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What changed in Life360, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Life360, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+490 added−507 removedSource: 10-K (2024-02-29) vs 10-K (2023-03-23)

Top changes in Life360, Inc.'s 2023 10-K

490 paragraphs added · 507 removed · 356 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changePeople We believe that different ideas, perspectives and backgrounds create a stronger and more creative work environment that delivers better results. Together, we continue to build an inclusive culture that encourages, supports, and celebrates the diverse voices of our employees. This fuels our innovation and connects us closer to our customers and the communities we serve.
Biggest changeTogether, we continue to build an inclusive culture that encourages, supports, and celebrates the diverse voices of our employees. This fuels our innovation and connects us closer to our customers and the communities we serve. We strive to create a workplace that reflects the communities we serve and where everyone feels empowered to bring their authentic best selves to work.
Pricing for the paid memberships of the Life360 Platform currently ranges from $7.99 per month for Life360 Silver to $24.99 per month for Life360 Platinum. Memberships are available in the United States and Canada.
Pricing for the paid memberships in the United States of the Life360 Platform currently ranges from $7.99 per month for Life360 Silver to $24.99 per month for Life360 Platinum. Memberships are available in the United States, United Kingdom and Canada.
Our Products Life360 Subscription Offerings The Life360 mobile application operates under a “freemium” model where the core offering is available to users at no charge.
Our Products Life360 Subscription Offerings The Life360 mobile application operates under a “freemium” model where its core offering is available to users at no charge.
Outside of these two markets, Life360 offers the free membership and a single paid membership option, which is priced at $4.99 per month in local currency equivalent and offers place alerts, location history and individual driver reports.
Outside of these three markets, Life360 offers the free membership and a single paid membership option, which is priced at $4.99 per month in local currency equivalent and offers place alerts, location history and individual driver reports.
In 2021, we committed to quantifying the environmental footprint of our business operations by measuring the following emissions: direct greenhouse emissions that occur from sources that are controlled or owned by us (“Scope 1 Emissions”), indirect greenhouse emissions associated with the purchase of electricity, steam, heat or cooling (“Scope 2 Emissions”) and results of activities from assets not owned or controlled by us, but that indirectly impact our value chain (“Scope 3 Emissions”).
We are committed to quantifying the environmental footprint of our business operations by measuring the following emissions: direct greenhouse gas emissions that occur from sources that are controlled or owned by us (“Scope 1 Emissions”), indirect greenhouse gas emissions associated with the purchase of electricity, steam, heat or cooling (“Scope 2 Emissions”) and results of activities from assets not owned or controlled by us, but that indirectly impact our value chain (“Scope 3 Emissions”).
Life360 aims to provide a work environment in which all of our people can excel regardless of race, religion, age, disability, gender, sexual preference or marital status. Our Diversity Policy reflects a strong commitment to diversity, and a recognition of the value of attracting people with different backgrounds, knowledge, experience and abilities.
Life360 aims to provide a work environment in which all of our people can excel regardless of race, religion, age, disability, gender identity, sexual orientation or marital status. Our Diversity Policy reflects a strong commitment to diversity, and a recognition of the value of attracting people with different backgrounds, knowledge, experience and abilities.
Under the provisions of Delaware General Corporation Law (“DGCL”), shares are freely transferable and subject to restrictions imposed by the U.S. federal or state securities laws, by the Company’s certificate of incorporation, as amended (“Amended and Restated Certificate of Incorporation”) or bylaws (“Bylaws”), or by an agreement signed with the holders of the shares at issuance.
Delaware Law, Certificate of Incorporation and Bylaws Under the provisions of Delaware General Corporation Law (“DGCL”), shares are freely transferable and subject to restrictions imposed by the U.S. federal or state securities laws, by the Company’s certificate of incorporation, as amended (“Certificate of Incorporation”) or bylaws (“Bylaws”), or by an agreement signed with the holders of the shares at issuance.
Such obligations may include, without limitation, the Federal Trade Commission Act, the Telephone Consumer Protection Act of 1991 (“TCPA”), the Children’s Online Privacy Protection Act of 1998 (“COPPA”), the Controlling the Assault of Non-Solicited Pornography And Marketing Act of 2003 (“CAN-SPAM”), the California Consumer Privacy Act of 2018 (“CCPA”), the European Union’s General Data Protection Regulation 2016/679 (“EU GDPR”), the EU GDPR as it forms part of United Kingdom (“UK”) law by virtue of section 3 of the European Union (Withdrawal) Act 2018 (“UK GDPR”), the Age Appropriate Design Code enacted by the UK Information Commissioner’s Office, the Privacy and Electronic Communications Directive 2002/58/EC on Privacy and Electronic Communications (the “ePrivacy Directive”), and the Payment Card Industry Data Security Standard (“PCI DSS”).
Such obligations may include, without limitation, the Federal Trade Commission Act, the Telephone Consumer Protection Act of 1991 (“TCPA”), the Children’s Online Privacy Protection Act of 1998 (“COPPA”), the Controlling the Assault of Non-Solicited Pornography And Marketing Act of 2003 (“CAN-SPAM”), the California Consumer Privacy Act of 2018 (“CCPA”), the European Union’s General Data Protection Regulation 2016/679 (“EU GDPR”), the EU GDPR as it forms part of United Kingdom (“UK”) law by virtue of section 3 of the European Union (Withdrawal) Act 2018 and the Data Protection Act 2018 (collectively the “UK GDPR”, with the EU GDPR and UK GDPR together referred to as the “GDPR”), EU Digital Services Act (“DSA”), the Age Appropriate Design Code enacted by the UK Information Commissioner’s Office, the Privacy and Electronic Communications Directive 2002/58/EC on Privacy and Electronic Communications (the “ePrivacy Directive”), and the Payment Card Industry Data Security Standard (“PCI DSS”).
Single Tile devices’ recommended retail prices range from $14.99 to $34.99 with additional bundles at higher price points. Tile devices are also available internationally at locally relevant prices. Tile Subscription Offerings The Tile mobile application offers a free service as well as two paid subscription options: Premium and Premium Protect, which offers additional services such as warranties and item reimbursement.
Single Tile devices’ recommended retail prices range from $24.99 to $39.99 with additional bundles at higher price points. Tile devices are also available internationally at locally relevant prices. Tile Subscription Offerings The Tile mobile application offers a free service as well as two paid subscription options: Premium and Premium Protect, which offer additional services such as warranties and item reimbursement.
We value metrics and use them to influence strategy and measure results, but at our core we always focus on building an exceptional experience for families. 4 Table of Contents • High Intensity, High Impact. We do whatever it takes to get the job done.
We value metrics and use them to influence strategy and measure results, but at our core we always focus on building an exceptional experience for families. • High Intensity, High Impact. We do whatever it takes to get the job done.
Facilities 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 had terminated the operating lease agreements in San Francisco and San Diego, California and relocated its corporate headquarters to San Mateo, California.
Facilities During the year ended December 31, 2023, the Company leased real estate space under non-cancellable operating lease agreements in San Mateo, California and Chicago, Illinois. As of December 31, 2023, the Company had terminated the operating lease agreement in Chicago, Illinois. As of December 31, 2022, the Company relocated its corporate headquarters to San Mateo, California.
Our research and development expenses were $102.5 million, $51.0 million and $39.6 million for the years ended December 31, 2022, 2021, and 2020, respectively. We intend to continue to significantly invest in research and development to bring new customer experiences and devices to market and expand our platform capabilities.
Our research and development expenses were $101.0 million, $102.5 million and $51.0 million for the years ended December 31, 2023, 2022, and 2021, respectively. We intend to continue to significantly invest in research and development to bring new customer experiences and devices to market and expand our platform capabilities.
Our offices in San Mateo and Chicago generally accommodate principal, development, engineering, marketing and administrative activities. Beginning in 2020 at the start of the COVID-19 pandemic, we began operating as a remote-first company with plans to continue as such indefinitely.
Our office in San Mateo generally accommodates principal, development, engineering, marketing and administrative activities. Beginning in 2020 at the start of the COVID-19 pandemic, we began operating as a remote-first company with plans to continue as such indefinitely.
Our 2022 calendar year ESG report will be available on March 31, 2023. Research and Development We invest substantial resources in research and development to enhance our customer offerings and competitiveness.
We expect our 2023 calendar year ESG report to be available on March 31, 2024. Research and Development We invest substantial resources in research and development to enhance our customer offerings and competitiveness.
By quantifying our impact, we will be able to implement an emission reduction plan that targets the greatest contributors to our carbon footprint. We achieved carbon neutrality across Scope 1, 2, and 3 Emissions for calendar years 2021 and 2020.
By quantifying our impact, we will be able to implement an emission reduction plan that targets the greatest contributors to our carbon footprint. We achieved carbon neutrality across Scope 1, 2, and 3 Emissions for calendar years 2021 and 2020. We did not achieve carbon neutrality across Scope 1, 2, or 3 Emissions for the 2022 calendar year.
For information regarding risks related to our intellectual property, please see “Risk Factors—Risks Related to Our Technology and Intellectual Property.” Seasonality Life360 subscriptions have historically experienced member and subscription growth seasonality in the third quarter of each calendar year, which includes the return to school for many of our members.
Risk Factors—Risks Related to Our Technology and Intellectual Property.” Seasonality Life360 subscriptions have historically experienced member and subscription growth seasonality in the third quarter of each calendar year, which includes the return to school for many of our members.
We have established a disciplined process to identify, assess and analyze risk, and ensure appropriate risk monitoring and reporting. Our 2021 and 2020 calendar year ESG reports are available at https://investors.life360.com/investor-relations, which is provided for reference only and is not incorporated by reference into this Annual Report on Form 10-K.
We have established a disciplined process to identify, assess and analyze risk, and ensure appropriate risk monitoring and reporting. 5 Table of Contents Our ESG reports are available at https://investors.life360.com/investor-relations, which is provided for reference only and is not incorporated by reference into this Annual Report on Form 10-K.
Notwithstanding these efforts, there can be no assurance that we will adequately protect our intellectual property or that it will provide any competitive advantage. Further, in some foreign countries, the mechanisms to establish and enforce intellectual property rights may be inadequate to protect our technology.
Notwithstanding these efforts, there can be no assurance that we will adequately protect our intellectual property or that it will provide any competitive advantage. Further, in some foreign countries, the mechanisms to establish and enforce intellectual property rights may be inadequate to protect our technology. To protect our brand, we hold and maintain a global trademark portfolio.
Additionally, we are or may become subject to various U.S. federal and state consumer protection laws which require us to publish statements that accurately and fairly describe how we handle personal data and choices individuals may have about the way we handle their personal data.
Several states within the United States have enacted or proposed data privacy laws. Additionally, we are or may become subject to various U.S. federal and state consumer protection laws which require us to publish statements that accurately and fairly describe how we handle personal data and choices individuals may have about the way we handle their personal data.
Hardware sales have historically experienced revenue seasonality in the fourth quarter of each calendar year, which includes the important selling periods in November (Black Friday and Cyber Monday) and December (Christmas and Hanukkah) in large part due to seasonal holiday demand.
Hardware sales have historically experienced comparatively higher seasonal growth in the fourth quarter of each calendar year, which includes the important selling periods in November (Black Friday and Cyber Monday) and December in large part due to seasonal holiday demand.
Further, it is possible that certain governments may seek to block or limit our products or otherwise impose other restrictions that may affect the accessibility or usability of any or all our products for an extended period of time or indefinitely.
Further, it is possible that certain governments may seek to block or limit our products or otherwise impose other restrictions that may affect the accessibility or usability of any or all our products for an extended period of time or indefinitely. For additional information, see the section entitled “Item 1A.
Additionally, the Company routinely posts additional important information, including press releases, on its website and recognizes its website as a channel of distribution to reach public investors and as a means of disclosing material non-public information for complying with disclosure obligations under Regulation FD. Accordingly, investors should monitor our website in addition to our SEC filings and public webcasts.
Additionally, the Company routinely posts additional important information, including press releases, on its website and recognizes its website as a channel of distribution to reach public investors and as a means of disclosing material non-public information for complying with disclosure obligations under Regulation FD.
However, provisions of the DGCL, the Company’s Certificate of Incorporation and the Company’s Bylaws could make it more difficult to acquire the Company by means of a tender offer (takeover), a proxy contest or otherwise, or to remove incumbent officers and Directors of the Company.
The Company’s Certificate of Incorporation and Bylaws do not impose any specific restrictions on transfer. However, provisions of the DGCL, the Company’s Certificate of Incorporation and the Company’s Bylaws could make it more difficult to acquire the Company by means of a tender offer (takeover), a proxy contest or otherwise, or to remove incumbent officers and Directors of the Company.
Hedging transactions with regard to the CDIs may only be conducted in accordance with the Securities Act. 9 Table of Contents
Hedging transactions with regard to the CDIs may only be conducted in accordance with the Securities Act.
Delaware Law, Certificate of Incorporation and Bylaws As a foreign Company registered in Australia, the Company is not subject to Chapters 6, 6A, 6B and 6C of the Corporations Act dealing with the acquisition of shares (including substantial shareholdings and takeovers).
As a foreign Company registered in Australia, the Company is not subject to Chapters 6, 6A, 6B and 6C of the Corporations Act 2001 (Cth) of Australia (“Corporations Act”) dealing with the acquisition of shares (including substantial shareholdings and takeovers).
Our agreement with Jabil expired in March 2022. We are currently in the process of renewing our agreement. Jabil has provided us with written confirmation of its intention to continue our relationship on the same terms as our original manufacturing agreement, and to enter into a new agreement with us on similar terms.
Jabil has provided us with written confirmation of its intention to continue our relationship on the same terms as our original manufacturing agreement, and to enter into a new agreement with us on similar terms.
We are in a fast moving and competitive environment and we have a team that is in it to win it. As of December 31, 2022, we had approximately 400 full-time employees and approximately 200 contractors, all of whom have the flexibility to work remotely or out of our San Mateo and Chicago offices.
We are in a fast moving and competitive environment and we have a team that is in it to win it. 4 Table of Contents As of December 31, 2023, we had approximately 383 full-time employees and approximately 125 contractors, all of whom have the flexibility to work remotely or out of our San Mateo, California and Vancouver, Canada offices.
These items are available at investors.life360.com under “Results and reports”. The information found on our website is not incorporated by reference into this Annual Report on Form 10-K or any other report we file with or furnish to the SEC.
Accordingly, investors should monitor our website in addition to our SEC filings, ASX filings and public webcasts. These items are available at investors.life360.com under “Financials and Filings”. The information found on our website is not incorporated by reference into this Annual Report on Form 10-K or any other report we file with or furnish to the SEC.
We further protect the use of our proprietary technology and intellectual property through provisions in both our customer terms of use on our website and in our vendor terms and conditions.
We further protect the use of our proprietary technology and intellectual property through provisions in both our customer terms of use on our website and in our vendor terms and conditions. For information regarding risks related to our intellectual property, please see “Item 1A.
The SEC maintains a website that contains reports, proxy and information statements and other information regarding our filings at www.sec.gov.
The SEC maintains a website that contains reports, proxy and information statements and other information regarding our filings at www.sec.gov. The ASX maintains a website that contains documents required under Australian securities laws and other information regarding our filings at www.asx.com.au.
Trademark registrations can generally be renewed as long as the marks are in use. We also enter into, and rely on, confidentiality and proprietary rights agreements with our employees, consultants, contractors and business partners to protect our trade secrets, proprietary technology and other confidential information.
We also enter into, and rely on, confidentiality and proprietary rights agreements with our employees, consultants, contractors and business partners to protect our trade secrets, proprietary technology and other confidential information.
The Company believes that the benefits of increased protection of its ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure the Company outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.
The Company believes that the benefits of increased protection of its ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure the Company outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms. 9 Table of Contents Chess Depository Interests (“CDIs”) Life360’s CDIs are issued in reliance on the exemption from registration contained in Regulation S of the U.S.
For additional information, see the section entitled “Risk Factors—Risks Related to Legal Matters and Our Regulatory Environment.” Government Regulation of Data Privacy and Security In the ordinary course of our business, we may process personal or other sensitive data.
Risk Factors—Risks Related to Legal Matters and Our Regulatory Environment.” Government Regulation of Data Privacy and Security In the ordinary course of our business, we may process personal or other sensitive data. This data may relate to our users, employees, partners, vendors, and others.
Community We aim to simplify safety so families can live fully. Our products and services deliver peace of mind and safety in the online and physical worlds.
We are in the process of finalizing the reporting of Scope 1, 2 and 3 Emissions for the 2023 calendar year. Community We aim to simplify safety so families can live fully. Our products and services deliver peace of mind and safety in the online and physical worlds.
Our platform seamlessly integrates with our partnership offerings with several software-as-a-service vendors. This enhances our offerings with capabilities and features such as contextual auto insurance ads, identity theft protection, data breach alerts, and voice service integrations. The Tile finding network, which allows Tile users to locate their devices via the Tile app, has been integrated into the Life360 Platform.
