Lifeward Ltd.LFWD

Lifeward Ltd. Income Taxes Disclosure

10-KFiled Mar 18, 20265 min read
NOTE 10:-          INCOME TAXES
 
The Company’s subsidiaries are separately taxed under the domestic tax laws of the jurisdiction of incorporation of each entity.
 
 
a.
Corporate tax rates in Israel:
 
Presented hereunder are the tax rates relevant to the Company in the years 2023-2025:
 
The Israeli statutory corporate tax rate and real capital gains were 23% in the years 2023-2025.
 
 
b.
Income (loss) before taxes on income is comprised as follows (in thousands):
 
   
Year Ended December 31,
  
 
  
2025
    
2024
    
2023
  
Domestic
  
$
(19,316
)
  
$
(15,022
)
  
$
(19,638
)
Foreign
    
(653
)
    
(13,877
)
    
(2,507
)
   
$
(19,969
)
  
$
(28,899
)
  
$
(22,145
)
 
 
c.
Taxes on income (benefit) are comprised as follows (in thousands):
 
   
Year Ended December 31,
  
 
  
2025
    
2024
    
2023
  
Current
  
$
(55
 )  
$
43
    
$
(12
 )
Deferred
    
-
      
-
      
-
  
                         
   
$
(55
)
  
$
43
    
$
(12
)
 
 
  
Year Ended December 31,
  
 
  
2025
    
2024
    
2023
  
Domestic
  
$
-
    
$
-
    
$
-
  
Foreign
    
(55
)
    
43
      
(12
)
                         
   
$
(55
)
  
$
43
    
$
(12
)

 

 
d.
Deferred income taxes (in thousands):
 
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. The Company’s deferred tax assets as of December 31, 2025 and 2024 are derived from temporary differences.
 
In assessing the realization of deferred tax assets, the Company considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized.
 
Undistributed earnings of certain subsidiaries as of December 31, 2025 were immaterial. The Company intends to reinvest these earnings indefinitely in the foreign subsidiaries. As a result, the Company has not provided for any deferred income taxes.
 
   
December 31,
  
 
  
2025
    
2024
  
Deferred tax assets:
            
Carry forward tax losses
  
$
76,695
    
$
70,430
  
Research and development expenses
    
905
      
1,378
  
Accrual and reserves
    
363
      
661
  
Share based compensation
    
84
      
507
  
Credit tax carry forwards
    
2,189
      
1,913
  
Intangible Assets
    
95
      
140
  
Lease liabilities
    
364
      
224
  
Total deferred tax assets
    
80,695
      
75,253
  
Valuation allowance
    
(79,353
 )    
(75,055
 )
Deferred tax assets after valuation allowance
  
$
1,342
    
$
198
  
                 
Deferred tax liabilities:
                
Right-of-use asset
    
(355
)
    
(136
)
Property and equipment
    
(91
)
    
(62
)
Other
    
(896
)
    
-
  
Total deferred tax liabilities
    
(1,342
)
    
(198
)
                 
Net deferred tax assets
  
$
-
    
$
-
  
 
The net changes in the total valuation allowance for each of the years ended December 31, 2025, 2024 and 2023, are comprised as follows (in thousands):
 
 
  
Year Ended December 31,
  
 
  
2025
    
2024
    
2023
  
Balance at beginning of year
  
$
(75,055
)
  
$
(65,209
)
  
$
(52,525
)
Additions during the year
    
(4,298
)
    
(9,846
)
    
(12,684
)
                         
Balance at end of year
  
$
(79,353
)
  
$
(75,055
)
  
$
(65,209
)
 
 
e.
Reconciliation of the theoretical tax expenses:
 
A reconciliation of the Company’s theoretical income tax expense to actual income tax expense after the adoption of ASU 23-09 is as follows (in thousands):
 
   
Year Ended December 31,
  
 
  
2025
  
Tax at Israel statutory rate
  
$
(4,593
)
    
23
%
                 
Foreign Tax Effects
                
United States
                
Change in valuation allowance
  
$
(402
)
    
2.0
%
Non-deductible Impairment
    
584
      
(2.9)
%
Other
    
11
      
(0.1)
 
