Vyome Holdings, Inc Income Taxes Disclosure

12.	Income taxes

 

The Company generated a current taxable loss for the years ended December 31, 2025 and 2024, and therefore, the only current income taxes payable were certain minimum taxes. The effective tax rate for the years ended December 31, 2025, and 2024 was zero and differs from the federal statutory income tax rate of 21% principally due to the full valuation allowance recognized against deferred income tax assets, and to a lesser extent due to different tax rates in the jurisdiction of VTL and certain non-deductible expenses for income tax purposes, summarized as follows.

 

For the Years Ended December 31,
		2025				2024
Tax benefit at the federal statutory rate			21	%			21	%
State tax, net of federal benefit			7	%			7	%
Permanent differences – principally unrealized gains/losses and expenses related to warrant issuance			(13	)%			(3	)%
India tax rate differential and other			(3	)%			(1	)%
Change in valuation allowance			(12	)%			(24	)%
Effective income tax rate			0	%			0	%

Deferred tax assets at December 31, 2025 and 2024 are summarized as follows:

 

		December 31, 2025				December 31, 2024
VTI - net operating loss carryforwards		$	7,828,389			$	5,391,381
Stock options			301,178				139,582
Accrued compensation			146,458				111,424
Accrued expenses			62,684				37,101
Interest			-				133,526
Research and development tax credits			78,388				78,388
VTL - net operating loss carryforwards and other			1,212,217				2,018,472
Reshape – net operating loss carryforwards			65,147,880				-
VHI – net operating loss carryforwards			407,981				-
Total deferred tax assets			75,194,175				7,909,873
Less: valuation allowance			(75,194,175	)			(7,909,873	)
Net deferred tax assets		$	-			$	-

  

A valuation allowance is established attributable to deferred tax assets recognized on carry forward tax losses by the Company where, based on available evidence, it is more likely than not that they will not be realized. The Company recorded full valuation allowance against its net deferred tax assets on December 31, 2025 and 2024. Significant management judgment is required in determining provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against deferred tax assets. The valuation allowance is based on the Company’s estimates of taxable income by jurisdiction in which the Company operates and the period over which deferred tax assets will be recoverable. The change in valuation allowance is approximately $67,300,000 and $379,000 for the years ended December 31, 2025, and 2024, respectively, principally due to the net operating losses acquired in the Merger – see below for discussion of limitation related thereto.

 

As of December 31, 2025, VTI has net operating loss carry-forwards of approximately $28.0 million in the United States, which will expire as follows: $16.1 million has no expiration date, $10.2 million expires in 2039, and $1.7 million expires in 2038. Due to the change in ownership provisions of the Internal Revenue Code, the availability of the Company’s net operating loss carry-forwards may be subject to annual limitations against taxable income in future periods, which could substantially limit the eventual utilization of such carry-forwards. The Company has not analyzed the historical or potential impact of its equity financings on beneficial ownership and therefore no determination has been made whether the net operating loss carry-forward is subject to any Internal Revenue Code Section 382 limitation. To the extent there is a limitation, there would be a reduction in the deferred tax asset with an offsetting reduction in the valuation allowance.

 

At the date of the Merger, Reshape had approximately $230 million of net operating loss carryforwards, the majority of which has no expiration. However, utilization of such net operating losses will be limited (pursuant our preliminary the Internal Revenue Code Section 382 analysis) to approximately $400,000 per year.

 

As of December 31, 2025, VTL has approximately $2.3 million USD equivalent of net operating loss carry-forwards.

 

The Company is subject to income taxes and tax audits in many jurisdictions. A certain degree of estimation is thus required in recording the assets and liabilities related to income taxes. Tax audits and examinations can involve complex issues, interpretations, and judgments and the resolution of matters that may span multiple years, particularly if subject to litigation or negotiation.

The Company’s investments in its foreign subsidiaries are considered to be permanently invested and no provision for income taxes on the related foreign exchange translation adjustments or income/(loss) of those subsidiaries has been recorded.

 

The Company does not expect a significant change to the amount of unrecognized tax benefits over the next 12 months. However, any adjustments arising from certain ongoing examinations by tax authorities could alter the timing or amount of taxable income or deductions, of the allocation of income among tax jurisdictions, and these adjustments could differ from the amount accrued. The Corporation’s federal and provincial income tax returns filed for all years remain subject to examination by the taxation authorities.