What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-29 compared with 2023-03-23 · 389 added, 355 removed, 982 unchanged (43% of the section changed)

1 unchanged sentence

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm ( BDO USA, LLP ;

Report of Independent Registered Public Accounting Firms (Deloitte and Touche LLP;

San Francisco, CA;

PCAOB ID # 34 and BDO USA, LLP.;

San Francisco, CA;

PCAOB ID # 243 )

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Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Life360, Inc.

(the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes to the consolidated financial statements.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022 , in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheet of Life360, Inc.

(the “Company”) as of December 31, 2022, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2022, and the related notes to the consolidated financial statements.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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/s/ BDO USA, LLP

We have served as the Company’s auditor since 2018.

We served as the Company's auditor from 2018 to 2023.

San Francisco, California

March 23, 2023

Report of Independent Registered Public Accounting Firm

To the stockholders and the Board of Directors of Life360, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Life360, Inc.

and subsidiaries (the "Company") as of December 31, 2023, the related consolidated statements of operations and comprehensive loss, stockholders' equity, and cash flows, for the year ended December 31, 2023 and the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 29, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Subscription revenue — Refer to Note 2 to the financial statements

Critical Audit Matter Description

The Company derives a significant amount of its revenue from subscription sales.

Subscriptions are considered single combined performance obligations and the subscription fees are fixed and recognized on a straight-line basis over the non-cancellable contractual term of the agreement.

During the year ended December 31, 2023, the Company recognized subscription revenue of $220.8 million.

We identified subscription revenue as a critical audit matter given the significant volume of transactions.

This required an increased extent of audit effort in performing procedures and evaluating audit evidence relating to the accuracy and occurrence of subscription revenue.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company's subscription revenue included the following, among others:

• We tested the effectiveness of controls relating to the subscription revenue recognition process, including controls over the accuracy and occurrence of subscription revenue recognized.

• We tested the internal listing of subscriptions sold used by the Company to calculate subscription revenue by comparing the subscriptions sold to third-party information and cash receipts.

• We recalculated the amount of subscription revenue recorded using the internal listing of subscriptions sold.

/s/ Deloitte & Touche LLP

San Francisco, California

February 29, 2024

We have served as the Company's auditor since 2023.

Life360, Inc.

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Prepaid expenses and other assets, noncurrent 6,848 7,134

Right-of-use-asset 802 1,627

Operating lease right-of-use asset 1,014 802

Intangible assets, net 45,441 52,699

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Escrow liability — 13,274

Contingent consideration — 9,500

Convertible notes, current ($ 3,449 and $ 3,513 measured at fair value, respectively)

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Accumulated deficit ( 285,143 ) ( 256,972 )

Accumulated other comprehensive income ( 6 ) —

Accumulated other comprehensive income (loss) 9 ( 6 )

Total stockholders’ equity 247,064 244,538

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Hardware revenue 58,178 47,884 952

Other revenue (including related party revenue of $ 0 , $ 0 and $ 195 , respectively)

Other revenue

25,546 27,134 25,140

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Loss before income taxes ( 27,555 ) ( 91,317 ) ( 33,684 )

Provision (benefit) for income taxes 312 ( 127 ) —

Provision for (benefit from) income taxes 616 312 ( 127 )

Net loss ( 28,171 ) ( 91,629 ) ( 33,557 )

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Exercise of stock options 1,056,352 1 3,542 — — — 3,543

Repurchase of common stock ( 4,554 ) — ( 1 ) — — — ( 1 )

Issuance of common stock for services rendered 1,250 — — — — — —

Vesting of restricted stock units 302,607 — — — — — —

Taxes paid related to net settlement of equity awards — — ( 1,150 ) — — — ( 1,150 )

Stock-based compensation expense — — 8,091 — — — 8,091

Interest accrued relating to notes due from affiliates — — — ( 96 ) — — ( 96 )

Net loss — — — — ( 16,334 ) — ( 16,334 )

Balance at December 31, 2020 50,035,408 $ 50 $ 196,852 $ ( 927 ) $ ( 131,786 ) $ — $ 64,189

Exercise of stock options 1,056,352 1 3,542 — — — 3,543

Exercise of warrants 37,410 — — — — — —

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Balance at December 31, 2022 65,239,843 $ 67 $ 501,763 $ ( 314 ) $ ( 256,972 ) $ ( 6 ) $ 244,538

Exercise of stock options 935,007 $ 1 $ 5,810 $ — $ — $ — $ 5,811

Life360, Inc.

Vesting of restricted stock units 1,980,980 2 ( 2 ) — — — —

Taxes paid related to net settlement of equity awards — — ( 14,033 ) — — — ( 14,033 )

Repayment of notes due from affiliate — — 78 274 — — 352

Stock-based compensation expense — — 38,512 — — — 38,512

Interest accrued relating to notes due from affiliates — — — 40 — — 40

Change in foreign currency translation adjustment — — — — — 15 15

Net loss — — — — ( 28,171 ) — ( 28,171 )

Balance at December 31, 2023 68,155,830 $ 70 $ 532,128 $ — $ ( 285,143 ) $ 9 $ 247,064

Life360, Inc.

Consolidated Statements of Cash Flows

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Amortization of costs capitalized to obtain contracts 2,125 2,928 4,014

Amortization of operating lease right-of-use asset 842 — —

Stock-based compensation expense 38,512 34,680 11,754

Compensation expense in connection with revesting notes 73 ( 87 ) 184

Non-cash interest (income) expense, net 474 166 ( 23 )

Non-cash interest expense, net 462 474 166

Convertible notes fair value adjustment 684 ( 1,786 ) 511

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(Gain)/loss on revaluation of contingent consideration — ( 5,279 ) 3,600

Non-cash revenue from affiliate ( 1,504 ) — —

Non-cash revenue from investment ( 1,608 ) ( 1,504 ) —

Inventory write-off 916 — —

Adjustment in connection with membership benefit ( 2,172 ) — —

Changes in operating assets and liabilities, net of acquisitions:

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Accounts payable ( 7,895 ) ( 12,654 ) 559

Accrued expenses and other liabilities ( 7,722 ) 4,720 438

Accrued expenses and other current liabilities 2,193 ( 7,722 ) 4,720

Deferred revenue 4,620 4,660 1,671

Other liabilities, noncurrent ( 498 ) ( 303 ) ( 1,180 )

Net cash used in operating activities ( 57,055 ) ( 12,153 ) ( 7,250 )

Net cash provided by (used in) operating activities 7,524 ( 57,055 ) ( 12,153 )

Cash Flows from Investing Activities:

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Internal use software ( 1,715 ) ( 701 ) —

Purchase of capital assets — ( 81 ) ( 653 )

Purchase of property and equipment ( 506 ) — ( 81 )

Cash advance on convertible note receivable — — ( 4,000 )

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Cash Flows from Financing Activities:

Indemnity escrow payment in connection with an acquisition ( 13,128 ) — —

Proceeds from the exercise of options 5,811 2,394 3,543

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Payments on borrowings — — ( 41 )

Proceeds from borrowings — — 3,115

Repayment of convertible notes ( 3,471 ) — —

Proceeds from capital raise, net of $ 0 , $ 1,050 , and $ 5,757 of transaction costs, respectively

— 32,215 193,064

Repayment of convertible notes ( 3,919 ) ( 3,471 ) —

Cash received in advance of the issuance of convertible notes — — 2,110

Net cash provided by financing activities 27,709 193,951 445

Net cash provided by (used in) financing activities ( 24,955 ) 27,709 193,951

Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash ( 19,652 ) ( 140,980 ) 174,734

Cash, Cash Equivalents and Restricted Cash at the Beginning of the Period 90,365 231,345 56,611

Cash, Cash Equivalents, and Restricted Cash at the End of the Period $ 90,365 $ 231,345 $ 56,611

Life360, Inc.

Cash, Cash Equivalents, and Restricted Cash at the End of the Period $ 70,713 $ 90,365 $ 231,345

Supplemental disclosure:

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Fair value of stock issued in connection with an acquisition $ — $ 15,409 $ 13,821

Fair value of warrants held as investment — 5,474 —

Fair value of stock issued in settlement of contingent consideration — 4,221 —

Right of use asset recognized in connection with lease modification 1,054 — —

Operating lease liability recognized in connection with lease modification 1,054 — —

Fair value of convertible debt issued in connection with an acquisition — — 11,597

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Fair value of vested options assumed in connection with an acquisition — — 533

Forgiveness of convertible note receivable in connection with an acquisition — 4,023 —

Relative fair value of warrants issued with convertible debt — 844 —

Relative fair value of warrants issue with convertible debt — — 844

Forgiveness of convertible debt receivable in connection with an acquisition — — 4,023

Beneficial conversion feature related to convertible debt — — 603

Fair value of bifurcated derivative related to convertible debt — — 663

Fair value of warrants held as investment in affiliate 5,474 — —

Fair value of stock issued in settlement of contingent consideration 4,221 — —

Total non-cash investing and financing activities:

$ 2,108 $ 25,104 $ 37,984

The following table provides a table of cash, cash equivalents, and restricted cash reported within the balance sheets totaling the same such amounts shown above:

The following table provides a table of cash, cash and cash equivalents, and restricted cash reported within the balance sheets totaling the same such amounts shown above:

2023 December 31,

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Cash and cash equivalents $ 68,964 $ 75,444 $ 230,990

Restricted cash 14,921 355 198

Total cash, cash equivalents, and restricted cash $ 90,365 $ 231,345 $ 56,611

Restricted cash, current — 13,274 —

Restricted cash, noncurrent 1,749 1,647 355

Total cash, cash and cash equivalents, and restricted cash $ 70,713 $ 90,365 $ 231,345

See accompanying notes to the consolidated financial statements.

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The Company operates under a “freemium” model where its core offering is available to users at no charge, with three membership subscription options that are available but not required.

The Company also generates revenue through monetization arrangements with certain commercial third parties (“Data Revenue Partners”) through Lead Generation and license agreements (including aggregated insights into the data collected from the Company’s user base).

On September 1, 2021, the Company acquired all ownership interests of Jiobit.

Jiobit is a provider of wearable location devices for young children, pets, and seniors.

On January 5, 2022, the Company acquired all ownership interests of Tile.

Tile is a smart location company whose products include a Bluetooth enabled device and related accessories that work in tandem with the Tile application to enable its customers to locate lost or misplaced objects.

The Company also generates revenue through Jiobit and Tile subscription services and hardware tracking devices and monetization arrangements with certain commercial third parties (“Data Revenue Partners”) through Lead Generation and license agreements including aggregated insights into the data collected from the Company’s user base.

Summary of Significant Accounting Policies

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The preparation of consolidated 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 the consolidated financial statements and the reported amount of revenue and expenses during the reporting period.

Significant estimates made by management include, but are not limited to, the determination of revenue recognition, including the determination of selling prices for distinct performance obligations sold in multiple-performance obligation arrangements, the period over which revenue is recognized for certain arrangements, and estimated delivery dates for orders with title transfer upon delivery, accounts receivable allowance, product returns, promotional and marketing allowances, inventory valuation, average useful customer life, stock-based compensation, legal contingencies, assessment of possible impairment of long-lived assets and goodwill, valuation of contingent consideration, convertible notes and Embedded Derivatives, useful lives of long lived assets and income taxes including valuation allowances on deferred tax assets.

Significant estimates made by management include, but are not limited to, the determination of revenue recognition, including the determination of selling prices for distinct performance obligations sold in multiple-performance obligation arrangements, the period over which revenue is recognized for certain arrangements, and estimated delivery dates for orders with title transfer upon delivery, allowance for credit losses, product returns, promotional and marketing allowances, inventory valuation, average useful customer life, stock-based compensation, legal contingencies, assessment of possible impairment of long-lived assets and goodwill, valuation of contingent consideration, convertible notes and embedded derivatives, useful lives of long lived assets and income taxes including valuation allowances on deferred tax assets.

