Owlet (OWLT) risk factors, FY2024 10-K

Risks Related to Our Business and Operations

1. 01We have a limited operating history
2. 02We 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
3. 03We have experienced fluctuations in the growth of our business and anticipate this will continue. If we fail to manage our growth effectively, our business could be materially and adversely affected
4. 04We will likely need to raise additional capital in the future in order to execute our strategic plan, which may not be available on terms acceptable to us, or at all
5. 05Our debt arrangements contain certain covenants and restrictions that may limit our flexibility in operating our business and any failure to satisfy those covenants and restrictions could adversely affect our business and financial condition
6. 06Our products rely on mobile applications to function and we rely on Apple’s App Store and the Google Play Store for distribution of our mobile applications
7. 07A substantial portion of our sales comes through a limited number of retailers
8. 08Any disruption of service at our third-party data and call centers or other cloud infrastructure services could interrupt or delay our ability to deliver our services to our customers
9. 09We rely on the experience and expertise of our senior management team, other key officers, our engineers, marketing and field sales team and other highly skilled personnel
10. 10Some of our products and services are in development or have been recently introduced into the market and may not achieve market acceptance, which could limit our growth and adversely affect our business, financial condition and results of operations
11. 11If we are unable to successfully develop and effectively manage the introduction of new products and services, our business may be adversely affected
12. 12We have in the past experienced challenges managing the inventory of our products, which has led and may in the future lead to increased shipping costs for air freight in order to fulfill customer orders in a timely manner, which has affected our gross margin and could impair the strength of our brand
13. 13We are involved, and may become involved in the future, in disputes and other legal or regulatory proceedings that, if adversely decided or settled, could materially and adversely affect our business, financial condition and results of operations
14. 14Increases in tariffs, trade restrictions or taxes on our products could have an adverse impact on our operations
15. 15Our distributors or retail customers may experience financial difficulties, and we may not be able to collect our receivables, which could materially or adversely affect our profitability, cash flows, working capital and business operations
16. 16unable to collect amounts owed to us and could even be required to repay certain amounts paid to us prior to the bankruptcy filing. The occurrence of any of these events would have an adverse effect on our business, cash flows, financial condition and results of operations
17. 17We 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
18. 18Adapting our production capacities to evolving patterns of demand is expensive, time-consuming and subject to significant uncertainties. We may not be able to adequately predict consumer trends and may be unable to adjust our production in a timely manner
19. 19The size and expected growth of our addressable market has not been established with precision and may be smaller than we estimate
20. 20We spend significant amounts on advertising and other marketing campaigns to acquire new customers, which may not be successful or cost effective
21. 21If we are unable to continue to drive consumers to our website, it could adversely affect our revenue
22. 22Our success depends substantially on our reputation and brand
23. 23Increased use of social media could create or amplify the effects of negative publicity and adversely affect sales and operating results
24. 24Defects or quality issues associated with our products could adversely affect the results of our operations
25. 25Our products must be manufactured, and services provided, in accordance with federal, state and foreign regulations, and we or any of our suppliers could be forced to recall products or terminate production or services if we fail to comply with these regulations
26. 26In addition, as the provider of products with a subscription-based element, a variety of laws and regulations govern the ability of users to cancel subscriptions and auto-payment renewals. California’s automatic renewal law in particular has been the basis for both consumer class actions and government enforcement
27. 27Operations in international markets expose us to additional business, political, regulatory, operational, financial and economic risks
28. 28Our business and operations may suffer in the event of IT system failures, cyberattacks or deficiencies in our cybersecurity
29. 29We are subject to a number of risks related to the credit extended by our manufacturing providers
30. 30Changes in tax laws may impact our future financial position and results of operations
31. 31In addition, as we expand our business internationally, the application and implementation of existing, new or future international laws regarding indirect taxes (such as a Value Added Tax) could materially and adversely affect our business, financial condition and results of operations
32. 32Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited
33. 33We are subject to a number of risks related to the credit card and debit card payments we accept
34. 34The increasing focus on environmental sustainability and social initiatives could increase our costs, harm our reputation and adversely impact our financial results
35. 35We are subject to a series of risks regarding climate change

