Law Offices of Howard G. Smith

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1 0 0 LIONEL Z. GLANCY (#0) ROBERT V. PRONGAY (#0) LESLEY F. PORTNOY (#0) CHARLES H. LINEHAN (#0) GLANCY PRONGAY & MURRAY LLP Century Park East, Suite 00 Los Angeles, California 00 Telephone: (0) 0-0 Facsimile: (0) info@glancylaw.com Attorneys for Plaintiff [Additional Counsel on Signature Page] SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SANTA CLARA, Individually and on Behalf of All Others Similarly Situated, v. Plaintiff, ARLO TECHNOLOGIES, INC., MATTHEW MCRAE, CHRISTINE M. GORJANC, PATRICK C.S. LO, ANDREW W. KIM, MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, DEUTSCHE BANK SECURITIES LLC, RAYMOND JAMES & ASSOCIATES, INC., COWEN AND COMPANY, LLC, and IMPERIAL CAPITAL, LLC, Defendants. Case No.: CLASS ACTION COMPLAINT DEMAND FOR JURY TRIAL

2 0 0 Plaintiff ( Plaintiff ), by and through his attorneys, alleges the following upon information and belief, except as to those allegations concerning Plaintiff, which are alleged upon personal knowledge. Plaintiff s information and belief is based upon, among other things, his counsel s investigation, which includes without limitation: (a) review and analysis of regulatory filings made by Arlo Technologies, Inc. ( Arlo or the Company ) with the United States Securities and Exchange Commission ( SEC ); (b) review and analysis of press releases and media reports issued by and disseminated by Arlo; and (c) review of other publicly available information concerning Arlo. NATURE OF THE ACTION AND OVERVIEW. This is a class action on behalf of persons and/or entities who purchased or otherwise acquired the common stock of Arlo pursuant and/or traceable to the Company s false and/or misleading Registration Statement and Prospectus (collectively, the Registration Statement ) issued in connection with the Company s August, 0 initial public offering (the IPO or the Offering ), seeking to pursue remedies under Sections, (a)() and of the Securities Act of (the Securities Act ).. Arlo purportedly operates a cloud-based platform that enables users to monitor their environments and engage in real-time with their families and businesses from any location with an internet connection. The Company s products include Wi-Fi- and LTE-enabled cameras, advanced baby monitors, and smart security lights.. On August, 0, the Company filed with the SEC its IPO prospectus, which forms part of the Registration Statement. In the IPO, the Company sold 0,,000 shares of common stock at a price of $.00 per share. The Company received proceeds of approximately $. million from the IPO, net

3 0 0 of underwriting discounts and commissions. The proceeds from the IPO were purportedly to be used for general corporate purposes.. On December, 0, the Company reported a delay in shipments of Ultra, the Company s new wire-free security camera system, due to a quality issue with the battery from one of its suppliers that was discovered during the final testing phase. As a result of the delay, the Company also lowered its fourth quarter 0 financial guidance with net revenue to be in the range of $ million to $0 million, non-gaap gross margin to be approximately 0%, and non-gaap operating loss to be approximately 0% of revenue.. On December, 0, the Company s share price closed at $. per share, which was a decline of $., or approximately %, from the IPO price of $.00 per share.. The Registration Statement was materially false and misleading and omitted to state: () that the final testing phase was reasonably likely to delay the launch of the Company s Ultra product; () that there was an issue with the quality of batteries used in the Company s Ultra product; () that, as a result, the launch of the Company s Ultra product would be delayed; () that, as a result, the Company s revenue and profitability would be materially impacted; and () that, as a result of the foregoing, Defendants statements in the Registration Statement regarding Arlo s business, operations, and prospects, were materially false and/or misleading. JURISDICTION AND VENUE. The claims asserted herein arise under and pursuant to Sections, and of the Securities Act ( U.S.C. k and o). This Court has jurisdiction over the subject matter of this action pursuant to Section of the Securities Act, U.S.C. v, which explicitly states that [e]xcept as provided in section (c), no case arising under this title and brought in any State court of competent jurisdiction shall be removed to any court in the United States. Section (c) of the Securities