Our platform seamlessly integrates with our partnership offerings with several software-as-a-service vendors. This enhances our offerings with capabilities and features such as contextual auto insurance ads, identity theft protection, data breach alerts, and voice service integrations.
Accordingly, we are or may become subject to numerous data privacy and security obligations, including federal, state, local, and foreign laws, regulations, guidance, and industry standards related to data privacy and security.
This data may include contact details, payment card information, geolocation data, as well as information collected from and about children and minors. Accordingly, we are or may become subject to numerous data privacy and security obligations, including federal, state, local, and foreign laws, regulations, guidance, and industry standards related to data privacy and security.
In addition, a portion of our revenue for the years ended December 31, 2022, 2021, and 2020 was generated indirectly and is categorized as other revenue on our Consolidated Statements of Operations and Comprehensive Loss.
Our revenue is primarily generated from the sale of subscriptions and hardware tracking devices to access our services across our three brands—Life360, Tile and Jiobit. In addition, a portion of our revenue for the years ended December 31, 2023, 2022, and 2021 was generated indirectly and is categorized as other revenue on our Consolidated Statements of Operations and Comprehensive Loss.
This integration allows members and Circles to keep track of their things and connect with each other through one seamless Life360 Platform.
The Tile finding network, which allows Tile users to locate their devices via the Tile app, has been integrated into the Life360 Platform. This integration allows members and Circles to keep track of their things and connect with each other through one seamless Life360 Platform.
Indirect revenue includes the sale of data insights from our member base and the sale of third-party products and services, including through targeted ads within our platform. For example, we generate revenue through the display of auto insurance products within the Life360 Platform.
Indirect revenue includes revenue from the sale of aggregated data (non-personally identifiable information) for the purposes of data insights from our member base to our partners, and revenue from the sale of third-party products and services, including through the placement of ads within our platform.
Jiobit Product Line The Jiobit product line offers wearable location devices for young children, pets, and seniors. Currently, Jiobit is offered exclusively in the United States via online retailers and brick and mortar retail channels.
Jiobit Product Line The Jiobit product line offers wearable location devices for young children, pets, and seniors. Currently, Jiobit is offered exclusively in the United States via online retailers. Customers purchase a Jiobit device at the current retail price of $129.99 and a monthly subscription to access Jiobit location tracking services.
Accordingly, the CDIs, have not been, and will not be, registered under the Securities Act or the laws of any state or other jurisdiction in the U.S. As a result of relying on the exemption pursuant to Regulation S, the CDIs are ‘restricted securities’ under Rule 144 of the Securities Act.
As a result of relying on the exemption pursuant to Regulation S, the CDIs are ‘restricted securities’ under Rule 144 of the Securities Act.
For the years ended December 31, 2022, 2021, and 2020 Life360 generated: • Total revenue of $228.3 million, $112.6 million, and $80.7 million respectively; and • Net loss of $91.6 million, $33.6 million, and $16.3 million, respectively.
For example, we generate revenue through the display of auto insurance products within the Life360 Platform. For the years ended December 31, 2023, 2022, and 2021 Life360 generated: • Total revenue of $304.5 million, $228.3 million, and $112.6 million, respectively; and • Net loss of $28.2 million, $91.6 million, and $33.6 million, respectively.
We view the quality of our products and services as our key long-term strategic differentiator, and as such, we are committed to providing continuous learning and development opportunities for our people. We provide peer training, including our standing Thursday “deep-dives” where our people can learn from the expertise of their colleagues.
We are committed to implementing further initiatives to increase the diversity of our workforce. We view the quality of our products and services as our key long-term strategic differentiator, and as such, we are committed to providing continuous learning and development opportunities for our people.
The CCPA and EU GDPR are examples of the increasingly stringent and evolving regulatory frameworks related to personal data processing that may increase our compliance obligations and exposure for any noncompliance.
The CCPA and the GDPR are examples of the increasingly stringent and evolving regulatory frameworks related to personal data processing that may increase our compliance obligations and exposure for any noncompliance. Similar laws have been enacted or proposed in the past few years in other U.S. states (including in Colorado, Connecticut, Utah and Virginia) and other foreign jurisdictions.
Subscription prices vary based on the duration of the contract and range from $8.99 per month with a two-year commitment to $14.99 per month with no commitment. Monthly contracts offer features such as location history, SOS notifications, and access to the Jiobit desktop portal.
Jiobit Subscription Offerings The Jiobit device requires a monthly subscription plan to stay connected to the Jiobit services. Subscription prices vary based on the duration of the contract and range from $8.33 per month with a one-year commitment to $16.99 per month with no commitment.
Environment We recognize that climate change will have an increasingly significant impact on all aspects of society.
Our workplace culture is supported by a range of policies adopted by our Board of Directors (our “Board”) that reflect our beliefs, including a Diversity Policy. Environment We recognize that climate change will have an increasingly significant impact on all aspects of society.
Additionally, we engage in community outreach by supporting and matching employee contributions to three non-profit organizations committed to supporting families: the Make-a-Wish Foundation, the American Society for the Prevention of Cruelty to Animals and Team Rubicon. 5 Table of Contents Governance We are committed to robust governance frameworks and responsible business practices to ensure the financial sustainability of the Company for all stakeholders including shareholders, employees, customers and suppliers.
Governance We are committed to robust governance frameworks and responsible business practices to ensure the financial sustainability of the Company for all stakeholders including shareholders, employees, customers and suppliers.
We also plan to remain a trusted brand and indispensable safety membership for families by continuing to offer a suite of safety services that span every life stage of the family. 2 Table of Contents Our members are our best acquisition engine, and we believe that word-of-mouth referrals will continue to drive strong new member growth for Life360.
We believe these investments will help us grow membership in new and existing markets so that we remain a trusted brand and indispensable tool for families at every life stage. 2 Table of Contents Our members are our best acquisition engine.
Paid subscriptions are available for either $8.99 per month or $14.99 per month, depending on the subscription term. Our Technology Platform To help families stay connected and safe, we have developed a scalable mobile-first technology platform that supports our business while protecting our operational integrity, security and performance.
Monthly contracts offer features such as location history, SOS notifications, and access to the Jiobit desktop portal. 3 Table of Contents Our Technology Platform To help families stay connected and safe, we have developed a scalable mobile-first technology platform that supports our business while protecting our operational integrity, security and performance.
We also provide full day and full week-long courses in “best practices” and broad and specialist business training to further promote personal and professional growth. Environmental, Social and Corporate Governance Our core mission is the social good of simplifying safety for families through ESG initiatives based on four key areas: people, environment, community and governance.
We also provide full day and full week-long courses in “best practices” and broad and specialist business training to further promote personal and professional growth. In addition, our people have opportunities for cohort learning as well as personalized learning via the LinkedIn Learning Platform throughout the year.
Life360’s CDIs are issued in reliance on the exemption from registration contained in Regulation S of the U.S. Securities Act of 1933 (the “Securities Act”) for offers of securities which are made outside the U.S.
Securities Act of 1933 (the “Securities Act”) for offers of securities which are made outside the U.S. Accordingly, the CDIs, have not been, and will not be, registered under the Securities Act or the laws of any state or other jurisdiction in the U.S.
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Our revenue is primarily generated from the sale of subscriptions and hardware tracking devices to access our services across our three brands - Life360, Tile and Jiobit.
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Our Growth Strategy Our growth is driven by member engagement and customer value, so our priority is driving continued innovation, delight, and value that continues to broaden our audience and enrich the role we play in their lives.
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Our Growth Strategy We plan to grow members in new and existing markets, increase monetization of our member base, and pursue disciplined expansion in new use cases, including entering new verticals.
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We believe that word of mouth referrals, coupled with increased investments in marketing and member acquisition initiatives will drive strong new member growth for Life360. We are also increasing our subscription value propositions and improving customer awareness of these benefits to grow subscription adoption and revenue per Paying Circle.
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We plan to drive further market penetration through increased investments in marketing and brand awareness, member acquisition initiatives, and the provision of new features in new and existing markets. Our primary strategy for subscriber conversion is to continue to invest in our product offering, provide the highest levels of member service and deepen our engagement with our member base.
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Further, we are opening new revenue streams, including advertising, that leverage our highly engaged base of 61 million monthly active users, while taking a cautious approach to ensure that we maintain the highest levels of customer satisfaction for free and paid customers.
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Customers purchase a Jiobit device at the current retail price of $129.99 and a monthly subscription to access Jiobit location tracking services. 3 Table of Contents Jiobit Subscription Offerings The Jiobit device requires a monthly subscription plan to stay connected to the Jiobit services.
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We believe that diversity contributes to our business success, and benefits all of our stakeholders. As of December 31, 2023, our company wide employees consisted of approximately 37% female, 62% male, and 1% non-binary. Our U.S. employees consisted of approximately 33% Asian, 3% Black/African-American, 8% Hispanic or Latino, 5% of two or more races, and 51% White.
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We believe that diversity contributes to our business success, and benefits all of our stakeholders. As of December 31, 2022, approximately 37% of Life360 employees were female and 49% were people of color. We are committed to implementing further initiatives to increase the diversity of our workforce.
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Employees are provided access to career ladders and are encouraged to create individual development plans to focus on growth to the next level in their role. Our standing Thursday “deep-dives” are where our people can learn from the expertise of their colleagues.
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We strive to create a workplace that reflects the communities we serve and where everyone feels empowered to bring their authentic best selves to work. Our workplace culture is supported by a range of policies adopted by our Board of Directors (our “Board”) that reflect our beliefs, including a Diversity Policy.
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Environmental, Social and Corporate Governance We accomplish our core mission of simplifying safety for families through ESG initiatives based on four key areas: people, environment, community and governance. People We believe that different ideas, perspectives and backgrounds create a stronger and more creative work environment that delivers better results.
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We are in the process of finalizing the reporting of Scope 1, 2 and 3 Emissions for the 2022 calendar year. We achieved a carbon neutral status for the 2021 and 2020 calendar years by purchasing EcoAustralia credits that blend InfraVest Guanyin Wind carbon credits with Mount Sandy Conservation biodiversity protection units.
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Additionally, we engage in community outreach by supporting and matching employee contributions to three non-profit organizations committed to supporting families: UNICEF USA, Best Friends Animal Society and St. Jude Children’s Research Hospital.
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By purchasing EcoAustralia credits, we neutralize our emissions and promote conservation partnerships between traditional landowners and non-indigenous Australians. Carbon neutral is a term used to describe when the greenhouse gas emissions released into the atmosphere by an organization over a certain time period, for example, calendar year, are negated through the purchase and retirement of carbon offsets.
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As of December 31, 2023, we are operating under an extension agreement to our initial agreement with Jabil, which expired in March 2022, and are in the process of negotiating a new agreement.
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To protect our brand, as of December 31, 2022, we owned a trademark portfolio comprising U.S. registered trademarks including our primary mark “Life360” and various versions of the Life360 logo, in addition to other Life360 word marks and logos, as well as registered and pending trademarks for our “Tile” and “Jiobit” marks in the United States and certain foreign jurisdictions.
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In the U.S., we own trademark registrations for our “Life360”, “Jiobit”, and “Tile” marks and logos. We also own applications and registrations for “Tile”, “Tile-formative” and other trademarks in certain foreign jurisdictions. Trademark registrations can generally be renewed as long as the marks are in use.
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Several states within the United States have enacted or proposed data privacy laws. For example, Virginia passed the Consumer Data Protection Act, and Colorado passed the Colorado Privacy Act.
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These laws impose certain data privacy and security obligations on covered businesses. Generally, these and similar laws obligate covered businesses to provide specific disclosures in privacy notices and afford relevant individuals with certain rights concerning their personal data.
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For example, the CCPA imposes obligations on covered businesses to provide specific disclosures related to a business’s collecting, using, and disclosing personal data and to respond to certain requests from California residents related to their personal data (for example, requests to know of the business’s personal data processing activities, to delete the individual’s personal data, and to opt out of certain personal data disclosures to third parties).
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As applicable, such rights may include the right to access, correct, or delete certain personal data, and to opt-out of certain personal data processing activities, such as targeted advertising, profiling, or automated decision-making. The exercise of these rights may impact our business and ability to provide our products and services.
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Also, the CCPA provides for civil penalties and a private right of action for data breaches which may include an award of statutory damages. In addition, the California Privacy Rights Act of 2020 (“CPRA”), effective January 1, 2023, expands the CCPA.
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These laws may also allow for regulators to impose statutory fines or allow private claimants to recover damages for noncompliance. The European Union is also focused on the regulation of digital services. The DSA came into force in 2022, with the majority of the substantive provisions taking effect in 2024.
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For example, the CPRA gives California residents the ability to limit use of certain sensitive personal data, establishes restrictions on personal data retention, expands the types of data breaches that are subject to the CCPA’s private right of action, and establishes a new California Privacy Protection Agency to implement and enforce the new law.
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The DSA may increase our compliance costs, require changes to our user interfaces, processes, operations, and business practices which may adversely affect our ability to attract, retain and provide our services to users, and may otherwise adversely affect our business, operations and financial condition.
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Foreign data privacy and security laws (including but not limited to the EU GDPR and UK GDPR) impose significant and complex compliance obligations on entities that are subject to those laws.
Added
Some European jurisdictions and the UK have also proposed or intend to pass legislation that imposes new obligations and liabilities on platforms with respect to certain types of harmful content.
Removed
As one example, the EU GDPR applies to any company established in the European Economic Area (“EEA”) and to companies established outside the EEA that process personal data in connection with the offering of goods or services to data subjects in the EEA or the monitoring of the behavior of data subjects in the EEA.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur actual or perceived failure to comply with such obligations could lead to adverse business consequences. • If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise. • Our success depends, in part, on the integrity of third-party systems and infrastructures and on the continued and unimpeded access to our products and services on the internet. • Our success depends, in part, on the integrity of our information technology systems and infrastructures and on our ability to enhance, expand and adapt these systems and infrastructures in a timely and cost-effective manner. • We may fail to adequately obtain, protect and maintain our intellectual property rights or prevent third parties from making unauthorized use of such rights. • Our business is subject to complex and evolving U.S. and international laws and regulations.
Biggest changeIf we are unable to manage our growth effectively, our brands, company culture and financial performance may suffer and place significant demands on our operational, risk management, sales and marketing, technology, compliance and finance and accounting resources. • Adverse developments affecting financial institutions, companies in the financial services industry, or the financial services industry generally, such as actual events or concerns involving liquidity, defaults or non-performance, could adversely affect our operations and liquidity. • Unstable market and economic conditions may adversely affect consumer discretionary spending and demand for our products and services. • Our operating margins may decline as a result of increasing product costs and inflationary pressures. • Our actual or perceived failure to comply with laws and regulations concerning data privacy and security, consumer protection, advertising, location tracking, digital tracking technologies, and those related to children’s data could lead to regulatory investigations or actions; litigation; fines and penalties; changes to or disruption of our business operations; reputational harm; loss of revenue or profits; declines in user growth or engagement; and other material adverse business consequences. • If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise. • Our success depends, in part, on the integrity of our information technology systems, of third-party systems and infrastructures, on the continued and unimpeded access to our products and services on the internet, and on our ability to enhance, expand and adapt these systems and infrastructures in a timely and cost-effective manner. • We may fail to adequately obtain, protect and maintain our intellectual property rights or prevent third parties from making unauthorized use of such rights. • Our business is subject to complex and evolving U.S. and international laws and regulations.
Our employees, consultants, third-party providers, partners and competitors could engage in misconduct, including the misuse of data and intentional failures to comply with applicable laws and regulations (including those related to cybersecurity and data privacy or those prohibiting a wide range of pricing, discounting and other business arrangements), report financial information or data accurately or disclose unauthorized activities.
Our employees, consultants, third-party providers, partners and competitors could engage in misconduct, including the misuse of data and intentional failures to comply with applicable laws and regulations (including those related to cybersecurity or data privacy, or those prohibiting a wide range of pricing, discounting and other business arrangements), report financial information or data accurately, or disclose unauthorized activities.
We cannot be certain that our pending patent applications will result in issued patents or that any of our issued patents will afford protection against a competitor, or provide a competitive advantage. The issuance of a patent involves complex legal and factual questions, and the breadth of claims allowed is uncertain.
We cannot be certain that our pending patent applications will result in issued patents or that any of our issued patents will afford protection against a competitor, or provide a competitive advantage. The issuance of a patent involves complex legal and factual questions, and the breadth of claims allowed is uncertain.
As a result, we cannot be certain that the patent applications that we file will result in patents being issued, or that our patents and any patents that may be issued to us in the future will afford protection against competitors with similar technology.
As a result, we cannot be certain that the patent applications that we file will result in patents being issued, or that our patents and any patents that may be issued to us in the future will afford protection against competitors with similar technology.
Some of our patents or patent applications (including licensed patents) may be challenged at a future point in time in opposition, derivation, reexamination, inter partes review, post-grant review or interference.
Some of our patents or patent applications (including licensed patents) may be challenged at a future point in time in opposition, derivation, reexamination, inter partes review, post-grant review or interference.