The Company bases its estimates and judgments on historical experience and on various assumptions that it believes are reasonable under the circumstances.

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Recently adopted accounting pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments .

ASU 2016-13 requires the use of the expected credit losses over the life impairment model of a broad scope of financial instruments including financial assets measured at amortized cost which includes loans, held-to-maturity debt securities and trade receivables, net investment in leases and certain off balance sheet credit exposures.

The guidance requires immediate recognition of estimated expected credit losses over the life of the financial instrument.

The Company adopted ASU 2016-13 in January 1, 2023.

The adoption of ASU 2016-13 did not have a material impact on its consolidated financial statements and related disclosures.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805), Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers .

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Notes to Consolidated Financial Statements

In December 2019, the FASB issued ASU No.

2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”), as part of its initiative to reduce complexity in accounting standards.

ASU 2019-12 removes the following exceptions:

exception to the incremental approach for intraperiod tax allocation;

exception to accounting for basis differences when there are ownership changes in foreign investments;

and exception to interim period tax accounting for year-to-date losses that exceed anticipated losses.

ASU 2019-12 also improves financial reporting for franchise taxes that are partially based on income;

transactions with a government that result in a step up in the tax basis of goodwill;

separate financial statements of legal entities that are not subject to tax;

and enacted changes in tax laws in interim periods.

ASU 2019-12 is effective for public business entities in fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

For all other entities, the standard is effective in fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022.

Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have not yet been issued.

On January 1, 2021, the Company adopted ASU 2019-12, and the standard did not have a material impact on its consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU No.

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Accounting pronouncements not yet adopted

Although there are several new accounting standards issued or proposed by the FASB, which the Company will adopt, as applicable, the Company does not believe any of these accounting pronouncements will have a material impact on its consolidated financial statements.

In July 2023, the FASB issued ASU No.

2023-07 – Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , to improve the disclosures about a public entity’s reportable segments and address requests from investors for additional, more detailed information about a reportable segment’s expenses.

The ASU 2023-07 introduces a new requirement to disclose significant segment expenses regularly provided to the chief operating decision maker (CODM) and extends certain annual disclosures to interim periods.

The ASU improve reportable segment disclosure requirement through enhanced disclosures about significant segment expenses.

The effective date for this amendment is for the fiscal year beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

This guidance will be applied retrospectively and effective for the Company starting in its annual disclosures for 2024 and interim periods starting 2025.

The Company does not expect adoption of this ASU will have a material impact on its financial position or results of operations.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”).

ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid.

The updates in this ASU are effective for annual periods beginning after December 15, 2024.

Early adoption is permitted.

The Company does not expect adoption of this ASU will have a material impact on its financial position or results of operations.

Revenue Recognition

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The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer.

Life360, Inc.

Notes to Consolidated Financial Statements

Performance Obligations

Some of the Company’s contracts with customers contain multiple performance obligations, primarily hardware and subscription services for the Tile and Jiobit hardware tracking devices.

For these contracts, the Company accounts for individual performance obligations separately if they are distinct.

The transaction price is allocated to the separate performance obligations on a relative stand-alone selling price (“SSP”) basis with the amounts allocated to ongoing services deferred and recognized over a period of time and amounts allocated to hardware tracking devices recognized at a point-in time with a portion of the consideration being allocated to application usage (maintenance) and support.

The Company determines SSP based on observable, if available, prices for those related goods and services when sold separately.

When such observable prices are not available, the Company determines SSP based on multiple factors including consumer behaviors, the Company’s internal pricing model, and relative costs incurred plus a normal margin.

The factors may vary depending upon the facts and circumstances related to each deliverable.

For hardware products, the Company generally offers a limited warranty to end-users covering a period of twelve months for products and obligates the Company to repair or replace products for manufacturing defects or hardware component failures.

The warranty is not sold separately and does not represent a separate performance obligation.

Therefore, such warranties are accounted for under ASC 460, Guarantees, and the estimated costs of warranty claims are generally accrued as cost of revenue in the period the related revenue is recorded.

See Note 11 “Commitments and Contingencies” for further details.

Variable Consideration

The Company recognizes hardware revenue at the net sales price, which includes certain estimates for variable consideration with its customers.

The Company’s variable consideration is primarily in the form of promotional agreements and marketing development fund agreements in relation to the hardware tracking devices.

These agreements are designed to enhance the sale of the Company’s products and consist of incentives to the Company’s customers.

The Company estimates variable consideration using the expected value method.

All forms of variable consideration are recorded as contra-revenue and a corresponding liability in its consolidated balance sheet.

Certain agreements are estimates at period end due to the nature of the incentives or expected and yet-to-be announced incentive programs that apply to current period revenue transactions.

These estimates are based on the Company’s incentive program experience, historical and projected sales data and current contractual terms.

The remaining portion of this liability is based on contractual amounts and does not require estimation.

Subscription Revenue

The Company’s subscription revenue includes related support and is comprised of Life360 mobile application subscriptions as well as subscription service plans for the Tile and Jiobit hardware tracking devices.

The Company’s subscription revenue includes related support and is comprised of Life360 mobile application subscriptions as well as subscription service plans for hardware tracking devices.

The Company’s subscription contracts with customers are established at the point of mobile application download and purchase as indicated through acceptance of the Company’s Terms of Use.

The Company’s subscription agreements generally have monthly or annual contractual terms and are billed and paid in advance.

Life360, Inc.

Notes to Consolidated Financial Statements

The cloud-based subscriptions are considered single combined performance obligations, consisting of multiple features that can be purchased separately, but which are bundled together and delivered to the customer as a combined output.

The Company provides its customers with technical support along with unspecified updates and upgrades to the platform on an if and when available basis.

The subscription service plan for the Tile and Jiobit hardware tracking device is a distinct and separate performance obligation from the hardware.

The subscription service plan for hardware tracking device is a distinct and separate performance obligation from the hardware.

Subscription fees are fixed and recognized on a straight-line basis over the non-cancellable contractual term of the agreement, generally beginning on the date that the Company’s service is made available to the customer.

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The Company’s contracts are generally non-cancelable and do not provide for refunds to customers in the event of cancellations.

Life360, Inc.

Notes to Consolidated Financial Statements

Hardware Revenue

The Company derives hardware revenue from sale of the Tile and Jiobit hardware tracking devices and related accessories.

For hardware and accessories, revenue is recognized at the time products are delivered.

The Company derives hardware revenue from sale of hardware tracking devices and related accessories.

For hardware and accessories, revenue is recognized when control is transferred to the customer.

The Company offers limited rights of return and estimates reserves based on historical experience and records the reserves as a reduction of revenue and an accrued liability.

Amounts billed to customers for shipping and handling are classified as revenue, and the Company’s related shipping and handling costs incurred are classified as cost of revenue.

The customers are billed upon shipment of the hardware tracking devices.

The customers are billed upon shipment of hardware tracking devices.

Sales taxes collected from customers and remitted to respective governmental authorities are recorded as liabilities and are not included in revenue.

The Company’s hardware and the embedded operating system are one distinct performance obligation and separate from the subscription service plans for the Tile and Jiobit hardware tracking device.

The Company’s hardware and the embedded operating system are one distinct performance obligation and are separate and distinct from the subscription service plans for hardware tracking device.

The Company’s embedded operating system is a component of the hardware that is integral to the functionality of the hardware and only together produce the essential functionality of the hardware.

The Company offers extended warranties and hardware protection plans that are recognized over the contractual service period (typically 1 to 2 years).

Payment terms and conditions vary by contract type and are billed either in advance or have a standard payment term generally requiring payment within 30 to 60 days.

Other Revenue

Other revenue consists primarily of data revenue and partnership revenue.

In January 2022, Life360 announced a new partnership agreement with a key Data Partner, a prominent provider of aggregated analytics for the retail ecosystem, in which executives of the Company have an immaterial ownership interest through a passive investment vehicle.

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The Company has a stand ready obligation to provide aggregated user data over the term of the partnership agreement and recognizes revenue ratably based on the fixed monthly amounts.

The Company estimates and includes variable consideration in the transaction price at contract inception to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

In connection with the agreement, the Data Partner issued the Company a warrant to purchase up to 5,100,167 shares of Series C Preferred Stock of the Data Partner at an exercise price of $ 4.90 per share (the “Investment”).

The Company estimates and includes variable consideration related to the Investment, in the transaction price at contract inception to the extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The partnership agreement has standard payment terms that require payment within 30 days.

In connection with the agreement, the Data Partner issued the Company a warrant to purchase up to 5,100,167 shares of Series C Preferred Stock at an exercise price of $ 4.90 per share (“Investment in Affiliate”).

The grant of the warrant is considered non-cash consideration, which the Company measured at fair value on the date of issuance.

The warrant was valued using a Black-Scholes option pricing model, and the fair value of approximately $ 5.4 million has been included as part of the transaction price of the data partnership agreement, and will be included in prepaid expenses and other assets, noncurrent on the Company’s consolidated balance sheets.

The warrant was valued using a Black-Scholes option pricing model, and the fair value of approximately $ 5.4 million has been included as variable consideration in the transaction price of the data partnership agreement, and was included in prepaid expenses and other assets, noncurrent on the Company’s consolidated balance sheets.

The warrant is amortized over the life of the agreement.

Life360, Inc.

Notes to Consolidated Financial Statements

The Company’s data revenue also includes Life360 data monetization arrangements with certain third parties established through Data Master Service Agreements (collectively, “Data MSAs”), which outline specific terms governing the access and use of data and related fees.

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Those customers historically had the ability to access certain portions of the Company’s user data over the contract term, in which certain customers pay a fee based on average active monthly users.

Most of the Company’s Data MSAs have been terminated as of December 31, 2022 as the Company has moved toward an aggregated data sales model.

The Company recognizes fees for legacy data arrangements over time based on the fee per average active monthly user as the customer simultaneously receives and consumes the benefit of the services that the Company provides over the term of the agreement.

In 2023, the Company has fully moved from Data MSAs to a single aggregated data sales model.

The Company recognized fees for legacy data MSAs over time based on the fee per average active monthly user as the customer simultaneously received and consumed the benefit of the services that the Company provided over the term of the agreement.

Data revenue was $ 21.6 million, $ 23.2 million, and $ 18.7 million for the years ended December 31, 2023, 2022, and 2021, respectively.

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As such, the Company will recognize revenue monthly based on the advertising placed.

Partnership revenue was $ 3.9 million, $ 3.9 million, and $ 6.4 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Performance Obligations

Some of the Company’s contracts with customers contain multiple performance obligations, primarily hardware and subscription services for hardware tracking devices and hardware bundles (bundled Life360 subscription and hardware offerings).

For these contracts, the Company accounts for individual performance obligations separately if they are distinct and distinct within the context of the contract.

The Company determines SSP based on observable, if available, prices for those related goods and services when sold separately.

The factors may vary depending upon the facts and circumstances related to each performance obligation.

Our hardware sales arrangements typically contain multiple performance obligations, consisting of the hardware sale, application usage, hardware support, and in some cases, subscriptions.

The Company provides warranties of up to twelve months for products with manufacturing defects or hardware failures.

As part of Tile Premium subscriptions, the Company offers warranties to end-users covering the contractual service period (up to 3 years) for products with manufacturing defects or hardware failures.

The warranties are not sold separately and do not represent separate performance obligations.

Payment terms and conditions vary by contract type and are billed either in advance or have a standard payment term generally requiring payment within 30 to 60 days.

Therefore, such warranties are accounted for under ASC 460, Guarantees , and the estimated costs of warranty claims are generally accrued as cost of revenue in the period the related revenue is recorded.

