this Item.
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Item 4. Controls and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Procedures.

Limitations on Effectiveness of Controls and Procedures
Class A Common Stock Subject to Possible Redemption

We account forIn designing and evaluating our shares of Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption is classified as a liability instrumentdisclosure controls and is measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, the Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of our unaudited condensed balance sheet.

Net Loss per Common Share

We apply the two-class method in calculating earnings per share. Net income per common share, basic and diluted for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account, net of applicable taxes, by the weighted average number of shares of Class A redeemable common stock outstanding for the periods. Net income per common share, basic and diluted for and Class B non-redeemable common stock is calculated by dividing net income less income attributable to Class A redeemable common stock, by the weighted average number of shares of Class B non-redeemable common stock outstanding for the periods presented.

Recent Accounting Standards

Management does not believeprocedures, management recognizes that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.

Item 3.
Quantitative and Qualitative Disclosures About Market Risk

Ascontrols and procedures, no matter how well designed and operated, can provide only reasonable assurance of September 30, 2020, we were not subjectachieving 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 any market or interest rate risk. Followingapply judgment in evaluating the consummationbenefits of our Initial Public Offering, the net proceeds of our Initial Public Offering, including amounts in the Trust Account, have been invested in U.S. government treasury bills, notes or bonds with a maturity of 185 days or less or in certain money market funds that invest solely in U.S. treasuries. Duepossible controls and procedures relative to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.

Item 4.
Controls and Procedures

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 ensureprovide 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.


Under the supervision andOur management, with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluationevaluated, as of June 30, 2022, the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2020, as such(as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.Act). Based on thisthat evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective atas of June 30, 2022 due to the material weaknesses in our internal control over financial reporting described below.

Material Weaknesses in Internal Control over Financial Reporting

In connection with the re-issuance of our consolidated financial statements as of and for the fiscal year ended December 31, 2019, we identified material weaknesses in our internal control over financial reporting. The identified material weaknesses in our internal control over financial reporting continued to exist as of June 30, 2022.

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

•We did not design and maintain effective controls over the segregation of duties related to journal entries. Specifically, certain personnel have the ability to both create and post journal entries within the Company’s general ledger system. This material weakness did not result in any adjustments to the consolidated financial statements.

•We did not design and maintain effective controls over the accounting for convertible preferred stock and warrant arrangements. Further, we did not design and maintain effective controls to verify the completeness and accuracy of sales returns and accrued sales tax. Each of these material weaknesses resulted in material adjustments to several account balances and disclosures in the consolidated financial statements as of and for the year ended December 31, 2019.

•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 annual consolidated financial statements that would not be prevented or detected.

Remediation Plan

We have initiated an implementation 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.
28


We have taken actions to improve our IT general controls, segregation of duties controls, period-end financial reporting controls, and journal entry controls. However, 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 information required to be disclosed by usnewly implemented and enhanced controls are operating effectively.

Notwithstanding the above, our management believes that the consolidated financial statements included in reports filed underthis Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.presented.

Changes in Internal Control over Financial Reporting

There was no change 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 fiscal quarter of 2020 covered by this Quarterly Report on Form 10-Qthree months ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



16
29
Table of Contents

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.
Item 1.
Legal Proceedings.


In the ordinary course of business, we face various claims brought by third parties, and we may, from time to time, make claims or take legal actions to assert our rights, including intellectual property rights as well as claims relating to employment matters and the safety or efficacy of our products. Any of these claims could subject us to costly litigation, and, while we generally believe that we have adequate insurance to cover many different types of liabilities, our insurance carriers may deny coverage, may be inadequately capitalized to pay on valid claims, or our policy limits may be inadequate to fully satisfy any damage awards or settlements. If this were to happen, the payment of any such awards could have a material adverse effect on our business, financial condition and results of operations. Additionally, any such claims, whether or not successful, could damage our reputation and business.
None.

Item 1A.
Risk Factors.

The information to be reported under this Item is not required for smaller reporting companies.

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.

On September 17, 2020, we consummated the Initial Public Offering of 23,000,000 Units, which included the full exercise by the underwriters of the over-allotment option to purchase an additional 3,000,000 Units. The Units soldIn November 2021, two putative class action complaints were filed against us in the Initial Public Offering were sold at an offering priceU.S. District Court for the Central District of $10.00 per unit, generating total gross proceeds of $230,000,000. Citigroup Global MarketsCalifornia, Butala v. Owlet, Inc., et al., Case No. 2:21-cv-09016, and UBS Securities LLC acted as joint book-running managers. The securities in the offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-248320). The SEC declared the registration statement effective on September 14, 2020.