Any successful third-party challenge to our patents in this or any other proceeding could result in the unenforceability or invalidity of such patents, which may lead to increased competition to our business, which could harm our business, financial condition and results of operations. In addition, in patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace.
Any successful third-party challenge to our patents in this or any other proceeding could result in the unenforceability or invalidity of such patents, which may lead to increased competition to our business, which could harm our business, financial condition and results of operations. In addition, in patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace.
The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on certain aspects of our platform technologies.
The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on certain aspects of our platform technologies.
In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or commercialize current or future products.
In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or commercialize current or future products.
Although we strive to enter into agreements that meet the criteria under GAAP for current revenue recognition on delivered performance obligations, our agreements are often subject to negotiation and revision based on the demands of our customers. The final terms of our agreements sometimes result in deferred revenue recognition, which may adversely affect our financial results in any given period.
Although we strive to enter into agreements that meet the criteria under GAAP for current revenue recognition on delivered performance obligations, our agreements are often subject to negotiation and revision based on the demands of our customers. The final terms of our agreements sometimes result in deferred revenue recognition, which may adversely affect our financial results in any given period.
Severe weather and natural disasters, including hurricanes, tornados, earthquakes, fires, droughts and floods, acts of war or terrorism (such as the recent escalation in regional conflicts exemplified by Russia’s invasion of Ukraine), epidemics and global pandemics (such as the outbreak of COVID-19), theft, civil unrest, government expropriation, condemnation or other external events in the markets where our apps are available for download or where our customers live could have a significant effect on our ability to conduct business.
Severe weather and natural disasters, including hurricanes, tornados, earthquakes, fires, droughts and floods, acts of war or terrorism (such as the recent escalation in regional conflicts exemplified by Russia’s invasion of Ukraine), epidemics and global pandemics (such as COVID-19), theft, civil unrest, government expropriation, condemnation or other external events in the markets where our apps are available for download or where our customers live could have a significant effect on our ability to conduct business.
Unfavorable publicity or media reports, including those regarding us, our data privacy and security practices, including those related to children and minors, security incidents, product or service changes, quality or features, litigation or regulatory activity, including any intellectual property proceeding, any investigation and/or enforcement activity from data protection authorities or proceeding relating to the privacy or security of member data, or regarding the actions of our partners, our members, our employees or other companies in our industry, could materially adversely affect our brands and reputation, regardless of the veracity of such publicity or media reports.
Unfavorable publicity or media reports, including those regarding us, our data privacy and security practices, including those related to children and minors, security incidents, product or service changes, quality or features, litigation or regulatory activity, including any intellectual property proceeding, any investigation and/or enforcement activity from data protection or other regulatory authorities or proceeding relating to the privacy or security of our data, or regarding the actions of our partners, our members, our employees or other companies in our industry, could materially adversely affect our brands and reputation, regardless of the veracity of such publicity or media reports.
We have limited control over our suppliers, manufacturers, fulfillment partners and inflation in costs, which subjects us to risks, including, among others: • inability to satisfy demand for our smart trackers; • reduced control over delivery timing and product reliability; • reduced ability to monitor the manufacturing process and components used in our smart trackers; • limited ability to develop comprehensive manufacturing specifications that take into account any materials shortages or substitutions; • variance in the manufacturing capability of our third-party manufacturers; • design and manufacturing defects; • price increases; • failure of a significant supplier, manufacturer, or fulfillment partner to perform its obligations to us for technical, market, or other reasons; • difficulties in establishing additional supplier, manufacturer, or fulfillment partner relationships if we experience difficulties with our existing suppliers, manufacturers, or fulfillment partners; • shortages of materials or components; • misappropriation of our intellectual property; • exposure to natural catastrophes, political unrest, terrorism, labor disputes, and economic instability resulting in the disruption of trade from foreign countries in which our smart trackers are manufactured or the components thereof are sourced; 19 Table of Contents • changes in local economic conditions in the jurisdictions where our suppliers, manufacturers, and fulfillment partners are located including as a result of global supply chain issues; • the imposition of new laws and regulations, including those relating to labor conditions, quality and safety standards, imports, duties, tariffs, taxes, and other charges on imports, as well as trade restrictions and restrictions on currency exchange or the transfer of funds; and • insufficient warranties and indemnities on components supplied to our manufacturers or performance by our partners.
We have limited control over our suppliers, manufacturers, fulfillment partners and inflation in costs, which subjects us to risks, including, among others: • inability to satisfy demand for our smart trackers; • reduced control over delivery timing and product reliability; • reduced ability to monitor the manufacturing process and components used in our smart trackers; • limited ability to develop comprehensive manufacturing specifications that take into account any materials shortages or substitutions; • variance in the manufacturing capability of our third-party manufacturers; • design and manufacturing defects; • price increases; • failure of a significant supplier, manufacturer, or fulfillment partner to perform its obligations to us for technical, market, or other reasons; • difficulties in establishing additional supplier, manufacturer, or fulfillment partner relationships if we experience difficulties with our existing suppliers, manufacturers, or fulfillment partners; • shortages of materials or components; • misappropriation of our intellectual property; • exposure to natural catastrophes, political unrest, terrorism, labor disputes, and economic instability resulting in the disruption of trade from foreign countries in which our smart trackers are manufactured or the components thereof are sourced; • changes in local economic conditions in the jurisdictions where our suppliers, manufacturers, and fulfillment partners are located including as a result of global supply chain issues; • the imposition of new laws and regulations, including those relating to labor conditions, quality and safety standards, imports, duties, tariffs, taxes, and other charges on imports, as well as trade restrictions and restrictions on currency exchange or the transfer of funds; and • insufficient warranties and indemnities on components supplied to our manufacturers or performance by our partners.
Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; inability to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize our products; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations.
Any of these events could have a material adverse effect on our reputation, business, or financial condition, including but not limited to: loss of customers; inability to process personal data or to operate in certain jurisdictions; limited ability to develop or commercialize our products or services; expenditure of time and resources to defend any claim or inquiry; adverse publicity; or substantial changes to our business model or operations.
However, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect us, the financial institutions with which we have arrangements directly, or the financial services industry or economy in general.
Our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our current and projected future business operations could be significantly impaired by factors that affect us, the financial institutions with which we have arrangements directly, or the financial services industry or economy in general.
Many countries in the European Union, as well as a number of other countries and organizations, such as the Organization for Economic Cooperation and Development and the European Commission, are actively considering changes to existing tax laws that, if enacted, could increase our tax obligations in countries where we do business.
Many countries in the European Union, as well as a number of other countries and organizations, such as the Organization for Economic Cooperation and Development (“OECD”) and the European Commission, are actively considering changes to existing tax laws that, if enacted, could increase our tax obligations in countries where we do business.
We are also subject to the COPPA, which applies to operators of certain websites and online services directed to children under the age of 13 or with actual knowledge that they collect or maintain personal information from children under the age of 13.
We are subject to COPPA, which applies to operators of certain websites and online services directed to children under the age of 13 or with actual knowledge that they collect or maintain personal information from children under the age of 13.
For example, in August 2020, our Channel Partners removed mobile apps from their platforms for violating their standard policies and terms of service which include policies against selling location data to brokers.
For example, in August 2020, one of our Channel Partners removed mobile apps from their platforms for violating their standard policies and terms of service which include policies against selling location data to brokers.
If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, our competitive position would be materially adversely harmed.
If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information were independently developed by a competitor, our competitive position would be materially adversely harmed.
Risks we may face in connection with our acquisitions and integrations of Jiobit and Tile include, among others: • We may not realize the benefits we expect to receive from the transactions, including anticipated synergies; • We may have difficulties managing Jiobit’s or Tile’s technologies and lines of business or retaining key personnel from Jiobit or Tile; • The acquisitions may not further our business strategy as we expected, we may not successfully integrate Jiobit or Tile as planned, there could be unanticipated adverse impacts on Jiobit’s or Tile’s business, or we may otherwise not realize the expected return on our investments, which could adversely affect our business or results of operations and potentially cause impairment to assets that we record as a part of an acquisition; • Our business, financial condition and results of operations may be adversely impacted by (i) claims or liabilities related to Jiobit’s or Tile’s business including, among others, claims from government agencies, terminated employees, current or former members, business partners or other third parties; (ii) pre-existing contractual relationships or lines of business of Jiobit or Tile that we would not have otherwise entered into, the termination or modification of which may be costly or disruptive to our business; (iii) unfavorable accounting treatment as a result of Jiobit’s or Tile’s practices; (iv) intellectual property claims or disputes; and (v) pre-existing lack of controls or difficulty with technical and data integrations resulting in data privacy, data security, and consumer protection risks that could lead to litigation or regulatory investigations or enforcement activity; • The manufacturing of Tile and Jiobit products is outsourced to a single manufacturer and if the contract is terminated or not renewed, we would be required to enter into a new agreement with another manufacturer that may not be available on reasonable terms, potentially resulting in new and unexpected operational complexities and costs; • We may fail to maintain existing agreements with Jiobit and Tile partners and alternative partnerships may not be available on reasonable terms, or at all; 24 Table of Contents • We may experience difficulties managing hardware inventories, including tracking movements, supply chain, and associated costs of managing hardware inventories; and • We may have failed to identify or assess the magnitude of certain liabilities, shortcomings or other risks in Jiobit’s or Tile’s businesses prior to closing our acquisitions of Jiobit or Tile, which could result in unexpected litigation or regulatory exposure, unfavorable accounting treatment, a diversion of management’s attention and resources, and other adverse effects on our business, financial condition and results of operations.
Risks we may face in connection with our acquisitions and integrations of Jiobit and Tile include, among others: • We may not realize the benefits we expect to receive from the transactions, including anticipated synergies; • We may have difficulties managing Jiobit’s or Tile’s technologies and lines of business or retaining key personnel from Jiobit or Tile; • The acquisitions may not further our business strategy as we expected, we may not successfully integrate Jiobit or Tile as planned, there could be unanticipated adverse impacts on Jiobit’s or Tile’s business, or we may otherwise not realize the expected return on our investments, which could adversely affect our business or results of operations and potentially cause impairment to assets that we record as a part of an acquisition; • Our business, financial condition and results of operations may be adversely impacted by (i) claims or liabilities related to Jiobit’s or Tile’s business including, among others, private party litigation (including class actions) and claims from government agencies, terminated employees, current or former members, business partners or other third parties; (ii) pre-existing contractual relationships or lines of business of Jiobit or Tile that we would not have otherwise entered into, the termination or modification of which may be costly or disruptive to our business; (iii) unfavorable accounting treatment as a result of Jiobit’s or Tile’s practices; (iv) intellectual property claims or disputes; and (v) pre-existing lack of controls or difficulty with technical and data integrations resulting in data privacy, data security, and consumer protection risks that could lead to litigation or regulatory investigations or enforcement activity; • The manufacturing of Tile and Jiobit products is outsourced to a single manufacturer and if the contract is terminated or not renewed, we would be required to enter into a new agreement with another manufacturer that may not be available on reasonable terms, potentially resulting in new and unexpected operational complexities and costs; • We may fail to maintain existing agreements with Jiobit and Tile partners and alternative partnerships may not be available on reasonable terms, or at all; • We may experience difficulties managing hardware inventories, including tracking movements, supply chain, and associated costs of managing hardware inventories; and • We may have failed to identify or assess the magnitude of certain liabilities, shortcomings or other risks in Jiobit’s or Tile’s businesses prior to closing our acquisitions of Jiobit or Tile, which could result in unexpected litigation or regulatory exposure, unfavorable accounting treatment, a diversion of management’s attention and resources, and other adverse effects on our business, financial condition and results of operations.
Major media outlets have increased scrutiny of the location data market and Life360 has been the target of media articles recently, which could impact member retention, growth, engagement and conversion as well as increase regulatory scrutiny of our actions or decisions regarding member privacy, encryption, content, contributors, advertising and other issues, which may materially adversely affect our reputation and brands.
Major media outlets have increased scrutiny of the location data market and Life360 has been the target of media articles, which could impact member retention, growth, engagement and conversion as well as increase regulatory scrutiny of our actions or decisions regarding member privacy, security, encryption, content, contributors, advertising and other issues, which may materially adversely affect our reputation and brands.
While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these positions may be challenged by jurisdictional tax authorities, which may have a significant impact on our global provision for income taxes. 44 Table of Contents Tax laws are being re-examined and evaluated globally.
While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible that these positions may be challenged by jurisdictional tax authorities, which may have a significant impact on our global provision for income taxes. 47 Table of Contents Tax laws are being re-examined and evaluated globally.
If the Cover Genius contract was terminated or not renewed, Tile would be required to enter into a new warranty program agreement and such agreement may not be available on reasonable terms, or at all, and could be disruptive and costly, and may have an adverse impact on Tile’s business, financial condition and results of operations.
If the Cover Genius contract were terminated or not renewed, Tile would be required to enter into a new warranty program agreement and such agreement may not be available on reasonable terms, or at all, and could be disruptive and costly, and may have an adverse impact on Tile’s business, financial condition and results of operations.
In addition, more customers may require extended payment terms, shorter term contracts or alternative arrangements that could reduce the amount of revenue we recognize upon delivery of our other products and services, and could adversely affect our short-term financial results. Furthermore, the presentation of our financial results requires us to make estimates and assumptions that may affect revenue recognition.
In addition, more customers may require extended payment terms, shorter term contracts or alternative licensing arrangements that could reduce the amount of revenue we recognize upon delivery of our other products and could adversely affect our short-term financial results. Furthermore, the presentation of our financial results requires us to make estimates and assumptions that may affect revenue recognition.
See “—If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; and other adverse consequences.” In addition, we depend on the ability of our members to access the internet with high-bandwidth data capabilities.
See “—If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; and other adverse consequences.” 38 Table of Contents In addition, we depend on the ability of our members to access the internet with high-bandwidth data capabilities.
These provisions could discourage an acquisition of us or other change in control transactions, thereby negatively affecting the price that investors might be willing to pay in the future for our common stock. We have identified a material weakness in our internal control over financial reporting.
These provisions could discourage an acquisition of us or other change in control transactions, thereby negatively affecting the price that investors might be willing to pay in the future for our common stock. We identified a material weakness in our internal control over financial reporting in the past.
Any number of factors can negatively affect member retention, growth, engagement and conversion, including the following, among others: • members increasingly engage with other competitive products or services; • member behavior on any of our apps or with respect to any of our products or services changes, including decreases in the frequency of their use; • members lose confidence in the quality or usefulness of our products or services or have concerns related to safety, security, privacy, well-being or other factors; • subscribers are no longer willing to pay for subscriptions or in-app hardware purchases; • members feel that their experience is diminished as a result of the decisions we make with respect to the frequency, prominence, format, size and quality of ads that we display; • member experience is affected due to difficulty installing, updating or otherwise accessing our products and services on mobile devices or hardware as a result of actions or unplanned network or site outages by us or third parties that we rely on to distribute our products and deliver our services; • we fail to introduce new features, products or services that members find engaging, or if we introduce new products or services, or make changes to existing products and services that are not favorably received; • we fail to keep pace with evolving online, mobile device, market and industry trends (including the introduction of new and enhanced digital services), as well as prevailing social, cultural or political preferences in the markets in which our apps are available for download; • initiatives designed to attract and retain members and increase engagement are unsuccessful or discontinued, whether as a result of actions by us, third parties or otherwise; • third-party initiatives that may enable greater use of our products and services, including low-cost or discounted data plans, are discontinued; • we, our partners or companies in our industry adopt terms, policies, procedures or practices that are perceived negatively by our members or the general public, including those related to areas such as member data, including practices involving our collection and sharing of precise geolocation data and information collected from children and minors under age 16 and their devices, privacy, security, or advertising; • we fail to detect or combat inappropriate, fraudulent, criminal or abusive activity on our platform; • we fail to provide adequate customer service to members, marketers or other partners; • we fail to protect our brands or reputation; • we, our partners or companies in our industry are the subject of regulatory investigation and/or rulings of non-compliance, litigation, adverse media reports or other negative publicity, including as a result of our or their member data practices, such as the collection and sharing of precise geolocation data and/or information collected from children and minors under age 16 and their devices; • there is decreased engagement with our products and services as a result of internet shutdowns or other actions by governments that affect the accessibility of our products and services in any of our markets; 12 Table of Contents • there are changes mandated or necessitated by legislation, regulatory authorities or litigation that adversely affect our products, services, members or partners; and • our financial condition and results of operations are subject to foreign currency fluctuation risks.
