OWLT 10-K & 10-Q changes, risk factors and insider trading

Our business is subject to numerous risks and uncertainties that you should be aware of in evaluating our business.business, some of which are described below. If any such risks and uncertainties actually occur, our business, prospects, financial condition and results of operations could be materially and adversely affected. References to past events are provided by way of example only and are not intended to be a complete listing or representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future. The risk factors described below should be read together with the other information set forth in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes, as well as in other documents that we file with the Securities and Exchange Commission ("SEC").

We were organized in 2014 and began selling Owlet Smart Sock in 2015, Owlet Cam in 2018, launched Dream Sock in January 2022 and launched BabySat and Dream Sock with Health Notifications in 2024. We launched Owlet360, our first subscription service, and our Dream Sight camera in 2025. Additionally, as of December 31, 2025, had expanded our distribution and sale of Owlet products to include over 30 countries, with expansion into India and other countries expected in 2026. Accordingly, we have a limited operating history,history of offering multiple products, including software subscriptions, at our current scale, which makes anit evaluationdifficult ofto evaluate our current business model and future prospectsprospects. difficult.We Ourhave encountered and will continue to encounter risks and difficulties frequently experienced by growing companies in evolving industries. For example, our operating results have fluctuated in the past, and we expect our future quarterly and annual operating results to fluctuate as we focus on increasing the demand for our products and services. We may also experience challenges with accurate financial planning and forecasting. Additionally, we may need to make business decisions that could adversely affect our operating results, such as modifications to our pricing strategy, business structure or operations.operations, for a variety of reasons, including to achieve market acceptance of our existing and future product and service offerings, in response to competitive or macroeconomic pressures, or in the interests of driving long-term growth. We cannot assure you that we will be successful in addressing these and other challenges we may face in the future and if we do not manage these risks successfully, our business and operating results may be adversely affected. You should consider our business and prospects in light of the risks and difficulties we may encounter as we increase our product and service offerings and expand internationally.

We have nota beenhistory profitableof to date,losses and operatingmay not achieve or sustain profitability. Operating losses could continue, which could materially and adversely affect our business, financial condition and results of operations, including our ability to continue as a going concern.operations.

TheWe successhave a history of ourlosses businessand dependsmay onnot ourachieve abilityor tosustain increase revenues to offset expenses.profitability. Since our inception, we have incurred recurring operating losses, generated negative cash flows from operations, and financed our operations principally through equity raises and borrowings. During 2025, we incurred a net loss of $39.7 million and had an accumulated deficit of $307.9 million as of December 31, 2025. Future profitability is difficult to predict with certainty, and failure to achieve and sustain profitability could materially and adversely affect our overall value and ability to obtain additional financing and capital. There can be no assurance that the Companywe will generate sufficient future cash flows from operations due to various potential factors, including but not limited to inflation, recessionnegative macroeconomic conditions or decreased demand for our products. If our revenues decrease from current levels, we may be unable to further reduce costs, or such cost reductions may limit our ability to pursue and implement strategic initiatives and grow revenues in the future. Also,We theremay can be no assurance as to whether or when we will be able to obtainrequire additional debt or equity financing in the future, and such financing may not be available when needed, on acceptable terms.terms, or at all. Our ability to reduce operating expenses or raise capital from external sources, if at all, may have a material adverse effect on our business, financial condition and operating results. Those factors, coupled with our current cash balance and current debt obligations, raise substantial doubt as to our ability to continue as a going concern.

