ORAMED PHARMACEUTICALS INC. Income Taxes Disclosure
NOTE 18 - TAXES ON INCOME:
Taxes on income included in the consolidated statements of comprehensive income (loss) represent current taxes due to taxable income of the Company.
| a. | Corporate taxation in the U.S. |
The applicable corporate tax rate for the Company is 21%.
As of December 31, 2025, the Company has utilized all of its outstanding net operating loss (“NOL”). Oravax had an accumulated tax loss carryforward of approximately $3,395 (as of December 31, 2024, $3,386). Under U.S. tax laws, subject to certain limitations, carryforward tax losses originating in tax years beginning after January 1, 2018, have no expiration date, but they are limited to 80% of the company’s taxable income in any given tax year. Carryforward tax losses originating in tax years beginning prior to January 1, 2018, expire 20 years after the year in which incurred.
| b. | Corporate taxation in Israel |
The Subsidiary is taxed in accordance with Israeli tax laws. The corporate tax rate applicable to 2025 and 2024 is 23%.
As of December 31, 2025, the Subsidiary and Oravax Medical Ltd. had an accumulated tax loss carryforward of approximately $115,623 (as of December 31, 2024, approximately $113,419). Under the Israeli tax laws, carryforward tax losses have no expiration date.
| c. | Cash paid for income taxes
Cash paid for U.S. income taxes was $3,318 and $0 for the years ended December 31, 2025 and 2024, respectively. |
| d. | Deferred income taxes |
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| In respect of: | ||||||||
| Net operating loss carryforward | $ | 27,306 | $ | 26,797 | ||||
| Research and development expenses | 1,005 | 1,220 | ||||||
| Revaluation of investments | (7,973 | ) | 5,608 | |||||
| Other temporary differences | 134 | 2,495 | ||||||
| Less - valuation allowance | (28,383 | ) | (36,120 | ) | ||||
| Net deferred tax liability | $ | (7,911 | ) | $ | ||||
Deferred taxes are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
The Company maintains a full valuation allowance against the deferred tax assets of certain entities, as management has determined that it is not more likely than not that such deferred tax assets will be realized.
| e. | Income (Loss) before taxes on income and income taxes included in the consolidated statements of comprehensive income (loss) |
| Year ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Income (loss) before taxes on income: | ||||||||
| U.S. | $ | 46,424 | $ | (8,853 | ) | |||
| Outside U.S. | 28,900 | (7,067 | ) | |||||
| $ | 75,324 | $ | (15,920 | ) | ||||
| Taxes on income (tax benefit): | ||||||||
| Current: | ||||||||
| U.S. | 3,573 | 3,183 | ||||||
| Outside U.S. | ||||||||
| $ | 3,573 | $ | 3,183 | |||||
| Deferred Taxes: | ||||||||
| U.S. | $ | (184 | ) | $ | ||||
| Outside U.S. | 8,095 | |||||||
| $ | 7,911 | $ | ||||||
| Prior Year Taxes: | ||||||||
| U.S. | (176 | ) | ||||||
| Outside U.S. | ||||||||
| $ | (176 | ) | $ | |||||
| Total Taxes: | ||||||||
| U.S. | $ | 3,213 | $ | 3,183 | ||||
| Outside U.S. | 8,095 | |||||||
| $ | 11,308 | $ | 3,183 | |||||
| f. | Reconciliation of the statutory tax benefit to effective tax expense |
Following is a reconciliation of the theoretical tax expense, assuming all income is taxed at the regular tax rates applicable to companies in the United States, and the actual tax expense. The amounts for 2024 are presented prior to the adoption of ASU 2023-09, while the amounts for 2025 are presented after its adoption.
| 2024 | ||||
| Income (loss) before taxes expenses | $ | (15,920 | ) | |
| Statutory tax (benefit) expense – 21% | (3,343 | ) | ||
| Increase (decrease) in income taxes resulting from: | ||||
| Change in valuation allowance | 7,647 | |||
| Disallowable deductions | (878 | ) | ||
| Influence of different tax rate applicable to the Subsidiary and Oravax Medical Ltd. | (219 | ) | ||
| Prior year adjustments | (13 | ) | ||
| Uncertain tax position | (11 | ) | ||
| Taxes on income for the reported year | $ | 3,183 | ||
| Year ended December 31, 2025 | ||||||||
| Amount | Percent | |||||||
| U.S. federal statutory tax rate | $ | 15,818 | 21 | |||||
| Foreign tax effects | ||||||||
| Israel | ||||||||
| Share-based payment awards | 2,573 | 3.4 | ||||||
| Changes In Valuation allowance | (1,137 | ) | (1.5 | ) | ||||
| Statutory tax rate difference between Israel and United States | 579 | 0.8 | ||||||
| Other | 13 | 0.0 | ||||||
| Effect of cross-border tax laws | 114 | 0.2 | ||||||
| Change in the valuation allowance | (6,600 | ) | (8.8 | ) | ||||
| Nontaxable or nondeductible items | 122 | 0.2 | ||||||
| Other | (174 | ) | (0.2 | ) | ||||
| Effective Tax Rate | $ | 11,308 | 15.0 | |||||
| g. | Uncertainty in Income Taxes |
ASC 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. The Company recognizes interest and penalties related to its tax contingencies as income tax expense.
The following table summarizes the activity of the Company unrecognized tax benefits:
| Year ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Balance at Beginning of Year | $ | $ | 11 | |||||
| Decrease in uncertain tax positions for the current year | (11 | ) | ||||||
| Balance at End of Year | $ | $ | ||||||
The Company does not expect unrecognized tax expenses to change significantly over the next 12 months.
The Company is subject to U.S. Federal income tax examinations for the tax years of 2021 through 2025.
The Subsidiary is subject to Israeli income tax examinations for the tax years of 2019 through 2025.
| h. | Valuation Allowance Rollforward |
| Year ended | ||||||||||||
| Balance at beginning of year | Additions (deductions) | Balance at end of year | ||||||||||
| Allowance in respect of carryforward tax losses: | ||||||||||||
| Year ended December 31, 2025 | $ | 36,120 | $ | (7,737 | ) | $ | 28,383 | |||||
| Year ended December 31, 2024 | $ | 28,473 | $ | 7,647 | $ | 36,120 | ||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 26, 2026 | Showing above |
| 2024 | Mar 27, 2025 | |
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.