RxSight, Inc. Income Taxes Disclosure
Note 10 – Income Taxes
The components of loss before income taxes are as follows (in thousands):
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
U.S. loss before taxes |
|
$ |
(38,877 |
) |
|
$ |
(27,406 |
) |
|
$ |
(48,590 |
) |
Foreign income before taxes |
|
|
(1 |
) |
|
|
1 |
|
|
|
2 |
|
Loss before income taxes |
|
$ |
(38,878 |
) |
|
$ |
(27,405 |
) |
|
$ |
(48,588 |
) |
Income tax expense for the years ended December 31, 2025, 2024 and 2023, consists of the following (in thousands):
|
|
Year ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Current: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
State |
|
|
66 |
|
|
|
49 |
|
|
|
21 |
|
Foreign |
|
|
— |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
$ |
66 |
|
|
$ |
50 |
|
|
$ |
20 |
|
Deferred: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
(4,823 |
) |
|
$ |
(14,588 |
) |
|
$ |
(9,527 |
) |
State |
|
|
(1,716 |
) |
|
|
(4,513 |
) |
|
|
(3,266 |
) |
Foreign |
|
|
(2 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
(6,541 |
) |
|
|
(19,101 |
) |
|
|
(12,793 |
) |
Change in valuation allowance |
|
|
6,541 |
|
|
|
19,101 |
|
|
|
12,793 |
|
Income tax expense |
|
$ |
66 |
|
|
$ |
50 |
|
|
$ |
20 |
|
The significant components that comprised the Company’s net deferred taxes are as follows (in thousands):
|
|
Year ended December 31, |
|
|||||||||
Deferred tax assets: |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Net operating loss |
|
$ |
90,249 |
|
|
$ |
82,860 |
|
|
$ |
73,600 |
|
Amortization |
|
|
50 |
|
|
|
63 |
|
|
|
81 |
|
R&D expenditures capitalization |
|
|
13,012 |
|
|
|
17,348 |
|
|
|
10,923 |
|
Stock-based compensation |
|
|
3,490 |
|
|
|
2,380 |
|
|
|
3,292 |
|
Research and development credit |
|
|
17,188 |
|
|
|
14,839 |
|
|
|
11,271 |
|
Right-of-use liability |
|
|
2,742 |
|
|
|
3,044 |
|
|
|
752 |
|
Depreciation |
|
|
975 |
|
|
|
1,016 |
|
|
|
1,035 |
|
Other |
|
|
3,697 |
|
|
|
3,606 |
|
|
|
2,934 |
|
Gross deferred tax assets |
|
|
131,403 |
|
|
|
125,156 |
|
|
|
103,888 |
|
Less: valuation allowance |
|
|
(128,872 |
) |
|
|
(122,299 |
) |
|
|
(103,242 |
) |
Total net deferred tax assets |
|
$ |
2,531 |
|
|
$ |
2,857 |
|
|
$ |
646 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
|
|||
Right-of-use asset |
|
|
(2,531 |
) |
|
|
(2,857 |
) |
|
|
(646 |
) |
Total deferred tax liabilities |
|
|
(2,531 |
) |
|
|
(2,857 |
) |
|
|
(646 |
) |
Net deferred tax assets |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
The reconciliation of the 2025 provision for income taxes with the expected income tax computed by applying the federal statutory income tax rate to loss before provision for income taxes reflects the impact ASU 2023-09 as of December 31, 2025, and was calculated as follows (amounts in thousands):
|
|
December 31, 2025 |
|
|||||
|
|
Rate |
|
|
Amount |
|
||
Income tax provision at the federal statutory tax rate |
|
|
21.0 |
% |
|
$ |
(8,164 |
) |
State taxes, net of federal benefit (1) |
|
|
0.6 |
% |
|
|
(237 |
) |
Foreign tax effects |
|
|
0.0 |
% |
|
|
— |
|
Effects of cross-border tax laws |
|
|
(0.0 |
)% |
|
|
1 |
|
Tax credits |
|
|
5.0 |
% |
|
|
(1,951 |
) |
Change in valuation allowance |
|
|
(12.4 |
)% |
|
|
4,822 |
|
Nontaxable or nondeductible items |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
(4.3 |
)% |
|
|
1,669 |
|
Limitation on officer compensation |
|
|
(1.3 |
)% |
|
|
507 |
|
Other non-deductible permanent items |
|
|
(0.7 |
)% |
|
|
272 |
|
Changes in unrecognized tax benefits |
|
|
(2.0 |
)% |
|
|
783 |
|
Other adjustments |
|
|
|
|
|
|
||
Expired tax attributes |
|
|
(2.2 |
)% |
|
|
873 |
|
Other |
|
|
0.1 |
% |
|
|
(23 |
) |
Stock-based compensation - other |
|
|
(3.9 |
)% |
|
|
1,514 |
|
Income tax expense |
|
|
(0.2 |
)% |
|
$ |
66 |
|
(1) State taxes in California made up the majority (greater than 50 percent) of the tax effect in this category.