Our business has experienced periods of significant fluctuations, including significant growth in revenue, headcount, our number of customers, usage, and amount of data delivered across our product offerings, since inception, which have placed, and we expect will continue to place, substantial demands on our management, financial, operational, and technological resources. For example, we experienced a 35.4% increase in revenue in 2025 compared to 2024 following receipt of marketing authorization for our BabySat and Dream Sock products. We anticipate that fluctuations in the growth of our business will continue as we adapt our plans and strategies to changing business and macroeconomic conditions. These fluctuations necessitate ongoing development and enhancement of our internal controls, including operational and financial systems. Any future growth initiatives will further intensify these demands:

In addition, we also expect to continue to incur additional legal, accounting, and other expenses as a public company. These investments may be more costly than we expect, and if we do not achieve the benefits anticipated from these investments, or if the realization of these benefits is delayed, they may not result in increased revenue or growth in our business. If we are not able to achieve or maintain positive cash flow in the long term, we may require additional financing, which may not be available on favorable terms or at all or which would be dilutive to our stockholders. If we are unable to successfully address these risks and challenges as we encounter them, our business, results of operations, and financial condition would be adversely affected. Our failure to achieve or maintain profitability could negatively impact the value of our common stock and warrants.securities.

We will likelymay need to raise additional capital in the future in order to executesupport our operations and strategic plan,plans, which may not be available to us when needed, on terms acceptable to us,terms, or at all.

WeOur willability likelyto stillraise capital as we have done in recent years may not always be successful, and we may need additional funding to fund our operations,operations. butThere can be no assurance that we will be able to obtain additional funds may not be available to usfunding on acceptable terms on a timely basis, if at all. We may seek funds through borrowings or additional rounds of financing, including private or public equity or debt offerings, or by other means. Our future capital requirements will depend on many factors, including:

Consequences of this indebtedness may require a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our debt, thereby reducing our ability to use our cash flow to fund operations, capital expenditures, and future business opportunities. The interest rates on our indebtedness are variable and therefore we are exposed to changes in interest rates, which could materially impact our ability to make interest payments as well as our results of operations and financial condition. If we cannot generate sufficient cash flow from operations to service our debt, we may need to refinance our debt, dispose of assets or issue equity to obtain necessary funds. We do not know whether we would be able to take any of these actions on a timely basis, on terms satisfactory to us, or at all. A failure by us or our subsidiaries to comply with the agreements governing our indebtednessindebtedness, including the liquidity covenant under the ABL Credit Agreement could result in an event of default under such indebtedness,indebtedness and its acceleration by the lenders, which could adversely affect our ability to respond to changes in our business and manage our operations. In addition, the ABL Credit Agreement contains a liquidity covenant requiring us to maintain liquidity of $4,000 and if the liquidity falls below $9,000, we are then subject to a minimum trailing-twelve-months EBITDA covenant as defined in the Credit Agreement. Upon the occurrence of an event of default under any of the agreements governing our indebtedness, the lenders could elect to declare all amounts outstanding to be due and payable and exercise other remedies as set forth in the agreements. If any of our indebtedness were to be accelerated,accelerated and/or our lenders were to exercise other remedies, there can be no assurance that our assets would be sufficient to repaysatisfy thisthe indebtednessaccelerated obligations and any related amounts in full, which could have a material adverse effect on our abilitybusiness, tofinancial continuecondition, toand operateresults asof a going concern.operations. As of December 31, 2024,2025, $7.5$7.0 million in aggregate principal amount was outstanding in term loans under the Loan Facility Agreement and $6.3$6.9 million in aggregate principal amount was outstanding under the asset-based revolving credit facility under the ABL Credit Agreement. See Part II. Item 8. "Financial Statements and Supplementary Data - Note 7," included in this Report.

Our products and services rely on our mobile applications to functionfunction, and we relydepend on Apple’s App Store and the Google Play Store for distributiondistribution, updates, and continued availability of our mobilethose applications.

