| INCOME TAXES |
NOTE
6 - INCOME TAXES:
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1. |
Tax
rates applicable to the income of the Israeli subsidiaries: |
Odysight.ai
Ltd. and D. View Ltd. are taxed according to Israeli tax laws.
The
Israeli corporate tax rate from the year 2018 and onwards is 23%.
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2. |
Tax
rates applicable to the income of the U.S. company, Odysight.ai Inc.: |
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The
Company is taxed according to U.S. tax laws. |
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The
U.S. corporate tax rate is 21%. |
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3. |
Tax
rates applicable to the income of the Italian subsidiary : |
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Odysight.ai EU Srl. is taxed according to Italian
tax laws. |
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Italy corporate tax rate is 24%. |
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b. |
Deferred
income taxes: |
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Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets
are as follows: |
SCHEDULE OF COMPONENT OF DEFERRED TAX ASSET
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December 31, | |
| | |
2025 | | |
2024 | |
| | |
USD in thousands | |
| Operating loss carryforward | |
| 55,700 | | |
| 34,433 | |
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| | | |
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| Net deferred tax asset before valuation allowance | |
| 12,791 | | |
| 7,991 | |
| Valuation allowance | |
| (12,791 | ) | |
| (7,991 | ) |
| Net deferred tax | |
| - | | |
| - | |
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As
of December 31, 2025, the Company has provided a full valuation allowance of $12,791
thousand in respect of deferred tax assets resulting from tax loss carryforwards and other temporary differences. Management
currently believes that because the Company has a history of losses, it is more likely than not that the deferred tax regarding the
loss carryforward and other temporary differences will not be realized in the foreseeable future. |
ODYSIGHT.AI
INC.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE
6 - INCOME TAXES (Continued):
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c. |
Available
carryforward tax losses: |
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As
of December 31, 2025, the Company has an accumulated tax loss carryforward of approximately $55,700 thousand. Carryforward
tax losses in Israel are of unlimited duration. Under the Tax Cut and Jobs Act of 2017 (the “Tax Act”) (subject to modifications
under the Coronavirus Aid, Relief, and Economic Security Act), federal net operating losses (NOL) incurred in taxable years ending
after December 31, 2017 and in future years may be carried forward indefinitely, but the deductibility of such federal net operating
losses is limited. It is uncertain if and to what extent various states will conform to the newly enacted federal tax law. |
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In
addition, under Section 382 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation
undergoes an “ownership change,” which is generally defined as a greater than 50 percentage point change, by value, in
its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and other
pre-change tax attributes to offset its post-change income or taxes may be limited. Such limitations may result in the expiration
of net operating losses before utilization. |
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d. |
The
main reconciling item between the statutory tax rate of the Company and the effective tax rate is the recognition of valuation allowance
in respect of deferred taxes relating to accumulated net operating losses carried forward due to the uncertainty of the realization
of such deferred taxes. |
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e. |
The following table presents the reconciliation between
the Company’s theoretical income tax and effective income tax for the year ended December 31, 2025 after the adoption of ASU 2023-09. The Company adopted ASU 2023-09 prospectively for the year
ended December 31, 2025.
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SCHEDULE OF EFFECTIVE INCOME TAX
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Year ended December 31, 2025 | |
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USD in thousands | | |
Percentage | |
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| Loss before taxes as reported in the consolidated statements of income | |
| (17,035 | ) | |
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| U.S. Federal Statutory rate tax | |
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| 21 | % |
| Theoretical Tax Income | |
| (3,577 | ) | |
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| Foreign Tax Effects: | |
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| Israel | |
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| Statutory tax rate difference | |
| (331 | ) | |
| 1.94 | % |
| Non-deductible items – Stock based compensation | |
| 706 | | |
| (4.15 | )% |
| Non-deductible items – other | |
| 7 | | |
| (0.04 | )% |
| Tax benefits | |
| (308 | ) | |
| 1.81 | % |
| Changes in valuation allowances | |
| 4,752 | | |
| (27.90 | )% |
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| Other countries | |
| 4 | | |
| (0.03 | )% |
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| Changes in valuation allowances | |
| 48 | | |
| (0.28 | )% |
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| Non-deductible items | |
| 54 | | |
| (0.31 | )% |
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| Currency differences | |
| (1,355 | ) | |
| 7.96 | % |
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| Effective Tax Expense | |
| 0 | | |
| 0.00 | % |
Cash
paid for income taxes:
The
Company did not pay any significant income taxes between 2024-2025.
Disaggregation
of Los:
The
Domestic and foreign components of loss before income taxes were as follows for the years ended December 31, 2025 and 2024:
SCHEDULE
OF DOMESTIC AND FOREIGN COMPONENTS OF LOSS BEFORE INCOME TAXES
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Year ended December 31, | |
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2025 | | |
2024 | |
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USD in thousands | |
| Domestic (US) | |
| 484 | | |
| 612 | |
| Foreign (Israel and Italy) * | |
| 16,551 | | |
| 11,155 | |
| * | 99% of the Foreign
is amount related to Israel |
Uncertain
Tax Positions
The
Company had no uncertain tax positions as of December 31, 2025 and December 31, 2024.
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