Owlet, Inc.OWLT
Owlet, Inc. Income Taxes Disclosure
Income Taxes
Income tax expense for the years ended December 31, 2025 and 2024 was $28 and $54, respectively.
Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, as described in Note 2, Summary of Significant Accounting Policies and Recent Accounting Guidance, the reconciliation of the federal statutory income tax rate to the Company's effective tax rate for the year ended December 31, 2025 was as follows:
| Year Ended December 31, 2025 | |||||||||||
| Amount | Percent | ||||||||||
US federal statutory tax rate | $ | (8,327) | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect (1) | 24 | (0.1) | % | ||||||||
Change in valuation allowance | 937 | (2.4)% | |||||||||
Nondeductible items: | |||||||||||
| Stock-based compensation | 1,067 | (2.7)% | |||||||||
Warrant (benefit) expense (2) | 5,579 | (14.1)% | |||||||||
Transaction costs (3) | 301 | (0.8)% | |||||||||
| Other permanent differences | 447 | (1.0)% | |||||||||
Effective tax rate | $ | 28 | (0.1) | % | |||||||
(1) State taxes in Texas made up the majority (greater than 50%) of the tax effect in this category.
(2) Represents a permanent item attributed to common stock warrant mark-to-market adjustments.
(3) Represents costs associated with the October 2025 warrant exchange.
The reconciliation of taxes at the federal statutory rate to the provision for income taxes for the year ended December 31, 2024 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows:
| Year Ended December 31, 2024 | |||||
| Amount | |||||
Federal income tax at statutory rates | $ | (2,637) | |||
State income tax at statutory rates | (300) | ||||
Change in valuation allowance | 3,958 | ||||
Warrant (benefit) expense (1) | (1,952) | ||||
Transaction costs (2) | 80 | ||||
| Stock-based compensation | 865 | ||||
Other | 40 | ||||
Total income tax provision | $ | 54 | |||
(1) Represents a permanent item attributed to common stock warrant mark-to-market adjustments.
(2) Represents costs associated with the February 2024 preferred stock offering.
Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, as described in Note 2. Summary of Significant Accounting Policies and Recent Accounting Guidance, cash paid for income taxes, net of refunds, during the year ended December 31, 2025 was as follows:
| Year Ended December 31, 2025 | |||||
| Federal | $ | — | |||
| State: | |||||
| Texas | 45 | ||||
| Foreign | — | ||||
| Total cash paid for income taxes, net of refunds | $ | 45 | |||
Significant components of the Company’s deferred income tax assets (liabilities) are as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Accrued liabilities | $ | 1,767 | $ | 1,408 | |||||||
| Stock-based compensation | 1,720 | 1,858 | |||||||||
| 163(j) Interest expense limitation | 2,811 | 2,137 | |||||||||
| Net operating loss carryforwards | 49,119 | 46,734 | |||||||||
| 174 capitalization | 2,867 | 4,486 | |||||||||
| Lease liability | 21 | 42 | |||||||||
| Other | 983 | 1,226 | |||||||||
| Litigation settlement | 1,198 | 1,312 | |||||||||
Total deferred income tax assets | $ | 60,486 | $ | 59,203 | |||||||
| Deferred tax liabilities: | |||||||||||
| ROU asset | (17) | (34) | |||||||||
| Other | (52) | (109) | |||||||||
| Intangibles | (177) | — | |||||||||
| Total deferred tax liabilities | (246) | (143) | |||||||||
| Valuation allowance | $ | (60,240) | $ | (59,060) | |||||||
| Net deferred tax asset (liability) | $ | — | $ | — | |||||||
As of December 31, 2025, the Company had $42,152 of federal and $6,967 of state net operating loss carry-forwards available to offset future taxable income, some of which, if not utilized, will begin to expire in 2034 for federal and 2036 for state purposes.
Accounting standards require that the tax benefit of net operating losses, temporary differences, and credit carryforwards be recorded as an asset to the extent that management assesses the realization is more likely than not. Realization of the future tax benefits from the net operating losses or credit carryforwards, if any, is dependent on the Company’s ability to generate sufficient taxable income within the applicable carryforward period. The Company has established a full valuation allowance due to historical cumulative losses and the uncertainty of its ability to generate sufficient taxable income to realize the deferred tax assets.
As of December 31, 2025, the Company recorded a valuation allowance of $60,240 for the portion of the deferred tax assets that we do not expect to be realized. Due to the Company's history of losses in the U.S., the net cumulative deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $1,180 in the year ended December 31, 2025.
The utilization of the net operating loss carryforwards could be subject to annual limitations under Section 382 of the Internal Revenue Code. Section 382 imposes limitations on a corporation’s ability to utilize its NOL carryforwards if it experiences an “ownership change.” In general terms, an ownership change results from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50% over a three-year period. Additionally, net operating losses utilized after 2017 would be limited to 80% of taxable income in years in which NOL carryforwards would be utilized.
Uncertain tax positions are recorded when it is more likely than not that a given tax position would not be sustained upon examination by taxing authorities. Based on positions taken in the Company’s tax filings, the Company has concluded that there are no significant uncertain tax positions, and there are no material amounts of unrecognized tax benefits.
We file income tax returns in the U.S. and various state jurisdictions. The Company's returns for 2014 and subsequent tax years remain subject to examination and all net operating losses generated to date are subject to adjustment for U.S. federal and state income tax purposes.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 9, 2026 | Showing above |
| 2024 | Mar 11, 2025 | |
| 2023 | Mar 8, 2024 | |
| 2022 | Apr 6, 2023 | |
| 2021 | Mar 25, 2022 | |
| 2020 | Mar 25, 2021 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.