Life360 Inc

1. Nature of Business

Life360, Inc. (the “Company”) is a leading technology platform connecting millions of people throughout the world to the people, pets and things they care about most. The Company has created a new category at the intersection of family, technology, and safety to help keep families connected and safe. The Company’s core offering, the Life360 mobile application, includes features like communications, driving safety, digital safety and location sharing. Beyond the everyday, Life360 also provides much-needed protection and saves lives, which is crucial for families in emergency situations such as natural disasters, vehicle collisions, physical property theft, and digital identity theft. The Life360 mobile application operates under a “freemium” model where its core offering is available to members at no charge, with three membership subscription options that are available but not required.

The Company acquired Jio, Inc. (“Jiobit”) and Tile, Inc, (“Tile”) in September 2021 and January 2022, respectively, to create a comprehensive platform-agnostic location tracking solution for people, pets and things. Jiobit is a leading wearable location device for young children, pets and seniors and Tile is a leading product suite of location trackers for finding objects.

The Company’s suite of product and service offerings, including the Life360 and Tile mobile applications, and related third-party services, is system and platform-agnostic, allowing its products and services to work seamlessly for its members, regardless of the devices they use.

U.S. Initial Public Offering (“U.S. IPO”)

On June 6, 2024, the Company completed its U.S. IPO and began trading on the Nasdaq Global Select Market under the trading symbol “LIF”. The Company issued and sold 3,703,704 shares of common stock and certain selling securityholders sold 2,908,796 shares of common stock (including 862,500 shares sold pursuant to the underwriters’ full exercise of their option to purchase additional shares) in each case at an offering price of $27.00 per share. The Company received net proceeds of $93.0 million after deducting underwriting discounts and commissions of $7.0 million. An additional $5.5 million of expenses were paid on behalf of selling securityholders. Refer to Note 15, "Related-Party Transactions" for further details. The Company did not receive any proceeds from the sale of shares of common stock by the selling securityholders.

In connection with the U.S. IPO, the Company restated its certificate of incorporation to increase the authorized number of shares of its common stock from 100,000,000 shares to 500,000,000 shares.

2. Summary of Significant Accounting Policies

Included below are select significant accounting policies. Refer to Note 2, "Summary of Significant Accounting Policies" in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 29, 2024 (“Annual Report”) for a full list of the Company’s significant accounting policies.

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements, which include the accounts of the Company and its wholly owned subsidiaries, have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim periods and following the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. All intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated balance sheet as of December 31, 2023, included herein, was derived from the audited financial statements as of that date. In the opinion of the Company’s management, the condensed consolidated financial statements reflect all normal recurring adjustments necessary to provide a fair presentation of the Company’s financial position, results of operations, stockholders’ equity, and cash flows for the interim periods presented. Operating results for these interim periods are not necessarily indicative of the Company’s future results of operations.

The condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report.

Use of Estimates

The preparation of the Company’s condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, net revenue, and expenses. Significant items subject to such estimates, judgments, and assumptions include:

•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;

•allowances for credit losses and product returns;

•promotional and marketing allowances;

•inventory valuation;

•average useful customer life;

•valuation of stock-based awards;

•achievement of performance-based restricted stock units (“PRSUs”);

•legal contingencies;

•impairment of long-lived assets and goodwill;

•valuation of 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. Actual results could differ significantly from those estimates.

Accounting pronouncements not yet adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07 –Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in Accounting Standards Codification (“ASC”) 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. 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 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.

Concentrations of Risk and Significant Customers

Major Customers

The Company derives its accounts receivable from revenue earned from customers located in the United States and internationally. Channel and retail partners account for the majority of the Company’s revenue and accounts receivable for all periods presented.

The following tables set forth the information about the Company’s third-party platforms and distribution channels (each a “Channel Partner”) that processed the Company’s overall revenue transactions and retail partners who represented greater than 10% of the Company’s revenue or accounts receivable, respectively:

• Represents less than 10%

Supplier Concentration

The Company currently relies on a single technology partner for its cloud platform and outsources the manufacturing of the Jiobit and Tile hardware devices to a single contract manufacturer. Although there are a limited number of suppliers, management believes that other suppliers could provide similar services on comparable terms.