Any number of factors can negatively affect member retention, growth, engagement and conversion, including the following, among others: • members increasingly engage with other competitive products or services; • member behavior on any of our apps or with respect to any of our products or services changes, including decreases in the frequency of their use; • members lose confidence in the quality or usefulness of our products or services or have concerns related to safety, security, privacy (for example, children’s data and precise geolocation data), well-being or other factors; • members or subscribers may not be willing to pay for subscriptions or hardware purchases; • members feel that their experience is diminished as a result of the decisions we make with respect to the frequency, prominence, format, size and quality of ads that we display; • member experience is affected due to difficulty installing, updating or otherwise accessing our products and services on mobile devices or hardware as a result of actions or unplanned network or site outages by us or third parties that we rely on to distribute our products and deliver our services; • we fail to introduce new features, products or services that members find engaging, or if we introduce new products or services, or make changes to existing products and services that are not favorably received; • we fail to keep pace with evolving online, mobile device, market and industry trends (including the introduction of new and enhanced digital services), as well as prevailing social, cultural or political preferences in the markets in which our apps are available for download; • initiatives designed to attract and retain members and increase engagement are unsuccessful or discontinued, whether as a result of actions by us, third parties or otherwise; • third-party initiatives that may enable greater use of our products and services, including low-cost or discounted data plans, are discontinued; • we, our partners or companies in our industry adopt terms, policies, procedures or practices that are perceived negatively by our members or the general public, including those related to areas such as member data, including practices involving our collection and sharing of precise geolocation data and information collected from and about children and minors and their devices, privacy, security, or advertising; • we fail to detect or combat inappropriate, fraudulent, criminal or abusive activity on our platform; • we fail to provide adequate customer service to members, marketers or other partners; • we fail to protect our brands or reputation; 12 Table of Contents • we, our partners or companies in our industry are or may become the subject of regulatory investigation and/or rulings of non-compliance, litigation, adverse media reports or other negative publicity, including as a result of our or their member data practices, such as the collection and sharing of precise geolocation data and/or information collected from and about children and minors and their devices; • there is decreased engagement with our products and services as a result of internet shutdowns or other actions by governments that affect the accessibility of our products and services in any of our markets; • there are changes mandated or necessitated by legislation, regulatory authorities or litigation that adversely affect our products, services, members or partners; and • our financial condition and results of operations are subject to foreign currency fluctuation risks.
See “—If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; and other adverse consequences” 36 Table of Contents We also continually work to expand and enhance the efficiency and scalability of our technology and network systems to improve the experience of our members, accommodate substantial increases in the volume of traffic to our various products, ensure acceptable load times for our products and keep up with changes in technology and member preferences.
See “—If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; and other adverse consequences.” We also continually work to expand and enhance the efficiency and scalability of our technology and network systems to improve the experience of our members, accommodate substantial increases in the volume of traffic to our various products, ensure acceptable load times for our products and keep up with changes in technology and member preferences.
If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims); additional reporting requirements and/or oversight; bans on processing personal data; and orders to destroy or not use personal data.
If we or the third parties on which we rely fail, or are perceived to have failed, to address or comply with applicable data privacy and security obligations, we could face significant consequences, including but not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar); litigation (including class-action claims and mass arbitration demands); additional reporting requirements and/or oversight; bans on processing personal data; and orders to destroy or not use personal data.
Outside the United States, an increasing number of laws, regulations, and industry standards may govern data privacy and security.
Outside the United States, an increasing number of laws, regulations, and industry standards may govern personal data privacy and security.
Offering our apps for download internationally and rolling out full-service memberships outside of the United States, particularly in countries in which we have limited experience, exposes us to a number of additional risks including, among others: • operational and compliance challenges caused by distance, language, and cultural differences; • difficulties in staffing and managing international operations and differing labor regulations for contractors and certain Tile employees working internationally; • differing levels of social and technological acceptance and adoption of our products and services or lack of acceptance of them generally and the risk that our products and services may not resonate as deeply in certain international markets; 21 Table of Contents • foreign currency fluctuations; • restrictions on the transfer of funds among countries and back to the United States, as well as costs associated with repatriating funds to the United States; • differing and potentially adverse tax laws and consequences; • multiple, conflicting and changing laws, rules and regulations, and difficulties understanding and ensuring compliance with those laws by our Company, our employees and our business partners, over whom we exert no control, and other government requirements, approvals, permits and licenses; • compliance challenges due to different requirements and processes set out in different laws and regulatory environments, particularly in the case of privacy, data security intermediary liability, and consumer protection; • competitive environments that favor local businesses or local knowledge of such environments; • limited or insufficient intellectual property protection, or the inability or difficulty to obtain, maintain, protect or enforce intellectual property rights or to obtain intellectual property licenses from third parties, which could make it easier for competitors to capture increased market position; • use of international data hosting platforms and other third-party platforms; • low usage and/or penetration of internet connected consumer electronic devices; • political, legal, social or economic instability (such as the Russian invasion of Ukraine or bank failures); • laws and legal systems less developed or less predictable than those in the United States; • trade sanctions, political unrest, terrorism, war, pandemics and epidemics or the threat of any of these events (such as COVID-19); and • breaches or violation of any export and import laws, anti-bribery or anti-corruption laws, anti-money laundering rules or other rules or regulations applicable to our business, including but not limited to the Foreign Corrupt Practices Act of 1977, as amended.
Offering our apps for download internationally and rolling out full-service memberships outside of the United States, particularly in countries in which we have limited experience, exposes us to a number of additional risks including, among others: • operational and compliance challenges caused by distance, language, and cultural differences; • difficulties in staffing and managing international operations and differing labor regulations for contractors and certain Tile employees working internationally; • differing levels of social and technological acceptance and adoption of our products and services or lack of acceptance of them generally and the risk that our products and services may not resonate as deeply in certain international markets; • foreign currency fluctuations; • restrictions on the transfer of funds among countries and back to the United States, as well as costs associated with repatriating funds to the United States; • differing and potentially adverse tax laws and consequences; • multiple, conflicting and changing laws, rules and regulations, and difficulties understanding and ensuring compliance with those laws by our Company, our employees and our business partners, over whom we exert no control, and other government requirements, approvals, permits and licenses; • compliance challenges due to different, overlapping and evolving requirements and processes set out in different laws and regulatory environments, particularly in the case of data privacy, data security, intermediary liability, and consumer protection; • competitive environments that favor local businesses or local knowledge of such environments; • limited or insufficient intellectual property protection, or the inability or difficulty to obtain, maintain, protect or enforce intellectual property rights or to obtain intellectual property licenses from third parties, which could make it easier for competitors to capture increased market position; • use of international data hosting platforms and other third-party platforms; • low usage and/or penetration of internet connected consumer electronic devices; • political, legal, social or economic instability; • laws and legal systems less developed or less predictable than those in the United States; • trade sanctions, political unrest, terrorism, war, pandemics and epidemics or the threat of any of these events; and • breaches or violation of any export and import laws, anti-bribery or anti-corruption laws, anti-money laundering rules or other rules or regulations applicable to our business, including but not limited to the Foreign Corrupt Practices Act of 1977, as amended.
These consequences may include: government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive data (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms.
These consequences may include: government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive data (including personal data); litigation (including class claims and mass arbitration demands); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions in our operations (including availability of data); financial loss; and other similar harms.
Our ability to compete to attract, engage and retain members, as well as to increase their engagement with our various products and services and to grow our subscriptions, depend on numerous factors, including our brand and reputation, the prices associated with our subscriptions, products and services, the ease of use of our platform and technology, the actual and perceived safety and security of our platform, products and services, and our ability to address consumer and regulatory concerns as they arise, including those related to data usage, data privacy and security such as practices involving the sharing of precise geolocation data and information collected from children and minors under age 16 and their devices.
Our ability to compete to attract, engage and retain members, as well as to increase their engagement with our various products and services and to grow our subscriptions, depend on numerous factors, including our brand and reputation, the prices associated with our subscriptions, products and services, the ease of use of our platform and technology, the actual and perceived safety and security of our platform, products and services, and our ability to address consumer and regulatory concerns as they arise, including those related to data usage, data privacy and security such as practices involving the sharing of precise geolocation data and information collected from and about children and minors and their devices.
In addition, consumer resistance to the collection and sharing of the data used to deliver targeted advertising, increased visibility of consent or “do not track” mechanisms (such as browser signals from the Global Privacy Control) as a result of industry regulatory or legal developments, the adoption by consumers of browser settings or “ad-blocking” software, and the development and deployment of new technologies could materially impact our ability to collect data or reduce our ability to deliver relevant promotions or media, which could materially impair the results of our operations.
In addition, consumer resistance to the collection and sharing of the data used to deliver targeted advertising, increased visibility of consent or “do not track” mechanisms (such as browser signals from the Global Privacy Control) as a result of industry regulatory or legal developments, the adoption by consumers of browser settings or “ad-blocking” software, and the development and deployment of new technologies could materially impact our ability to collect data or reduce our ability to deliver relevant promotions or media or market our products and reach new users, which could materially impair the results of our operations.
See “—Investment in new business strategies and acquisitions could disrupt our ongoing business, present risks not originally contemplated and materially adversely affect our business, reputation, results of operations and financial condition.” Our user metrics and other estimates are subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics may negatively affect our reputation and our business.
See “—Investment in new business strategies and acquisitions could disrupt our ongoing business, present risks not originally contemplated and materially adversely affect our business, reputation, results of operations and financial condition.” 25 Table of Contents Our user metrics and other estimates are subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics may negatively affect our reputation and our business.
We incur increased costs and are subject to additional regulations and requirements as a result of becoming a U.S. reporting company, and our management is required to devote substantial time to complying with Delaware laws, Australian laws, and reporting requirements pursuant to U.S. securities laws, which could lower profits and make it more difficult to run our business.
General Risk Factors We incur increased costs and are subject to additional regulations and requirements as a result of becoming a U.S. reporting company, and our management is required to devote substantial time to complying with Delaware laws, Australian laws, and reporting requirements pursuant to U.S. securities laws, which could lower profits and make it more difficult to run our business.
Accordingly, the loss of a small number of our large retailers distributors, and distribution channels, or the reduction in business with, or access to, one or more of these retailers, distributors, or distribution channels could have a significant adverse impact on our operating results. 18 Table of Contents We rely on a limited number of suppliers, manufacturers, and fulfillment partners for our smart trackers.
Accordingly, the loss of a small number of our large retailers, distributors, and distribution channels, or the reduction in business with, or access to, one or more of these retailers, distributors, or distribution channels could have a significant adverse impact on our operating results. We rely on a limited number of suppliers, manufacturers, and fulfillment partners for our smart trackers.
This partnership marked the beginning of Life360’s exit from its legacy data sales model and transition to commercialize solely aggregated data, while still providing members the option to opt out of even aggregated data sales.
This partnership marked the beginning of Life360’s exit from its legacy data sales model and transition to commercialize aggregated data, while still providing certain members the option to opt out of even aggregated data sales.
In the future, we may offer additional third-party solutions through lead generation. There is a risk that members may not engage with the lead generation offering at the scale necessary for potential advertising partners to spend any of their advertising budget on the lead generation offering. There is a risk that advertisers will not utilize the lead generation offering.
In the future, we may offer additional third-party solutions through lead generation. There is a risk that members may not engage with the lead generation offering or other advertisements at the scale necessary for potential advertising partners to spend any of their advertising budget on the offering. There is a risk that advertisers will not utilize the lead generation offering.
Although certain of our newer brands, products and services may experience significant growth over relatively short periods of time, the historical growth rates of these brands and products and services may not be an indication of their future growth rates generally. We have encountered, and may continue to encounter, risks and difficulties as we build our newer brands and products.
Although certain of our newer brands, products and services may experience significant growth over relatively short periods of time, the historical growth rates of these brands and products and services may not be an indication of their future growth rates generally. 26 Table of Contents We have encountered, and may continue to encounter, risks and difficulties as we build our newer brands and products.
Any of the foregoing, and any unfavorable resolution of such disputes and litigation, would materially and adversely impact our business, financial condition and results of operations. 41 Table of Contents Our use of “open source” software could subject our proprietary software to general release, adversely affect our ability to sell our products and services and subject us to possible litigation.
Any of the foregoing, and any unfavorable resolution of such disputes and litigation, would materially and adversely impact our business, financial condition and results of operations. Our use of “open source” software could subject our proprietary software to general release, adversely affect our ability to sell our products and services and subject us to possible litigation.
Such litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources. Additionally, our securities may in the future trade on more than one stock exchange and this may result in price variations between the markets and volatility in our stock price.
Such litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources. 49 Table of Contents Additionally, our securities may in the future trade on more than one stock exchange and this may result in price variations between the markets and volatility in our stock price.
Any failure by us to maintain the expected level of support could reduce member satisfaction and negatively impact our customer retention, our business and reputation. 23 Table of Contents Our growth strategy includes expanding in international markets which requires significant resources and management attention.
Any failure by us to maintain the expected level of support could reduce member satisfaction and negatively impact our customer retention, our business and reputation. Our growth strategy includes expanding in international markets which requires significant resources and management attention.
A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our services. We may expend significant resources or modify our business activities to try to protect against security incidents.
A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to provide our services. 36 Table of Contents We may expend significant resources or modify our business activities to try to protect against security incidents.
Seasonality in our business can also be affected by introductions of new or enhanced products and services, including the costs associated with such introductions. 28 Table of Contents We derive a portion of our revenues from lead generation offerings.
Seasonality in our business can also be affected by introductions of new or enhanced products and services, including the costs associated with such introductions. We derive a portion of our revenues from lead generation offerings.
A failure to grow the lead generation offering may have a material adverse impact on our business, financial condition and results of operations. Our operating margins may decline as a result of increasing product costs and inflationary pressures.
A failure to grow the lead generation offering or other advertisements may have a material adverse impact on our business, financial condition and results of operations. Our operating margins may decline as a result of increasing product costs and inflationary pressures.
Any failure in these efforts could materially adversely affect our business, financial condition and results of operations. • Distribution and marketing of, and access to, our products and services depends, in significant part, on third-party publishers and platforms.
Any failure in these efforts could materially adversely affect our business, financial condition and results of operations. 10 Table of Contents • Distribution and marketing of, and access to, our products and services depends, in significant part, on third-party publishers and platforms.
If the conditions in the general economy and the markets in which we operate worsen from present levels, our business, financial condition, and results of operations could be materially adversely affected. We are affected by seasonality.
If the conditions in the general economy and the markets in which we operate worsen from present levels, our business, financial condition, and results of operations could be materially adversely affected. 28 Table of Contents We are affected by seasonality.
See “Item 3. Legal Proceedings”. Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations. In general, under Section 382 of the U.S.
See “Item 3. Legal Proceedings.” Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations. In general, under Section 382 of the U.S.
The occurrence of any such event could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations. Item 1B. Unresolved Staff Comments None.
The occurrence of any such event could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations. Item 1B. Unresolved Staff Comments None. 53 Table of Contents
Further, our systems and infrastructures are vulnerable to damage from fire, power loss, hardware and operating software errors, cyber-attacks, technical limitations, telecommunications failures, acts of God, the financial insolvency of third parties that we work with, global pandemics and other public health crises, such as the COVID-19 pandemic, and other unanticipated problems or events.
Further, our systems and infrastructures are vulnerable to damage from fire, power loss, hardware and operating software errors, cyber-attacks, technical limitations, telecommunications failures, acts of God, the financial insolvency of third parties that we work with, global pandemics and other public health crises, and other unanticipated problems or events.
In the ordinary course of our business, we and the third parties upon which we rely may process proprietary, confidential, and sensitive data (such as precise geolocation data and information relating to children and minors under 16 and their devices), and, as a result, we and the third parties upon which we rely face a variety of evolving threats, including but not limited to ransomware attacks, which could cause security incidents.
In the ordinary course of our business, we and the third parties upon which we rely may process proprietary, confidential, and sensitive data (such as precise geolocation data and information relating to children), and, as a result, we and the third parties upon which we rely face a variety of evolving threats, including but not limited to ransomware attacks, which could cause security incidents.
These new ventures are inherently risky and may not be successful. The failure of any significant investment could materially adversely affect our business, reputation, results of operations and financial condition. Our recently completed acquisitions of Jiobit and Tile present numerous risks that may affect our ability to realize the anticipated strategic and financial goals from the acquisitions.
These new ventures are inherently risky and may not be successful. The failure of any significant investment could materially adversely affect our business, reputation, results of operations and financial condition. 24 Table of Contents Our acquisitions of Jiobit and Tile present numerous risks that may affect our ability to realize the anticipated strategic and financial goals from the acquisitions.
The EU and other governments in jurisdictions in which our apps are available for download have imposed severe sanctions and export controls against Russia and Russian interests, and have threatened additional sanctions and controls.
The European Union and other governments in jurisdictions in which our apps are available for download have imposed severe sanctions and export controls against Russia and Russian interests, and have threatened additional sanctions and controls.
If we are unable to remediate this material weakness, or if we identify additional material weaknesses in the future or otherwise fail to maintain effective internal control over financial reporting, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and the price of our common stock and CDIs.
If we identify additional material weaknesses in our future or otherwise fail to maintain effective internal control over financial reporting, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and the price of our common stock and CDIs.
Each platform provider (each a “Channel Partner”) has broad discretion to change its policies and interpret its terms of service and other policies with respect to us and other companies, including changes that may be unfavorable to us and may limit, eliminate or otherwise interfere with our ability to distribute or market through their stores, affect our ability to update our applications, including to make bug fixes or other feature updates or upgrades and affect our ability to access native functionality or other aspects of mobile devices and our ability to access information about our members that they collect.