Variable Consideration

The Company recognizes hardware revenue at the net sales price, which includes certain estimates for variable consideration with its customers.

The Company’s variable consideration is primarily in the form of promotional agreements and marketing development fund agreements in relation to the hardware tracking devices.

These agreements are designed to enhance the sale of the Company’s products and consist of incentives to the Company’s customers.

The Company estimates variable consideration using the expected value method.

All forms of variable consideration are recorded as contra-revenue and a corresponding liability in its consolidated balance sheets.

These estimates are based on the Company’s incentive program experience, historical and projected sales data and current contractual terms.

The remaining portion of this liability is based on contractual amounts and does not require estimation.

Life360, Inc.

Notes to Consolidated Financial Statements

Partnership revenue was $ 3.9 million, $ 6.4 million, and $ 6.0 million for the years ended December 31, 2022, 2021, and 2020, respectively.

Remaining Performance Obligations

Remaining performance obligations represent the amount of contracted future revenue not yet recognized as the amounts relate to undelivered performance obligations, including both deferred revenue and non-cancelable contracted amounts that will be invoiced and recognized as revenue in future periods.

Revenue allocated to remaining performance obligations was $ 32.8 million as of December 31, 2022, of which the Company expects $ 30.1 million to be recognized over the next twelve months .

Revenue allocated to remaining performance obligations was $ 13.9 million as of December 31, 2021, all of which the Company expected to be recognized over the next twelve months .

Revenue allocated to remaining performance obligations was $ 67.9 million as of December 31, 2023, of which the Company expects 85 % to be recognized over the next twelve months .

Cost of Revenue

Cost of subscription revenue includes all direct costs to deliver the Company’s subscription services.

These costs include personnel-related costs associated with the Company’s cloud-based infrastructure and the Company’s customer support organization, third-party hosting fees, software, and maintenance costs, outside services associated with the delivery of the Company’s subscription services, personnel-related expenses, travel-related costs, amortization of acquired intangibles and allocated overhead, such as facilities, including rent, utilities, depreciation on equipment shared by all departments, credit card and transaction processing fees, and shared information technology costs.

These costs include personnel-related costs associated with the Company’s cloud-based infrastructure and the Company’s customer support organization, third-party hosting fees, software, and maintenance costs, outside services associated with the delivery of the Company’s subscription services, travel-related costs, amortization of acquired intangibles and allocated overhead, such as facilities, including rent, utilities, depreciation on equipment shared by all departments, credit card and transaction processing fees, and shared information technology costs.

Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.

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Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.

Cost of other revenue consists of cloud-based hosting costs, as well as costs of product operations function and employee-related costs associated with the Company’s data platform.

Cost of other revenue consists of cloud-based hosting costs, as well as costs of product operations functions and personnel-related costs associated with the Company’s data platform.

Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.

Costs Capitalized to Obtain Contracts

Costs capitalized to obtain contracts comprise of revenue-share payments in connection with annual subscription sales of the Company’s mobile application on each respective third-party store platform as well as sales commissions paid to employees on hardware sales.

Costs that are incremental and directly related to new customer sales contracts are accrued and capitalized upon execution of a non-cancelable customer contract, and subsequently expensed over the average life of the customer relationship, which is currently estimated to be two to three years depending on the subscription type.

Costs that are incremental and directly related to new customer sales contracts are accrued and capitalized upon execution of a non-cancelable customer contract, and subsequently expensed over an estimated period of benefit, which is currently estimated to be two to three years depending on the subscription type.

The Company has elected the practical expedient under ASC 340-40 to expense incremental costs of obtaining a contract if the amortization periods is one year or less.

Allowance for Doubtful Accounts

The Company makes judgments as to its ability to collect outstanding accounts receivable and provide allowances for accounts receivable when and if collection becomes doubtful.

The Company evaluates the collectability of its accounts receivable based on review of its past-due balances, known collection risks and historical experience.

In circumstances where the Company is aware of a specific customer’s potential inability to meet its financial obligations to the Company (e.g., bankruptcy filings or substantial downgrading of credit ratings), the Company records a specific reserve for bad debt against amounts due to reduce the net recognized receivable to the amount it reasonably believes will be collected.

The allowance for doubtful accounts as of December 31, 2022 and December 31, 2021 and total bad debt expense for the years ended December 31, 2022, 2021 and 2020 was immaterial.

Life360, Inc.

Notes to Consolidated Financial Statements

Accounts Receivable and Allowances

Accounts receivable are recorded at the invoiced amount, net of allowance for credit losses.

The allowance for credit losses is based on the Company’s assessment of the collectibility of accounts by considering the age of each outstanding invoice, the collection history of each customer, and an evaluation of current expected risk of credit loss based on current economic conditions and reasonable and supportable forecasts of future economic conditions over the life of the receivable.

The Company assesses collectibility by reviewing accounts receivable on an aggregated basis where similar characteristics exist and on an individual basis when specific customers with collectibility issues are identified.

The allowance for credit losses as of December 31, 2023 and December 31, 2022 and total bad debt expense for the years ended December 31, 2023, 2022 and 2021 was immaterial.

Inventory and Contract Manufacturing

Inventory is comprised of raw materials and finished goods related to the Tile and Jiobit hardware tracking devices and accessories.

Inventory is comprised of raw materials and finished goods related to hardware tracking devices and accessories.

Inventory is stated at the lower of cost or net realizable value on a weighted average basis.

The Company assesses the valuation of inventory and writes down the value for estimated excess and obsolete inventory based upon estimates of future demand and market conditions.

The Company’s inventory is held at third party warehouses and contract manufacturer premises.

Life360, Inc.

Notes to Consolidated Financial Statements

The Company outsources a significant portion of its manufacturing to independent contract manufacturers in Asia.

A significant portion of its cost of revenue consists of inventory purchased from these manufacturers.

The Company’s inventory is held at third party warehouses and contract manufacturer premises.

The Company’s manufacturers procure components and manufacture the Company’s products based on the demand forecasts provided.

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Concentrations of Risk and Significant Customers

The Company’s business, operations, and financial results are subject to various risks and uncertainties including adverse global economic conditions, such as the coronavirus (COVID-19) pandemic, and competition in the Company’s industry that could adversely affect the Company’s business, financial conditions, results of operations and cash flows.

The Company’s business, operations, and financial results are subject to various risks and uncertainties including adverse global economic conditions, and competition in the Company’s industry that could adversely affect the Company’s business, financial conditions, results of operations and cash flows.

These important factors, among others, could cause actual results to differ materially from any future results.

Cash Deposits in Excess of Federally Insured Limits

The Company currently maintains its cash balances at one financial institution, Silicon Valley Bridge Bank, N.A.

Accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000.

The Company currently maintains its cash balances at multiple financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000.

As of December 31, 2023, the Company’s cash balances exceeded amounts insured by the FDIC.

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While the Company has not experienced any losses in such accounts, the recent failure of Silicon Valley Bank (“SVB”) exposed the Company to significant credit risk prior to the completion by the FDIC of the resolution of SVB in a manner that fully protected all depositors.

The Company is in the process of transferring its accounts to one or more alternate depository institutions, the financial position of which management believes does not expose the Company to significant credit risk.

As of December 31, 2023, the Company has transferred the majority of its accounts to one or more alternate depository institutions, the financial position of which management believes does not expose the Company to significant credit risk.

Major Customers

The Company’s customers primarily consist of individual consumers, who subscribe to the Company’s product offerings through market exchanges operated by Channel Partners, data revenue customers and retail partners, who purchase hardware tracking devices from the Company and resell them directly to individual consumers.

The Company’s customers primarily consist of individual consumers, who subscribe to the Company’s product offerings through market exchanges operated by our third-party platform providers (“Channel Partners”), data revenue customers and retail partners, who purchase hardware tracking devices from the Company and resell them directly to individual consumers.

Any changes in customer preferences and trends or changes in terms of use of Channel Partners’ platforms could have an adverse impact on its results of operations and financial condition.

The Company depends on the constant real-time performance, reliability and availability of its technology system and access to its partner’s networks.

The Company primarily relies on a single technology partner for its cloud platform and a limited number of contract manufacturers to assemble components of the Jiobit and Tile hardware tracking devices.

Any adverse impacts to the platform and the contract manufacturers could negatively impact the Company’s relationships with its partners or users and may adversely impact its business, financial performance, and reputation.

The Company derives its accounts receivable from revenue earned from customers located in the United States and internationally.

The Company does not perform ongoing credit evaluations of its customers’ financial condition and does not require collateral from its customers.

Historically, bad debt expenses have been insignificant.

Channel and retail partners account for the majority of the Company’s revenue and accounts receivable for all periods presented.

Life360, Inc.

Notes to Consolidated Financial Statements

The following tables set forth the information about the Company’s channel and retail partners who represented greater than 10% of its revenue or accounts receivable, respectively:

The following tables set forth the information about the Company’s Channel Partners that processed our overall revenue transactions and retail partners who represented greater than 10% of our revenue and accounts receivable, respectively:

Percentage of Revenue

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* Represents less than 10%

Life360, Inc.

Notes to Consolidated Financial Statements

Percentage of Gross Accounts Receivable

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Channel Partner A 50 % 33 %

Channel Partner B * 14 %

Data Partner A * 11 %

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* Represents less than 10%

Supplier Concentration

The Company currently outsources the manufacturing of its hardware devices to a sole contract manufacturer.

Although there are a limited number of manufacturers, management believes that other suppliers could provide similar manufacturing services on comparable terms.

Research and Development Costs

The Company charges costs related to research, design, and development of products to research and development expense as incurred.

These costs consist of payroll related expenses, contractor fees, outside third-party vendors, and allocated facilities costs.

The Company charges costs related to research and development which primarily consist of personnel-related costs for our engineering, product, and design teams, material costs of building and developing prototypes for new products, mobile app development and allocated overhead.

Sales and Marketing Costs

Our sales and marketing expenses consist primarily of personnel-related costs, brand marketing costs, lead generation costs, sales incentives, sponsorships and amortization of acquired intangibles.

Revenue-share payments to Channel Partners in connection with annual subscription sales of the Company’s mobile application on Channel Partner store platforms are considered to be incremental and recoverable costs of obtaining a contract with a customer and are deferred and typically amortized over an estimated period of benefit of two to three years depending on the subscription type.

Advertising Expense

Advertising expense was $ 17.0 million, $ 7.1 million, and $ 6.7 million for the years ended December 31, 2022, 2021, 2020, respectively.

Advertising expenses are recorded in the period in which cost is incurred, and are presented within sales and marketing expense on the consolidated statements of operations.

Advertising expense was $ 28.6 million, $ 17.0 million, and $ 7.1 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Cash and Cash Equivalents

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Deposits of $ 1.7 million and $ 14.9 million were restricted from withdrawal as of December 31, 2023 and December 31, 2022, respectively.

$ 13.1 million of the restricted balance as of December 31, 2022 relates to funds placed in an indemnity escrow fund to be held for fifteen months after the acquisition date of Tile (i.e., through April 2023) for general representations and warranties and $ 0.2 million relates to funds placed in an indemnity escrow fund to be held for eighteen months after the acquisition date of Jiobit (i.e., through March 2023) for general representations and warranties.

The restricted cash balances associated with the Tile and Jiobit indemnity escrow funds are included within restricted cash, current on the accompanying balance sheet.

In April 2023, the Company released and paid $ 13.1 million of restricted cash which was previously held in indemnity escrow as part of the acquisition of Tile in January 2022 (the “Tile Acquisition”) for general representations and warranties, fifteen months after the acquisition date.

Refer to Note 8, "Balance Sheet Components" for further details.