Simultaneously with the consummation of the Initial Public Offering, including the closing of the over-allotment option, we consummated the private placement of an aggregate of 6,600,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, generating total proceed of $6,600,000. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2)Cherian v. Owlet, Inc., et al., Case No. 2:21-cv-09293. Both complaints allege violations of the Securities Act.Exchange Act of 1934 against the Company and certain of its officers and directors on behalf of a putative class of investors who (i) purchased the Company’s common stock between March 31, 2021 and October 4, 2021 or (ii) 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. 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 the Owlet Smart Sock product as a medical device requiring marketing authorization. The Court has pending before it motions to consolidate the Butala and Cherian cases and appoint a lead plaintiff. The Company intends to vigorously defend itself against these claims, including by filing a motion to dismiss on behalf of itself and the named officers and directors.

The Private Placement Warrants are identicalItem 1A. Risk Factors.

In addition to the warrants underlyinginformation contained in this report, you should carefully consider the Units soldrisk factors disclosed in the Initial Public Offering, except that the Private Placement Warrants are not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.

Of the gross proceeds received from the Initial Public Offering, including the closing of the over-allotment option,our Form 10-K and the Private Placement Warrants, $230,000,000 was placed in the Trust Account.

We paid a total of $4,204,000 in underwriting discounts and commissions and $694,806 for other offering costs related to the Initial Public Offering. In addition, the underwriters agreed to defer $8,050,000 in underwriting discounts and commissions.

Item 3.
Defaults Upon Senior Securities.

None.

Item 4.
Mine Safety Disclosures.

Not Applicable.

Item 5.
Other Information.

None.

Item 6.
Exhibits

The following exhibits are filed as part of, or incorporated by reference into, thisour Quarterly Report on Form 10-Q.10-Q for the period ended March 31, 2022, which could materially affect our business, financial condition or results. Except as set forth below or as may otherwise be described elsewhere in this report, there have been no material changes from the risk factors previously disclosed in our Form 10-K and our Quarterly Report on Form 10-Q for the period ended March 31, 2022.

No.Description of Exhibit
1.1
Underwriting Agreement, dated September 14, 2020, between the Company and Citigroup Global Markets Inc. and UBS Securities LLC, as representatives of the several underwriters (1)
3.1
Amended and Restated Certificate of Incorporation (1)
4.1
Warrant Agreement, dated September 14, 2020, between Continental Stock Transfer & Trust Company and the Company (1)
10.1
Warrant Purchase Agreement, dated September 14, 2020, between the Company and Sandbridge Acquisition Holdings LLC (1)
10.2
Investment Management Trust Account Agreement, dated September 14, 2020, between Continental Stock Transfer & Trust Company and the Company (1)
10.3
Registration and Stockholder Rights Agreement, dated September 14, 2020, among the Company, the Sponsor and the other Holders (as defined therein) signatory thereto (1)
10.4
Letter Agreement, dated September 14, 2020, among the Company, the Sponsor, certain investors in the Sponsor and each of the initial stockholders, directors and officers of the Company (1)
10.5
Administrative Services Agreement, dated September 14, 2020, between the Company and Sandbridge Capital, LLC (1)
10.6
Form of Indemnification Agreement, dated September 14, 2020, between the Company and each of the officers and directors of the Company (1)
31.1*
Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**
Certification of Principal 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*XBRL Instance Document
101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document
101.SCH*XBRL Taxonomy Extension Schema Document
101.DEF*XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document

*Filed herewith.
**Furnished herewith.
(1)Previously filed as an exhibit to our Current Report on Form 8-K filed on September 18, 2020 and incorporated by reference herein.


18If our distributors or retail customers experience financial difficulties due to various factors, we may not be able to collect our receivables, which could materially or adversely affect our profitability, cash flows, working capital and business operations.

TableThe timely collection of Contents
our receivables allows us to generate cash flows, provide working capital and continue our business operations. Our distributors and retail customers may experience financial difficulties for a number of reasons, such as macroeconomic or volatile market conditions, which could impact a distributor’s or retailer’s financial condition or cause its delay or failure to pay us. This could result in longer payment cycles, delay or default in payment or increased credit risk, which, in turn, could cause our cash collections to decrease and allowance for doubtful accounts to increase. While we may resort to alternative collection remedies or other methods to pursue claims with respect to receivables, these alternatives are expensive and time consuming, and successful collection is not guaranteed. Failure to collect our receivables or prevail on related claims could adversely affect our profitability, cash flows, working capital and business operations.
SIGNATURES

We are subject to risks associated with our distributors’ and retailers’ Owlet product inventories and sell-through to end consumers, which could adversely affect our revenues and results of operations.