Each Channel Partner has broad discretion to change its policies and interpret its terms of service and other policies with respect to us and other companies, including changes that may be unfavorable to us and may limit, eliminate or otherwise interfere with our ability to distribute or market through their stores, affect our ability to update our applications, including to make bug fixes or other feature updates or upgrades and affect our ability to access native functionality or other aspects of mobile devices and our ability to access information about our members that they collect.
This places pressure on our supply chain and could adversely affect our revenues and profitability if we are unable to successfully fulfill customer orders during this quarter. 20 Table of Contents Our primary manufacturer’s facilities are located in the PRC and Malaysia.
This places pressure on our supply chain and could adversely affect our revenues and profitability if we are unable to successfully fulfill customer orders during this quarter. Our primary manufacturer’s facilities are located in the PRC and Malaysia.
For example, in December 2017, the Federal Communications Commission adopted an order reversing net neutrality protections in the United States, including the repeal of specific rules against blocking, throttling or “paid prioritization” of content or services by internet service providers.
For example, in December 2017, the FCC adopted an order reversing net neutrality protections in the United States, including the repeal of specific rules against blocking, throttling or “paid prioritization” of content or services by internet service providers.
Failure to comply with such laws and regulations could result in claims, changes to our business practices, monetary penalties, increased cost of operations, reputational damage, or declines in member growth or engagement. • We incur increased costs and are subject to additional regulations and requirements as a result of becoming a U.S. reporting company, and our management is required to devote substantial time to complying with Delaware laws, Australian laws, and reporting requirements pursuant to U.S. securities laws, which could lower profits and make it more difficult to run our business. • The market price of our CDIs has been, and common stock may be, volatile, which could cause the value of our common stock to decline. 11 Table of Contents • We have identified a material weakness in our internal controls, as a result of which we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and the price of our common stock and CDIs.
Failure to comply with such laws and regulations could result in claims, changes to our business practices, monetary penalties, increased cost of operations, reputational damage, or declines in member growth or engagement. 11 Table of Contents • The market price of our CDIs has been, and common stock may be, volatile, which could cause the value of our common stock to decline. • We have identified a material weakness in our internal control over financial reporting in the past..If we identify additional material weaknesses in our future or otherwise fail to maintain effective internal control over financial reporting, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and the price of our common stock and CDIs. • We incur increased costs and are subject to additional regulations and requirements as a result of becoming a U.S. reporting company, and our management is required to devote substantial time to complying with Delaware laws, Australian laws, and reporting requirements pursuant to U.S. securities laws, which could lower profits and make it more difficult to run our business.
If we are not able to compete effectively against our current or future competitors and products or services that may emerge, the size and level of engagement of our member base may decrease, which could adversely affect our business, financial condition and results of operations. We may need to change our pricing models to compete successfully.
If we are not able to compete effectively against our current or future competitors and products or services that may emerge, the size and level of engagement of our member base may decrease, which could adversely affect our business, financial condition and results of operations.
We and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.
We and the third parties upon which we rely may be subject to and have previously responded to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks and deep fakes, which may be increasingly more difficult to identify as fake), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks, credential stuffing attacks, credential harvesting, personnel misconduct or error, ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, earthquakes, fires, floods, and other similar threats.
Hardware sales have historically experienced revenue seasonality in the fourth quarter of each calendar year, which includes the important selling periods in November (Black Friday and Cyber Monday) and December (Christmas and Hanukkah) in large part to seasonal holiday demand.
Hardware sales have historically experienced comparatively higher seasonal growth in the fourth quarter of each calendar year, which includes the important selling periods in November (Black Friday and Cyber Monday) and December (Christmas and Hanukkah) in large part to seasonal holiday demand.
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds, have in the past and may in the future lead to market-wide liquidity problems.
Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds, have in the past and may in the future lead to market-wide liquidity problems. There is no guarantee that the U.S.
Disruption in the supply chains from the PRC and Malaysia could also adversely affect our business. 10 Table of Contents • Our apps are currently available for download internationally and in the future we expect to penetrate additional international regions, including certain markets and regions in which we have limited experience, which subjects us to a number of additional risks. • Our future success depends on the continuing efforts of our executive officers and other key employees and our ability to attract and retain highly skilled personnel and senior management. • We rely on key data partners, and any termination of our agreements with such partners could have a material adverse effect on our revenues, business, financial condition, and results of operations. • Our growth strategy includes expanding in international markets which requires significant resources and management attention. • Investment in new business strategies and acquisitions could disrupt our ongoing business, present risks not originally contemplated and materially adversely affect our business, reputation, results of operations and financial condition. • The limited operating history of our new brands, products and services makes it difficult to evaluate our current business and future prospects. • We have grown rapidly in recent years and have limited operating experience at our current scale of operations.
Disruption in the supply chains from the PRC and Malaysia could also adversely affect our business. • Our apps are currently available for download internationally and in the future we expect to penetrate additional international regions, including certain markets and regions in which we have limited experience, which subjects us to a number of additional risks. • We rely on key data partners, and any termination of our agreements with such partners could have a material adverse effect on our revenues, business, financial condition, and results of operations. • Our future success depends on the continuing efforts of our executive officers and other key employees and our ability to attract and retain highly skilled personnel and senior management. • Investment in new business strategies and acquisitions could disrupt our ongoing business, present new risks and materially adversely affect our business, reputation, results of operations and financial condition. • The limited operating history of our new brands, products and services makes it difficult to evaluate our current business and future prospects. • We have grown rapidly and have limited operating experience at our current scale of operations.
We are, or may in the future become, subject to litigation and various legal proceedings, including litigation and proceedings related to intellectual property matters, data privacy, data security, and consumer protection laws, as well as stockholder derivative suits, class action lawsuits, actions from former employees and other matters, that involve claims for substantial amounts of money or for other relief or that might necessitate changes to our business or operations.
We have been in the past, are, and may in the future become, subject to litigation and various legal proceedings (including, without limitation, government and private party inquiries and claims), including litigation and proceedings related to intellectual property matters, data privacy, data security, and consumer protection laws, as well as stockholder derivative suits, class action lawsuits, actions from former employees and other matters, that involve claims for substantial amounts of money or for other relief or that might necessitate changes to our business or operations.
Transportation costs, fuel costs, labor unrest, political unrest, natural disasters, regional or global pandemics, including emerging variants of COVID-19 and consequences thereof, and other adverse effects on our ability, timing and cost of delivering products can increase our inventory, decrease our margins, adversely affect our relationships with distributors and other customers and otherwise adversely affect our financial condition and results of operations.
Transportation costs, fuel costs, labor unrest, political unrest, natural disasters, regional or global pandemics, and other adverse effects on our ability, timing and cost of delivering products can increase our inventory, decrease our margins, adversely affect our relationships with distributors and other customers and otherwise adversely affect our financial condition and results of operations.
In January 2022, Life360 announced a new partnership agreement with a key data partner (“Data Partner”), a provider of anonymized aggregated analytics for the retail ecosystem. As part of this partnership, the Data Partner will provide data processing and analytics services to Life360 and will have the right to commercialize solely aggregated data insights.
In January 2022, Life360 announced a new partnership agreement with a key data partner (“Data Partner”), a provider of anonymized aggregated analytics for the retail ecosystem. As part of this partnership, the Data Partner has provided data processing and analytics services to Life360 and has the right to commercialize aggregated data insights.
As of December 31, 2022, we have approximately $252.2 million and $119.4 million of federal and state net operating loss carryforwards, respectively, available to offset future taxable income which, if not utilized, will begin to expire in varying amounts in 2027. Our ability to utilize NOLs may be currently subject to limitations due to a prior ownership change.
As of December 31, 2023, we have approximately $197.5 million and $81.0 million of federal and state net operating loss carryforwards, respectively, available to offset future taxable income which, if not utilized, will begin to expire in varying amounts in 2027. Our ability to utilize NOLs may be currently subject to limitations due to a prior ownership change.
We currently rely on member acquisition through paid efforts on a limited basis and are not reliant on it for our member growth. Our paid acquisition efforts include paid search in app stores as well as commercials on streaming television.
We currently rely on member acquisition through paid efforts, however, we are not exclusively reliant on it for our member growth. Our paid acquisition efforts include paid search in app stores as well as commercials on streaming television.
Additionally, no assurance can be given that these agreements will be effective in controlling access to or potential misuse of our proprietary information and trade secrets, any such assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property. 38 Table of Contents Policing unauthorized use of our intellectual property and misappropriation of our technology and trade secrets is difficult and we may not always be aware of such unauthorized use or misappropriation.
Additionally, no assurance can be given that these agreements will be effective in controlling access to or potential misuse of our proprietary information and trade secrets, any such assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property.
We currently depend on the continued services and performance of our executive officers and other key employees. If one or more of our executive officers or other key employees were unable or unwilling to continue their employment with us, we may not be able to replace them easily, in a timely manner, or at all.
If one or more of our executive officers or other key employees were unable or unwilling to continue their employment with us, we may not be able to replace them easily, in a timely manner, or at all.
Federal, state and local privacy and consumer protection laws also govern specific technologies that we employ or how we market to, and otherwise communicate with, our members. For example, the CAN-SPAM and the TCPA impose specific requirements on communications with consumers.
Federal, state and local privacy and consumer protection laws also govern specific technologies that we employ or how we market to, and otherwise communicate with, our members. For example, the Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM) and the Telephone Consumer Protection Act (TCPA) impose specific requirements on communications with consumers.
In the ordinary course of business, we collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, processing) personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, sensitive third-party data, business plans, transactions, and financial information (collectively, sensitive data).
In the ordinary course of business, we (and the third parties or service providers upon whom we rely) collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, “process” and its conjugates) personal data and other sensitive information, including proprietary and confidential business data, trade secrets, intellectual property, sensitive third-party data, business plans, transactions, and financial information (collectively, sensitive data).
A loss of any of these partners could negatively affect our business. • We have limited control over our suppliers, manufacturers, fulfillment partners and inflation in costs, which may subject us to significant risks, including the potential inability to produce or obtain quality products and services on a timely basis or in sufficient quantity. • If we do not successfully coordinate the worldwide manufacturing and distribution of our products, we could lose sales, which could materially adversely affect our business, financial condition and results of operations. • Our primary manufacturer’s facilities are located in the PRC and Malaysia.
A loss of or change with any of these partners could negatively affect our business, including the potential inability to produce or obtain quality products and services on a timely basis or in sufficient quantity. • If we do not successfully coordinate the worldwide manufacturing and distribution of our products, we could lose sales, which could materially adversely affect our business, financial condition and results of operations. • Our primary manufacturer’s facilities are located in the PRC and Malaysia.
While our remuneration and nomination committee is responsible for overseeing and implementing proper succession plans for the Company, if we fail to ensure the effective transfer of senior management knowledge and smooth transitions involving senior management across our various businesses, our ability to execute short and long term strategic, financial and operating goals, as well as our business, financial condition and results of operations generally, could be materially adversely affected.
While our remuneration and nomination committee is responsible for overseeing and implementing proper succession plans for the Company, if we fail to ensure the effective transfer of senior management knowledge and smooth transitions involving senior management across our various businesses, our ability to execute short and long term strategic, financial and operating goals, as well as our business, financial condition and results of operations generally, could be materially adversely affected. 23 Table of Contents Our employees, consultants, third-party providers, partners and competitors could engage in misconduct that materially adversely affects us.
Any changes, bugs, or technical issues in such systems, or changes in our relationships with mobile operating system partners, handset manufacturers, or mobile carriers, or in their terms of service or policies that degrade our products’ functionality, reduce or eliminate our ability to update or distribute our products, give preferential treatment to competitive products, limit our ability to deliver, target, or measure the effectiveness of ads, or charge fees related to the distribution of our products or our delivery of ads could materially adversely affect the usage of our products and services on mobile devices.
Any changes, bugs, or technical issues in such systems, or changes in our relationships with mobile operating system partners, handset manufacturers, or mobile carriers, or in their terms of service or policies that degrade our products’ functionality, reduce or eliminate our ability to update or distribute our products, give preferential treatment to competitive products, limit our ability to deliver, target, or measure the effectiveness of ads, or charge fees related to the distribution of our products or our delivery of ads could materially adversely affect the usage of our products and services on mobile devices. 17 Table of Contents We are subject to the standard policies and terms of service of these third-party platforms, which generally govern the promotion, distribution, content, and operation of applications on such platforms.
We have entered into an agreement (the “Arity Agreement”) to license from Arity 875, LLC (“Arity”) its application program interfaces, including the Arity Driving Engine API, which we integrate into our products and services. Pursuant to the Arity Agreement, we are required to exclusively obtain such services from Arity during the term of the Arity Agreement.
We have entered into an agreement (the “Arity Agreement”) to license from Arity 875, LLC (“Arity”) its application program interfaces, including the Arity Driving Engine API, which we integrate into our products and services.
There is no guarantee that investing in new lines of business, products, services, product and services extensions or other initiatives to show our community meaningful opportunities to facilitate family safety or location, driving and family coordination will succeed, that members will like the changes or that we will be able to implement such new lines of business, products, services, product and services extensions or other initiatives effectively or on a timely basis, which may negatively affect our brands.
We may not receive revenues from these investments for several years and may not realize returns from such investments at all. 15 Table of Contents There is no guarantee that investing in new lines of business, products, services, product and services extensions or other initiatives to show our community meaningful opportunities to facilitate family safety or location, driving and family coordination will succeed, that members will like the changes or that we will be able to implement such new lines of business, products, services, product and services extensions or other initiatives effectively or on a timely basis, which may negatively affect our brands.
While the scope and timing of these proposals are currently uncertain, if the rules, doctrines or currently available defenses change, if international jurisdictions refuse to apply similar protections that are currently available in the United States, or the European Union or if a court were to disagree with our application of those rules to our service, we could be required to expend significant resources to try to comply with the new rules or incur liability, and our business, financial condition and results of operations could be harmed. 43 Table of Contents We may fail to comply with laws regulating subscriptions and auto-payment renewals, which could have a material adverse effect on our business, reputation, financial condition and results of operations.
While the scope and timing of these proposals are currently uncertain, if the rules, doctrines or currently available defenses change, if international jurisdictions refuse to apply similar protections that are currently available in the United States, or the European Union or if a court were to disagree with our application of those rules to our service, we could be required to expend significant resources to try to comply with the new rules or incur liability, and our business, financial condition and results of operations could be harmed.
Adverse litigation judgments or settlements resulting from legal proceedings in which we may be involved could have a material adverse effect on our business, financial condition and results of operations.
In addition, compliance and remediation efforts can be costly. 46 Table of Contents Adverse litigation judgments or settlements resulting from legal proceedings in which we may be involved could have a material adverse effect on our business, financial condition and results of operations.
As of December 31, 2022, international members represented over 36% of our total Monthly Active Users (“MAUs”) and accounted for approximately 8% of revenue.
As of December 31, 2023, international members represented over 40% of our total Monthly Active Users (“MAUs”) and accounted for approximately 12% of revenue.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAll of our facilities are leased. Beginning in 2020 at the start of the COVID-19 pandemic, we began operating as a remote-first company with plans to continue as such indefinitely.
Biggest changeBeginning in 2020 at the start of the COVID-19 pandemic, we began operating as a remote-first company with plans to continue as such indefinitely. We believe that our current facilities are adequate to meet our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations.
Item 2. Properties. In January 2023, we moved our corporate headquarters from San Francisco, California to San Mateo, California, where we lease approximately 16,738 square feet of space under a lease that expires on October 31, 2023. Our corporate headquarters currently accommodates our principal, development, engineering, marketing and administrative activities. We also maintain office space in Chicago, Illinois.
Item 2. Properties. In January 2023, we moved our corporate headquarters from San Francisco, California to San Mateo, California, where we lease approximately 7,390 square feet of space under a lease that expires on November 30, 2026. Our corporate headquarters currently accommodates our principal, development, engineering, marketing and administrative activities. All of our facilities are leased.
Removed
We believe that our current facilities are adequate to meet our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePerformance Graph The following performance graph shows a comparison of the change in the cumulative total return for our common stock, the S&P 500 Index, and the ASX 200 Index between June 30, 2019, the first quarter end after our common stock commenced trading on the Australian Securities Exchange on May 10, 2019, and December 31, 2022.
Biggest changeSubject to such restrictions, any future determination to pay dividends or other distributions from our reserves will be at the discretion of our Board and will depend upon a number of factors, including our results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors our Board deems relevant . 56 Table of Contents Performance Graph The following performance graph shows a comparison of the change in the cumulative total return for our common stock, the S&P 500 Index, and the ASX 200 Index between June 30, 2019, the first quarter end after our common stock commenced trading on the Australian Securities Exchange on May 10, 2019, and December 31, 2023.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock began trading on the Australian Securities Exchange under the symbol “360” on May 10, 2019.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock began trading on the Australian Securities Exchange under the symbol “360” on May 10, 2019. Prior to that time, there was no public market for our common stock.
The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.
