Nexentis Technologies Inc. Income Taxes Disclosure
NOTE 20 – INCOME TAX
| A. | The Company is subject to the U.S. federal income tax rate of 21% plus state income tax rates which vary from state to state. |
Income of the Israeli company is taxable at enacted tax rate of 23%.
The Company, Save Foods Ltd. and NTWO OFF Ltd. have not received final tax assessments since their inception although the tax reports of the Company for the years through December 31, 2015 and of Save Foods Ltd for the years through December 31, 2017 are deemed to be final.
As of December 31, 2024 and 2023, the Company and subsidiaries have estimated carry forward losses for tax purposes of approximately $31,202 and $24,689, respectively, of which $771 can be offset against taxable income generated until 2027 and $30,495 can be offset against future taxable income, if any.
| B. | The following is a reconciliation between the theoretical tax on pre-tax loss, at the income tax rate applicable to the Company (federal tax rate) and the income tax expense reported in the financial statements: |
| Year ended December 31 | ||||||||
| 2024 | 2023 | |||||||
| US Dollars | ||||||||
| Pretax loss | 5,602 | 7,260 | ||||||
| Federal tax rate | 21 | % | 21 | % | ||||
| Income tax computed at the federal income tax rate | 1,176 | 1,525 | ||||||
| Non-deductible expenses | (*) | (383 | ) | |||||
| Share-based compensation | (1 | ) | (27 | ) | ||||
| Differences in corporate income tax rates | 26 | 68 | ||||||
| Remeasurement of deferred taxes for foreign currency effects | 20 | 99 | ||||||
| Changes in valuation allowance | (1,221 | ) | (1,282 | ) | ||||
| (*) | Less than $1 thousand. |
N2OFF, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(USD in thousands, except share and per share data)
NOTE 20 – INCOME TAX (continued)
| C. | Deferred taxes result primarily from temporary differences in the recognition of certain revenue and expense items for financial and income tax reporting purposes and for carryforwards. Significant components of the Company’s deferred assets and liabilities are as follows: |
| Year ended December 31 | ||||||||
| 2024 | 2023 | |||||||
| Composition of deferred tax assets: | US Dollars | |||||||
| Employees and related institutions | 2 | 4 | ||||||
| Operating loss carry-forwards | 6,883 | 5,493 | ||||||
| Operating lease liabilities | 2 | 11 | ||||||
| Share-based compensation | 182 | 182 | ||||||
| Others | 47 | 33 | ||||||
| Total deferred tax assets | 7,116 | 5,723 | ||||||
Composition of deferred tax liabilities: | ||||||||
| Right-of-use asset | (2 | ) | (13 | ) | ||||
| Total deferred tax liabilities | (2 | ) | (13 | ) | ||||
| Net deferred tax assets | 7,114 | 5,710 | ||||||
| Valuation allowance | (7,114 | ) | (5,710 | ) | ||||
The net change during the year ended December 31, 2024 in the total valuation allowance amounted to $1,404
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.