Cash and Cash Equivalents

The Company considers all highly liquid investment securities with remaining maturities at the date of purchase of three months or less to be cash equivalents. Cash and cash equivalents include deposit and money market funds. Money market mutual funds are valued using quoted market prices and therefore are classified within Level 1 of the fair value hierarchy.

Restricted Cash

The restricted cash, noncurrent balance of $1.2 million and $1.7 million as of September 30, 2024 and December 31, 2023, respectively, 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.

3. Segment and Geographic Revenue

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.

Revenue by geographic region is generally based on the address of the customer as defined in the contract with the customer. The following table sets forth revenue by geographic region for the periods presented (in thousands):

The Company’s revenues in the United States were $79.1 million, or 85%, of total revenue for the three months ended September 30, 2024 and $67.4 million, or 86%, of total revenue for the three months ended September 30, 2023. The Company’s revenues in the United States were $221.4 million, or 86%, of total revenue for the nine months ended September 30, 2024 and $188.5 million, or 87%, of total revenue for the nine months ended September 30, 2023.

4. Deferred Revenue

Deferred revenue consists primarily of payments received and accounts receivable recorded in advance of revenue recognition under the Company’s subscription service arrangements and is recognized as the revenue recognition criteria is met. The Company primarily invoices its customers for its subscription services arrangements in advance. Amounts anticipated to be recognized within one year of the balance sheet date are recorded as deferred revenue, current and the remaining portion is recorded as deferred revenue, noncurrent on the condensed consolidated balance sheets.

During the three and nine months ended September 30, 2024, the Company recognized revenue of $5.0 million and $31.2 million, respectively, that was included in the deferred revenue balance at December 31, 2023. During the three and nine months ended September 30, 2023, the Company recognized revenue of $3.5 million and $23.4 million, respectively, that was included in the deferred revenue balance at December 31, 2022

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 expected to be recognized in connection with remaining performance obligations was $218.9 million as of September 30, 2024, of which the Company expects 34% to be recognized over the next twelve months.

5. Costs Capitalized to Obtain Contracts

The Company recognizes as an asset the costs of obtaining a contract with a customer if it expects to recover those costs and they are both direct and incremental. These costs are attributable to the Company’s largest Channel Partners.

Costs of obtaining new revenue contracts are deferred and then amortized on a straight-line basis over the related period of benefit, which is estimated to betwo tothree 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):

6. Fair Value Measurements

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 which may be used to measure fair value are as follows:

Level 1 - Observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Valuations based on unobservable inputs to the valuation methodology and including data about assumptions market participants would use in pricing the asset or liability based on the best information available under the circumstances.

The carrying amounts of certain financial instruments, including cash and cash equivalents, prepaid expenses, accounts receivable, and accounts payable approximate fair value due to their short-term maturities.

The Company measures and reports certain assets and liabilities at fair value on a recurring basis. The fair value of these assets and liabilities as of September 30, 2024 and December 31, 2023 are classified as follows (in thousands):

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

For the three and nine months ended September 30, 2024, the Company recorded a loss associated with the change in fair value of the derivative liability ofzero and $1.7 million, respectively. For the three and nine months ended September 30, 2024, the Company recorded a gain ofzero and $1.9 million, respectively, related to the settlement of the derivative liability upon conversion of the July 2021 Convertible Notes. Refer to Note 8, "Convertible Notes" for further details.

For the three and nine months ended September 30, 2024, the Company recorded a loss associated with the change in fair value of the September 2021 Convertible Notes ofzero and $0.6 million, respectively. For the three and nine months ended September 30, 2024, the Company recorded a gain ofzero and $0.5 million, respectively, related to the settlement of the September 2021 Convertible Notes upon conversion. For the year ended December 31, 2023, the Company recorded a loss associated with the change in fair value of the derivative liability and the convertible notes of $0.1 million and $0.7 million, respectively. These amounts have been recorded in other income (expense), net in the condensed consolidated statements of operations and comprehensive income (loss).

For the three and nine months ended September 30, 2023, the Company recorded a gain associated with the change in fair value of the derivative liability of $0.1 million and a loss of $0.2 million, respectively. For the three and nine months ended September 30, 2023, the Company recorded a loss associated with the change in fair value of the September 2021 Convertible Notes of $0.6 million and $0.8 million, respectively. The amounts have been recorded in other income (expense), net in the condensed consolidated statements of operations and comprehensive loss.