Holders of Record As of February 22, 2024, there were approximately 591 stockholders of record. The actual number of stockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
Dividend Policy We have never paid or declared any cash dividends on our common stock or CDIs in the past, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and expansion of our business.
We currently intend to retain all available funds and any future earnings to fund the development and expansion of our business.
The issuance of the CDIs in the Placement was made in reliance upon the exemption from registration contained in Regulation S of the Securities Act. Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved]
Purchases of Equity Securities by the Issuer and Affiliated Purchasers None. Item 6. [Reserved]
The USD value of our common stock is equivalent to the CDI value (the AUD value of our common stock traded on the Australian Securities Exchange) multiplied by 3 (CDI conversion ratio) and then multiplied by the applicable foreign currency exchange rate between the USD and the AUD for the applicable period. 52 Table of Contents Recent Sales of Unregistered Equity Securities On November 20, 2022 (November 21, 2022 in Australia), we entered into an underwriting agreement, whereby we agreed to issue 2,645,503 shares of our common stock in the form of 7,936,509 new CDIs (with each CDI representing one-third of a share of our common stock, par value $0.001 per share) to institutional investors (the “Placement”).
The USD value of our common stock is equivalent to the CDI value (the AUD value of our common stock traded on the Australian Securities Exchange) multiplied by 3 (CDI conversion ratio) and then multiplied by the applicable foreign currency exchange rate between the USD and the AUD for the applicable period. Recent Sales of Unregistered Equity Securities None.
Removed
Prior to that time, there was no public market for our common stock. 51 Table of Contents Holders of Record As of March 10, 2023, there were approximately 474 stockholders of record.
Added
This number of holders of record also does not include stockholders whose shares may be held in trust by other entities. Dividend Policy We have never paid or declared any cash dividends on our common stock or CDIs in the past, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future.
Removed
Subject to such restrictions, any future determination to pay dividends or other distributions from our reserves will be at the discretion of our Board and will depend upon a number of factors, including our results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors our Board deems relevant .
Removed
We received aggregate gross proceeds of approximately $33 million and paid aggregate underwriting commissions of approximately $0.9 million in connection with the Placement. The Placement was fully underwritten by Bell Potter Securities Limited. MST Financial Services Pty Ltd acted as Co-Lead Manager.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe results of historical periods are not necessarily indicative of the results of operations for any future period. 57 Table of Contents Year Ended December 31, 2022 2021 % Change (in thousands) Subscription revenue $ 153,287 $ 86,551 77 % Hardware revenue 47,884 952 4,930 % Other revenue 27,134 25,140 8 % Total revenue 228,305 112,643 103 % Cost of subscription revenue 30,659 17,807 72 % Cost of hardware revenue 45,441 1,340 3,291 % Cost of other revenue 3,607 3,621 0 % Total cost of revenue 79,707 22,768 250 % Gross Profit 148,598 89,875 65 % Operating expenses (1) : Research and development 102,480 50,994 101 % Sales and marketing 92,419 47,473 95 % General and administrative 48,110 23,670 103 % Total operating expenses 243,009 122,137 99 % Loss from operations (94,411) (32,262) 193 % Other income (expense): Convertible notes fair value adjustment 1,786 (511) (450) % Derivative liability fair value adjustment 1,295 (733) (277) % Other income (expense), net 13 (178) (107) % Total other income (expense), net 3,094 (1,422) (318) % Loss before income taxes (91,317) (33,684) 171 % Provision (benefit) for income taxes 312 (127) (346) % Net loss (91,629) (33,557) 173 % Change in foreign currency translation adjustment (6) — 100 % Total comprehensive loss $ (91,635) $ (33,557) 173 % ____________________ (1) Includes stock-based compensation expense as follows: Year Ended December 31, 2022 2021 % Change (in thousands) Cost of revenue Subscription costs $ 684 $ 444 54 % Hardware costs 514 13 3,854 % Other costs 237 65 265 % Total cost of revenue 1,435 522 Research and development 19,431 7,457 161 % Sales and marketing 3,834 752 410 % General and administrative 9,980 3,207 211 % Total stock-based compensation expense $ 34,680 $ 11,938 191 % 58 Table of Contents The following table sets forth our results of operations as a percentage of revenue: Year Ended December 31, 2022 2021 Subscription revenue 67 % 77 % Hardware revenue 21 % 1 % Other revenue 12 % 22 % Total revenue 100 % 100 % Cost of subscription revenue 13 % 16 % Cost of hardware revenue 20 % 1 % Cost of other revenue 2 % 3 % Total cost of revenue 35 % 20 % Gross Profit 65 % 80 % Operating expenses: Research and development 45 % 45 % Sales and marketing 40 % 42 % General and administrative 21 % 21 % Total operating expenses 106 % 108 % Loss from operations (41) % (29) % Other income (expense): Convertible notes fair value adjustment 1 % 0 % Derivative liability fair value adjustment 1 % (1) % Other income (expense), net 0 % 0 % Total other income (expense), net 1 % (1) % Loss before income taxes (40) % (30) % Provision (benefit) for income taxes 0 % 0 % Net loss (40) % (30) % Change in foreign currency translation adjustment 0 % 0 % Total comprehensive loss (40) % (30) % Comparison of the years ended December 31, 2022 and 2021.
Biggest changeYear Ended December 31, 2023 2022 2021 (in thousands) Subscription revenue $ 220,794 $ 153,287 $ 86,551 Hardware revenue 58,178 47,884 952 Other revenue 25,546 27,134 25,140 Total revenue 304,518 228,305 112,643 Cost of subscription revenue 30,975 30,659 17,807 Cost of hardware revenue 47,384 45,441 1,340 Cost of other revenue 3,522 3,607 3,621 Total cost of revenue (1) 81,881 79,707 22,768 Gross profit 222,637 148,598 89,875 Operating expenses (1) : Research and development 100,965 102,480 50,994 Sales and marketing 99,072 92,419 47,473 General and administrative 52,583 48,110 23,670 Total operating expenses 252,620 243,009 122,137 Loss from operations (29,983) (94,411) (32,262) Other income (expense): Convertible notes fair value adjustment (684) 1,786 (511) Derivative liability fair value adjustment (116) 1,295 (733) Other income (expense), net 3,228 13 (178) Total other income (expense), net 2,428 3,094 (1,422) Loss before income taxes (27,555) (91,317) (33,684) Provision for (benefit from) income taxes 616 312 (127) Net loss (28,171) (91,629) (33,557) Change in foreign currency translation adjustment 15 (6) — Total comprehensive loss $ (28,156) $ (91,635) $ (33,557) ____________________ (1) Includes stock-based compensation expense as follows: 62 Table of Contents Year Ended December 31, 2023 2022 % Change (in thousands) Cost of revenue Subscription costs $ 651 $ 684 (5) % Hardware costs 1,096 514 113 % Other costs 43 237 (82) % Total cost of revenue 1,790 1,435 Research and development 22,015 19,431 13 % Sales and marketing 3,059 3,834 (20) % General and administrative 11,648 9,980 17 % Total stock-based compensation expense $ 38,512 $ 34,680 11 % The following table sets forth our results of operations as a percentage of revenue: Year Ended December 31, 2023 2022 2021 Subscription revenue 73 % 67 % 77 % Hardware revenue 19 % 21 % 1 % Other revenue 8 % 12 % 22 % Total revenue 100 % 100 % 100 % Cost of subscription revenue 10 % 13 % 16 % Cost of hardware revenue 16 % 20 % 1 % Cost of other revenue 1 % 2 % 3 % Total cost of revenue (1) 27 % 35 % 20 % Gross profit 73 % 65 % 80 % Operating expenses (1) : Research and development 33 % 45 % 45 % Sales and marketing 33 % 40 % 42 % General and administrative 17 % 21 % 21 % Total operating expenses 83 % 106 % 108 % Loss from operations (10) % (41) % (29) % Other income (expense): Convertible notes fair value adjustment — % 1 % — % Derivative liability fair value adjustment — % 1 % (1) % Other income, net 1 % — % — % Total other income, net 1 % 1 % (1) % Loss before income taxes (9) % (40) % (30) % Provision for (benefit from) income taxes — % — % — % Net loss (9) % (40) % (30) % Change in foreign currency translation adjustment — % — % — % Total comprehensive loss (9) % (40) % (30) % ___________________ (1) Includes stock-based compensation expense as follows: 63 Table of Contents Comparison of the years ended December 31, 2023 and 2022: Revenue Year Ended December 31, Change 2023 2022 $ % (in thousands) Subscription revenue $ 220,794 $ 153,287 $ 67,507 44 % Hardware revenue 58,178 47,884 10,294 21 % Other revenue 25,546 27,134 (1,588) (6) % Total revenue $ 304,518 $ 228,305 $ 76,213 33 % Total revenue increased $76.2 million, or 33%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Investing Activities For the year ended December 31, 2022, net cash used in investing activities was $111.6 million, which relates to $110.9 million of cash paid for the Tile Acquisition, net of cash acquired and $0.7 million related to the capitalization of internal use software costs.
For the year ended December 31, 2022, net cash used in investing activities was $111.6 million, which relates to $110.9 million of cash paid for the Tile Acquisition, net of cash acquired and $0.7 million related to the capitalization of internal use software costs.
These expenses include employee-related costs associated with our cloud-based infrastructure and our customer support organization, third-party hosting fees, software, and maintenance costs, outside services associated with the delivery of our subscription services, personnel-related expenses, 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 expenses include personnel-related costs associated with our cloud-based infrastructure and our customer support organization, third-party hosting fees, software, and maintenance costs, outside services associated with the delivery of our subscription services, 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.
Financing Activities For the year ended December 31, 2022, net cash provided by financing activities was $27.7 million, which relates to $32.2 million of proceeds from a capital raise, $2.4 million of proceeds from the exercise of options, and $0.6 million of proceeds from the repayment of notes due from affiliates, partially offset by $4.1 million of taxes paid related to net settlement of equity awards and $3.5 million of repayment of convertible notes.
For the year ended December 31, 2022, net cash provided by financing activities was $27.7 million, which primarily relates to $32.2 million of proceeds from a capital raise, $2.4 million of proceeds from the exercise of options, and $0.6 million of proceeds from the repayment of notes due from affiliates, partially offset by $4.1 million of taxes paid related to net settlement of equity awards and $3.5 million of repayment of convertible notes.
Net cash used in operating activities is impacted by our net loss adjusted for certain non-cash items, including depreciation and amortization expenses, amortization of costs capitalized to obtain contracts, change in fair value of convertible notes, derivative liability, and contingent consideration, and stock-based compensation, as well as the effect of changes in operating assets and liabilities.
Net cash provided by (used in) operating activities is impacted by our net loss adjusted for certain non-cash items, including depreciation and amortization expenses, amortization of costs capitalized to obtain contracts, change in fair value of convertible notes, derivative liability, and contingent consideration, and stock-based compensation, as well as the effect of changes in operating assets and liabilities.
The non-cash charges primarily consisted of $34.7 million in stock-based compensation, $9.2 million of depreciation and amortization, $5.3 million in gains on revaluation of contingent consideration, $2.9 million of amortization of costs capitalized to obtain contracts, $1.8 million gain in convertible notes fair value adjustment, $1.5 million non-cash revenue from affiliate, and $1.3 million gain in derivative liability fair value adjustment.
The non-cash charges primarily consisted of $34.7 million in stock-based compensation, $9.2 million of depreciation and amortization, $5.3 million gain on revaluation of contingent consideration, $2.9 million of amortization of costs capitalized to obtain contracts, $1.8 million gain in convertible notes fair value adjustment, $1.5 million non-cash revenue from affiliate, and $1.3 million gain in derivative liability fair value adjustment.
Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel. We plan to continue increasing the capacity and enhancing the capability and reliability of our infrastructure to support user growth and increased use of our platform. We expect the cost of revenue will increase in absolute dollars in future periods.
Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel. We plan to continue increasing the capacity and enhancing the capability and reliability of our infrastructure to support user growth and increased use of our platform. We expect that cost of revenue will increase in absolute dollars in future periods.
Our business model is based on attracting new members to our platform, converting free members to subscribers, and retaining and expanding subscriptions over time. Our continued success depends in part on our ability to offer compelling new products and features to our members, and to continue providing a quality user experience to retain paying subscribers.
Our business model is based on attracting new members to our platform, converting free members to subscribers, and retaining and expanding subscriptions over time. Our continued success depends in part on our ability to offer compelling new products and features to our members, and to continue providing a quality user experience to convert and retain paying subscribers.
Key operating metrics are presented in millions, except ARPPC, Average Revenue per Paying Subscription (“ARPPS”) and Net Average Sales Price (“ASP”), however percentage changes are calculated based on actual results. As a result, percentage changes may not recalculate based on figures presented due to rounding.
Key operating metrics are presented in millions, except ARPPC, Average Revenue per Paying Subscription (“ARPPS”) and Average Sales Price (“ASP”), however percentage changes are calculated based on actual results. As a result, percentage changes may not recalculate based on figures presented due to rounding.
Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel. Cost of Other Revenue Cost of other revenue includes cloud-based hosting costs, as well as costs of product operations functions and employee-related costs associated with our data platform. Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel.
Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel. Cost of Other Revenue Cost of other revenue includes cloud-based hosting costs, as well as costs of product operations functions and personnel-related costs associated with our data platform.
Monthly Active Users We have a large and growing global member base as of December 31, 2022. A Life360 Monthly Active User (“MAU”) is defined as a unique user who engages with our Life360 branded services each month, which includes both paying and non-paying members.
Monthly Active Users We have a large and growing global member base as of December 31, 2023. A Life360 monthly active user (“MAU”) is defined as a unique user who engages with our Life360 branded services each month, which includes both paying and non-paying members.
Research and Development Our research and development expenses consist primarily of employee-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. We believe that continued investment in our platform is important for our growth.
Research and Development Our research and development expenses consist primarily 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. We believe that continued investment in our platform is important for our growth.
If we are unable to raise additional capital on terms acceptable to us or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, financial condition and results of operations. On March 10, 2023, we had a banking relationship with SVB.
If we are unable to raise additional capital on terms acceptable to us or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, financial condition and results of operations. 69 Table of Contents On March 10, 2023, we had a banking relationship with SVB.
We accelerate our organic member acquisition with strategic and targeted paid marketing spend. We expect to continue to invest in product and marketing, while balancing growth with strong unit economics. As we continue to expand internationally, we may increase our targeted marketing investments. Ability to Attract New and Repeat Purchasers of Our Hardware Tracking Devices.
We accelerate our organic member acquisition with strategic and targeted paid marketing spend. We expect to continue to invest in product and marketing, while balancing growth with strong unit economics. As we continue to expand internationally, we may increase our targeted marketing investments. 58 Table of Contents Ability to Attract New and Repeat Purchasers of Our Hardware Tracking Devices.
Our process for determining the SSP considers multiple factors including consumer behaviors, our internal pricing model, and cost-plus margin, and may vary depending upon the facts and circumstances related to each deliverable. For business-to-business hardware sales, we will estimate the expected consideration amount after credits and discounts.
Our process for determining the SSP considers multiple factors including consumer behaviors, our internal pricing model, and cost-plus margin, and may vary depending upon the facts and circumstances related to each performance obligation. For business-to-business hardware sales, we will estimate the expected consideration amount after credits and discounts.
Our brand is trusted by approximately 49 million members as of December 31, 2022, and because we know the value of trust is immeasurable, we will continue to work tirelessly to ensure that we provide useful, reliable, trustworthy and innovative products and services. Attract, Retain and Convert Members .
Our brand is trusted by approximately 61 million members as of December 31, 2023, and because we know the value of trust is immeasurable, we will continue to work tirelessly to ensure that we provide useful, reliable, trustworthy and innovative products and services. Attract, Retain and Convert Members .
Amounts that have been billed are initially recorded as deferred revenue until the revenue is recognized. Hardware Revenue We generate a majority of our hardware revenue from the 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.
Amounts that have been billed are initially recorded as deferred revenue until the revenue is recognized. Hardware Revenue We generate our hardware revenue from the sale of hardware tracking devices and related accessories. For hardware and accessories, revenue is recognized at the time products are delivered.
As of December 31, 2022 and 2021, we had deferred revenue of $32.8 million and $13.9 million, respectively, of which $30.1 million and $13.9 million is expected to be recorded as revenue in the next 12 months, provided all other revenue recognition criteria have been met.
As of December 31, 2023 and 2022, we had deferred revenue of $35.8 million and $32.8 million, respectively, of which $33.9 million and $30.1 million is expected to be recorded as revenue in the next 12 months, respectively, provided all other revenue recognition criteria have been met.
Please refer to “—Results of Operations” for additional metrics management reviews in conjunction with the consolidated financial statements.
Please refer to “Results of Operations” for additional metrics management reviews in conjunction with the consolidated financial statements.
Our cash flow activities were as follows for the periods presented: Year Ended December 31, 2022 2021 (in thousands) Net cash used in operating activities $ (57,055) $ (12,153) Net cash used in investing activities (111,634) (7,064) Net cash provided by financing activities 27,709 193,951 Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash $ (140,980) $ 174,734 64 Table of Contents Operating Activities Our largest source of operating cash is cash collections from our paying users for subscriptions to our platform and hardware device sales.