4 0 0 Act refers to covered class actions, which are defined as lawsuits brought as class actions or brought on behalf of more than fifty persons asserting claims under state or common law. This is an action asserting federal law claims. Thus, it does not fall within the definition of a covered class action under (c) and therefore is not removable to federal court under the Securities Litigation Uniform Standards Act of.. Each Defendant has sufficient contacts with California, or otherwise purposefully avails themselves of benefits from California or has property in California so as to render the exercise of jurisdiction over each by the California courts consistent with traditional notions of fair play and substantial justice.. The amount in controversy exceeds the jurisdictional minimum of this Court, and the total amount of damages sought exceeds $, This Court has jurisdiction over the subject matter of this action pursuant to Section of the Securities Act ( U.S.C. v).. Venue is proper in this Court pursuant to Section of the Securities Act, U.S.C. v. Many of the violations of law complained of herein occurred in this State and in large part in this County, including the dissemination of the materially false and misleading statements complained of herein into this State and into this County. In addition, many Defendants are residents of, do business in, or maintain offices in, this County. PARTIES. Plaintiff purchased Arlo securities pursuant and/or traceable to the Registration Statement issued in connection with the Company s IPO and has been damaged thereby.. Defendant Arlo is a Delaware corporation with its principal executive offices located at 0 East Plumeria Drive, San Jose, California.

5 0 0. Defendant Matthew McRae ( McRae ) was, at all relevant times, the Chief Executive Officer of the Company, and signed or authorized the signing of the Company s Registration Statement filed with the SEC.. Defendant Christine M. Gorjanc ( Gorjanc ) was, at all relevant times, the Chief Financial Officer of the Company, and signed or authorized the signing of the Company s Registration Statement filed with the SEC.. Defendant Patrick C.S. Lo ( Lo ) was a Director of the Company and signed or authorized the signing of the Company s Registration Statement filed with the SEC.. Defendant Andrew W. Kim ( Kim ) was a Director of the Company and signed or authorized the signing of the Company s Registration Statement filed with the SEC.. Defendants McRae, Gorjanc, Lo, and Kim are collectively referred to hereinafter as the Individual Defendants.. Defendant Merrill Lynch, Pierce, Fenner & Smith Incorporated ( Merrill Lynch ) served as an underwriter for the Company s IPO. In the Offering, Merill Lynch agreed to purchase,0,000 shares of the Company s common stock, exclusive of the over-allotment option. 0. Defendant Deutsche Bank Securities Inc. ( Deutsche ) served as an underwriter for the Company s IPO. In the Offering, Deutsche agreed to purchase,0,00 shares of the Company s common stock, exclusive of the over-allotment option.. Defendant Guggenheim Securities LLC ( Guggenheim ) served as an underwriter for the Company s IPO. In the Offering, Guggenheim agreed to purchase,0,00 shares of the Company s common stock, exclusive of the overallotment option.

6 0 0. Defendant Raymond James & Associates, Inc. ( Raymond James ) served as an underwriter for the Company s IPO. In the Offering, Raymond James agreed to purchase,0,00 shares of the Company s common stock, exclusive of the over-allotment option.. Defendant Cowen and Company, LLC ( Cowen ) served as an underwriter for the Company s IPO. In the Offering, Cowen agreed to purchase 0,0 shares of the Company s common stock, exclusive of the over-allotment option.. Defendant Imperial Capital, LLC ( Imperial Capital ) served as an underwriter for the Company s IPO. In the Offering, Imperial Capital agreed to purchase 0,0 shares of the Company s common stock, exclusive of the overallotment option. Defendants Merrill Lynch, Deutsche, Guggenheim, Raymond James, Cowen, and Imperial Capital are collectively referred to hereinafter as the Underwriter Defendants. The Underwriter Defendants received commissions for their participation in the IPO. CLASS ACTION ALLEGATIONS. Plaintiff brings this action as a class action pursuant to California Code of Civil Procedure Section on behalf of a Class, consisting of all persons and/or entities who purchased or otherwise acquired the common stock of Arlo pursuant and/or traceable to the Company s false and/or misleading Registration Statement and Prospectus issued in connection with the Company s IPO, and who were damaged thereby (the Class ). Excluded from the Class are Defendants, the officers and directors of the Company or its related entities, at all relevant times, members of their immediate families and their legal representatives, heirs, successors or assigns and any entity in which Defendants have or had a controlling interest.

7 0 0. The members of the Class are so numerous that joinder of all members is impracticable. During the relevant period, Arlo s securities were actively traded on the New York Stock Exchange ( NYSE ). While the exact number of Class members is unknown to Plaintiff at this time and can only be ascertained through appropriate discovery, Plaintiff believes that there are hundreds or thousands of members in the proposed Class. The Company sold 0,,000 shares of common stock in the IPO. Moreover, record owners and other members of the Class may be identified from records maintained by Arlo or its transfer agent and may be notified of the pendency of this action by mail, using the form of notice similar to that customarily used in securities class actions.. Plaintiff s claims are typical of the claims of the members of the Class as all members of the Class are similarly affected by Defendants wrongful conduct in violation of federal law that is complained of herein.. Plaintiff will fairly and adequately protect the interests of the members of the Class and have retained counsel competent and experienced in class and securities litigation. 0. Common questions of law and fact exist as to all members of the Class and predominate over any questions solely affecting individual members of the Class. Among the questions of law and fact common to the Class are: (a) whether the Securities Act was violated by Defendants acts as alleged herein; (b) whether statements made by Defendants to the investing public in connection with the Company s IPO omitted and/or misrepresented material facts about the business, operations, and prospects of Arlo; and (c) to what extent the members of the Class have sustained damages and the proper measure of damages.