Our distributors and retail customers typically stock and maintain their own inventories of Owlet products and sell a large portion of those products through to our end consumers. Substantially all of our revenues in the second quarter of 2022 were derived from product sales, and we recognize revenue when control of goods and services is transferred to customers, such as upon product shipment to our distributors and retailers.

In accordancea given period, if these distributors and retailers are unable to sell an adequate amount of their Owlet product inventories, or if they decide to decrease or become unwilling to manage or sell their Owlet product inventories for any reason, our sales to and through these third parties could decline, which could result in lower sales volume or increased sales returns, excess inventory or inventory write-offs. Various factors could impact their ability or desire to sell their Owlet product inventories through to end consumers, including but not limited to economic conditions or downturns, pricing discounts or credits, marketing and promotion, customer incentives or other business arrangements. In addition, any deterioration in the financial condition of our distributors and retail customers could adversely impact the flow of our products to our consumers and thus our revenues and results of operations.

We may not successfully execute or achieve the expected benefits of our restructuring program and other cost-saving measures we may take in the future, and our efforts may result in further actions and may materially and adversely affect our business, financial condition and results of operations.
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On July 21, 2022, we implemented a company-wide restructuring program designed to position the Company for long-term profitable growth by prioritizing the sell-through of our products to end consumers, obtaining regulatory clearances and managing our liquidity. The program includes streamlining our organizational structure in response to current business conditions, reducing our operating expenses and conserving our cash resources. The restructuring program is based on our current estimates, assumptions and forecasts, which are subject to known and unknown risks and uncertainties, including but not limited to assumptions regarding cost savings, cash burn rate, access to restricted cash, gross profit improvements and effectiveness of reduced marketing spend. Accordingly, we may not be able to fully realize the cost savings, enhanced liquidity and other benefits anticipated from the restructuring program. Additionally, implementation of the restructuring program and any other cost-saving initiatives may be costly and disruptive to our business, the expected costs and charges may be greater than we forecasted, and the estimated cost savings may be lower than we forecasted. The restructuring program has also required, and may continue to require, a significant amount of time, resources and focus from our management and employees, which may divert attention from effectively operating and growing our business.

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

The success of our business depends on our ability to increase revenues to offset expenses. Since our inception, we have incurred recurring operating losses, generated negative cash flows from operations, experienced year over year revenue declines and financed our operations principally through equity investments and borrowings. Those factors, coupled with our current cash balance and noncompliance with one of our revenue covenants, raise substantial doubt as to our ability to continue as a going concern.

We are considering a number of strategic alternatives to address these financial conditions. The Company has undertaken cost-saving measures and implemented a company-wide restructuring program, which significantly reduced our employee headcount and is expected to reduce our operating spend and improve cost efficiency. These cost-saving and restructuring actions include reductions in consulting and outside services and marketing programs and prioritizations and sequencing of research and development projects. In addition, we have entered into a waiver agreement with SVB related to the revenue covenant noncompliance, and we maintain access to a line of credit, with reduced capacity, during this period.

Future profitability is difficult to predict with certainty, and failure to achieve 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 further 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. Also, there can be no assurance as to whether or when we will be able to obtain additional debt or equity financing on acceptable terms. 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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
There were no unregistered sales of equity securities for the three months ended June 30, 2022.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
31

Item 6. Exhibits

Exhibit
Number		DescriptionFormFile No.ExhibitFiling Date
2.18-K001-395162.12/16/2021
3.1S-4333-2548883.33/31/2021
3.2S-4333-2548883.43/31/2021
4.18-K001-395164.19/18/2020
4.2S-1333-248324.49/1/2020
10.1#S-4333-25488810.15(c)3/31/2021
10.2#S-4333-25488810.15(d)5/28/2021
10.3#S-4333-25488810.15(e)5/28/2021
10.4S-1333-25850610.168/19/2021
10.510-Q001-3951610.211/15/2021
10.610-Q001-3951610.611/15/2021
10.710-K001-3951610.73/25/2022
10.810-Q001-3951610.85/13/2022
10.9#*
10.10+8-K001-3951610.18/11/2022
31.1*
31.2*
32.1**
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.
+ Indicates management contract or compensatory plan.
# Certain portions of this exhibit (indicated by “[***]”) have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
32

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.

SANDBRIDGE ACQUISITION CORPORATION
Owlet, Inc.
Date: August 15, 2022By:/s/ Kurt Workman
Name:Kurt Workman
Title:Chief Executive Officer
  
Date: November 13, 2020By:/s/ Ken Suslow
Name:Ken Suslow
Title:Chief Executive Officer
(Principal Executive Officer)
Date: November 13, 2020August 15, 2022By:/s/ Richard HenryKathryn R. Scolnick
Name:Richard HenryKathryn R. Scolnick
Title:Chief Financial Officer
(Principal Accounting and Financial Officer)



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