Our cash flow activities were as follows for the periods presented: Year Ended December 31, 2023 2022 2021 (in thousands) Net cash provided by (used in) operating activities $ 7,524 $ (57,055) $ (12,153) Net cash used in investing activities (2,221) (111,634) (7,064) 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 Operating Activities Our largest source of operating cash is cash collections from our paying users for subscriptions to our platform and hardware device sales.
This information should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
We have derived this data from our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. This information should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
We believe that our ability to recruit talent is aided by our reputation. Seasonality . We experience seasonality in our user growth, engagement, Paying Circles growth and monetization on our platform. Life360 has historically experienced member and subscription growth seasonality in the third quarter of each calendar year, which includes the return to school for many of our members.
We experience seasonality in our user growth, engagement, Paying Circles growth and monetization on our platform. Life360 has historically experienced member and subscription growth seasonality in the third quarter of each calendar year, which includes the return to school for many of our members.
The remaining increase of $0.2 million is attributable to other general and administrative expenses associated with Company growth. 61 Table of Contents Convertible Notes Fair Value Adjustment For the years ended December 31, 2022 and 2021, the Company recorded a gain associated with the convertible notes fair value adjustment of $1.8 million and a loss of $0.5 million, respectively.
The remaining increase of $1.0 million is attributable to other general and administrative expenses. Convertible Notes Fair Value Adjustment For the years ended December 31, 2023 and 2022, the Company recorded a loss associated with the convertible notes fair value adjustment of $0.7 million and a gain of $1.8 million, respectively.
The average number of paying subscribers is calculated by adding the number of paying subscribers as of the beginning of the period to the number of paying subscribers as of the end of the period, and then dividing by two.
The average number of paying subscribers is calculated by adding the number of paying subscribers as of the beginning of the period to the number of paying subscribers as of the end of the period, and then dividing by two. Paying subscribers represent subscribers who have been billed as of the end of the period.
For the year ended December 31, 2022, net cash used in operating activities was $57.1 million. The primary factors affecting our operating cash flows during this period were our net loss of $91.6 million, impacted by $37.3 million of non-cash charges, and $2.8 million of cash provided by changes in our operating assets and liabilities.
The primary factors affecting our operating cash flows during this period were our net loss of $91.6 million, impacted by $37.3 million of non-cash charges, and $2.8 million of cash provided by changes in our operating assets and liabilities.
We are in the process of transferring our accounts to one or more alternate depository institutions, the financial position of which management believes does not expose our company to significant credit risk or jeopardize our liquidity.
We have transferred more than 80% of our accounts to one or more alternate depository institutions, the financial position of which management believes does not expose our company to credit risk or jeopardize our liquidity.
A discussion of our financial condition and results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 is included under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within our Form 10.
A discussion of our financial condition and results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021 is included under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” within our Form 10-K filed with the SEC on March 23, 2023.
International Expansion . We believe our global opportunity is significant, and to address this opportunity, we intend to continue to invest in sales and marketing efforts and infrastructure and personnel to support our international expansion, including undertaking initiatives such as the first international launch of our subscription offering in Canada during the three months ended December 31, 2021.
We believe our global opportunity is significant, and to address this opportunity, we intend to continue to invest in sales and marketing efforts and infrastructure and personnel to support our international expansion, including undertaking initiatives such as the international launch of our subscription offerings in United Kingdom for the year ended December 31, 2023.
Gross Profit and Gross Profit Margin Our gross profit has been, and may in the future be, influenced by several factors, including timing of capital expenditures and related depreciation expense, increases in infrastructure costs, component costs, contract manufacturing and supplier pricing, and foreign currency exchange rates.
Personnel-related expenses include salaries, bonuses, benefits, and stock-based compensation for operations personnel. 60 Table of Contents Gross Profit and Gross Profit Margin Our gross profit has been, and may in the future be, influenced by several factors, including timing of capital expenditures and related depreciation expense, increases in infrastructure costs, component costs, contract manufacturing and supplier pricing, and foreign currency exchange rates.
The Company has no segment managers who are held accountable by the CODM for operations, operating results, and planning for levels of components below the consolidated unit level. In the future, the Company plans to integrate Life360, Tile and Jiobit into one platform. Revenue Subscription Revenue We generate revenue from sales of subscriptions on our platforms.
The Company has no segment managers who are held accountable by the CODM for operations, operating results, and planning for levels of components below the consolidated unit level. 59 Table of Contents Revenue Subscription Revenue We generate revenue from sales of subscriptions on our platforms.
Other Income (Expense), net Other income (expense), net consists of interest income earned on our cash and cash equivalents balances, foreign currency exchange (losses)/gains related to the remeasurement of certain assets and liabilities of our foreign subsidiaries that are denominated in currencies other than the functional currency of the subsidiary and foreign exchange transactions gains/(losses) and interest expense primarily related to the Convertible Notes.
Other Income (Expense), net Other income (expense), net consists of interest income earned on our cash and cash equivalents balances, foreign currency exchange (losses)/gains related to the remeasurement of certain assets and liabilities of our foreign subsidiaries that are denominated in currencies other than the functional currency of the subsidiary and foreign exchange transactions gains/(losses) and interest expense primarily related to the Convertible Notes. 61 Table of Contents Provision for (Benefit from) Income Taxes Provision for (benefit from) income taxes consists of U.S. federal and state income taxes in jurisdictions in which we conduct business.
Average Paying Circles are calculated based on adding the number of Paying Circles as of the beginning of the period to the number of Paying Circles as of the end of the period, and then dividing by two. For the years ended December 31, 2022 and 2021, our ARPPC was $95.40 and $80.20, respectively.
Average Paying Circles are calculated based on adding the number of Paying Circles as of the beginning of the period to the number of Paying Circles as of the end of the period, and then dividing by two. For the years ended December 31, 2023 and 2022, our ARPPC was $121.09 and $96.95, respectively, representing a 25% increase year-over-year.
As of December 31, 2022 and 2021, we had approximately 1.5 million and 1.2 million paid subscribers to services under our Life360 brand, respectively, representing an increase of 23% year-over-year.
As of December 31, 2023 and 2022, we had approximately 2.4 million and 2.1 million paid subscribers to services under Life360, Tile, and Jiobit brands, respectively, representing an increase of 17% year-over-year.
The cash used by changes in our operating assets and liabilities was primarily due to a $4.7 million increase in accrued expenses and other liabilities, a $1.7 million increase in deferred revenue, and a $0.6 million increase in accounts payable.
The cash used by changes in our operating assets and liabilities was primarily due to an increase of $9.1 million in accounts receivable, net, a decrease of $7.9 million in accounts payable, and an increase of $6.7 million in prepaid expenses and other assets.
Key Factors Affecting Our Performance As we focus on growing our customers and revenue, and achieving profitability while investing for the future and managing risk, expenses and capital, the following factors and others identified in the section of this Annual Report on Form 10-K titled “Risk Factors” have been important to our business and we expect them to impact our operations in future periods: Ability to Retain Trusted Brand .
Key Factors Affecting Our Performance As we focus on growing our customers and revenue, and achieving profitability while investing for the future and managing risk, expenses and capital, the following factors and others identified in the section of this Annual Report on Form 10-K titled “Item 1A.
Liquidity and Capital Resources We believe that our existing cash and cash equivalents and cash provided by sales of our subscriptions and hardware devices will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months.
We believe our existing cash and cash equivalents and cash provided by sales of our subscriptions and hardware devices will be sufficient to support working capital and capital expenditure requirements for at least the next 12 months. Our future capital requirements will depend on many factors and as a result, we may be required to seek additional capital.
For the year ended December 31, 2021, net cash used in operating activities was $12.2 million. The primary factors affecting our operating cash flows during this period were our net loss of $33.6 million, impacted by $21.8 million non-cash charges and $0.4 million of cash used by changes in our operating assets and liabilities.
For the year ended December 31, 2023, net cash provided by operating activities was $7.5 million. The primary factors affecting our operating cash flows during this period were our net loss of $28.2 million, impacted by $49.1 million of non-cash adjustments, and $13.4 million of cash used by changes in our operating assets and liabilities.
For arrangements with multiple performance obligations where the contracted price differs from the stand-alone selling price (the “SSP”) for any distinct good or service, we may be required to allocate the transaction price to each performance obligation using our best estimates for the SSP.
Some of our contracts with customers contain multiple performance obligations, primarily hardware and subscription services for hardware tracking devices. For arrangements with multiple performance obligations where the contracted price differs from the SSP for any distinct good or service, we may be required to allocate the transaction price to each performance obligation using our best estimates for the SSP.
Our subscription arrangements do not provide customers with the right to take possession of the software supporting the platform and, as a result, are accounted for as service arrangements.
We sell subscriptions to our platform through arrangements that are generally monthly to annual in length. Our arrangements are generally non-cancellable and non-refundable. Our subscription arrangements do not provide customers with the right to take possession of the software supporting the platform and, as a result, are accounted for as service arrangements.
General and Administrative Year Ended December 31, Change 2022 2021 $ % (in thousands) General and administrative $ 48,110 $ 23,670 $ 24,440 103 % General and administrative expense increased $24.4 million, or 103%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021.
General and Administrative Year Ended December 31, Change 2023 2022 $ % (in thousands) General and administrative $ 52,583 $ 48,110 $ 4,473 9 % General and administrative expense increased $4.5 million, or 9%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Hardware sales have historically experienced revenue seasonality in the fourth quarter of each calendar year, which includes the important selling periods in November (Black Friday and Cyber Monday) and December (Christmas and Hanukkah) in large part due to seasonal holiday demand. As the majority of revenue is generated within the United States, our seasonality primarily relates to U.S. events.
Hardware sales have historically experienced comparatively higher seasonal growth in the fourth quarter of each calendar year, which includes the important selling periods in November (Black Friday and Cyber Monday) and December (Christmas and Hanukkah) in large part due to seasonal holiday demand.
We sell hardware tracking devices and accessories through a number of channels including our websites, brick and mortar retail and online retail. 55 Table of Contents Other Revenue We also generate revenue through data monetization arrangements with certain third parties through data acquisition and license agreements for data collected from our member base for purposes of targeted advertising, research, analytics, attribution, and other commercial purposes.
Other Revenue We also generate revenue through data monetization arrangements with certain third parties through data acquisition and license agreements for data collected from our member base for purposes of targeted advertising, research, analytics, attribution, and other commercial purposes.
Research and Development Year Ended December 31, Change 2022 2021 $ % (in thousands) Research and development $ 102,480 $ 50,994 $ 51,486 101 % Research and development expenses increased $51.5 million, or 101%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Research and Development Year Ended December 31, Change 2023 2022 $ % (in thousands) Research and development $ 100,965 $ 102,480 $ (1,515) (1) % Research and development expenses decreased $1.5 million, or 1%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022.
We grow the number of Paying Circles by increasing our free member base, converting free members to subscribers, and retaining them over time with the provision of high-quality family and safety services. We have experienced strong recent growth in the number of paying subscribers.
We grow the number of Paying Circles by increasing our free member base, converting free members to subscribers, and retaining them over time with the provision of high-quality family and safety services. Below is a comparison of Paying Circles as of December 31, 2022 using the current and prior definitions (in millions).
The remaining increase of $0.3 million is attributable to other expenses associated with Company growth.
The remaining increase of $0.2 million is attributable to other cost of hardware revenue associated with our growth.
As of December 31, 2022 and 2021, we had approximately 48.6 million and approximately 35.5 million MAUs on the Life360 Platform, respectively, representing an increase of 37% year-over-year. We believe this has been driven by continued strong organic member growth and retention. Paying Circles We define a Paying Circle as a group of Life360 users with a paying subscription.
As of December 31, 2023 and 2022, we had approximately 61.4 million and 48.6 million MAUs on the Life360 Platform, respectively, representing an increase of 26% year-over-year. We believe this has been driven by continued strong new user growth and retention.
In addition to historical consolidated financial information, the following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements as a result of a variety of factors, including but not limited to those discussed in “Risk Factors” and “Forward-Looking Statements” in this Annual Report on Form 10-K.
Our actual results could differ materially from those discussed in the forward-looking statements as a result of a variety of factors, including but not limited to those discussed in “Risk Factors” and “Forward-Looking Statements” in this Annual Report on Form 10-K. 57 Table of Contents A discussion of our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022 is presented below.
On March 13, 2023, we regained access to our funds held in SVB accounts. While we have not experienced any losses in such accounts, the recent failure of SVB exposed us to significant credit risk prior to the completion by the FDIC of the resolution of SVB in a manner that fully protected all depositors.
While we did not experience any losses in such accounts, the recent failure of SVB exposed us to credit risk as it relates to our direct deposits in excess of the FDIC insured limits, prior to the completion by the FDIC of the resolution of SVB in a manner that fully protected all depositors.
Our business relies on the ability to attract and retain talent, including engineers, data scientists, designers and software developers. As of December 31, 2022, we had approximately 600 employees and contractors. Our core values are aimed at simplifying safety for families and we believe there are people who want to work at a values-driven company like Life360.
As of December 31, 2023, we had approximately 508 employees and contractors. Our core values are aimed at simplifying safety for families and we believe there are people who want to work at a values-driven company like Life360. We believe that our ability to recruit talent is aided by our reputation. Seasonality .
Other revenue increased $2.0 million, or 8%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021, due to our strategic shift to focus on a single aggregated data arrangement and the transition period term overlap with legacy agreements.
Other revenue decreased $1.6 million, or 6%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, due to the short-term impacts of our strategic shift to focus on a single aggregated data partner and the terms associated with the arrangement.
Sales and Marketing Year Ended December 31, Change 2022 2021 $ % (in thousands) Sales and marketing $ 92,419 $ 47,473 $ 44,946 95 % Sales and marketing expenses increased $44.9 million, or 95%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Sales and Marketing Year Ended December 31, Change 2023 2022 $ % (in thousands) Sales and marketing $ 99,072 $ 92,419 $ 6,653 7 % 65 Table of Contents Sales and marketing expenses increased $6.7 million, or 7%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Critical Accounting Policies and Significant Management Estimates We prepare our consolidated financial statements in accordance with GAAP. The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures.
The preparation of consolidated financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances.
Accordingly, an unexpected decrease in sales over those traditionally high-volume selling periods may impact our revenue, result in surplus inventory and could have a disproportionate effect on our operating results for the entire fiscal year. Seasonality in our business can also be affected by introductions of new or enhanced products and services, including the costs associated with such introductions.
As the majority of revenue is generated within the United States, our seasonality primarily relates to U.S. events. Accordingly, an unexpected decrease in sales over those traditionally high-volume selling periods may impact our revenue, result in surplus inventory and could have a disproportionate effect on our operating results for the entire fiscal year.
We are continually evaluating new product offerings that are aligned with our core competencies and the needs of families across the life stage continuum. For example, our acquisition of Tile gives our members the ability to seamlessly leverage Bluetooth-enabled smart trackers, which can equip nearly any item—such as wallets, keys or remotes—with location-based finding technology.
For example, our acquisition of Tile gives our members the ability to seamlessly leverage Bluetooth-enabled smart trackers, which can equip nearly any item—such as wallets, keys or remotes—with location-based finding technology. Likewise, our acquisition of Jiobit allows subscribers to track family members and pets wearing Jiobit devices via GPS-enabled trackers on the Jiobit app.
Average Revenue per Paying Circle We define Average Revenue per Paying Circle (“ARPPC”) as subscription revenue derived from the Life360 mobile application for the reported period divided by the Average Paying Circles during the same period.
As of December 31, 2022 Paying Circles (current definition) 1.49 Paying Circles (prior definition) 1.52 % Change (1.8) % Average Revenue per Paying Circle We define Average Revenue per Paying Circle (“ARPPC”) as subscription revenue derived from the Life360 mobile application, excluding certain revenue adjustments related to bundled Life360 subscription and hardware offerings, for the reported period divided by the Average Paying Circles during the same period.
We strongly believe in our vision to become the indispensable safety membership for families, with a suite of safety services that span every life stage of the family. Our business model and future success are dependent on the value and reputation of the Life360, Jiobit and Tile brands.
Risk Factors” have been important to our business and we expect them to impact our operations in future periods: Ability to Retain Trusted Brand . We strongly believe in our vision to become the indispensable safety membership for families, with a suite of safety services that span every life stage of the family.
Each subscription covers all members in the payor’s Circle so everyone in the Circle can utilize the benefits of a Life360 Membership, including access to premium location, driving, digital and emergency safety insights and services.
Each subscription covers all members in the payor’s Circle so everyone in the Circle can utilize the benefits of a Life360 Membership, including access to premium location, driving, digital and emergency safety insights and services. 67 Table of Contents As of December 31, 2023 and 2022, we had approximately 1.8 million and 1.5 million paid subscribers to services under our Life360 brand, respectively, representing an increase of 21% year-over-year.
