XML 27 R14.htm IDEA: XBRL DOCUMENT v3.23.1
Leases
 12 Months Ended
Dec. 31, 2022
Leases [Abstract]  
Leases 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 assets and lease liabilities for leases with an initial term of 12 months or less from the balance sheet date, 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 primarily consist of leases for
corporate offices and have remaining lease terms of approximately 2 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 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 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 year ended December 31, 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 December 31, 2022 consolidated balance sheet was as follows:

December 31, 2022
Right of use assets, net$2,260
Accrued and other expenses$2,105
Noncurrent lease liabilities1,162
Total lease liabilities, net$3,267
Weighted average remaining lease term1.7 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 $1,492 for the year ended December 31, 2022, which included immaterial amounts related to short-term and variable lease costs.

Supplemental cash flow information related to leases was as follows:
Year Ended December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities$1,231
Right of use assets obtained in exchange for new operating lease liabilities$530

The following table shows the future maturities of lease liabilities for leases in effect as of December 31, 2022:
Years Ending December 31,Lease Liabilities
2023$2,235
20241,170
202518
Total lease payments3,423
Less: imputed interest(156)
Total$3,267

As of December 31, 2022, the Company had three sublease arrangements which are noncancellable and have remaining lease terms of 1.4 to 1.6 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 December 31, 2022:

Years Ending December 31,Sublease Receipts
2023$1,178
2024679
Total expected sublease receipts$1,857

The Company recognized sublease income of $975 and $277 for the years ended December 31, 2022 and 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 $1,985 for the year ended December 31, 2021.
Leases 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 assets and lease liabilities for leases with an initial term of 12 months or less from the balance sheet date, 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 primarily consist of leases for
corporate offices and have remaining lease terms of approximately 2 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 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 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 year ended December 31, 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 December 31, 2022 consolidated balance sheet was as follows:

December 31, 2022
Right of use assets, net$2,260
Accrued and other expenses$2,105
Noncurrent lease liabilities1,162
Total lease liabilities, net$3,267
Weighted average remaining lease term1.7 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 $1,492 for the year ended December 31, 2022, which included immaterial amounts related to short-term and variable lease costs.

Supplemental cash flow information related to leases was as follows:
Year Ended December 31, 2022
Cash paid for amounts included in the measurement of lease liabilities$1,231
Right of use assets obtained in exchange for new operating lease liabilities$530

The following table shows the future maturities of lease liabilities for leases in effect as of December 31, 2022:
Years Ending December 31,Lease Liabilities
2023$2,235
20241,170
202518
Total lease payments3,423
Less: imputed interest(156)
Total$3,267

As of December 31, 2022, the Company had three sublease arrangements which are noncancellable and have remaining lease terms of 1.4 to 1.6 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 December 31, 2022:

Years Ending December 31,Sublease Receipts
2023$1,178
2024679
Total expected sublease receipts$1,857

The Company recognized sublease income of $975 and $277 for the years ended December 31, 2022 and 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 $1,985 for the year ended December 31, 2021.