Our products relyand subscription services are highly dependent on the installationcontinued availability and functionality of our mobile applications. If our mobile applications toare functionunavailable properly.or materially impaired, our camera products Dream Sight and Owlet Cam would be unusable, our Owlet360 subscription services would be unavailable, and Dream Sock functionality would be materially limited. Because our subscription services are delivered through our mobile applications, any disruption in service could adversely affect end customer acquisition, retention, and engagement. We develop mobile applications on Apple’s iOS platform and Google’s Android platform. Our customers download our mobile applications on Apple’s App Store and the Google Play Store. The App Store and Google Play Store are controlled entirely by Apple and Google, respectively. Mobile applications on the iOS platform are subject to approval by Apple and mobile applications on the Android platform are subject to approval by Google. The terms and policies for maintenance of existing applications and the approval process of new applications are very broad and subject to interpretationchange and frequentmay changes,be interpreted or applied in a manner adverse to us, and Apple and Google have complete control over the approval or removal of each mobile application submitted to or offered on their respective platforms. If either Apple or Google changes its standard terms and conditions for maintaining or approving mobile applications in a way that is detrimental to us or decide to remove our mobile applications from their stores, it will be much more difficult or may not be possible for users to install the mobile applications and receive updates to the mobile applications, and our current or future products may cease to function as intended.intended or at all. In addition, changes in iOS, Android, app store requirements, or third-party APIs could require us to modify our applications, could introduce performance issues, and could delay or prevent the release of updates or new features. Apple has informed us that it will remove our mobile applications from the App Store in any country in which any Owlet product requires marketing authorization or certification from any governmental authority or notified body. Any such removal or suspension could occur with limited advance notice and could be difficult to remedy quickly If Apple removes our applications from the App Store or Google removes our applications from the Google Play Store, our products would not function as intended,intended or at all, and we may be required to recall our products, issue refunds and accept returns, and we may be subject to costly litigation.litigation, and our business, financial condition and results of operations could be materially affected.

Historically, we have relied on a limited number of retailers for a substantial portion of our total sales. For example, sales through our topthree threelargest customers represented 58%66.5% of our revenue for the year ended December 31, 20242025 and 54%63.0% for the year ended December 31, 2023.2024. These retailers work with us on a non-exclusive basis. If we are unable to establish, maintain or grow these relationships over time, or if these relationships grow more slowly than we anticipate, we are likely to fail to recover these costs and our operating results will suffer. The loss of any significant retail customer, whether or not related to our business or our products or services, could have an impact on the growth rate of our revenue as we work to obtain new retail customers or replacement relationships. In addition, retailers may reduce purchases, change product assortment, reduce shelf or online placement, delay, cancel, or return orders, or discontinue carrying our products with limited advance notice. Contracts with retailers may typically be terminated or renegotiated before their term expires for various reasons, subject to certain conditions. For example, after a specified period, certain of our contracts are terminable for convenience by such retailers, subject to a notice period. Additionally, certain contracts may be terminated immediately by the retailer if we go bankrupt or if we fail to comply with certain specified laws. Any renegotiation of the commercial agreements may result in less favorable economic terms for us. Retailers may also seek price concessions, increased promotional funding, cooperative marketing support, or other allowances, or impose or increase chargebacks, credits, or return rights, any of which could adversely affect our margins and operating results. Retailers may also consolidate their operations, reducing the overall number of locations in which they sell our products and services. Ongoing challenges affecting brick-and-mortar retail, including store closures, reduced foot traffic, and shifts in consumer purchasing behavior toward e-commerce, may reduce demand for our products through these channels and could cause retailers to reduce orders, limit in-store placement, or increase promotional activity and pricing pressure. Historically, we have had retail customers declare bankruptcy and stop operations, negatively affecting our sales and business. If regulatory actions such as the Warning Letter we received in October 2021 regarding the regulatory status of the Smart Sock are threatened or taken against us or our products, or if we are required to modify, suspend, or withdraw any products or product features, retailers may return and stop carrying and return our products. Such returns have had, and may have,have a material adverse effect on our business, financial condition and results of operations.