7. Balance Sheet Components

Accounts receivable, net

Accounts receivable, net consists of the following (in thousands):

Inventory

Inventory consists of the following (in thousands):

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following (in thousands):

Prepaid expenses primarily consist of certain cloud platforms, customer service program costs, prepaid insurance and inventory. Other receivables primarily consist of freight and refunds owed to the Company and other amounts which the Company is expected to receive in less than twelve months.

Property and Equipment, net

Property and equipment, net consists of the following (in thousands):

Construction in progress relates to certain costs incurred with production manufacturing equipment.

For the three and nine months ended September 30, 2024, depreciation expense was $51 thousand and $146 thousand, respectively, and for the three and nine months ended September 30, 2023, depreciation expense was $46 thousand and $123 thousand, respectively.

There wasno impairment of property and equipment or long-lived assets recognized during the three and nine months ended September 30, 2024 or 2023.

Prepaid Expenses and Other Assets, noncurrent

Prepaid expenses and other assets, noncurrent consist of the following (in thousands):

Prepaid expenses, noncurrent primarily consist of cloud platform costs as of December 31, 2023.

Investment relates to non-marketable equity securities in a privately held company without a readily determinable market value. Non-marketable equity securities consist of warrants to purchase shares of preferred stock of a 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.

During the three months ended September 30, 2024, an observable price change related to our investment in warrants held to purchase shares of preferred stock of a data revenue partner took place. This resulted in a $5.4 million increase in the investment asset value and a corresponding gain on fair value adjustment recorded in other income (expense), net in the condensed consolidated statements of operations and comprehensive income (loss) for the three and nine months ended September 30, 2024.

Leases

The Company leases office space under a non-cancelable operating lease with a remaining lease term of 2.2 years, which includes the option to extend the lease.

The Company did not have any finance leases as of September 30, 2024 or December 31, 2023.

The components of lease expense are as follows (in thousands):

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

For the three and nine months ended September 30, 2024, payments for operating leases included in cash from operating activities were $0.1 million and $0.3 million, respectively. For the three and nine months ended September 30, 2023, payments for operating leases included in cash from operating activities were $0.2 million and $0.7 million, respectively.

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

The weighted-average discount rate used to measure the present value of the operating lease liabilities was 5.0% for each period presented.

Maturities of the Company’s operating lease liability, which does not include short-term leases, as of September 30, 2024 were as follows (in thousands):

Goodwill and Intangible Assets, net

Intangible assets, net consists of the following (in thousands):

For the three and nine months ended September 30, 2024, the Company capitalized $1.2 million and $3.8 million, respectively, in internal use software. For the three and nine months ended September 30, 2023, the Company capitalized $0.4 million and $1.2 million, respectively, in internal use software.

For the three and nine months ended September 30, 2024, amortization expense was $2.3 million and $6.9 million, respectively. For the three and nine months ended September 30, 2023, amortization expense was $2.2 million and $6.7 million, respectively.

During the three and nine months ended September 30, 2024 and 2023, there wasno impairment of intangible assets recorded.

As of September 30, 2024, the estimated remaining amortization expense for intangible assets by fiscal year is as follows (in thousands):

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

As of September 30, 2024, the Company had $4.1 million of capitalized internal use software projects that were not yet in service. The internal use software projects that were not yet in service have been excluded from the weighted-average remaining useful life calculation for internal use software in the table above.

As of September 30, 2024 and December 31, 2023, goodwill was $133.7 million. No goodwill impairment was recorded during the three and nine months ended September 30, 2024 or 2023.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

Other current liabilities primarily relate to sales taxes payable and inventory received not yet billed, as of September 30, 2024, and warranty liabilities related to the Company’s hardware tracking devices, inventory received not yet billed, and sales taxes payable as of December 31, 2023.