8 0 0. A class action is superior to all other available methods for the fair and efficient adjudication of this controversy since joinder of all members is impracticable. Furthermore, as the damages suffered by individual Class members may be relatively small, the expense and burden of individual litigation make it impossible for members of the Class to individually redress the wrongs done to them. There will be no difficulty in the management of this action as a class action. SUBSTANTIVE ALLEGATIONS Background. Arlo purportedly operates a cloud-based platform that enables users to monitor their environments and engage in real-time with their families and businesses from any location with internet connection. Its products include Wi-Fi- and LTE-enabled cameras, advanced baby monitors, and smart security lights. The Company s False and/or Misleading Registration Statement and Prospectus. On July, 0, Arlo filed its final amendment to the Registration Statement with the SEC on Form S-/A, which forms part of the Registration Statement. The Registration Statement was declared effective on August, 0.. On August, 0, the Company filed with the SEC its IPO prospectus, which forms part of the Registration Statement. In the IPO, the Company sold 0,,000 shares of common stock at a price of $.00 per share. The Company received proceeds of approximately $. million from the IPO, net of underwriting discounts and commissions. The proceeds from the IPO were purportedly to be used for general corporate purposes.. The IPO Registration Statement and IPO Prospectus were negligently prepared and, as a result, contained untrue statements of material facts or omitted to state other facts necessary to make the statements made not misleading, and were

9 0 0 not prepared in accordance with the rules and regulations governing their preparation.. Under applicable SEC rules and regulations, the IPO Registration Statement was required to disclose known trends, events or uncertainties that were having, and were reasonably likely to have, an impact on the Company s continuing operations.. Regarding the risk of delays in launching new products, the Registration Statement stated: If we fail to continue to introduce or acquire new products or services that achieve broad market acceptance on a timely basis, or if our products or services are not adopted as expected, we will not be able to compete effectively and we will be unable to increase or maintain revenue and gross margin. * * * We may experience delays and quality issues in releasing new products and services, which may result in lower quarterly revenue than expected.. Regarding the risk of defective components supplied by third-party manufacturers, the Registration Statement stated: We obtain several key components from limited or sole sources, and if these sources fail to satisfy our supply requirements or we are unable to properly manage our supply requirements with our third-party manufacturers, we may lose sales and experience increased component costs. Any shortage or delay in the supply of key product components would harm our ability to meet scheduled product deliveries. Many of the components used in our products are specifically designed for use in our products, some of which are obtained from sole source suppliers. These components include lens, lens-sensors and passive infrared ( PIR ) sensors that have been customized for the Arlo application, as well as custom-made batteries that provide power conservation and safety features. In addition, the components used in our end products have been optimized to extend battery life.

10 0 0 * * * If we are unable to obtain a sufficient supply of components, or if we experience any interruption in the supply of components, our product shipments could be reduced or delayed or our cost of obtaining these components may increase. Component shortages and delays affect our ability to meet scheduled product deliveries, damage our brand and reputation in the market, and cause us to lose sales and market share.... In addition, at times sole suppliers of highly specialized components have provided components that were either defective or did not meet the criteria required by our retailers, distributors or other channel partners, resulting in delays, lost revenue opportunities and potentially substantial write-offs.. The Registration Statement was materially false and misleading and omitted to state: () that the final testing phase was reasonably likely to delay the launch of the Company s Ultra product; () that there was an issue with the quality of batteries used in the Company s Ultra product; () that, as a result, the launch of the Company s Ultra product would be delayed; () that, as a result, the Company s revenue and profitability would be materially impacted; and () that, as a result of the foregoing, Defendants statements in the Registration Statement regarding Arlo s business, operations, and prospects, were materially false and/or misleading. The Subsequent Disclosure 0. On December, 0, the Company reported a delay in shipments of Ultra, the Company s wire-free security camera system, due to a quality issue with the battery from one of its suppliers that was discovered during the final testing phase.. As a result of the delay, the Company also lowered its fourth quarter 0 financial guidance with net revenue to be in the range of $ million to $0 million, non-gaap gross margin to be approximately 0%, and non-gaap operating loss to be approximately 0% of revenue.