In order to grow our business, we anticipate that we will continue to depend on our relationships with third parties, including our retailers. IdentifyingCompetition retailers,for retail distribution is significant, and negotiating and documenting relationships with them, requires significant time and resources. Ourour competitors may be more effective in providingsecuring incentivesfavorable toplacement, thirdpromotional parties to favor their productssupport, or services.other commercial terms. If we are unsuccessful in establishing, or maintainingmaintaining, or strengthening our relationships with third parties, including our retailers, our ability to compete in the marketplace or to grow our revenue could be impaired and our results of operations may suffer. Even if we are successful, these relationships may not result in increased customer use of our services or increased revenue.

We have no manufacturing capabilities of our own. We currently rely on a single manufacturer located in Thailand, Benchmark Electronics, for the manufacture of our Dream Sock, Smart Sock and BabySat products. Additionally, we currently rely on a separate single manufacturer located in China,China Shenzhenand AoniVietnam, Electronic,Aoni, for the manufacture of ourDream Owlet Cam.Sight. We expect to rely on limited manufacturers for future products we may develop. For us to be successful, our contract manufacturers must be able to provide us with products in substantial quantities, in compliance with regulatory requirements, in accordance with agreed upon specifications, at acceptable costs and on a timely basis. Our existing manufacturers may not be able to continue to meet our demand requirements on a timely basis, and their ability and willingness to continue to do so going forward may be limitedaffected forby severala reasons,number of factors, including our relative importance as a customer of each manufacturermanufacturer, capacity constraints, and disruptions to their operations or theirthose respectiveof abilitykey tosuppliers. provideOur assemblyoperations, servicesand tothose manufactureof our products,contract whichmanufacturers and key suppliers, may be adversely affected by pandemicsnatural disasters or other naturalcatastrophic or man-made disasters. Earthquakes are of particular significance since our headquarters are located in an earthquake-prone area. We are also vulnerable to damage from other types of disasters,events, including earthquakes, power loss, attackscyber fromincidents, extremistepidemics or terroristpandemics, organizations,fires, epidemics,floods, severe weather, acts of terrorism, geopolitical instability, communication failures, fire, floods and similar events. Certain of these events may be exacerbated by climate change; for more information, (see our risk factor titled “—We are subject to a series of risks regarding climate change.”). Furthermore, weWe are also subject to the risk that one or more of our critical third-party manufacturers,manufacturers may experience financial instability, file for bankruptcy, or otherwise cease operations.operations, The loss of a key providerwhich could result in significant supply chain delays, inability to meet sales demand, and increased costs associated with transitioning to alternative providers. In addition, componentComponent parts sourcedand frommaterials theseused suppliersin our products may also be subject to tariffs or other limitations imposed by the U.S. administration, which could limit availability of necessary parts for our products, increase our costs and impact our business and results of operations (see “—Increases in tariffs, trade restrictions or taxes on our products could have an adverse impact on our operations.”). Furthermore,In addition, our manufacturing agreements can be terminated by our contract manufacturers without cause by giving us prior notice of six months or less. The facilities and the manufacturing equipment used to produce our products would be difficult to replace and could require substantial time to repair if significant damage were to result from any of these occurrences. An interruption in our commercial operations could occur if we encounter delays or difficulties in securing these manufactured products for any reason and we cannot obtain an acceptable substitute.

Because our products and services are used by caregivers to monitor infants, it is critical that our products and services be accessible without interruption or degradation of performance. Customers may become dissatisfied by any system failure that interrupts our ability to provide our services to them. Sustained or repeated system failures would reduce the attractiveness of our products or services to customers. Moreover, negative publicity arising from these types of disruptions could damage our reputation and may adversely impact use of our products and services.services and our ability to attract and retain customers.

