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Debt and Other Financing Arrangements
 9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
Debt and Other Financing Arrangements Debt and Other Financing Arrangements
The Company’s indebtedness consisted of the following (in thousands):
September 30, 2024December 31, 2023
Term note payable to SVB$— $5,000 
Term loan facility payable to WTI, net4,585 — 
Line of credit9,875 9,250 
Financed insurance premium466944
Total debt14,926 15,194 
Less: current portion(10,341)(15,194)
Total long-term debt, net$4,585 $— 

SVB Revolver and Term Loan

On November 23, 2022, the Company entered into the Third Amended and Restated Loan and Security Agreement (as amended, the “LSA”) with SVB. The LSA provided for a $10,000 revolving line of credit (the “SVB Revolver”) and for a $8,500 term loan, which amortized with equal monthly installments of $500 that would have matured on October 1, 2024.

On September 11, 2024, the Company signed the refinancing of the LSA with SVB and used existing cash to repay and extinguish all borrowings outstanding under the line of credit and term loan agreements with SVB. In addition to normal principal and interest, the Company paid $761 of termination fees to extinguish the loan. Of the total termination fees recorded, during the three months ended September 30, 2024, $343 was recorded as interest expense, net on the condensed consolidated statements of operations; and $11 was recorded within general and administrative expense on the condensed consolidated statements of operations. The remaining $407 was accrued as interest expense, net, in prior periods.

WTI Loan Facility

On September 11, 2024 (the “Effective Date”), the Company entered into a Loan Facility Agreement (the “Loan Facility Agreement”) with WTI Fund X, Inc. and WTI Fund XI, Inc. (collectively “WTI” for a term loan facility of up to $15,000 (the “WTI Loan Facility”).

The WTI Loan Facility consists of two tranches. The first tranche of $10,000 was available at closing and through September 30, 2024, with $2,500 of the first tranche availability extendable until December 31, 2024 (the “First Tranche Commitment”). The second tranche of $5,000 is available through August 15, 2025 (the ‘Second Tranche Commitment,” or together with the First Tranche Commitment, the “Loan Commitments”) upon achievement of (a) at least $48,600 in revenue for the period commencing October 1, 2024 and ending June 30, 2025 (the “Second Tranche Condition Period”), (b) total cash burn during the Second Tranche Condition Period not to exceed $600 for such period, (c) receipt by the Company of at least $6,000 of net proceeds from an equity financing during a period commencing on the closing date and ending on the second tranche borrowing date, and (d) receipt by WTI of the Company’s then-current, board-approved operating and financing plan to WTI's satisfaction, as well as compliance with certain reporting conditions.

The Company initiated its first drawdown under the WTI Loan Facility of $7,500 (the “Initial Loan”) shortly after closing. The remaining $2,500 of the First Tranche Commitment is available until December 31, 2024. Once repaid, the Company cannot reborrow from the WTI Loan Facility.

Interest on the outstanding principal amounts of any borrowing under the WTI Loan Facility accrues at a rate per annum equal to the sum of the prime rate plus 3.5%, with a floor of 12.0%. The interest rate on the outstanding principal amounts of any borrowing under the WTI Loan Facility for the three months ended September 30, 2024 was 12.0%. Commencing on November 1, 2025 through maturity on January 1, 2028, the Company is required to make monthly interest and principal payments. Loans under the WTI Loan Facility also accrue 2.5% in payment-in-kind interest (“PIK Interest”) compounded monthly, and PIK Interest payments will be due and payable upon maturity of the loans. Accrued coupon interest and accrued PIK interest are recorded within accrued and other expenses and within long-term debt, net respectively on the condensed consolidated balance sheet. Accrued PIK interest was immaterial for the three months ended September 30, 2024.

The Company has the option to prepay the outstanding loans issued under the WTI Loan Facility in whole at any time by repaying all outstanding principal and accrued interest, as well as all scheduled unpaid interest on the loan, including PIK Interest, as if the loan continued to accrue interest through its stated maturity. Provided if the Company’s fully diluted market capitalization of the Company’s Class A common stock (“common stock”) is greater than or equal to $250,000 for 10 consecutive Trading Days, then so
long as such prepayment is made within 60 days thereafter, the redemption price will be discounted by 30% of the total amount of all scheduled but unpaid interest (but excluding any PIK Interest, which will not be discounted).

The WTI Loan Facility contains certain reporting and operational covenants that must be met by the Company to borrow funds under the Loan Commitments and not cause an event of default. Upon the occurrence of an event of default, WTI could elect to force redemption of the outstanding balances under the WTI Loan Facility, requiring the Company to pay all outstanding principal and accrued interest, as well as all scheduled unpaid interest on the loan, including PIK interest. Upon the occurrence of an event of default, the Company will also be required to pay default interest on any overdue balances at a rate of 5.0%. The WTI Loan Facility and any loans and obligations issued thereunder are collateralized by substantially all of the Company’s assets and are guaranteed by Owlet, Inc. As of September 30, 2024, the Company was in compliance with all financial covenants associated with the WTI Loan Facility.

As partial consideration for the availability and funding of the WTI Loan Facility, the Company and WTI Fund X, LLC (“Fund X”) and WTI Fund XI, LLC (“Fund XI”, and together with Fund X, the “WTI Funds”) entered into a Stock Issuance Agreement (the “WTI Stock Issuance Agreement”), dated as of the Effective Date. Pursuant to the WTI Stock Issuance Agreement, the Company issued to the WTI Funds an aggregate of 750,000 shares of redeemable common stock on the Effective Date, of which 187,500 are subject to forfeiture in the event that the Company does not draw on any portion of the remaining outstanding Loan Commitment. To the extent the Company does exercise its option under the Loan Commitments to issue additional debt, a number of forfeitable shares will 'vest' and no longer be subject to forfeiture based on the pro rata portion of the outstanding Loan Commitments drawn against.