8. Convertible Notes

July 2021 Convertible Notes

In July 2021, the Company issued convertible notes (the “July 2021 Convertible Notes”) to investors with an underlying principal amount of $2.1 million. In June 2024, the July 2021 Convertible Notes were converted to common stock based on a fixed conversion price of $11.96 per share. At the time of conversion, the July 2021 Convertible Notes had an outstanding principal and accrued interest balance of $2.2 million. As a result of the conversion,184,192 shares of common stock were issued to the holders in redemption of the outstanding July 2021 Convertible Notes. In June 2024, the fair value of the issued common stock was recorded within additional paid-in capital on the Company’s condensed consolidated balance sheet and a $0.9 million loss on the settlement of the July 2021 Convertible Notes was recorded in other income (expense), net on the condensed consolidated statements of operations and comprehensive loss. As of September 30, 2024, the balance of the July 2021 Convertible Notes iszero on the Company’s condensed consolidated balance sheet.

September 2021 Convertible Notes

In September 2021, the Company, in connection with the acquisition of Jiobit, issued $11.6 million representing the fair value of convertible notes (the “September 2021 Convertible Notes”) and $1.6 million of revesting convertible notes that vested over time. In April 2024, the holders of the September 2021 Convertible Notes elected to convert their notes and accrued interest to common stock based on a fixed conversion price of $22.50 per share. At the time of conversion, the September 2021 Convertible Notes had an outstanding principal and accrued interest balance of $3.5 million. As a result of the conversion,157,685 shares of common stock with a fair value of $3.5 million were issued to the holders in redemption of the outstanding September 2021 Convertible Notes. In April 2024, the fair value of the issued common stock was recorded within additional paid-in capital on the Company’s condensed consolidated balance sheet and a $0.5 million gain on settlement of the September 2021 Convertible Notes was recorded in other income (expense), net on the condensed consolidated statements of operations and comprehensive loss. As of September 30, 2024, the balance of the September 2021 Convertible Notes iszero on the Company’s condensed consolidated balance sheet.

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

9. Derivative Liability

The Company’s derivative liability, which represented embedded share-settled redemption features bifurcated from its July 2021 Convertible Notes, was settled in June 2024 upon the conversion of the July 2021 Convertible Notes to common stock based on a fixed conversion price of $11.96 per share. A $1.9 million gain was recorded at the time of conversion within other income (expense), net on the condensed consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2024. As of September 30, 2024, the fair value of the derivative liability waszero on the Company’s condensed consolidated balance sheet. As of December 31, 2023, the fair value of the derivative liability was $0.2 million. Refer to Note 6, "Fair Value Measurements" and Note 8, "Convertible Notes" for further details.

10. Commitments and Contingencies

Purchase Commitments

The Company has certain commitments with its cloud platform provider and sole contract manufacturer that are non-cancellable. As of September 30, 2024, future non-cancellable commitments under these agreements were as follows in thousands):

Contingencies

From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business activities. The Company accrues a liability for such matters when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated. The Company is not subject to any current pending legal matters or claims that the Company believes could have a material adverse effect on its financial position, results of operations or cash flows.

Warranties and Indemnification

To date, the Company has not incurred significant costs and has not accrued any material liabilities in the accompanying condensed consolidated financial statements as a result of its warranty and indemnification obligations.

Litigation

Occasionally, the Company is involved in various legal proceedings, claims and government investigations in the ordinary course of business. The outcome of litigation and other legal matters is inherently uncertain, though the Company intends to vigorously defend the matters. In making a determination regarding accruals, using available information, the Company evaluates the likelihood of an unfavorable outcome in legal or regulatory proceedings to which the Company is a party and records a loss contingency when it is probable a liability has been incurred and the amount of the loss can be reasonably estimated. When the Company determines an unfavorable outcome is not probable or reasonably estimable the Company does not accrue for any potential litigation loss. 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 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’sinter 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. The claim construction hearing took place on January 18, 2024, and on April 23, 2024, the court released its order which found 10 of the claims invalid, leaving only 2 active claims remaining. At this time, a loss is reasonably possible but not estimable, and as a result, no litigation reserve has been recorded on our condensed consolidated balance sheet as of September 30, 2024.

No material litigation reserve was recorded on our condensed consolidated balance sheets as of September 30, 2024 and December 31, 2023, respectively.