The restricted cash, noncurrent balance of $ 1.7 million as of December 31, 2023 relates to the letters of credit issued on behalf of the Company for indebtedness to trade creditors incurred in the ordinary course of business.

The restricted cash, noncurrent balance of $ 1.6 million as of December 31, 2022 relates to funds placed in an indemnity escrow fund after the acquisition of Jiobit, and facility lease agreements.

Life360, Inc.

Notes to Consolidated Financial Statements

The restricted cash, noncurrent balance of $ 1.6 million as of December 31, 2022 relates to cash deposits restricted under letters of credit issued on behalf of the Company in support of indebtedness to trade creditors incurred in the ordinary course of business and to securing the Company’s facility leases.

The restricted cash, noncurrent balance of $ 0.4 million as of December 31, 2021 relates to funds placed in an indemnity escrow fund after the acquisition of Jiobit, and facility lease agreements.

Fair Value of Financial Instruments

The Company uses fair value measurements to record fair value adjustments to certain financial and non-financial assets and liabilities to determine fair value disclosures.

The accounting standards define fair value, establish a framework for measuring fair value, and require disclosures about fair value measurements.

Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the principal or most advantageous market in which the Company would transact are considered along with assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.

The accounting standard for fair value establishes a fair value hierarchy based on three levels of inputs, the first two of which are considered observable and the last unobservable, that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company measures its financial assets at fair value each reporting period using a fair value hierarchy that prioritizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The three levels of Inputs that may be used to measure fair value are as follows:

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Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets.

Equipment, computer software, furniture, and product manufacturing equipment have estimated useful lives ranging from three to ten years .

Equipment, computer software, furniture, and product manufacturing equipment, which includes construction-in-process that is capitalized and depreciated when placed into service, have estimated useful lives ranging from three to ten years .

Leasehold improvements are amortized on a straight-line basis over the lesser of the estimated useful life or the term of the lease with expected renewals.

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When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss is reported in other income (expense), net in the period realized.

Software Development Costs

Internal Use Software

For development costs related to internal use software projects, the Company capitalizes costs incurred during the application development stage.

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Internal use software is amortized on a straight-line basis over its estimated useful life of three years .

The Company capitalized $ 0.7 million during the year ended December 31, 2022.

The Company capitalized $ 1.7 million and $ 0.7 million during the years ended December 31, 2023 and 2022, respectively.

Capitalized costs are included within intangible assets, net on the consolidated balance sheet.

The Company did no t capitalize any internal use software costs during the year ended December 31, 2021 as the capitalizable costs were not material.

Life360, Inc.

Notes to Consolidated Financial Statements

Lease Obligations

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The Company generally uses the base, non-cancellable, lease term when recognizing the lease assets and liabilities, unless it is reasonably certain that the renewal option will be exercised.

Life360, Inc.

Notes to Consolidated Financial Statements

In addition, certain of the Company’s operating lease agreements contain tenant improvement allowances from its landlords.

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Refer to Note 8, "Balance Sheet Components" for additional lease disclosures.

Restructuring and Other Charges

Restructuring generally includes significant actions involving employee-related severance charges, facilities consolidation and contract termination costs.

Employee-related severance charges are largely based upon substantive severance plans, while some are mandated requirements in certain foreign jurisdictions.

Severance costs generally include severance payments, outplacement services, health insurance coverage and legal costs.

These charges are reflected in the period when both the actions are probable, at the balance sheet date, and the amounts are reasonably estimable.

Right-of-use asset impairments are recognized on the date the premises have been vacated or the Company have ceased-use of the leased facilities.

On January 12, 2023, the Company announced a workforce restructure which resulted in a reduction of the Company’s workforce of approximately 14 %.

The Company incurred $ 4.0 million in non-recurring personnel and severance related expenses in connection with the restructuring during the year ended December 31, 2023.

As of December 31, 2023, all expenses incurred had been paid.

The restructuring costs are recognized in the consolidated statements of operations for the year ended December 31, 2023 as follows (in thousands):

Personnel and Severance Related Expenses

Year Ended December 31, 2023

Cost of subscription revenue $ 64

Cost of hardware revenue 94

Research and development 1,824

Sales and marketing 872

General and administrative 1,170

Total $ 4,024

Business Combinations

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Goodwill represents the excess of the purchase price in a business combination over the fair value of net tangible and intangible assets acquired.

Goodwill amounts are not amortized but tested for impairment on an annual basis during the fourth quarter.

There was no impairment of goodwill during the years ended December 31, 2022, 2021, or 2020.

Goodwill amounts are not amortized but are tested for impairment at least annually during the fourth quarter, or more frequently if indicators of impairment exist.

The Company tests for goodwill impairment annually as of October 31 of each year.

There was no impairment of goodwill during the years ended December 31, 2023, 2022 and 2021.

Life360, Inc.

Notes to Consolidated Financial Statements

Intangible Assets, net

Intangible assets, including acquired, trade names, customer relationships, and acquired developed technology are carried at cost and amortized on a straight-line basis over their estimated useful lives.

Intangible assets, including acquired, trade names, customer relationships, acquired developed technology, and internal use software are carried at cost and amortized on a straight-line basis over their estimated useful lives.

The Company determines the appropriate useful life of the Company’s intangible assets by measuring the expected cash flows of acquired assets.

There was no impairment of intangible assets recorded during the years ended December 31, 2022, 2021, or 2020.

There was no impairment of intangible assets recorded during the years ended December 31, 2023, 2022 and 2021.

Impairment of Long-Lived Assets

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The Company reviews long-lived assets for impairment at least annually, or more frequently if events or changes in circumstances would more likely than not reduce the fair value of its single reporting unit below its carrying value.

There was no impairment of long-lived assets recognized during the years ended December 31, 2022, 2021 or 2020.

Life360, Inc.

Notes to Consolidated Financial Statements

There was no impairment of long-lived assets recognized during the years ended December 31, 2023, 2022 and 2021.

Deferred Revenue

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the remaining portion is recorded as deferred revenue, noncurrent in the consolidated balance sheets.

Investment in Affiliate

Investment in Affiliate relates to non-marketable equity securities held in a privately held company without a readily determinable market value.

Non-marketable equity securities consist of warrants held to purchase shares of preferred stock of a Data Revenue Partner, refer to Note 2 “Summary of Significant Accounting Policies” for additional information regarding the Company’s Data Revenue Partner.

Investment relates to non-marketable equity securities held in a privately held company without a readily determinable market value.

Non-marketable equity securities consist of warrants held to purchase shares of preferred stock of a Data Revenue Partner, refer to “Revenue Recognition ” section above for additional information regarding the Company’s Data Revenue Partner.

Investments in non-public businesses that do not have readily determinable pricing, and for which the Company does not have control or does not exert significant influence, are carried at cost less impairments, if any, plus or minus changes in observable prices for those investments.

Gains or losses resulting from changes in the carrying value of these investments are included as a non-operating expense to the Company’s consolidated statements of operations and comprehensive loss.

There have been no adjustments to the basis of the Company’s Investment in Affiliate to date.

The carrying value of the Company’s Investment in Affiliate is included in prepaid expenses and other assets, noncurrent in the consolidated balance sheets.

There have been no adjustments to the basis of the Company’s Investment to date.

The carrying value of the Company’s Investment is included in prepaid expenses and other assets, noncurrent in the consolidated balance sheets.

As of December 31, 2023 and 2022, the Company’s Investment was $ 5.5 million and $ 5.5 million, respectively.

Common Stock Warrants

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The fair value has been recorded as a debt discount that is being amortized to interest expense under the straight-line method over the term of respective convertible notes.

Life360, Inc.

Notes to Consolidated Financial Statements

Stock-Based Compensation

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Forfeitures are recorded as they occur.

In 2020, the Company granted a market performance award to an executive that is subject to time-based vesting requirements in which vesting is contingent upon the Company’s achievement of certain market performance goals.

The fair value of such performance awards was determined using a Monte Carlo simulation and is recognized under the accelerated attribution method over a four year period.

In 2022 and 2021, the Company issued stock options and restricted stock that have performance-based vesting conditions.

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If a performance condition is not probable of being met, no compensation cost is recognized.

The Company did not issue any stock options or restricted stock that had performance based vesting conditions for the year ended December 31, 2023.

Refer to Note 14, "Equity Incentive Plan" for further details.

Life360, Inc.

Notes to Consolidated Financial Statements

Foreign Currency

The functional currency of the Company’s foreign subsidiary is the respective local currency.

Translation adjustments arising from the use of a differing exchange rate from period to period are included in accumulated other comprehensive income (loss) within the consolidated statements of stockholders’ equity.

Foreign currency transaction gains and losses are included in interest and other, net in the consolidated statements of operations and were not material during the years ended December 31, 2023, 2022 or 2021.

All assets and liabilities denominated in a foreign currency are translated into U.S.

dollars at the exchange rate on the balance sheet date.

Revenue and expenses are translated at the average exchange rate during the period.

The Company accounts for income taxes under the asset and liability method.

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The Company recognizes interest and penalties related to uncertain tax positions in income tax expense.

The Company did not accrue any interest or penalties related to income tax positions during the years ended December 31, 2022 or 2021.

Contingencies

From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business.

The Company evaluates the likelihood of an unfavorable outcome in legal or regulatory proceedings to which it is a party and records a loss contingency on an undiscounted basis when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

These judgments are subjective and based on the status of such legal proceedings, the merits of the Company’s defenses, and consultation with legal counsel.

Actual outcomes of these legal proceedings may differ materially from the Company’s estimates.

The Company estimates accruals for legal expenses when incurred as of each balance sheet date based on the facts and circumstances known to the Company at that time.

Segment Information

The Company operates as a single operating segment.

The Company’s chief operating decision maker is its chief executive officer, who reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance, and allocating resources.

All material long-lived assets are based in the United States.

The Company did not accrue any interest or penalties related to income tax positions during the years ended December 31, 2023, 2022, and 2021.

Refer to Note 11, "Commitments and Contingencies" for more details.

Life360, Inc.

Notes to Consolidated Financial Statements

Net Loss Per Share

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Refer to Note 18, "Net Loss Per Share" for further details.

Life360, Inc.

Notes to Consolidated Financial Statements

Geographical Revenue

Segment and Geographic Revenue

The Company operates as a single operating segment.

All material long-lived assets are based in the United States.

Revenue by geography is generally based on the address of the customer as defined in the contract with the customer.

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Deferred revenue, end of period $ 35,774 $ 32,762

The Company’s total deferred revenue balances totaled $ 32.8 million and $ 13.9 million as of December 31, 2022 and 2021, respectively.

During the year ended December 31, 2023, the Company recognized $ 30.1 million of revenue that was included in the deferred revenue balance as of December 31, 2022.

During the year ended December 31, 2022, the Company recognized $ 13.9 million of revenue that was included in the deferred revenue balance as of December 31, 2021.

Life360, Inc.

Notes to Consolidated Financial Statements

Costs Capitalized to Obtain Contracts

The Company recognizes as an asset the incremental costs of obtaining a contract with a customer if the entity expects to recover those costs.

The Company determined that its costs to obtain contracts were both direct and incremental.

These costs are attributable to the Company’s largest Channel Partners.

Costs of obtaining renewal contracts, which are not considered commensurate with new revenue contracts, are deferred and then amortized on a straight-line basis over the related period of benefit, which is approximately two to three years depending on the subscription type.

The following table represents a roll forward of the Company’s costs capitalized to obtain contracts, net (in thousands):

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Capitalized costs to obtain contracts, end of period $ 1,844 $ 2,064

Life360, Inc.

Notes to Consolidated Financial Statements

Fair Value Measurements

The Company measures and reports certain financial instruments as assets and liabilities at fair value on a recurring basis.