11 0 0. On December, 0, the Company s share price closed at $. per share, which was a decline of $., or approximately %, from the IPO price of $.00 per share. above. FIRST CLAIM Violation of Section of The Securities Act (Against All Defendants). Plaintiff repeats and re-alleges each and every allegation contained. This Count is brought pursuant to Section of the Securities Act, U.S.C. k, on behalf of the Class, against all Defendants (the Section Defendants ).. The Registration Statement for the IPO was inaccurate and misleading, contained untrue statements of material facts, omitted to state other facts necessary to make the statements made not misleading, and omitted to state material facts required to be stated therein.. Arlo is the registrant for the IPO. The Section Defendants named herein were responsible for the contents and dissemination of the Registration Statement.. As issuer of the shares, Arlo is strictly liable to Plaintiff and the Class for the misstatements and omissions.. None of the Section Defendants named herein made a reasonable investigation or possessed reasonable grounds for the belief that the statements contained in the Registration Statement were true and without omissions of any material facts and were not misleading.. By reasons of the conduct herein alleged, each Section Defendant violated, and/or controlled a person who violated Section of the Securities Act. 0. Plaintiff acquired Arlo shares pursuant and/or traceable to the Registration Statement for the IPO. 0

12 0 0. Plaintiff and the Class have sustained damages. The value of Arlo common stock has declined substantially subsequent to and due to Section Defendants violations. SECOND CLAIM Violation of Section (a)() of The Securities Act (Against All Defendants). Plaintiff repeats and re-alleges each and every allegation contained above, except any allegation of fraud, recklessness or intentional misconduct.. This Count is brought pursuant to Section (a)() of the Securities Act, on behalf of the Class, against all Defendants (the Section Defendants ).. The Section Defendants were sellers, offerors, and/or solicitors of purchasers of common stock offered by Arlo pursuant to the IPO. The Section Defendants issued, caused to be issued, and/or signed the IPO Registration Statement in connection with the Offering. The IPO Registration Statement was used to induce investors, such as Plaintiff and other members of the Class, to purchase Arlo securities.. The IPO Registration Statement was inaccurate and misleading, contained untrue statements of material facts, omitted to state other facts necessary to make the statements made not misleading, and omitted to state material facts required to be stated therein.. The Section Defendants actions of solicitation included participating in the preparation of the false and/or misleading IPO Registration Statement.. None of the Section Defendants named herein made a reasonable investigation or possessed reasonable grounds for the belief that the statements contained in the IPO Registration Statement were true and without omissions of any material facts and were not misleading.

13 0 0. Plaintiff and other Class members did not know, nor could they have known, of the untruths and/or omissions contained in the IPO Registration Statement and Secondary Registration Statement.. By virtue of the conduct alleged herein, the Section Defendants are liable for the aforesaid wrongful conduct and are liable to Plaintiff and the Class for damages suffered. above. THIRD CLAIM Violation of Section of The Securities Act (Against the Individual Defendants) 0. Plaintiff repeats and re-alleges each and every allegation contained. This count is asserted against the Individual Defendants (the Section Defendants ) and is based upon Section of the Securities Act.. The Section Defendants, by virtue of their offices, directorship and specific acts were, at the time of the wrongs alleged herein and as set forth herein, controlling persons of Arlo within the meaning of Section of the Securities Act. The Section Defendants had the power and influence and exercised the same to cause Arlo to engage in the acts described herein.. The Section Defendants positions made them privy to and provided them with actual knowledge of the material facts concealed from Plaintiff and the Class.. By virtue of the conduct alleged herein, the Section Defendants are liable for the aforesaid wrongful conduct and are liable to Plaintiff and the Class for damages suffered. WHEREFORE, Plaintiff pray for relief and judgment, as follows: (a) Determining that this action is a proper class action under California Code of Civil Procedure Section ;

14 0 0 (b) Awarding compensatory damages in favor of Plaintiff and the other Class members against all Defendants, jointly and severally, for all damages sustained as a result of Defendants wrongdoing, in an amount to be proven at trial, including interest thereon; (c) Awarding Plaintiff and the Class their reasonable costs and expenses incurred in this action, including counsel fees and expert fees; (d) (e) Awarding rescission or a rescissory measure of damages; and Such other and further relief as the Court may deem just and proper. JURY TRIAL DEMANDED Plaintiff hereby demand a trial by jury. Dated:, 0 GLANCY PRONGAY & MURRAY LLP By: Draft Lionel Z. Glancy Robert V. Prongay Lesley F. Portnoy Charles H. Linehan Century Park East, Suite 00 Los Angeles, CA 00 Telephone: (0) 0-0 Facsimile: (0) 0-0 LAW OFFICES OF HOWARD G. SMITH Howard G. Smith 00 Bristol Pike, Suite Bensalem, PA 00 Telephone: () - Facsimile: () - Attorneys for Plaintiff