Lifeward Ltd.LFWD
Lifeward Ltd. Income Taxes Disclosure
NOTE 11:- 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 2022-2024:
The Israeli statutory corporate tax rate and real capital gains were 23% in the years 2022-2024.
|
b.
|
Income (loss) before taxes on income is comprised as follows (in thousands):
|
|
|
Year Ended December 31,
|
|||||||||||
|
|
2024
|
2023
|
2022
|
|||||||||
|
Domestic
|
$
|
(15,022
|
)
|
$
|
(19,638
|
)
|
$
|
(19,110
|
)
|
|||
|
Foreign
|
(13,877
|
) |
(2,507
|
)
|
8
|
|||||||
|
$
|
(28,899
|
)
|
$
|
(22,145
|
)
|
$
|
(19,102
|
)
|
||||
|
c.
|
Taxes on income (benefit) are comprised as follows (in thousands):
|
|
|
Year Ended December 31,
|
|||||||||||
|
|
2024
|
2023
|
2022
|
|||||||||
|
Current
|
$
|
43
|
$
|
(12
|
)
|
$
|
151
|
|||||
|
Deferred
|
-
|
-
|
316
|
|||||||||
|
$
|
43
|
$
|
(12
|
)
|
$
|
467
|
||||||
|
|
Year Ended December 31,
|
|||||||||||
|
|
2024
|
2023
|
2022
|
|||||||||
|
Domestic
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
|
Foreign
|
43
|
(12
|
)
|
467
|
||||||||
|
$
|
43
|
$
|
(12
|
)
|
$
|
467
|
||||||
|
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, 2024 and 2023 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. Based on the Company’s history of losses, the Company established a full valuation allowance for LL.
Undistributed earnings of certain subsidiaries as of December 31, 2024 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,
|
|||||||
|
|
2024
|
2023
|
||||||
|
Deferred tax assets:
|
||||||||
|
Carry forward tax losses
|
$
|
70,430
|
$
|
64,090
|
||||
|
Research and development expenses
|
1,378
|
1,311
|
||||||
|
Accrual and reserves
|
661
|
849
|
||||||
|
Share based compensation
|
507
|
394
|
||||||
|
Credit tax carry forwards
|
1,913
|
1,714
|
||||||
|
Intangible Assets
|
140
|
-
|
||||||
|
Lease liabilities
|
224
|
480
|
||||||
|
Total deferred tax assets
|
75,253
|
68,838
|
||||||
|
Valuation allowance
|
(75,055
|
)
|
(65,209
|
)
|
||||
|
Deferred tax assets after valuation allowance
|
$
|
198
|
$
|
3,629
|
||||
|
Deferred tax liabilities:
|
||||||||
|
Right-of-use asset
|
(136
|
)
|
(470
|
)
|
||||
|
Intangible Assets
|
-
|
(3,015
|
)
|
|||||
|
Property and equipment
|
(62
|
)
|
(144
|
)
|
||||
|
Total deferred tax liabilities
|
(198
|
)
|
(3,629
|
)
|
||||
|
Net deferred tax assets
|
$
|
-
|
$
|
-
|
||||
The net changes in the total valuation allowance for each of the years ended December 31, 2024, 2023 and 2022, are comprised as follows (in thousands):
|
|
Year Ended December 31,
|
|||||||||||
|
|
2024
|
2023
|
2022
|
|||||||||
|
Balance at beginning of year
|
$
|
(65,209
|
)
|
$
|
(52,525
|
)
|
$
|
(48,098
|
)
|
|||
|
Changes due to exchange rate differences
|
-
|
-
|
1,418
|
|||||||||
|
Adjustment previous year loss
|
100
|
(5
|
)
|
(14
|
)
|
|||||||
|
Acquisition
|
-
|
(7,269
|
)
|
-
|
||||||||
|
Additions during the year
|
(9,946
|
)
|
(5,410
|
)
|
(5,831
|
)
|
||||||
|
Balance at end of year
|
$
|
(75,055
|
)
|
$
|
(65,209
|
)
|
$
|
(52,525
|
)
|
|||
|
e.
|
Reconciliation of the theoretical tax expenses:
|
A reconciliation between the theoretical tax expense, assuming all income is taxed at the statutory tax rate applicable to income of the Company, and the actual tax expense (benefit) as reported in the consolidated statements of operations is as follows (in thousands):
|
|
Year Ended December 31,
|
|||||||||||
|
|
2024
|
2023
|
2022
|
|||||||||
|
Loss before taxes, as reported in the consolidated statements of operations
|
$
|
(28,899
|
)
|
$
|
(22,145
|
)
|
$
|
(19,102
|
)
|
|||
|
Statutory tax rate
|
23
|
%
|
23
|
%
|
23.0
|
%
|
||||||
|
Theoretical tax benefits on the above amount at the Israeli statutory tax rate
|
$
|
(6,646
|
)
|
$
|
(5,093
|
)
|
$
|
(4,393
|
)
|
|||
|
Income tax at rate other than the Israeli statutory tax rate
|
(2,364
|
)
|
56
|
(2
|
)
|
|||||||
|
Non-deductible expenses including equity-based compensation expenses and other
|
-
|
-
|
262
|
|||||||||
|
Operating losses and other temporary differences for which valuation allowance was provided
|
9,846
|
5,410
|
5,375
|
|||||||||
|
Permanent differences
|
(496
|
)
|
(342
|
)
|
(775
|
)
|
||||||
|
Adjustment in respect of prior years
|
(297
|
)
|
(43
|
)
|
-
|
|||||||
|
Actual tax expense (benefit)
|
$
|
43
|
$
|
(12
|
)
|
$
|
467
|
|||||
|
f.
|
Foreign tax rates:
|
Taxable income of LI and LCAI was subject to tax at the rate of 21% in 2024, 2023 and 2022.
Taxable income of LG was subject to tax at the rate of 30% in 2024, 2023, and 2022.
|
g.
|
Tax assessments:
|
LL has had final tax assessments up to and including the 2019 tax year. LG has had final tax assessments up to and including the 2018 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, 2021, and later are generally subject to federal tax examination, while the returns for the years ended December 31, 2020, 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, 2024, LL has carry-forward losses amounting to approximately $256.5 million, which can be carried forward for an indefinite period.
As of December 31, 2024, the Company had approximately $48.7 million of U.S. federal net operating loss (“NOL”) carry forwards, and $30.9 million of state NOL carry forwards, which will begin to expire in 2025 and 2028, respectively. The federal net operating losses from years beginning after January 1, 2018, of approximately $19.2 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.
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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.