These liabilities are considered Level 3 instruments.

The fair value of these instruments as of December 31, 2023 and December 31, 2022 are classified as follows (in thousands):

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Level 1 Level 2 Level 3 Total

Money market funds $ 41,981 $ — $ — $ 41,981

Total assets $ 41,981 $ — $ — $ 41,981

Derivative liability (Note 10) $ — $ — $ 217 $ 217

Convertible notes (Note 9) — — 3,449 3,449

Total $ — $ — $ 7,039 $ 7,039

Total liabilities $ — $ — $ 3,666 $ 3,666

As of December 31, 2022

Level 1 Level 2 Level 3 Total

Money market funds $ 61,227 $ — $ — $ 61,227

Total assets $ 61,227 $ — $ — $ 61,227

Derivative liability (Note 10) $ — $ — $ 101 $ 101

Convertible notes (Note 9) — — 6,938 6,938

Contingent consideration — — 9,500 9,500

Total $ — $ — $ 23,189 $ 23,189

Total liabilities $ — $ — $ 7,039 $ 7,039

The change in fair value of the Level 3 instruments were as follows (in thousands):

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(Note 10) Convertible

(Note 9) Contingent

consideration

Fair value, beginning of the year $ 101 $ 6,938

Vesting of revesting notes — 72

Forfeiture of revesting notes — ( 235 ) —

Repayment of convertible notes (Note 9) — ( 3,471 ) —

Changes in fair value 116 684

Issuance of common stock in settlement of contingent consideration — — ( 4,221 )

Fair value, end of year $ 101 $ 6,938 $ —

Forfeiture of convertible notes — ( 326 )

Repayment of convertible notes (Note 9) — ( 3,919 )

Fair value, end of period $ 217 $ 3,449

Life360, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2022

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Fair value, beginning of the year $ 1,396 $ 12,293 $ 9,500

Issuance of derivative liability 663 — —

Issuances of convertible notes — 11,597 —

Issuance of revesting notes — 186 —

Issuance of contingent consideration — — 5,900

Vesting of revesting notes — 137 —

Forfeiture of revesting notes — ( 235 ) —

Repayment of convertible notes (Note 9) — ( 3,471 ) —

Changes in fair value ( 1,295 ) ( 1,786 ) ( 5,279 )

Fair value, end of year $ 1,396 $ 12,293 $ 9,500

Life360, Inc.

Notes to Consolidated Financial Statements

For the year ended December 31, 2022, the Company recorded a gain associated with the change in fair value of the derivative liability and convertible notes of $ 1.3 million and $ 1.8 million, respectively.

For the year ended December 31, 2021, the Company had recorded a loss associated with the change in fair value of the derivative liability and convertible notes of $ 0.7 million and $ 0.5 million, respectively.

Issuance of common stock in settlement of contingent consideration — — ( 4,221 )

Fair value, end of period $ 101 $ 6,938 $ —

For the year ended December 31, 2023, the Company recorded a loss associated with the change in fair value of the derivative liability and convertible notes of $ 0.1 million and $ 0.7 million, respectively.

For the year ended December 31, 2022, the Company had recorded a gain associated with the change in fair value of the derivative liability and convertible notes of $ 1.3 million and $ 1.8 million, respectively.

The amounts have been recorded in other income (expense), net in the consolidated statement of operations and comprehensive loss.

For the year ended December 31, 2022, the Company recorded a gain associated with the change in fair value of the contingent consideration of $ 5.3 million.

For the year ended December 31, 2021, the Company had recorded a loss associated with the change in fair value of the contingent consideration of $ 3.6 million.

For the year ended December 31, 2022, the Company had recorded a gain associated with the change in fair value of the contingent consideration of $ 5.3 million.

The amounts have been recorded in general and administrative expense in the consolidated statement of operations and comprehensive loss.

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The addition of Jiobit is expected to strengthen and extend the Company’s market leadership position by leveraging Jiobit’s developed technology and customer relationships to accelerate the Company’s own product development and augment the Company with a critical mass of talent with strong tracking/wearables experience.

The aggregate purchase consideration was $ 43.2 million, of which $ 7.3 million was paid in cash, $ 5.9 million of contingent consideration was payable upon reaching certain operational goals for 2021 and 2022, $ 11.6 million representing the fair value of the September 2021 Convertible Notes, $ 4.0 million representing forgiveness of Jiobit’s convertible debt held by the Company, $ 0.6 million comprised of 25,245 vested common stock options issued to Jiobit employees, and $ 13.8 million comprised of 674,516 shares of the Company’s common stock.

The aggregate purchase consideration was $ 43.2 million, of which $ 7.3 million was paid in cash, $ 5.9 of contingent consideration was payable upon reaching certain operational goals for 2021 and 2022, $ 11.6 million representing the fair value of the September 2021 Convertible Notes, $ 4.0 million representing forgiveness of Jiobit’s convertible debt held by the Company, $ 0.6 million comprised of 25,245 vested common stock options issued to Jiobit employees, and $ 13.8 million comprised of 674,516 shares of the Company’s common stock.

Of the consideration transferred, $ 0.2 million in cash was placed in an indemnity escrow fund to be held for eighteen months after the acquisition date for general representations and warranties.

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The estimated fair value of the September 2021 Convertible Notes is determined using a combination of the present value of the cash flows and the Black-Scholes option pricing model using assumptions as follows:

Life360, Inc.

Notes to Consolidated Financial Statements

As of December 31, As of December 31, As of September 1,

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Annual dividend yield 0 % 0 % 0 %

Life360, Inc.

Notes to Consolidated Financial Statements

A total of $ 6.2 million was excluded from purchase consideration which consists of $ 1.9 million comprised of 91,217 shares of the Company’s common stock (“Revesting Stock” – Note 14) and $ 1.6 million comprised of convertible notes (“Revesting Notes”) issued to key employees, retention bonuses of $ 1.0 million, and $ 0.5 million comprised of 43,083 unvested common stock options issued to Jiobit employees (“Unvested Replacement Awards” – Note 14).

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The Revesting Stock is recognized in general and administrative expense as the Revesting Stock vests.

In April 2022, one of the key employees exited the Company, and so the entirety of their Revesting Notes and Revesting Stock was forfeited.

In April 2022, one of the key employees exited the Company, and so the entirety of their Revesting Notes and Revesting Stock were forfeited.

The Company recorded $ 0.3 million credit to stock-based compensation included in general and administrative expense related to the forfeiture of their Revesting Stock and $ 0.3 million credit to compensation included in general and administrative expense related to the forfeiture of their Revesting Notes.

The Company recorded $ 0.2 million and $ 0.2 million as stock-based compensation included in general and administrative expense related to the vesting of the Revesting Stock for the years ended December 31, 2022 and 2021, respectively.

In January 2023, the other key employee exited the Company.

As part of such employee’s separation agreement, the Company recorded $ 0.2 million to compensation included in general and administrative expense related to their Revesting Stock.

Additionally, in accordance with their separation agreement, their Revesting Notes are due in their entirety at the maturity date and the Company recorded $ 0.1 million of compensation expense included in general and administrative expense.

The Company recorded $ 0.2 million, $ 0.2 million and $ 0.2 million as stock-based compensation included in general and administrative expense related to the vesting of the Revesting Stock for the years ended December 31, 2023, 2022 and 2021, respectively.

The Company records the Revesting Notes at fair value and will remeasure the Revesting Notes at fair value on each reporting date.

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The terms of the Revesting Notes are consistent with the terms of the September 2021 Convertible Notes.

The Company recorded an $ 0.2 million amount and $ 0.2 million as general and administrative and expense related to the changes in fair value of Revesting Notes during the years ended December 31, 2022 and 2021, respectively.

The Company recorded $ 0.1 million, $ 0.2 million and $ 0.2 million as general and administrative and expense related to the changes in fair value of Revesting Notes during the years ended December 31, 2023, 2022 and 2021, respectively.

The retention bonuses are recognized in prepaid expenses and other assets, noncurrent in the consolidated balance sheet and vest monthly over a period of 24 months and require continuous employment.

The expense associated with the Unvested Replacement Awards is recognized as stock-based compensation ratably over the remaining service period.

As of December 31, 2023, all retention bonuses have been recognized and none remain outstanding on the consolidated balance sheets.

Life360, Inc.

Notes to Consolidated Financial Statements

The 2021 and 2022 contingent consideration is based on the achievement of a Qualifying Units Sold Target for the period January 1, 2021 through December 31, 2021 (“2021 Contingent Consideration”) and for the period January 1, 2022 through December 31, 2022 (“2022 Contingent Consideration,” collectively, “Contingent Consideration”).

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The Company recorded a $ 5.3 million gain and $ 3.6 million loss within general and administrative expense related to the change in the fair value of the Contingent Consideration during the years ended December 31, 2022 and 2021, respectively.

The 2021 and 2022 Contingent Consideration was settled during the year ended December 31, 2022.

In April 2022, the Board of Directors and previous Jiobit shareholders approved an amendment to the 2021 Contingent Consideration.

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As of December 31, 2022, the Contingent Consideration was zero as it was fully settled in April 2022.

Life360, Inc.

Notes to Consolidated Financial Statements

The acquisition was accounted for as a business combination.

The total purchase price of $ 43.2 million was allocated to the net tangible and intangible assets and liabilities based on their estimated fair values on the acquisition date and the excess was recorded to goodwill.

Any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill.

The assets acquired and liabilities assumed in connection with the acquisition were recorded at their fair value on the date of acquisition as follows (in thousands):

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The goodwill is not deductible for tax purposes.

The Company estimated and recorded a net deferred tax liability of $ 0.1 million after offsetting the acquired available tax attributes with the intangible assets shown in the table above.

Refer to Note 15 “Income Taxes” for discussion of the partial release of the Company’s valuation allowance relating to the deferred tax liability.

The results of operations of Jiobit are included in the accompanying consolidated statements of operations and comprehensive loss from the date of acquisition.

Life360, Inc.

Notes to Consolidated Financial Statements

In 2022, the Company estimated and recorded a net deferred tax liability of $ 0.1 million after offsetting the acquired available tax attributes with the intangible assets shown in the table above.

Refer to Note 15 “Income Taxes” for discussion of the partial release of the Company’s valuation allowance relating to the deferred tax liability.

The results of operations of Jiobit are included in the accompanying consolidated statements of operations and comprehensive loss from the date of acquisition.

Pro Forma Financial Information (Unaudited)

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Net loss $ ( 37,356 )

Life360, Inc.

Notes to Consolidated Financial Statements

On January 5, 2022, the Company completed the acquisition of Tile, Inc., a privately held consumer electronics company.

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The remaining costs excluded from purchase consideration were a result of 1,561 shares granted to key employee and vested based continued employment and 4,784 shares of contingent consideration granted to a key employee and vested based on continued employment.

Of the 1,499,349 shares of retention restricted stock units, 787,446 shares valued at $ 15.6 million contain performance vesting criteria based on the achievement of certain company milestones, and vest over a two year period.

Of the 1,499,349 shares of retention restricted stock units, 787,446 shares valued at $ 15.6 million contained performance vesting criteria based on the achievement of certain company milestones, and were scheduled to vest over a two year period.

As of March 31, 2022, the vesting criteria had not been met and all 787,446 restricted stock units were forfeited.

The remaining retention restricted stock units of 711,903 shares vest over a two to four year period.

The contingent consideration was based on the Company’s achievement of certain targets for revenue and earnings before interest, taxes, depreciation, and amortization for the three months ended December 31, 2021 and the three months ended March 31, 2022.

The Company determined that the criteria to satisfy the contingent consideration was not met, and as such, no value was ascribed to the contingent consideration.

Life360, Inc.

Notes to Consolidated Financial Statements

The Company ascribed no value to the contingent consideration.