11. Common Stock

The Company has the following potentially outstanding common stock reserved for issuance:

12. Warrants

As of September 30, 2024, the Company had outstanding warrants entitling the holder thereof to purchase 7,761 shares of Company common stock with an exercise price of $6.44 and expiry date of 2025.

As of December 31, 2023, the Company had outstanding warrants to purchase 137,658 shares of Company common stock with exercise prices ranging from $2.28 to $11.96 and expiry dates ranging from 2024 to 2026. Refer to Note 8, "Convertible Notes" for further details.

13. Equity Incentive Plan

2011 Equity Incentive Plan

The Company’s equity incentive plan allows the Company to grant restricted stock units (“RSUs”), PRSUs, 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.

The following summary of stock option activity for the periods presented is as follows (in thousands, except share and per share data):

As of September 30, 2024, there was total unrecognized compensation cost for outstanding stock options of $2.6 million to be recognized over a period of approximately 1.3 years.

Performance-based Restricted Stock Units

The Company granted 115,403 PRSUs (“the Target Grant”) to certain executive officers during the nine months ended September 30, 2024. No PRSUs were granted to executive officers during the three months ended September 30, 2024, or during the three and nine months ended September 30, 2023. The number of PRSUs that may vest depends on the extent to which the performance goals for the award are achieved over aone-year performance period, as determined by the Compensation Committee of the Board, up to a maximum of 200% of the Target Grant. The performance goals for the PRSUs consist of the following two metrics, each with a weighting of 50%: (1) a revenue metric for the year ended December 31, 2024; and (2) an Adjusted EBITDA metric for the year ended December 31, 2024. Each of the metrics are within the Company’s published revenue and Adjusted EBITDA guidance described in the Company’s press release furnished within Exhibit 99.1 of the Company’s Current Report on Form 8-K filed with the SEC on February 29, 2024.

The PRSU awards vest over afour-year period with 1/4th of the shares vesting after the first year and 1/16th of the shares vesting each quarter thereafter, subject to continuous service with the Company. The Company uses the grant date fair value of the common stock to measure compensation expense for PRSU awards. Compensation expense is recognized over the vesting period of the PRSU award using the graded-vesting attribution method and shares attained over target upon vesting will be recognized as awards granted in the period. No PRSU awards vested as of September 30, 2024.

RSU, including PRSU, activity for the periods presented is as follows:

As of September 30, 2024, there was unrecognized compensation cost for outstanding restricted stock units, including PRSUs, of $90.2 million to be recognized over a period of approximately 2.9 years.

The number of RSUs vested and settled includes shares of common stock that the Company withheld on behalf of employees to satisfy the minimum statutory tax withholding requirements.

Stock-based Compensation

Stock-based compensation expense was allocated as follows (in thousands):

There was $0.1 million and $0.5 million of capitalized stock-based compensation costs recognized during the three and nine months ended September 30, 2024, respectively. There was animmaterial amount of capitalized stock-based compensation costs recognized during the three and nine months ended September 30, 2023.

Equity Awards Issued in Connection with Business Combinations

Jio, Inc.

In connection with the acquisition of Jiobit in September 2021, 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 September 30, 2024, there was $12 thousand of unrecognized compensation expense related to unvested assumed stock options, which is expected to be recognized over the remaining weighted average life of 0.4 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.

Tile, Inc.

In connection with the Tile acquisition in January 2022, the Company issued 1,499,349 shares of retention restricted stock units with an aggregate fair value of $29.6 million. 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 during the three months ended March 31, 2022, and vest over atwo-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 711,903 retention restricted stock units vest over atwo-to-four-year period. As of September 30, 2024, there was $0.4 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 1.3 years. 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.

14. Income Taxes

The provision for income taxes for interim quarterly reporting periods is based on the Company's estimates of the effective tax rates for the full fiscal year, in accordance with ASC 740-270, Income Taxes, Interim Reporting. ASC 740-270-25-2 requires that an annual effective tax rate be determined and such annual effective rate be applied to year to date income/loss in interim periods. The effective tax rate in any quarter may be subject to fluctuations during the year as new information is obtained, which may positively or negatively affect the assumptions used to estimate the annual effective tax rate, including factors such as valuation allowances against deferred tax assets, the recognition or de-recognition of tax benefits related to uncertain tax position, if any, and changes in or the interpretation of tax laws in jurisdictions where the Company conducts business. In accordance with the Tax Cuts and Jobs Act of 2017, 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 fifteen years for foreign expenses. The Company has capitalized R&E expenditures in its income tax provision. This is a driver for the annual estimated income tax rate used to calculate the provision for income taxes.