We currently host our products and services, serve our customers and support our operations primarily from third-party data and call centers and other cloud-based services. For example, we rely on cloud services and bespoke software services provided by Ayla Networks for our Dream Sock and Smart Sock products to support the transfer of data to the cloud and back to us and the user. Additionally, we rely on the data transfer services of ThroughTek to enable video viewing access for the Owlet Cam.Cam and Dream Sight. We do not have control over the operations of the services or the facilities of any of those providers. These facilities are vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, cyber security attacks, terrorist attacks, power losses, telecommunications failures and similar events. Certain of these events may be exacerbated by climate change; for more information, (see our risk factor titled “—We are subject to a series of risks regarding climate change.”). The occurrence of a natural disaster or an act of terrorism, a decision by a provider to close theor discontinue facilities or services without adequate notice, or other unanticipated problems could result in lengthy interruptions in our services. The facilities also could be subject to break-ins, computer viruses, sabotage, intentional acts of vandalism and other misconduct. We may not be able to easily switch our cloud operations to another cloud provider ifon thereacceptable areterms, disruptionswithin a reasonable timeframe, or interferencewithout withservice suchinterruption, providers.including due to technical, contractual, or operational constraints.

Furthermore, we are subject to the risk that one or more of our critical third-party providers, such as Ayla Networks or ThroughTek, may experience financial instability, file for bankruptcy, or otherwise cease operations. The loss of a key provider could result in significant disruptions to our services, delays in product functionality, and increased costs associated with transitioning to alternative providers. BecauseGiven the nature of our products areand essential for infant monitoring,services, any such disruption could severely damage our reputation and adversely affect our business, financial condition, and results of operations.

We are highly dependent on our senior management, other key officers, our engineers, marketing and field sales team, and may be increasingly dependent on healthcare and clinical specialists for the sale of any medical devices we may market. We face significant competition for talent from other healthcare, technology and high-growth companies, which include both large enterprises and privately-held companies. To attract top talent, we have had to offer, and believe we will need to continue to offer, highly competitive compensation packages (including equity-based compensation) and to incur recruiting and onboarding costs before we can validatefully theevaluate productivityan ofemployee's those employees.performance. In addition, we may not be able to hire new employees quickly enough to meet our needs or effectively integrate new hires, and fluctuations in the price of our common stock may make it more difficult or costly to use equity compensation to motivate, incentivize and retain our employees.

In addition, we recruit professionals on a global basis and must comply with the immigration laws in the countries in which we operate, including the U.S. Some of our employees are working under Owlet-sponsored temporary work visas, including H1-B visas. Statutory law limits the number of new H1-B temporary work permit petitions that may be approved in a fiscal year. Furthermore, there is a possibility that the current administration of the U.S. immigration visa program mayis beundergoing significant change, including a significantly overhauled,increased H1-B visa fee and changes in the number ofway H1-B visas available,are asawarded. well as the process to obtain them, may be subject to significant change. Any resultingThese changes to this visa program could impact our ability to recruit, hire and retain qualified skilled personnel. If we are unable to obtain work visas in sufficient quantities or at a sufficient rate for a significant period of time, our business, operating results and financial condition could be adversely affected.

If we are unable to successfully developdevelop, introduce, and effectivelydrive manage the introductionadoption of new productsproducts, services, and services,enhancements, our businessbusiness, mayfinancial condition and results of operations could be adversely affected.

We face and expect to face increasing competition from other companies, many of which have substantially greater resources than we do. If we do not successfully develop and commercialize enhanced or newinnovative products and services that remain competitive with products and services or alternative technologies developed by others,competitive, we could lose revenue opportunities and customers, and our ability to grow our business would be impaired, adversely affecting our financial condition and results of operations.

We recognize revenue primarily from products and the associated mobile applications. Revenues are recognized when control of goods and services is transferred to customers in an amount that reflects the consideration expected to be received by us in exchange for those goods and services. Substantially all of our revenues were derived from product sales.sales, with a growing minority portion of revenues being generated from subscriptions to our Owlet360 service.

Cost of revenues consists of product costs, including contract manufacturing, shipping and handling, depreciation and amortization relating to tooling and manufacturing equipment and software, warranty replacement, fulfillment costs, warehousing, hosting and platform costs, and reserves for excess and obsolete inventory. Cost of revenues associated with Owlet360 mainly consist of app store distribution fees.