The acquisition was accounted for as a business combination and the total purchase consideration was allocated to the net tangible and intangible assets and liabilities based on their fair values on the acquisition date and the excess was recorded to goodwill.

The provisional values assigned to the assets acquired and liabilities assumed are based on preliminary estimates of fair value available as of the date of these financial statements and certain assets and liabilities may be subject to adjustment during the measurement period of up to 12 months from the date of acquisition including, but not limited to, intangible assets, certain reserves and income taxes.

Any changes in the fair values of the assets acquired and liabilities assumed during the measurement period may result in adjustments to goodwill.

The provisional values assigned to the assets acquired and liabilities assumed were based on estimates of fair value available and were finalized as of January 5, 2023.

During the year ended December 31, 2022, the Company made a measurement period adjustment to the preliminary purchase price allocation which included:

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The measurement period adjustment was made to reflect facts and circumstances that existed as of the acquisition date and is reflected in the table below.

The assets acquired and liabilities assumed in connection with the acquisition were recorded at their fair value on the date of acquisition as follows (in thousands):

Life360, Inc.

Notes to Consolidated Financial Statements

The assets acquired and liabilities assumed in connection with the acquisition were recorded at their fair value on the date of acquisition, inclusive of the measurement period adjustments, as follows (in thousands):

Cash $ 32,997

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The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition:

(in thousands)

Estimated Useful

(in thousands) Estimated Useful

Developed technology $ 18,400 5

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The difference between actual financial results and pro forma results is immaterial for the year ended December 31, 2022.

The results are consolidated for December 31, 2023, hence there is no difference between pro forma and actual results.

Year Ended December 31,

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Accounts receivable $ 42,274 $ 33,219

Allowance for doubtful accounts ( 94 ) —

Allowance for credit losses ( 94 ) ( 94 )

Accounts receivable, net $ 42,180 $ 33,125

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Notes to Consolidated Financial Statements

The Company recorded a raw materials inventory write-off of $ 0.9 million for the year ended December 31, 2023.

The write-off resulted from a decision made during the three months ended March 31, 2023 to discontinue a product line in the Company’s product roadmap.

The raw materials have no alternative use and have been fully written off for the year ended December 31, 2023.

There were no additional inventory write-offs for the year ended December 31, 2023, and there were no inventory write-offs recorded for the year ended December 31, 2022.

Prepaid Expenses and Other Current Assets

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Production manufacturing equipment 839 624

Construction in progress 249 —

Furniture and fixtures 29 9

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As of December 31,

Prepaid expenses $ 1,524 $ 3,324

Investment in affiliate 5,474 —

Prepaid expenses, noncurrent $ 1,353 $ 1,524

Investment 5,474 5,474

Other assets 21 136

Total prepaid expenses and other assets, noncurrent $ 6,848 $ 7,134

Prepaid expenses primarily consist of cloud platform costs.

Investment in Affiliate relates to warrants to purchase shares of common stock of a current Data Revenue Partner.

Prepaid expenses, noncurrent primarily consist of cloud platform costs.

Investment relates to warrants to purchase shares of preferred stock of a current Data Revenue Partner.

Refer to Note 2, "Summary of Significant Accounting Policies" for additional information.

During the year ended December 31, 2022, the Company leased real estate space under non-cancellable operating lease agreements in San Francisco, San Diego and San Mateo, California and Chicago, Illinois.

As of December 31, 2022, the Company has terminated the operating lease agreements in San Francisco and San Diego, California and currently holds a lease for its corporate headquarters in San Mateo, California and a leased office in Chicago, Illinois.

The operating leases have remaining lease terms of up to 1 year, some of which include the option to extend the lease.

Life360, Inc.

Notes to Consolidated Financial Statements

The Company has recognized an operating lease right-of-use (ROU) asset and short term lease liabilities of $ 0.8 million and $ 0.8 million in “Right-of-use-asset” and “ Accrued expenses and other current liabilities, ” respectively, on the Company’s consolidated balance sheet as of December 31, 2022.

No long-term lease liabilities were recorded within “ Other noncurrent liabilities ” on the Company’s consolidated balance sheet as of December 31, 2022.

The Company has recognized operating ROU assets, short term and long-term lease liabilities of $ 1.6 million, $ 1.6 million, and $ 0.3 million in “Right-of-use-asset,” “ Accrued expenses and other current liabilities, ” and “ Other noncurrent liabilities, ” respectively, on the Company’s consolidated balance sheet as of December 31, 2021.

The Company leases office space under a non-cancelable operating lease with a remaining lease term of up to 2.9 years, includes the option to extend the lease.

In May 2023, the Company amended its lease agreement for its headquarter office space located in San Mateo, California.

The amendment extended the lease term to November 2026, reduced the Company’s leased office space and reduced the monthly lease payments.

As a result, the associated right-of-use asset and lease liability were remeasured and the right-of-use asset and lease liability increased by $ 1.1 million and $ 1.1 million, respectively, upon the remeasurement date.

The Company has recognized an operating lease right-of-use (ROU) asset and short term lease liabilities of $ 1.0 million and $ 0.3 million in “Operating lease right-of-use asset” and “Accrued expenses and other current liabilities,” respectively, on the Company’s consolidated balance sheet as of December 31, 2023.

The Company has recognized a long-term lease liability of $ 0.7 million in “Other liabilities, noncurrent” on the Company’s consolidated balance sheet as of December 31, 2023.

The Company has recognized an operating lease ROU asset, and short term lease liabilities of $ 0.8 million and $ 0.8 million in “Operating lease right-of-use asset” and “Accrued expenses and other current liabilities , ” respectively, on the Company’s consolidated balance sheet as of December 31, 2022.

No long-term lease liabilities were recorded within “Other liabilities, noncurrent,” on the Company’s consolidated balance sheet as of December 31, 2022.

The Company did not have any finance leases as of December 31, 2023 or December 31, 2022.

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(1) Amounts include short-term leases, which are immaterial.

The weighted-average remaining term of the Company’s operating leases was 0.8 years and 1.3 years as of December 31, 2022 and 2021, respectively, and the weighted-average discount rate used to measure the present value of the operating lease liabilities was 5.0 % and 4.8 %, respectively.

Maturities of the Company’s operating lease liabilities, which do not include short-term leases, as of December 31, 2022 were as follows (in thousands):

For the years ended December 31, 2023, 2022, and 2021, payments for operating leases included in cash from operating activities were $ 0.9 million, $ 2.4 million and $ 1.6 million, respectively.

Supplemental balance sheet information related to leases is as follows (in thousands, except lease term):

As of December 31, As of December 31,

Operating lease right-of-use asset $ 1,014 $ 802

Operating lease liability, current (included in accrued expenses and other current liabilities) 335 813

Operating lease liability, noncurrent (included in other liabilities, noncurrent) 723 —

Weighted-average remaining term for operating lease (in years) 2.9 0.8

The weighted-average discount rate used to measure the present value of the operating lease liabilities was 5.0 %, respectively.

Life360, Inc.

Notes to Consolidated Financial Statements

Maturities of the Company’s operating lease liabilities as of December 31, 2023, were as follows (in thousands):

Operating leases

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Total operating lease liability $ 1,058

Payments for operating leases included in cash from operating activities were $ 2.4 million and $ 1.6 million for the years ended December 31, 2022 and 2021, respectively.

Intangible Assets, net

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As of December 31 2023,

Gross Accumulated Amortization Net

Trade name $ 23,380 $ ( 4,762 ) $ 18,618

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Internal use software 2,416 ( 340 ) 2,076

Total intangible assets, gross 61,801 8,400

accumulated amortization ( 9,102 ) ( 414 )

Total intangible assets, net $ 52,699 $ 7,986

Total $ 63,516 $ ( 18,075 ) $ 45,441

As of December 31 2022,

Gross Accumulated Amortization Net

Trade name $ 23,380 $ ( 2,424 ) $ 20,956

Technology 22,430 ( 4,705 ) 17,725

Customer relationships 15,290 ( 1,895 ) 13,395

Internal use software 701 ( 78 ) 623

Total $ 61,801 $ ( 9,102 ) $ 52,699

Amortization expense was $ 9.0 million, $ 8.7 million, and $ 0.4 million for the years ended December 31, 2023, 2022, and 2021, respectively.

Life360, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2023, estimated remaining amortization expense for intangible assets by fiscal year is as follows (in thousands):

Beyond 17,505

Thereafter 9,079

Total future amortization expense $ 45,441

Life360, Inc.

Notes to Consolidated Financial Statements

The weighted-average remaining useful lives of the Company’s acquired intangible assets are as follows:

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Customer relationships 6.1 years 7.1 years

Internal use software 2.8 years —

The detail of intangible assets, net is as follows (in thousands):

As of December 31, 2022

name Technology Customer

relationships Internal use software Total

Total intangible assets $ 23,380 $ 22,430 $ 15,290 $ 701 $ 61,801

Less accumulated amortization ( 2,424 ) ( 4,705 ) ( 1,895 ) ( 78 ) ( 9,102 )

Total intangible assets, net $ 20,956 $ 17,725 $ 13,395 $ 623 $ 52,699

As of December 31, 2021

name Technology Customer

relationships Total

Total intangible assets $ 3,380 $ 4,030 $ 990 $ 8,400

Less accumulated amortization ( 113 ) ( 268 ) ( 33 ) ( 414 )

Total intangible assets, net $ 3,267 $ 3,762 $ 957 $ 7,986

Goodwill consists of the following (in thousands):

Balance as of December 31, 2021 $ 31,127

Acquisitions 102,547

Balance as of December 31, 2022 $ 133,674

Life360, Inc.

Notes to Consolidated Financial Statements

Internal use software 3.6 years 2.8 years

Accrued Expenses and Other Current Liabilities

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Total accrued expenses and other current liabilities $ 27,538 $ 27,015

Other current liabilities primarily relate to warranty liabilities related to the Company’s hardware tracking devices and inventory received not yet billed.

Other current liabilities primarily relate to warranty liabilities related to the Company’s hardware tracking devices, inventory received not yet billed, and sales tax payable.

Escrow Liability

The escrow liability relates to restricted cash associated with the Tile Acquisition, $ 13.1 million, and Jiobit Acquisition, $ 0.2 million, placed in an indemnity escrow fund to be held for fifteen months and eighteen months , respectively, after the acquisition date for general representations and warranties.

The escrow liability as of December 31, 2022 relates to restricted cash associated with the Tile Acquisition, $ 13.1 million, and Jiobit Acquisition, $ 0.2 million, placed in an indemnity escrow fund to be held for fifteen months and eighteen months , respectively, after the acquisition date for general representations and warranties.

The initial balances were included within total consideration transferred.

As of December 31, 2022 the total escrow liability remaining was $ 13.3 million and is included within current liabilities.

As of December 31, 2021, the total escrow liability was $ 0.2 million and was included within noncurrent liabilities.

Other Noncurrent Liabilities

As of December 31, 2023, all escrow liabilities had been released and paid as scheduled.

Other Liabilities, noncurrent

Other noncurrent liabilities consist of the following (in thousands):

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Total other liabilities, noncurrent $ 723 $ 576

Life360, Inc.

Notes to Consolidated Financial Statements

Convertible Notes

July 2021 Convertible Notes

In July 2021, the Company issued the July 2021 Convertible Notes to investors with an underlying principal amount of $ 2.1 million.

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or (iii) upon maturity, settlement in cash at the outstanding accrued interest and principal amount.

Life360, Inc.

Notes to Consolidated Financial Statements

Certain conversion and redemption features of the July 2021 Convertible Notes were determined to not be clearly and closely associated with the risk of the debt-type host instrument and were required to be separately accounted for as derivative financial instruments.