For the three and nine months ended September 30, 2024, the Company recorded a benefit from income taxes of $4.7 million and a provision for income taxes of $2.1 million, respectively. For the three and nine months ended September 30, 2023, the Company recorded a benefit from income taxes of $0.2 million and a provision for income taxes of $0.2 million, respectively.

15. Related-Party Transactions

On June 6, 2024, in connection with its U.S. IPO, the Company issued and sold 3,703,704 shares of common stock and certain selling securityholders including members of the Company’s board of directors, executive officers, non-executive employees, and other stockholders of the Company, sold 2,908,796 shares of common stock (including 862,500 shares sold pursuant to the underwriters’ full exercise of their option to purchase additional shares) in each case at an offering price of $27.00 per share. The Company received net proceeds of $93.0 million after deducting underwriting discounts and commissions of $7.0 million. The Company did not receive any proceeds from the sale of shares of common stock by the selling securityholders. The Company paid the underwriting discounts and commissions in connection with the sale of shares of common stock by the selling securityholders. A summary of the expenses paid on behalf of the selling securityholders is detailed below (in millions):

(1) Includes $0.7 million in expenses paid on behalf of a securityholder who is both an executive officer and member of the board of directors.

No additional expenses were paid on behalf of the selling securityholders during the three months ended September 30, 2024. The $5.5 million in total fees paid have been recorded within Other income (expense), net on the condensed consolidated statements of operations for the nine months ended September 30, 2024.

For additional details regarding this transaction, refer to the prospectus supplement filed with the SEC on June 6, 2024 as well as the registration statement on Form S-3 (File No. 333-279271) filed with the SEC on May 9, 2024, of which the prospectus supplement forms a part.

16. Defined Contribution Plan

The Company sponsors a defined contribution plan under Section 401(k) of the Internal Revenue Code covering substantially all employees over the age of 21 years. 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. Employer contributions to the plan were $0.1 million and $1.1 million for the three and nine months ended September 30, 2024, respectively, andimmaterial for the three and nine months ended September 30, 2023, respectively.

17. Net Income (Loss) Per Share

Basic net income (loss) per share is calculated by dividing net income (loss) available to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net income (loss) per share reflects the potential dilution that could occur if options, RSUs, PRSUs, warrants, or other securities with features that could result in the issuance of common stock were exercised or converted to common stock using the treasury-stock method.

The following table presents the calculation of basic and diluted net income (loss) per share (in thousands except share and per share information):

Certain potential shares of common stock were excluded from the diluted net loss per share calculation as their inclusion would have been antidilutive. Excluded shares are as follows:

Outstanding PRSUs are not considered to be potential shares of common stock until performance goals and service requirements have been met. As of September 30, 2024, no performance goals have been met and as a result no outstanding PRSUs are considered potential shares of common stock within the diluted net income (loss) per share calculation for any of the periods presented.

18. Subsequent Events

In October 2024, the Company entered into a Manufacturing Services Agreement (“MSA”) with Jabil, Inc. and Jabil Circuit (Singapore) Pte. Ltd (collectively, “Jabil”), under which Jabil will continue to manufacture the Company’s Tile and Jiobit products as the designated sole contract manufacturer for Tile products and the primary manufacturer for Jiobit products. The MSA has an initial term ofthree years and will automatically renew forone-year periods unless terminated by either party.

On November 12, 2024 (the “Effective Date”), the Company entered into a series of transactions with Hubble Network, Inc. (“Hubble”), subject to Hubble shareholder approval, including (i) a technology exclusivity and revenue sharing agreement (the “Hubble Agreement”), (ii) a $5.0 million Simple Agreement for Future Equity (“SAFE”) investment by the Company into Hubble; and (iii) Hubble’s issuance of a warrant to the Company to purchase Hubble common stock. The Hubble Agreement has an initial term of 5 years beginning on the Effective Date.