General and Administrative. General and administrative expenses consist primarily of salaries, benefits, stock-based compensation, and bonuses for finance and accounting, legal, human resources, operations, quality and administrative executives and employees; third-party legal, accounting, customer service, software, and other professional services; corporate travel and entertainment; depreciation and amortization of property and equipment, asset impairment charges, legallitigation settlements,settlement costs, insurance loss recovery, and facilities rent.

Research and Development. Research and development expenses consist primarily of salaries, benefits, stock-based compensation, and bonuses for employees and contractors engaged in the design, development, maintenance, and testing of our productsproducts, platforms and platforms,services, including quality and clinical testing.

Interest Income (Expense), Net. Interest income (expense), net consists of interest incurred on our outstanding borrowings, debt extinguishment costs, gain on interest for forgiveness of interest accrued related to an arrangement with a significant vendor,borrowings and amortization of the associated deferreddebt financing costs. Interest income consists of interest earned on our money market account.funds and other cash and cash equivalents.

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

We have included a certain non-GAAP financial measure in this Annual Report, adjusted EBITDA. Adjusted EBITDA is defined as net loss adjusted for income tax provision, interest expense, net, depreciation and amortization, impairment of intangible assets, common stock warrant liability adjustment, stock-based compensation, transaction costs, charges related to certain legal matters, net of insurance loss recovery related to certain legal matters, and restructuring costs. We use suchthis non-GAAP financial measuresmeasure as an internal measuresmeasure of business operating performance and as performance measures for benchmarking against our peers and competitors. We believe our presentation of adjusted EBITDA provides a meaningful perspective of the underlying operating performance of our current business and enables investors to better understand and evaluate our historical and prospective operating performance. We believe that this non-GAAP financial measure is an important supplemental measure of operating performance because it excludes items that vary from period to period without correlation to our core operating performance and highlight trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures. Due to the nature of the items being excluded, such items do not reflect future gains, losses, expenses or benefits and are not indicative of our future operating performance. We believe investors, analysts and other interested parties use adjusted EBITDA in evaluating issuers, and the presentation of these measures facilitates a comparative assessment of our operating performance in addition to our performance based on GAAP results.

OurAdjusted non-GAAP financial measuresEBITDA should not be considered as an alternative to net loss as a measure of financial performance or any other performance measure derived in accordance with GAAP,GAAP and should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

Adjusted EBITDA is not a recognized termsterm under GAAP, and our presentation of this non-GAAP measuresmeasure does not replace the presentation of our financial results in accordance with GAAP. Because all companies do not use adjusted EBITDA (and similarly titled financial measures) in the same way, those measures as used by other companies may not be consistent with the way we calculate such measures. The non-GAAP financial measure included in this report should not be construed as a substitute for or better indicators of the Company’s performance than the most directly comparable GAAP financial measures. See the reconciliation tablestable below for additional information regarding the non-GAAP financial measure included herein (in thousands):

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Report and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K and Form 10-K/A. Certain statements we make under the following discussion and analysis constitute “forward-looking statements” under the Reform Act. See “Cautionary Note Regarding Forward-Looking Statements” in this Report. You should consider our forward-looking statements in light of the risks discussed in our unaudited condensed consolidated financial statements, related notes and other financial information appearing elsewhere in this Report, the section entitled “Risk Factors” in our Form 10-K, Form 10-K/A and this Report, and our other filings with the SEC. Note that amounts included in the following discussion and analysis are presented in thousands and may not sum due to rounding. Also note that reported amounts reflect the revisions discussed in Note 11 to the consolidated financial statements as applicable.

Cost of revenue consists of product costs, including contract manufacturing, shipping and handling, depreciation and amortization relating to tooling and manufacturing equipment and capitalized internally developed software, warranty replacement, fulfillment costs, warehousing, hosting and platform costs, and reserves for excess and obsolete inventory. Cost of revenue associated with Owlet360 mainly consists of app store distribution fees.fees and amortization relating to capitalized internally developed software.