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As of December 31, 2023 the unamortized amount and net carrying value of the July 2021 Convertible Notes is $ 1.1 million and $ 1.1 million, respectively.

The amount by which July 2021 Convertible Notes if-converted value does not exceed its principal is $ 0.4 million as of December 31, 2022.

As of December 31, 2021 the unamortized amount and net carrying value of the July 2021 Convertible Notes is $ 1.9 million and $ 0.2 million, respectively.

The amount by which July 2021 Convertible Notes if-converted value exceeds its principal is $ 0.6 million as of December 31, 2023.

In connection with the July 2021 Convertible Notes, the Company issued warrants to purchase 88,213 shares of the Company’s common stock with an exercise price of $ 0.01 per share and a term of one year (Warrant Tranche 1), 44,106 shares of the Company’s common stock with an exercise price of $ 11.96 per share and a term of 5 years (Warrant Tranche 2), and 44,106 shares of the Company’s common stock which is exercisable starting twelve months from the issuance date with an exercise price of $ 11.96 per share and a term of 5 years (Warrant Tranche 3).

As of December 31, 2022 the unamortized amount and net carrying value of the July 2021 Convertible Notes was $ 1.5 million and $ 0.6 million, respectively.

The amount by which July 2021 Convertible Notes if-converted value exceeds its principal was $ 0.4 million as of December 31, 2022.

In connection with the July 2021 Convertible Notes, the Company issued warrants to purchase 88,213 shares of the Company’s common stock with an exercise price of $ 0.01 per share and a term of one year (Warrant Tranche 1), 44,106 shares of the Company’s common stock with an exercise price of $ 11.96 per share and a term of five years (Warrant Tranche 2), and 44,106 shares of the Company’s common stock which is exercisable starting twelve months from the issuance date with an exercise price of $ 11.96 per share and a term of five years (Warrant Tranche 3).

The fair value of the warrants was determined using the Black-Scholes option-pricing method, with the following assumptions:

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The beneficial conversion feature was recorded as a debt discount and is being amortized to interest expense under the straight-line method over the term of the respective notes.

The Company recognized a total of $ 0.4 million and $ 0.2 million in non-cash interest expense related to the July 2021 Convertible Notes for the years ended December 31, 2022 and 2021, respectively.

The Company has also issued convertible notes, September 2021 Convertible Notes, in connection with an acquisition.

Refer to Note 7 “Business Combinations” for further details.

Life360, Inc.

Notes to Consolidated Financial Statements

The Company recognized a total of $ 0.4 million, $ 0.4 million, and $ 0.2 million in non-cash interest expense related to the July 2021 Convertible Notes for the years ended December 31, 2023, 2022, and 2021, respectively.

The Company has also issued convertible notes, September 2021 Convertible Notes, in connection with an acquisition.

Refer to Note 7, "Business Combinations" for further details.

Convertible notes, current and noncurrent consist of the following (in thousands):

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The contractual future principal payments for all convertible notes as of December 31, 2023 were as follows (in thousands):

2027 and beyond —

Total principal outstanding 5,475

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Purchase Commitments

The Company has certain commitments from outstanding purchase orders primarily related to technology support, facilities, marketing and branding and professional services.

These agreements, which total $ 138.9 million as of December 31, 2022 and $ 11.0 million as of December 31, 2021, are cancellable at any time with the Company required to pay all costs incurred through the cancellation date.

The Company has contractual commitments with our cloud platform provider and contract manufacturer that are non-cancellable.

As of December 31, 2023, future non-cancellable commitments under these arrangements were as follows (in thousands):

2024 $ 29,727

Total purchase commitments $ 106,227

Contingencies

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Actual outcomes of these legal and regulatory proceedings may materially differ from the Company’s estimates.

On March 12, 2019, a former alleged competitor of Tile, Cellwitch, Inc, filed a patent infringement claim against the Company in the U.S.

Life360, Inc.

Notes to Consolidated Financial Statements

On March 12, 2019, a former alleged competitor of Tile, Cellwitch, Inc, filed a patent infringement claim against Tile in the U.S.

District Court, Northern District of California, seeking permanent injunction and damages.

On December 18, 2019, Tile filed an inter partes review petition with the Patent Trial and Appeal Board (“PTAB”) challenging the validity of the patent.

On May 13, 2021, the PTAB issued a Final Written Decision on Tile’s inter partes review petition (the “Final Written Decision”), which both parties appealed.

On May 13, 2021, the PTAB issued a Final Written Decision on Tile’s inter partes review petition (the “Final Written Decision”), finding a majority of the claims invalid.

The Final Written Decision was affirmed by the U.S.

Court of Appeals for the Federal Circuit on May 13, 2022.

The case is currently in trial court with a case management conference scheduled for March 2023.

The case is currently in trial court.

The claim construction hearing took place on January 18, 2024, and the parties currently await the court's order from that hearing.

At this time, a loss is not probable nor estimable, so no legal accrual has been recorded on our consolidated balance sheets as of December 31, 2023.

A purported class action (E.S.

Life360, Inc.) alleging a single cause of action for unjust enrichment was filed against Life360 on January 12, 2023 seeking equitable relief purportedly arising out of Life360’s historic data sales.

Given the inherently uncertain nature of litigation, the ultimate disposition of the case is not presently determinable, but the Company intends to defend against the claim.

We cannot predict at this point the length of time that this action will be ongoing or estimate the liability, if any, which may arise therefrom.

Life360, Inc.

Notes to Consolidated Financial Statements

Based on information currently available and the current state of the litigation, we are unable to reasonably estimate a possible loss or range of possible losses, if any, with regards to outstanding litigation.

As a result, no litigation reserve has been recorded on our consolidated balance sheets as of December 31, 2022 or 2021.

We will continue to evaluate information as it becomes known and will record an estimate for losses at the time or times if and when it is probable a loss will be incurred and the amount of the loss is reasonably estimable.

As of December 31, 2022 and December 31, 2021, the Company was authorized to issue up to 100,000,000 shares of par value $ 0.001 per share common stock.

Plaintiff dismissed these claims on November 3, 2023 and we settled the matter for an immaterial amount.

No additional litigation reserve was recorded on our consolidated balance sheets as of December 31, 2023.

No litigation reserve was recorded on our consolidated balance sheets as of December 31, 2022.

As of December 31, 2023 and December 31, 2022, the Company had 108,592 shares of common stock subject to the Company’s right to repurchase.

The Company has also issued shares of common stock as a result of stock option exercises throughout its existence.

Common stockholders are entitled to dividends when and if declared by the Board of Directors subject to the prior rights of the preferred stockholders.

The holder of each share of common stock is entitled to one vote.

The common stockholders voting as a class are entitled to elect three members to the Company’s Board of Directors.

No dividends have been declared in the Company’s existence.

In November 2022, the Company issued a total of 2,645,503 common shares raising proceeds before issuance costs of $ 33.3 million.

In December 2021, the Company issued a total of 7,779,014 common shares raising proceeds before issuance costs of $ 198.8 million.

The Company has reserved shares of common stock, on an as if converted basis, for issuance as follows:

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2011 Equity Incentive Plan

The Company’s 2011 Stock Plan was originally adopted by the Company’s Board of Directors on July 27, 2011 and the Company’s stockholders on October 11, 2011, and most recently amended by the Board of Directors on September 7, 2018 and the Company’s stockholders (as restated, the “Plan”).

The Company’s 2011 Stock Plan was originally adopted by the Company’s Board of Directors on July 27, 2011 and the Company’s stockholders on October 11, 2011, and most recently amended and restated, and adopted by the Board of Directors on March 10, 2020 and the Company’s stockholders on July 21, 2020 (as restated, the “Plan”).

The Plan allows the Company to grant restricted stock units, restricted stock and stock options to employees and consultants of the Company and any of the Company’s parent, subsidiaries, or affiliates, and to the members of the Board of Directors.

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Incentive stock options (“ISOs”), may be granted only to employees of the Company or any of the Company’s parent or subsidiaries (including officers and directors who are also employees).

Nonqualified stock options, or NSOs, may be granted to any person eligible for grants under the Plan.

Nonqualified stock options (“NSOs”), may be granted to any person eligible for grants under the Plan.

Life360, Inc.

Notes to Consolidated Financial Statements

Under the Plan, the Board of Directors determines the per share exercise price of each stock option, which for ISOs shall not be less than 100 % of the fair market value of a share on the date of grant;

provided that the exercise price of an ISO granted to a stockholder who at the time of grant owns stock representing more than 10% of the voting power of all classes of stock (a “10% Stockholder”) shall not be less than 110 % of the fair market value of a share on the date of grant.

The Board of Directors determines the period over which options vest and become exercisable.

Options granted to new employees generally vest over a 4-year period:

25 % of the shares vest on the first anniversary from the vesting commencement date of the option and an additional 1/48 th of the shares vest on each monthly anniversary thereafter, subject to the employee’s continuous service through each vesting date.

Options granted to continuing employees generally vest monthly over a 4-year period.

Options issued under the Plan generally are exercisable for periods not to exceed ten years and generally vest over a 4 -year period with 25 % vesting after one year and the remainder vesting monthly thereafter in equal installments.

The Board of Directors also determines the term of options, provided the maximum term for ISOs granted to a 10% stockholder must be no longer than 5 years from date of grant and the maximum term for all other options must be no longer than 10 years from date of grant.

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Exercisable as of December 31, 2023 5,506,657 $ 5.54 4.65 $ 55,258

As of December 31, 2022, the Company had 27,294,447 shares authorized for issuance and 396,347 shares available for issuance under the Plan.

As of December 31, 2023, there was total unrecognized compensation cost for outstanding stock options of $ 4.1 million to be recognized over a period of approximately 1.9 years.

As of December 31, 2023, the Company had 23,246,474 shares reserved for issuance and 16,882,215 shares available for issuance under the Plan.

There were no stock options granted during the year ended December 31, 2023.

Stock options granted during the years ended December 31, 2022 and 2021 had a weighted average grant date fair value of $ 8.33 , and $ 12.65 per share, respectively.

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Balance as of December 31, 2023 6,182,543 $ 12.67

As of December 31, 2023, there was unrecognized compensation cost for outstanding restricted stock units of $ 61.3 million to be recognized over a period of approximately 2.8 years.

Life360, Inc.

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2023 2022 2021

Expected terms (in years) 3.87 4.24 5.68

Expected volatility 65 % 49 % 43 %

Risk-free interest rate 2.22 % 0.68 % 0.60 %

Expected dividend rate 0 % 0 % 0 %

Expected terms (in years) N/A 3.87 4.24

Expected volatility N/A 65 % 49 %

Risk-free interest rate N/A 2.22 % 0.68 %

Expected dividend rate N/A 0 % 0 %

Fair Value of Common Stock :

As the Company’s stock is traded on the public market, the fair value on the date of the grant is used.

Since the listing of our CDIs on the ASX, the fair value of common stock is based on the closing price of our CDIs on the ASX as reported in Australian dollars, adjusted to reflect the CDI/per share of common stock ratio in effect, and translated to U.S.

dollars based on the date of grant of our common stock.

Expected Term :

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Expected Volatility :

As the Company has limited historical trading data regarding the volatility of its common stock, the expected volatility is based on volatility of a Company of similar entities and the Company’s trading data since IPO.

In evaluating similarity, the Company considered factors such as industry, stage of life cycle and size.

Since we have limited trading history of CDIs, interests in our common stock, the expected volatility is determined based on the historical stock volatilities of our comparable companies, and the Company’s trading data since listing on the ASX.

Comparable companies consist of public companies in our industry, which are similar in size, stage of life cycle and financial leverage.

The Company will continue to analyze the historical stock price volatility and expected term assumptions as more historical data for the Company’s common stock becomes available.