The shares issued to WTI pursuant to the WTI Stock Issuance Agreement contain an embedded redemption option (the “Redemption Option”) such that WTI may elect to force the Company to redeem the shares that are no longer subject to forfeiture for a price of $8.40 per share. The Redemption Option may be exercised in whole or in part, at any time, from time to time, during the period commencing on the first trading day following the fifth anniversary of the Effective Date and continuing through the date which is 10 years after the Effective Date, subject to certain acceleration provisions set forth in the WTI Stock Issuance Agreement. Because the shares are redeemable at the option of the WTI Funds, the shares are recorded in mezzanine equity on the condensed consolidated balance sheet. The redeemable common shares were initially recorded at their fair value of $7.66 per share, which was an aggregate value of $4,308. The value of the redeemable common shares was determined using a combination of the value of the Company's stock on the date of issuance and the theoretic value of a stand-alone put option valued using a Black-Scholes put option model discounted by a present value factor that considers the credit spread between an estimated Company specific discount rate and the risk-free rate of return. Because the shares are required to be redeemed at the option of WTI, based solely on the passage of time, and provided WTI did not elect to otherwise sell or transfer the shares beforehand, the carrying value of the shares will accrete to their redemption value of $8.40 per share from the issuance date through September 11, 2029, the date the Redemption Option first becomes exercisable.

The Company allocated the lender fees (including the fair value of the vested shares) and third-party debt issuance costs between the Initial Loan and the remaining, undrawn Loan Commitments. The costs allocated to the Initial Loan are accounted for as a discount and will be amortized across the term of the Initial Loan using the effective interest method. The costs allocated to the remaining, undrawn Loan Commitments are accounted for as loan commitment assets, which are being amortized to interest expense using the straight-line method over the commitment periods, due to uncertainty about the Company's intent to access the Loan Commitment. The unamortized portion of the loan commitment assets of $1,385 as of September 30, 2024 are recorded within Other assets on the condensed consolidated balance sheet.

As of September 30, 2024, details of the WTI Loan Facility were as follows (in thousands):

Amount
Principal outstanding
7,500 
Unamortized debt issuance costs
(2,915)
Net carrying value
$4,585 

The Company recognized $43 of interest expense related to the amortization of debt issuance costs of the WTI Loan Facility and $136 of interest expense related to the amortization of the loan commitment assets during the three and nine months ended September 30, 2024.

ABL Line of Credit

On September 11, 2024 (the “Effective Date”), the Company entered into a Credit and Security Agreement (the “Credit Agreement”) with the financial institutions party thereto from time to time as lenders (collectively the “Lenders”) and ABL OPCO LLC, a Delaware limited liability company, in its capacity as administrative agent for the Lenders.
The Credit Agreement provides for an asset-based revolving credit facility (the “ABL Line of Credit”) in a maximum principal amount of up to $15,000, which amount shall increase to $20,000 on September 11, 2025 (the “Revolving Commitment”). The ABL Line of Credit is collateralized by substantially all of the Company's assets. Loans and other obligations under the Credit Agreement bear interest at a rate per annum equal to the 1-month Secured Overnight Financing Rate (subject to a floor of 3.50%) plus a margin, which varies between 7.50% and 8.50% depending on the Company’s earnings before interest, taxes, depreciation and amortization (“EBITDA”); provided that the interest rate shall not exceed the maximum rate permitted under applicable law.

The ABL Line of Credit matures on September 10, 2027 (the “Maturity Date”). If for any reason the Credit Agreement is terminated or all outstanding loans and other obligations are paid in full and the ABL Line of Credit is terminated before the Maturity Date, the Company will be obligated to pay a prepayment fee equal to a percentage of the then-current Revolving Commitment, which percentage decreases on certain anniversary of the closing date.

The Credit Agreement contains representations, warranties, covenants, and events of default customary for agreements of this type. The Company’s obligations under the Credit Agreement are: (i) fully and unconditionally guaranteed by Owlet, Inc.; and (ii) secured by a security interest in substantially all personal property assets of the Company, including the Owlet Inc.'s pledge of the outstanding capital stock of the Company. Among these financial covenants is a covenant requiring minimum amounts of trailing-twelve-months EBITDA. As of September 30, 2024, the Company was in compliance with all financial covenants associated with the Credit Agreement.

Debt issuance costs related to the Credit Agreement of $648 were recorded as a loan commitment asset within other assets on the condensed consolidated balance sheet. Issuance costs are amortized straight-line over the term of the Credit Agreement and recorded within interest income (expense), net on the condensed consolidated statement of operations.

On September 30, 2024, there was $9,875 of outstanding borrowings, which is recorded as a current liability on the condensed consolidated balance sheet based on the Company's intent and ability to repay the outstanding borrowings in the near term. The borrowing base availability under the Credit Agreement was $673 as of September 30, 2024. The outstanding borrowings as of September 30, 2024 were repaid to the lender in October 2024.

Financed Insurance Premiums

In July 2024, the Company renewed its corporate directors & officers and employment liability policies and entered into several new short-term commercial premium finance agreements with First Insurance Funding totaling $594 to be paid within one year, accruing interest at a weighted average rate of 8.6%. As of September 30, 2024, the remaining principal balance on the combined financed insurance premiums was $466.

Future Aggregate Maturities

As of September 30, 2024, future aggregate maturities of the WTI Loan Facility and Financed Insurance Premium payables were as follows (in thousands):

Years Ending December 31,Amount
2024197 
20251,102 
Thereafter6,667 
Total$7,966