General and Administrative. General and administrative expenses consist primarily of salaries, benefits, stock-based compensation, and bonuses for finance and accounting, legal, human resources, operations, quality and administrative executives and employees; third-party legal, accounting, customer service, software, and other professional services; corporate travel and entertainment; depreciation and amortization of property and equipment, asset impairment charges, litigation settlement costs, insurance loss recovery, and facilities rent.

Research and Development. Research and development expenses consist primarily of salaries, benefits, stock-based compensation, and bonuses for employees and contractors engaged in the design, development, maintenance, and testing of our products, platforms and services, including quality and clinical testing. In addition, research and development expenses that qualify as internal-use software development costs are capitalized, reducing the expenses software development costs incurred in the period, and the amount capitalized may fluctuate significantly from period to period.

Other Income (Expense), Net. Other income (expense), net includes our net gain (loss) on foreign exchange transactionstransactions, net gain (loss) on insurance claim proceeds, and transactioninterest costs.income on tariff refunds.

The decreaseincrease in hardware revenue for the three months ended June 30, 2026 was primarily due to approximately $3,100$6,800 impact fromreflecting aan largeincrease retailin partnerconsumer tightening weeks of supply on handdemand as well as timing differences of load-inscompared to retailers,the prior year, partially offset by approximately $1,800$1,300 decreaseincrease in retail discounts due to the timing of promotion load-in dates, and approximatelyreturns $400associated increasedwith direct-to-consumerhigher demand.sales volume.

The increase in subscription revenue for the three months ended June 30, 2026 was due to an increase in subscribers for our Owlet360 service and higher average revenue per user.

The decrease in hardware cost of revenue for the three months ended June 30, 2026 was primarily due to the decreaseimpact of tariff refunds, partially offset by an increase in product sales. The decreaseincrease in hardware gross margin was primarily due to the impact of tariffs,tariff partially offset byrefunds, favorable product mixmix, and lowerfavorable directfixed productcost and fulfillment costs.absorption.

The increase in subscription cost of revenue for the three months ended June 30, 2026 was primarily due to increased subscriptions to our Owlet360 service. The increasedecrease in subscription gross margin is attributable to efficiencieshigher gainedapp duestore todistribution a larger subscription base.fees.

The increase for the three months ended June 30, 2026 was driven primarily by approximately $300 in higher marketing personnel and consulting costs, $200$1,500 in expanded retail marketing spend,spend due to a shift in timing of large promotional event from the third quarter to the second quarter 2025, and approximately $100 in increased stock-based compensation, partially offset by $100 in miscellaneous net decreases.compensation.

The increase for the three months ended June 30, 2026 was driven primarily by approximately $800$1,100 in higher personnel costs, $400approximately $300 in stock-based compensation, and $200approximately $100 in regulatoryrestructuring testingcosts andrelated geographicthe expansionpreviously-announced costs.reprioritization of core geographies. These increases were partially offset primarily by approximately $300$700 decrease due to decreased regulatory testing and geographic expansion costs and an increase in increasedcapitalized capitalizedinternally developed software costs.

The decrease in interest expense for the three and six months ended June 30, 2026 was driven primarily by a decrease in loan commitment amortization related to ourthe currentWTI term loan facility due to the last loan commitment period ending in November 2025.

Fluctuations in our common stock warrant liability adjustment resultedfor fromthe three and six months ended June 30, 2026 represents a decreasesignificantly inreduced ourmagnitude commonof stock price, and the related decrease in theperiod-over-period fair value remeasurement of liability-classified common stock warrants.warrants as a result of the October 2025 warrant exchange.

Changes in other income (expense) for the three and six months ended June 30, 2026 were driven primarily by a gaingains from insurance proceeds.proceeds and interest income related to tariff refunds.