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The Company has never paid any dividends and does not plan to pay dividends in the foreseeable future, and, therefore, an expected dividend rate of zero is used in the valuation model.

The Company accounts for forfeitures as they occur.

Equity Awards Issued in Connection with Business Combinations

In connection with the Jiobit Acquisition in September 2021, the Company issued 91,217 shares of restricted common stock with an aggregate fair value of $ 1.9 million to be recognized as post combination stock-based compensation ratably with continuous employment of certain employees over a 3 -year period.

As of December 31, 2022, there was $ 0.2 million of unrecognized compensation expense related to the restricted common stock which is expected to be recognized over the remaining weighted average life of 1.7 years.

As of December 31, 2023, there was zero unrecognized compensation expense related to the restricted common stock, as a result of the termination of certain employees.

As of December 31, 2022, there was $ 0.2 million of unrecognized compensation expense related to this restricted common stock which is expected to be recognized over the remaining weighted average life of 1.7 years.

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Additionally, the Company granted 43,083 service-based stock options under the Plan to certain Jiobit employees with an aggregate fair value of $ 0.5 million which vests ratably over the requisite service period.

As of December 31, 2022, there was $ 0.2 million of unrecognized compensation expense related to unvested assumed stock options, which is expected to be recognized over the remaining weighted average life of 1.8 years.

As of December 31, 2023, there was $ 0.1 million of unrecognized compensation expense related to unvested assumed stock options, which is expected to be recognized over the remaining weighted average life of 1 year.

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As of December 31, 2023, there was $ 0.7 million of unrecognized compensation expense related to the retention restricted stock units which is expected to be recognized over the remaining weighted average life of 1.9 years.

As of December 31, 2022, there was $ 5.6 million of unrecognized compensation expense related to the retention restricted stock units which is expected to be recognized over the remaining weighted average life of 1.5 years.

The Company also issued 38,730 vested common stock options to Tile employees as stock-based compensation on the acquisition date.

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A total of 1,561 shares of common stock with an aggregate fair value of $ 30.8 thousand were issued to a key employee, the vesting of which is subject to continued employment over a 30-month period.

As of December 31, 2022, there was $ 69.6 thousand of unrecognized compensation expense related to unvested restricted stock units which is expected to be recognized over the remaining 1.6 years.

As of December 31, 2023 and 2022, there was an immaterial amount of unrecognized compensation expense related to unvested restricted stock units which is expected to be recognized over the remaining 0.5 years and 1.6 years, respectively.

A total of 84,524 shares of common stock were issued as part of consideration transferred and were placed in an indemnity escrow fund to be held for fifteen months after the acquisition date for general representations and warranties.

The aggregate fair value of $ 1.7 million was included within purchase consideration.

All 84,524 shares of common stock were released from escrow in April 2023 as scheduled.

Stock-Based Compensation

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Total stock-based compensation expense $ 38,512 $ 34,680 $ 11,938

As of December 31, 2022, there was total unrecognized compensation cost for outstanding stock options of $ 9.7 million to be recognized over a period of approximately 2.8 years.

Life360, Inc.

Notes to Consolidated Financial Statements

As of December 31, 2022, there was unrecognized compensation cost for outstanding restricted stock units of $ 50.9 million to be recognized over a period of approximately 2.6 years.

There were no capitalized stock-based compensation costs or recognized stock-based compensation tax benefits during the year ended December 31, 2022 .

There was an immaterial amount of capitalized stock-based compensation costs during the years ended December 31, 2023 and 2022.

The Company has historically incurred net operating losses only in the United States since its inception.

In 2022, the Company incurred $ 91.8 million of net operating losses in the United States and $ 0.3 million of net operating income internationally.

An income tax provision of $ 0.1 million and an income tax benefit of $ 0.1 million were recorded for the years ended December 31, 2022 and 2021, respectively, and no provision or benefit for income taxes was recorded for the year ended December 31, 2020.

During the year ended December 31, 2023, the Company incurred $ 27.1 million of net operating losses in the United States and $ 0.3 million of net operating income internationally.

An income tax provision of $ 0.6 million and $ 0.1 million and an income tax benefit of $ 0.1 million were recorded for the years ended December 31, 2023, 2022 and 2021, respectively.

In accordance with ASC 805, a change in the acquirer’s valuation allowance that stems from a business combination should be recognized as an element of the acquirer’s income tax expense or benefit in the period of the acquisition.

Accordingly, for the years ended December 31, 2022 and 2021, the Company recorded a $ 27.4 thousand partial release of its valuation allowance stemming from the Tile Acquisition and a $ 0.1 million partial release of its valuation allowance stemming from the Jiobit Acquisition.

Accordingly, for the years ended December 31, 2022 and 2021, the Company recorded a $ 27.4 thousand partial release of its valuation allowance stemming from the Tile Acquisition and $ 0.1 million partial release of its valuation allowance stemming from the Jiobit Acquisition.

The reconciliation of the Company’s effective tax rate to the U.S.

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Statutory federal income tax rate 21 % 21 % 21 %

State tax rate ( 3 ) % — % — %

Research and development tax credits 5 % — % 2 %

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Permanent differences ( 1 ) % ( 2 ) % ( 1 ) %

Officer Compensation ( 10 ) % — % — %

Change in valuation allowance ( 14 ) % ( 19 ) % ( 25 ) %

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Deferred tax liabilities:

Right-of-use asset ( 210 ) ( 378 )

Operating lease right-of-use asset ( 250 ) ( 210 )

Acquired intangibles ( 10,073 ) ( 12,829 )

2 unchanged sentences

Net deferred tax asset $ — $ —

Life360, Inc.

Notes to Consolidated Financial Statements

The Company has provided a full valuation allowance on the net deferred tax assets.

The valuation allowance increased by $ 4.5 million during 2023 and $ 42.7 million during 2022.

Life360, Inc.

Notes to Consolidated Financial Statements

At December 31, 2023 the Company had approximately $ 197.5 million and $ 81.0 million of federal and state net operating loss carryforwards, respectively, available to offset future taxable income.

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The state tax credits do not expire.

Additionally, the Company has approximately $ 1.0 million of tax credits in Canada in which are expected to expire in varying amounts beginning 2032.

Additionally, the Company has approximately $ 1.9 million of tax credits in Canada, which are expected to expire in varying amounts beginning 2032.

The Tax Reform Act of 1986 limits the use of net operating loss carryforwards in certain situations where changes occur in the stock ownership of a Company.

14 unchanged sentences

Additions based on tax positions related to 2022 1,327

Additions for tax positions of prior years 5,176

Balance as of December 31, 2022 11,091

2 unchanged sentences

Balance as of December 31, 2023 $ 12,059

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law and is effective for taxable years beginning after December 31, 2022.

The IRA includes multiple incentives to promote clean energy with tax provisions primarily focused on implementing a 15% minimum tax on global adjusted financial statement income and a 1% excise tax on share repurchases.

The Company does not believe the IRA will have a material impact on its income tax provision and cash taxes.

In accordance with the 2017 Tax Act, research and experimental (“R&E”) expenses under Internal Revenue Code Section 174 are required to be capitalized beginning in 2022.

R&E expenses are required to be amortized over a period of five years for domestic expenses and 15 years for foreign expenses.

The Company has capitalized research and development expenditures in its income tax provision as a result.

Life360, Inc.

Notes to Consolidated Financial Statements

Related-Party Transactions

3 unchanged sentences

In February 2016, the Company issued an aggregate of $ 0.6 million in secured partial recourse promissory notes (“Partially Secured Loan”) to the Chief Executive Officer, Non-Executive Director (Previously President), Chief Operating Officer and another executive of the Company.

Life360, Inc.

Notes to Consolidated Financial Statements

The Company accounted for the Partially Secured Loan as consideration received for the exercise of the related equity award, because even after the original options are exercised or the shares are purchased, an employee could decide not to repay the loan if the value of the shares declines below the outstanding loan amount and could instead choose to return the shares in satisfaction of the loan.

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During the year ended December 31, 2022, the Company received proceeds from the repayment of the Partially Secured Loans of $ 0.6 million.

As of December 31, 2022 and December 31, 2021, the Company had deposit liability balances of $ 0.3 million and $ 0.7 million, respectively, in connection with the 2016 Partially Secured Loan and other early exercises of equity awards.

During the year ended December 31, 2023, the Company received proceeds from the repayment of the partially secured loan that remained outstanding of $ 0.3 million.

As of December 31, 2023 and 2022, the Company had deposit liability balances of zero and $ 0.3 million, respectively, in connection with the Partially Secured Loan and other early exercises of equity awards.

Principal amounts due under the Partially Secured Loan are included in Notes Due From Affiliates as a reduction in stockholders’ equity on the consolidated balance sheets.

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Non-executive director, James Synge, is a Principal and Partner of Carthona Capital.

During the year ended December 31, 2021, the Company entered into a consultancy agreement with Carthona Capital.

Under this agreement, Carthona Capital agreed to provide consultancy services to the Company in relation to capital raising matters.

During the year ended December 31, 2022, Carthona Capital received consideration of $ 0.1 million.

During the year ended December 31, 2022, Carthona Capital received consideration of $ 0.1 million for consultancy services to the Company in relation to capital raising matters.

Annika Hulls is the spouse of the CEO and Executive Director, Chris Hulls.

During the year ended December 31, 2022, a cash payment of $ 6.5 thousand was paid to Annika Hulls for services relating to a marketing campaign.

During the year ended December 31, 2022, a

cash payment of $ 6.5 thousand was paid to Annika Hulls for services relating to a marketing campaign.

Defined Contribution Plan

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Contributions made by the Company are voluntary and are determined annually by the Board of Directors on an individual basis subject to the maximum allowable amount under federal tax regulations.

The Company has made no contributions to the plan since its inception.

Employer contributions to the plan were $ 1.1 million for the year ended December 31, 2023.

There were immaterial employer contributions to the plan for the years ended December 31, 2022 and 2021.

Net Loss Per Share

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The potential shares of common stock that were excluded from the computation of diluted net loss per share for the periods presented because including them would have been antidilutive are as follows:

As of December 31,

Year Ended December 31,

2023 2022 2021

Issuances under stock incentive plan 6,625,812 8,180,840 6,972,376

2 unchanged sentences

Issuances of convertible notes 325,981 — 686,926

Shares reserved for shares available to be granted but not granted yet 396,347 4,071,403

13,271,994 15,098,390 10,454,425

Life360, Inc.

Notes to Consolidated Financial Statements

Subsequent Events

During January 2023, the Company announced a restructuring which resulted in an approximate 14 % reduction of the company's workforce and the departure of Charles (CJ) Prober, President and Executive Director, who will step down from his current positions on the earlier of (i) 30 calendar days after the date that the Company appoints a chief operating officer (or equivalent role) of the Company or (ii) September 2, 2023.

On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver.

At the time of closing, the Company had total cash and cash equivalents of approximately $ 95.1 million, including $ 75.4 million in shares of money market mutual funds managed by Morgan Stanley, Blackrock and Western Asset, for which SVB acted as custodian, and $ 6.1 million in deposits with SVB.

On March 12, 2023, the U.S.

Department of the Treasury, the Board of Governors of the Federal Reserve, and the FDIC announced that SVB depositors would have access to all of their funds starting March 13, 2023.

On March 13, 2023, the Company had regained access to all funds in SVB accounts and was transacting normally.

While the Company has not experienced any losses in such accounts, the recent failure of SVB exposed the Company to significant credit risk prior to the completion of the FDIC of the resolution of SVB in a manner that fully protected all depositors.

The Company is in the process of transferring its accounts to one or more alternative depository institutions, the financial position of which management believes does not expose the Company to significant credit risk or jeopardize its liquidity.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data