%
Germany
    
(98
)
    
0.5
%
Changes in valuation allowance
    
4,358
      
(21.8)
%
Non-taxable or Non-deductible Items
    
85
      
(0.4)
%
                 
Effective Tax Rate
  
$
(55
)
    
0.3
%
 
A reconciliation of the Company’s theoretical income tax expense to actual income tax expense before the adoption of ASU 23-09 is as follows (in thousands):
 
   
Year Ended December 31,
  
 
  
2024
    
2023
  
Loss before taxes, as reported in the consolidated statements of operations
  
$
(28,899
)
  
$
(22,145
)
                 
Statutory tax rate
    
23
%
    
23
%
                 
Theoretical tax benefits on the above amount at the Israeli statutory tax rate
  
$
(6,646
)
  
$
(5,093
)
Income tax at rate other than the Israeli statutory tax rate
    
(2,364
)
    
56
  
Operating losses and other temporary differences for which valuation allowance was provided
    
9,846
      
5,410
  
Permanent differences
    
(496
)
    
(342
)
Adjustment in respect of prior years
    
(297
)
    
(43
)
                 
Actual tax expense (benefit)
  
$
43
    
$
(12
)
 
 
f.
Foreign tax rates:
 
Taxable income of LI and LCAI was subject to tax at the rate of 21% in 2025, 2024 and 2023.
 
Taxable income of LG was subject to tax at the rate of 30% in 2025, 2024, and 2023.
 
 
g.
Tax assessments:
 
LL has had final tax assessments up to and including the 2020 tax year. LG has had final tax assessments up to and including the 2019 tax year.
 
LI and LCAI file income tax returns in the United States and in various U.S. states. The returns for the years ended December 31, 2022, and later are generally subject to federal tax examination, while the returns for the years ended December 31, 2021, and later are generally subject to state tax examination. However, net operating losses and tax credits generally remain subject to tax examination and adjustment until they are utilized on a future tax return and the statute of limitations closes for that year. Therefore, tax attributes generally remain open to both federal and state tax examination and adjustment.
 
 
h.
Net operating carry-forward losses for tax purposes:
 
As of December 31, 2025, LL has carry-forward losses amounting to approximately $279.9 million, which can be carried forward for an indefinite period.
 
As of December 31, 2025, the Company had approximately $49.5 million of U.S. federal net operating loss (“NOL”) carry forwards, and $35.3 million of state NOL carry forwards, which will begin to expire in 2027 and 2028, respectively.  The federal net operating losses from years beginning after January 1, 2018, of approximately $20.0 million may be carried forward indefinitely and losses prior to January 1, 2018 of approximately $29.5 million expire beginning in 2027 under prior law.
 
Internal Revenue Code Section 382 places a limitation (“Section 382 Limitation") on the amount of taxable income which can be offset by NOL carry forwards after a change in control (generally greater than 50% change in the value of the stock owned by 5% shareholders during the testing period) of a loss corporation. California has similar rules. On August 11, 2023, AlterG was involved in an equity transaction that constitutes a Section 382 change in ownership. The change in ownership limits the ability to utilize net operating loss carry forwards in future years. The 382-limitation impact on NOLs has been included in the current period provision. The Company may have had earlier Section 382 changes in ownership. This will be assessed upon realization of tax attributes.
 
  i.
Cash paid for income taxes, net of refunds was as follows:
 
We adopted ASU 2023-09 on a prospective basis for the year ended December 31, 2025 and have included the following table which presents income taxes paid (net of refunds received) is as follows (in thousands):
 
   
Year Ended December 31, 2025
  
Israel
    
-
  
Foreign
        
United States
    
9
  
Germany
    
27
  
Total cash taxes paid
    
36
  

Historical Timeline

Fiscal YearFiled
2025Mar 18, 2026Showing above
2024Mar 7, 2025
2023Feb 27, 2024
2022Feb 23, 2023
2021Feb 24, 2022
2020Feb 18, 2021
2019Feb 20, 2020
2018Feb 8, 2019
2017Mar 8, 2018
2016Feb 17, 2017
2015Feb 29, 2016

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.

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