v3.26.1
TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
TAXES

NOTE 16 – TAXES

 

a. Corporate taxation in the U.S.

 

The corporate U.S. Federal Income tax rate applicable to the Company and its US subsidiaries is 21%.

 

As of December 31, 2024, the Company has an accumulated tax loss carryforward of approximately $48 million (as of December 31, 2023, approximately $36 million).

 

For U.S. federal income tax purposes, net operating losses (“NOLs”) arising in tax years beginning after December 31, 2017, the Internal Revenue Code of 1986, as amended (the “Code”) limits the ability to utilize NOL carryforwards to 80% of taxable income in tax years beginning after December 31, 2018. In addition, NOLs arising in tax years ending after December 31, 2017 can be carried forward indefinitely, but carryback is generally prohibited. NOLs generated in tax years beginning before January 1, 2018 will not be subject to the taxable income limitation, and NOLs generated in tax years ending before January 1, 2018 will continue to have a two-year carryback and twenty-year carryforward period. Deferred tax assets for NOLs will need to be measured at the applicable tax rate in effect when the NOL is expected to be utilized. The changes in the carryforward/carryback periods as well as the new limitation on use of NOLs may significantly impact the Company’s valuation allowance assessments for NOLs generated after December 31, 2017.

 

 

In addition, utilization of the NOLs may be subject to substantial annual limitation under Section 382 of the Code due to an “ownership change” within the meaning of Section 382(g) of the Code. An ownership change subjects pre-ownership change NOL carryforwards to an annual limitation, which significantly restricts the ability to use them to offset taxable income in periods following the ownership change. In general, the annual use limitation equals the aggregate value of the Company’s stock at the time of the ownership change multiplied by a specified tax-exempt interest rate.

 

b. Corporate taxation in Israel

 

The Israeli Subsidiaries are taxed in accordance with Israeli tax laws. The corporate tax rate applicable to 2024 and 2023 are 23%.

 

As of December 31, 2024, the Israeli Subsidiary has an accumulated tax loss carryforward of approximately $10 million (as of December 31, 2023, approximately $10 million). Under the Israeli tax laws, carryforward tax losses have no expiration date.

 

c.Deferred Taxes

 

The following table presents summary of information concerning the Company’s deferred taxes as of the years ending December 31, 2024 and December 31, 2023:

  

   2024   2023 
   December 31, 
   2024   2023 
   (U.S. dollars in thousands) 
Deferred tax assets (liabilities), net:          
Net operating loss carry forwards  $13,048   $12,331 
Research and development expenses   4,466    3,932 
Equity compensation   1,357    1,563 
Employee benefits   80    70 
Property, plants and equipment   (19)   (26)
Leases asset   -    66 
Lease liability   -    (67)
Partnership Investment   31    8,627 
Intangible assets   (1,455)   (1,629)
Bad debt allowance   2,910    575 
Other   1,024    1,088 
Deferred tax assets gross   21,442    26,530 
           
Valuation allowance   (21,442)   (26,530)
Net deferred tax liabilities  $-   $- 

 

Realization of deferred tax assets is contingent upon sufficient future taxable income during the period that deductible temporary differences and carry forwards losses are expected to be available to reduce taxable income. As the achievement of required future taxable income is not considered more likely than not achievable, the Company and all its subsidiaries have recorded full valuation allowance.

 

The changes in valuation allowance are comprised as follows:

  

   December 31, 
   2024   2023 
   (U.S dollars in thousands) 
Balance at the beginning of year  $(26,530)  $(14,753)
Deconsolidation of Octomera   -    1,252 
Change during the year   5,088    (13,029)
Balance at end of year  $(21,442)  $(26,530)

 

 

d.Reconciliation of the Theoretical Tax Expense to Actual Tax Expense

 

The main reconciling item between the statutory tax rate of the Company and the effective rate is the provision for valuation allowance with respect to tax benefits from carry forward tax losses.

 

e.Uncertain Tax Provisions

 

ASC Topic 740, “Income Taxes” requires significant judgment in determining what constitutes an individual tax position as well as assessing the outcome of each tax position. Changes in judgment as to recognition or measurement of tax positions can materially affect the estimate of the effective tax rate and consequently, affect the operating results of the Company. As of December 31, 2024, the Company has not accrued a provision for uncertain tax positions.