This increase was primarily due to a $24.4 million increase in marketing expenses consisting of increases of $9.8 million in paid user acquisition spend, $9.5 million in Channel Partner commission charges, $4.1 million in television advertising spend, and $1.0 million in other marketing spend, respectively.
The increase was primarily due to a $10.1 million increase in marketing expenses consisting of increases of $11.3 million in Channel Partner commission charges due to increased subscription sales and $2.1 million in paid user acquisition spend, partially offset by a $3.3 million decrease in other marketing spend.
We continue to develop new monetization features leveraging our core technologies to offer additional services, expand into more stages of families and enter new verticals to increase adoption.
We continue to develop new monetization features leveraging our core technologies to offer additional services, expand into more stages of families and enter new verticals to increase adoption. Many factors will affect the ARPPC including the number of Paying Circles, mix of monetization offerings on our platform, as well as demographic shifts and geographic differences across these variables.
As a result of an increase in Paying Circles combined with an increased mix of sales towards higher-priced subscription plans, we experienced an increase of 19% in our ARPPC year-over-year. ARPPC is a key indicator utilized by Life360 to determine the effective penetration of our tiered product offering for Paying Circles.
The year-over-year increase in ARPPC is a result of subscription price increases for U.S. Life360 subscriptions, which were implemented beginning in August 2022. ARPPC is a key indicator utilized by Life360 to determine the effective penetration of our tiered product offering for Paying Circles.
Other Income (Expense), Net Other income (expense), net increased $0.2 million, or 107%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021. Other income (expense) includes interest income, foreign exchange losses, and interest expense associated with the Convertible Notes.
Other Income (Expense), Net Other income (expense), net increased $3.2 million, or 24,731%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022.
Provision (Benefit) for Income Taxes Provision (benefit) for income taxes consists of U.S. federal and state income taxes in jurisdictions in which we conduct business. We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized.
We maintain a full valuation allowance on our federal and state deferred tax assets as we have concluded that it is not more likely than not that the deferred tax assets will be realized. Results of Operations The following tables set forth our consolidated statement of operations and comprehensive loss for the years ended December 31, 2023, 2022, and 2021.
The change in fair value is primarily driven by the share price volatility and reduction in time to convert. Derivative Liability Fair Value Adjustment The derivative liability fair value decreased by $1.3 million, or 93%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021.
The changes in fair value are primarily driven by the share price volatility and reduction in time to convert. Derivative Liability Fair Value Adjustment For the years ended December 31, 2023 and 2022, the Company recorded a loss associated with the derivative liability fair value adjustment of $0.1 million and a gain of $1.3 million, respectively.
Net Average Sales Price To determine the net ASP of a unit, we divide hardware revenue recognized during a period by the number of net hardware units shipped (“ASP”) during the same period. ASP is largely driven by the price we charge customers, including the price we charge our retail partners, net of customer allowances, and directly to consumers.
Net Average Sales Price To determine the net average sales price (“ASP”) of a unit, we divide hardware revenue recognized, excluding certain revenue adjustments related to bundled Life360 subscriptions and hardware offerings, for the reported period by the number of net hardware units shipped during the same period.
To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.
The increase in pricing for new Paying Circles in August 2022 has led to subscribers signing up for higher price products over time, increasing ARPPC. Subscriptions We define Subscriptions as the number of paying subscribers associated with the Life360, Tile and Jiobit brands as of the end of the period.
The increase in pricing for new Paying Circles beginning in August 2022 has led to subscribers signing up for higher price products over time, increasing ARPPC. Below is a comparison of ARPPC for the year ended December 31, 2022 using the current definitions.
Our obligations under our convertible notes are described in Notes 6 and 9 to our consolidated financial statements. Information regarding our non-cancellable lease and other purchase commitments as of December 31, 2022, can be found in Notes 8 and 11 to our consolidated financial statements.
Information regarding our non-cancellable lease and other purchase commitments as of December 31, 2023, can be found in Note 8, "Balance Sheet Components" and Note 11, "Commitments and Contingencies" to our consolidated financial statements. Critical Accounting Policies and Significant Management Estimates We prepare our consolidated financial statements in accordance with GAAP.
For the years ended December 31, 2022 and 2021, Life360 generated: • Total revenues of $228.3 million and $112.6 million, respectively, representing year-over-year growth of 103%; • Subscription revenues of $153.3 million and $86.6 million, respectively, representing year-over-year growth of 77%; • Hardware revenues of $47.9 million and $1.0 million, respectively, representing year-over-year growth of 4,930%; • Other revenues of $27.1 million and $25.1 million, respectively, representing year-over-year growth of 8%; • Gross profit of $148.6 million and $89.9 million, respectively, representing year-over-year growth of 65%; and • Net loss of $91.6 million and $33.6 million, respectively. 53 Table of Contents Impact of COVID-19 The COVID-19 pandemic had an initial impact on our operations and financial performance, as we saw decreased engagement and member growth in the early phase of the pandemic.
For the years ended December 31, 2023 and 2022, Life360 generated: • Total revenues of $304.5 million and $228.3 million, respectively, representing year-over-year growth of 33%; • Subscription revenues of $220.8 million and $153.3 million, respectively, representing year-over-year growth of 44%; • Hardware revenues of $58.2 million and $47.9 million, respectively, representing year-over-year growth of 21%; • Other revenues of $25.5 million and $27.1 million, respectively, representing year-over-year decline of 6%; • Gross profit of $222.6 million and $148.6 million, respectively, representing year-over-year growth of 50%; and • Net loss of $28.2 million and $91.6 million, respectively.
We expect our research and development expenses will increase in absolute dollars as our business grows. 56 Table of Contents Sales and Marketing Our sales and marketing expenses consist primarily of employee-related costs, brand marketing costs, lead generation costs, sales incentives, sponsorships and amortization of acquired intangibles.
We intend to continue to invest in research and development to bring new customer experiences and devices to market and expand our platform capabilities. Sales and Marketing 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.
Likewise, our acquisition of Jiobit allows subscribers to track family members and pets wearing Jiobit devices via GPS-enabled trackers on the Jiobit app. We will continue to invest in and launch products where we see opportunities to grow our platform. Attracting and Retaining Talent . We compete for talent in the technology industry.
We will continue to invest in and launch products where we see opportunities to grow our platform. Attracting and Retaining Talent . We compete for talent in the technology industry. Our business relies on the ability to attract and retain talent, including engineers, data scientists, designers and software developers.
Key Performance Indicators We review several operating metrics, including the following key performance indicators, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
Provision for (Benefit from) Income Taxes The provision for (benefit from) income taxes increased $0.3 million, or 97%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022. 66 Table of Contents Key Performance Indicators We review several operating metrics, including the following key performance indicators, to evaluate our business, measure our performance, identify trends affecting our business, develop financial forecasts and make strategic decisions.
Cost of hardware revenue increased by $44.1 million, or 3,291%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to the inclusion of hardware costs of approximately $33.5 million related to Tile and a full year of Jiobit hardware costs, $4.3 million in additional personnel-related costs and stock-based compensation due to increased headcount, an additional $3.6 million related to depreciation and amortization associated with the Tile and Jiobit acquisitions, an additional $2.0 million in technology expenses and $0.4 million in professional and outside services due to higher contractor spend as a result of increased scaling of the combined business.
Cost of other revenue decreased by $0.1 million, or 2%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily due to a decrease of $0.3 million in personnel-related expenses and stock-based compensation costs associated with the reduction in workforce which took place during the three months ended March 31, 2023.
Cost of Revenue, Gross Profit, and Gross Margin Year Ended December 31, Change 2022 2021 $ % (in thousands) Subscription costs $ 30,659 $ 17,807 $ 12,852 72 % Hardware costs 45,441 1,340 44,101 3,291 % Other costs 3,607 3,621 (14) (0) % Total cost of revenue 79,707 22,768 56,939 Gross profit $ 148,598 $ 89,875 $ 58,723 Gross margin: Subscription 80 % 79 % Hardware 5 % (41) % Other 87 % 86 % Cost of subscription revenue increased by $12.9 million, or 72%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to $6.0 million in technology expenses as a result of the inclusion of costs related to cloud infrastructure associated with the Tile and Jiobit subscription offerings, an increase of $4.0 million related to volume growth for Life360 subscriptions, an increase of $0.9 million related to depreciation and amortization associated with the Tile and Jiobit acquisitions, $0.8 million in additional personnel-related costs and stock-based compensation due to increased headcount and an increase of $0.5 million due to an increase in professional and consulting fees.
Cost of Revenue, Gross Profit, and Gross Margin Year Ended December 31, Change 2023 2022 $ % (in thousands) Subscription costs $ 30,975 $ 30,659 $ 316 1 % Hardware costs 47,384 45,441 1,943 4 % Other costs 3,522 3,607 (85) (2) % Total cost of revenue 81,881 79,707 2,174 Gross profit $ 222,637 $ 148,598 $ 74,039 Gross margin: Subscription 86 % 80 % Hardware 19 % 5 % Other 86 % 87 % Cost of subscription revenue increased $0.3 million, or 1%, during the year ended December 31, 2023 as compared to the year ended December 31, 2022, primarily related to increases of $1.2 million in technology expenses, $1.0 million in contractor expenses, and $0.1 million in depreciation and amortization associated with our growth.
ARPPS has increased year over year as a result of the percentage of subscribers who select higher priced subscriptions, including Life360 membership tiers, has increased over time. 63 Table of Contents Net Hardware Units Shipped Net hardware units shipped represents the number of tracking devices sold during a period, net of returns by our retail partners and directly to consumers.
As of December 31, 2022 ARPPS (current definition) $ 80.63 ARPPS (prior definition) $ 79.75 % Change 1.1 % Net Hardware Units Shipped Net hardware units shipped represents the number of tracking devices sold during a period, excluding certain hardware units related to bundled Life360 subscription and hardware offerings, net of returns by our retail partners and directly to consumers.
For the year ended December 31, 2022, Life360 sold approximately 3.6 million units, down approximately 42% as compared to the 6.2 million units sold during the year ended December 31, 2021, reflecting the backdrop of weaker consumer electronics category demand and high retail channel inventory levels.
For the year ended December 31, 2023, Life360 sold approximately 4.0 million units, up approximately 12% as compared to the 3.6 million units sold during the year ended December 31, 2022, reflecting higher sales and lower returns compared to the prior period.
Recent Accounting Pronouncements See Note 2, “Summary of Significant Accounting Policies, ” to our consolidated financial statements included in Item 8 of Part II hereof for a discussion of recent accounting pronouncements. Jumpstart Our Business Startups (“JOBS”) Act Accounting Elections We are an emerging growth company, as defined in the JOBS Act.
Any change in judgments with respect to these assumptions and estimates could impact the timing or amount of revenue recognition. Recent Accounting Pronouncements See Note 2, "Summary of Significant Accounting Policies" to our consolidated financial statements included in Item 8 of Part II hereof for a discussion of recent accounting pronouncements.
AMR includes the annualized monthly value of subscription, data and partnership agreements. All components of these agreements that are not expected to recur are excluded. AMR as of December 31, 2022, and 2021 was $224.4 million and $139.8 million, respectively, representing an increase of 61% year-over-year.
Annualized Monthly Revenue We use Annualized Monthly Revenue (“AMR”) to identify the annualized monthly value of active customer agreements at the end of a reporting period. AMR includes the annualized monthly value of subscription, data and partnership agreements. All components of these agreements that are not expected to recur are excluded.
Average Revenue per Paying Subscription We define ARPPS as total subscription revenue for the respective period divided by the average number of paying subscribers during the same period.
As of December 31, 2022 Subscriptions (current definition) 2.07 Subscriptions (prior definition) 2.10 % Change (1.3) % 68 Table of Contents Average Revenue per Paying Subscription We define ARPPS as total subscription revenue recognized, excluding certain revenue adjustments related to bundled Life360 subscription and hardware offerings, for the reported period divided by the average number of paying subscribers during the same period.
Key Operating Metrics As of and for the years ended December 31, 2022 2021 % Change (in millions, except ARPPC, ARPPS and ASP) AMR $ 224.4 $ 139.8 61 % MAUs 48.6 35.5 37 % Paying Circles 1.5 1.2 23 % ARPPC $ 95.40 $ 80.20 19 % Subscriptions* 2.1 1.8 20 % ARPPS* $ 79.75 $ 67.70 18 % Net hardware units shipped* 3.6 6.2 (42) % ASP* $ 13.47 $ 15.04 (10) % *Metrics presented for the years ended December 31, 2022 and 2021 are adjusted and include pre-acquisition data for Tile and Jiobit related to periods before the acquisitions of Tile on January 5, 2022 and Jiobit on September 1, 2021. 62 Table of Contents Annualized Monthly Revenue We use Annualized Monthly Revenue (“AMR”) to identify the annualized monthly value of active customer agreements for a particular period.
Key Operating Metrics As of and for the years ended December 31, 2023 2022 % Change (in millions, except ARPPC, ARPPS and ASP) AMR $ 274.1 $ 224.4 22 % MAUs 61.4 48.6 26 % Paying Circles 1 1.8 1.5 21 % ARPPC 1 $ 121.09 $ 96.95 25 % Subscriptions 1, 2 2.4 2.1 17 % ARPPS 1, 2 $ 99.53 $ 80.63 23 % Net hardware units shipped 2 4.0 3.6 12 % ASP 2 $ 13.48 $ 13.47 — % __________ 1 Metrics presented as of and for the periods ended December 31, 2022 have been recast to reflect the calculations under a revised metric definition.
For the year ended December 31, 2021, net cash used in investing activities was $7.1 million, which relates to a $4.0 million cash advance on convertible note receivable and $3.0 million of cash paid for the Jiobit Acquisition, net of cash acquired.
Investing Activities For the year ended December 31, 2023, net cash used in investing activities was $2.2 million, which primarily relates to $1.7 million of capitalization of internal use software costs in accordance with ASC 350-40, Intangibles - Goodwill and Other, Internal-Use Software and $0.5 million of purchases of property and equipment.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOur consolidated results of operations are therefore subject to market fluctuations and may be affected in the future as a result of these fair value changes.
Biggest changeOur consolidated results of operations are therefore subject to market fluctuations and may be affected in the future as a result of these fair value changes. In September 2021 in connection with the acquisition of Jiobit, we issued convertible notes with a fair value of $11.6 million.
Our cash and cash equivalents are held for working capital purposes. As of December 31, 2022 and December 31, 2021, a hypothetical 10% relative change in interest rates would not have a material impact on our consolidated financial statements. Foreign Currency Exchange Risk Our reporting currency and functional currency is the U.S. dollar.
Our cash and cash equivalents are held for working capital purposes. As of December 31, 2023 and December 31, 2022, a hypothetical 10% relative change in interest rates would not have a material impact on our consolidated financial statements. Foreign Currency Exchange Risk Our reporting currency and functional currency is the U.S. dollar.
We do not believe that a hypothetical 1,000 basis-point increase or decrease in the relative value of the U.S. dollar to other currencies would have a material effect on our operating results. Inflation Risk We do not believe that inflation has had a material effect on our business, results of operations, or financial condition.
We do not believe that a hypothetical 1,000 basis-point increase or decrease in the relative value of the U.S. dollar to other currencies would have a material effect on our operating results. 72 Table of Contents Inflation Risk We do not believe that inflation has had a material effect on our business, results of operations, or financial condition.
Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates. Interest Rate Risk As of December 31, 2022 and December 31, 2021, we had $75.4 million and $231.0 million, respectively, of cash equivalents invested in cash and cash equivalents and money market funds.
Our market risk exposure is primarily the result of fluctuations in interest rates and foreign currency exchange rates. Interest Rate Risk As of December 31, 2023 and December 31, 2022, we had $69.0 million and $75.4 million, respectively, of cash equivalents invested in cash and cash equivalents and money market funds.
Fair Value Risk As of December 31, 2022 and December 31, 2021, we had $7.0 million and $23.2 million of liabilities that are measured at fair value, respectively. Fair value measurements include significant assumptions that are driven by market conditions and macroeconomic factors at measurement dates.
Fair Value Risk As of December 31, 2023 and December 31, 2022, we had $3.7 million and $7.0 million of liabilities that are measured at fair value, respectively. Fair value measurements include significant assumptions that are driven by market conditions and macroeconomic factors at measurement dates.
Added
We will repay the remaining one third of the unconverted principal balance plus accrued interest to the holders of such notes on the third annual anniversary of the issuance date, and they may be converted to common stock at any time at a fixed conversion price of $22.50 per share. Interest is accrued at the U.S. Prime rate plus 0.25%.
Added
We have elected the fair value option and remeasure the September 2021 Convertible Notes at their fair value at each reporting date to reflect the changes in fair value in earnings. Refer to Note 9, "Convertible Notes" to our consolidated financial statements for more information.
Added
Generally, the fair market value of the September 2021 Convertible Notes will increase as interest rates rise and decrease as interest rates fall. In addition, the fair value of the September 2021 Convertible Notes fluctuates when the market price of our common stock fluctuates.
Added
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.
Added
Changes in the interest rate environment could have an effect on our future cash flows and earnings, depending on whether the debt is held to maturity or converted to shares of our common stock.

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