Risks Related to Regulation of Our Industry and Products

1. 36marketing and sales of Owlet Smart Sock in the UK, we may have to cease support of the product in the UK and could be subject to enforcement action
2. 37We rely on third parties to manufacture our products. Failure of those third parties to provide us with sufficient quantities of our products, in compliance with applicable regulatory requirements, or to do so at acceptable quality levels or prices could adversely impact our business
3. 38If any of these items were to occur, it would harm our reputation and adversely affect our business, financial condition and results of operations
4. 39Regulatory reforms may impact our ability to develop and commercialize our products and services and technologies
5. 40Promotion of any medical devices using claims that are off-label, unsubstantiated, false or misleading could subject us to substantial penalties and enforcement action
6. 41Failure to comply with post-marketing regulatory requirements could subject us to enforcement actions, including substantial penalties, and might require us to recall or withdraw a product from the market
7. 42Any of these sanctions could result in higher than anticipated costs or lower than anticipated sales and have a material adverse effect on our reputation, business, financial condition and results of operations
8. 43Changes in and actual or perceived failures to comply with U.S. and foreign privacy and data protection laws, regulations and standards may adversely affect our business, operations and financial performance
9. 44concerns, even if unfounded, could result in additional cost and liability to us, regulatory investigations or enforcement actions, litigation (including class actions), damage our reputation, and adversely affect our business and results of operations
10. 45With respect to Dream Sock and Owlet Cam, we utilize a direct-to-consumer model where consumers purchase our products directly from us or one of our retailers. Currently, these products are not covered or reimbursed by any third-party payor
11. 46Given the evolving nature of the healthcare industry and on-going healthcare cost reforms, the likelihood of success of our new commercial strategy is, and will continue to be, subject to changes in the level of third-party payor coverage and reimbursement for these products and services
12. 47We face the risk of product liability claims and the amount of insurance coverage we hold now or in the future may not be adequate to cover all liabilities we might incur
13. 48We may incur environmental and personal injury liabilities related to certain hazardous materials used in our operations
14. 49products, add greater testing lead-times for product introductions or have other similar effects. Moreover, certain laws, including regarding the remediation of hazardous materials, can impose liability regardless of fault or legality of actions, including the classification of materials at the time of disposal
15. 50Changing laws and increasingly complex corporate governance and public disclosure requirements could have an adverse effect on our business and operating results
16. 51Changes in the regulation of the internet could adversely affect our business

Risks Related to Our Intellectual Property

1. 52If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest and our competitive position may be harmed
2. 53We rely on third-party technology solutions, including software and software services, to support our IT infrastructure and in our products and services
3. 54The laws of foreign countries may not adequately protect our intellectual property rights
4. 55If third parties claim that we infringe their intellectual property rights, we may incur liabilities and costs and may have to redesign or discontinue selling certain products and services
5. 56We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful
6. 57Our proprietary software may not operate properly, which could damage our reputation, give rise to claims against us, or divert application of our resources from other purposes, any of which could harm our business and operating results

Risks Related to Our Common Stock and Warrants

1. 58The price of our common stock and warrants may be volatile
2. 59Our failure to meet the NYSE’s continued listing requirements could result in a delisting of our common stock
3. 60If securities or industry analysts issue an adverse or misleading opinion regarding our common stock or warrants, the price and trading volume of our common stock and warrants could decline
4. 61Concentration of ownership among our existing directors, executive officers and principal stockholders may prevent new investors from influencing significant corporate decisions
5. 62We may acquire other businesses or form other joint ventures or make investments in other companies or technologies that could negatively affect our operating results, dilute our stockholders’ ownership, increase our debt or cause us to incur significant expense
6. 63favorable to us, or at all. If the price of our common stock is low or volatile, we may not be able to acquire other companies or fund a joint venture project using our stock as consideration
7. 64Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain
8. 65The redemption of our outstanding Convertible Preferred Stock or exercise of the WTI Redemption Option may require us to make a significant cash payment
9. 66Our corporate documents and Delaware law contain provisions that could discourage, delay or prevent a change in control of our company, prevent attempts to replace or remove current management and reduce the market price of our common stock and warrants
10. 67We are an “emerging growth company” and a “smaller reporting company" and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies may make our common stock and warrants less attractive to investors
11. 68Our bylaws provide that the state or federal courts located within the State of Delaware are the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees
12. 69You may only be able to exercise our public warrants on a “cashless basis” under certain circumstances, and if you do so, you will receive fewer shares of common stock from such exercise than if you were to exercise such warrants for cash
13. 70may be initiated by holders of the warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with us