Adjusted EBITDA is defined as net income (loss) adjusted for income tax provision, interest expense, net, depreciation and amortization, impairment of intangible assets, common stock warrant liability adjustment, stock-based compensation, and charges related to certain legal matters.matters, restructuring costs, and loss on debt extinguishment.

We fund our operations primarily with proceeds from issuances of our equity securities, borrowings under our loan facilities,facility, and sales of our products and services. As of MarchJune 31,30, 2026, we had cash and cash equivalents of $35,459,$30,948, and additional availability of $3,944$7,531 on our line of credit. We believe our existing cash and cash equivalent balances, cash flows from operations, and committedborrowing capacity under our asset-based revolving credit linesagreement will be sufficient to meet our long-term working capital and capital expenditure needs for at least the next 12 months. The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis and accordingly, do not include any adjustments relating to the recoverability and classification of asset carrying amounts, or the amount and classification of liabilities that might result should we be unable to continue as a going concern. There can be no assurance that we will generate sufficient future cash flows from operations due to potential factors, including but not limited to inflation, recession, or reduced demand for our products. If revenue decreases from current levels, we may be unable to further reduce costs, or such reductions may limit our ability to pursue strategic initiatives and grow revenue in the future. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of spending on research and development efforts and other business initiatives, our planned sales and marketing activities, the timing of new product introductions, market acceptance of our products, and overall economic conditions. To the extent that current and anticipated sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in increased dilution to our stockholders. If we were to incur additional debt financing, it would result in increased debt service obligations and the instruments governing such debt could require additional operating and financing covenants that would restrict our operations.

In 2025, wethe Company renewed a number of ourits insurance policies and entered into several new short-term commercial premium finance agreements with premium finance companies totaling $739 to be paid within one year, accruing interest at a weighted average rate of 8.0%.year. As of MarchJune 31,30, 2026, thethere was no remaining principal balance onoutstanding therelated combinedto financedthese insurance premiums was $224.agreements.

For the threesix months ended MarchJune 31,30, 2026, net cash used in operating activities was $5,049$5,141 as compared to net cash used in operating activities of $5,925$8,170 in the prior year. The positive change in operating cash flows was primarily driven by changesa significant improvement in net loss that was largely offset by an unfavorable swing in the non-cash fair value adjustment on our common stock warrant liability. The improvement also reflected positive impacts from a $2,209 loss on debt extinguishment related to the June 2026 debt refinancing and $3,589 higher stock-based compensation expense, partially offset by a net unfavorable change in operating assets and liabilities, particularlyprimarily relateddue to a smaller source of cash from accounts receivable, inventorypayable and accountsaccrued payable, as well as smaller common stock warrant liability adjustment compared to the prior year. These positive changes were partially offset by the $3,336 net loss recognized for the three months ended March 31, 2026, compared to the $3,025 net income recognized in the comparative prior year period.expenses.

For both the threesix months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, we used $415$1,356 and $110$199 respectively, to invest in various projects, primarily for the development and enhancement of our new subscription app.

For the threesix months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, net cash provided by financing activities was $5,462$2,034 and $2,014,$9,865, respectively. The increasedecrease is primarily driven by higher net proceeds from short-term borrowings in the currentrepayment periodof comparedlong-term borrowings, related to the priorJune period.2026 debt refinancing.

The One Big Beautiful Bill Act of 2025 (the “OBBBA”) was signed into law on July 4, 2025. The OBBBA makes changes to the U.S. corporate income tax, including reinstating the option to claim 100% accelerated depreciation deductions on qualified property, with retroactive application beginning January 20, 2025, and immediate expensing of domestic research and development costs, with retroactive application beginning January 1, 2025. The Company determined that the OBBBA did not have a material impact on the unaudited condensed consolidated financial statements for the three and six months ended MarchJune 31,30, 2026. The Act includes multiple effective dates, with certain provisions effective in 2026 and 2027. The Company will continue to evaluate the impact of these provisions on our 2026 and subsequent financial statements.