A reconciliation of the provision for income taxes prior to the adoption of ASU Topic 2023-09, with the expected income tax computed by applying the federal statutory income tax rate to loss before provision for income taxes was calculated as follows (amounts in thousands):
|
|
December 31, 2024 |
|
|
December 31, 2023 |
|
||||||||||
|
|
Rate |
|
|
Amount |
|
|
Rate |
|
|
Amount |
|
||||
|
|
21.0 |
% |
|
$ |
(5,755 |
) |
|
|
21.0 |
% |
|
$ |
(10,203 |
) |
|
State taxes, net of federal benefit |
|
|
9.4 |
% |
|
|
(2,579 |
) |
|
|
4.1 |
% |
|
|
(1,992 |
) |
Research and development credits |
|
|
13.2 |
% |
|
|
(3,627 |
) |
|
|
3.7 |
% |
|
|
(1,805 |
) |
Stock-based compensation |
|
|
40.2 |
% |
|
|
(11,016 |
) |
|
|
(0.3 |
)% |
|
|
150 |
|
Limitation on officer compensation |
|
|
(11.6 |
)% |
|
|
3,186 |
|
|
|
— |
|
|
|
— |
|
Other non-deductible permanent items |
|
|
(1.2 |
)% |
|
|
323 |
|
|
|
(0.5 |
)% |
|
|
246 |
|
Expired tax attributes |
|
|
(3.2 |
)% |
|
|
882 |
|
|
|
(2.2 |
)% |
|
|
1,070 |
|
Other |
|
|
1.7 |
% |
|
|
(464 |
) |
|
|
0.5 |
% |
|
|
(239 |
) |
Change in valuation allowance |
|
|
(69.7 |
)% |
|
|
19,100 |
|
|
|
(26.3 |
)% |
|
|
12,793 |
|
Income tax expense |
|
|
(0.2 |
)% |
|
$ |
50 |
|
|
|
0.0 |
% |
|
$ |
20 |
|
The Company’s valuation allowance increased by $6.5 million and $19.1 million in 2025 and 2024, respectively.
Activity related to the Company's valuation allowance consisted of the following (in thousands):
|
|
Year ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Balance as of January 1 |
|
$ |
122,299 |
|
|
$ |
103,242 |
|
|
$ |
90,471 |
|
Charged to expense |
|
|
6,539 |
|
|
|
19,099 |
|
|
|
12,792 |
|
Charged (credited) to Other comprehensive income |
|
|
34 |
|
|
|
(42 |
) |
|
|
(21 |
) |
Balance, as of December 31, |
|
$ |
128,872 |
|
|
$ |
122,299 |
|
|
$ |
103,242 |
|
As of December 31, 2025, the Company had federal net operating loss carryforwards of $376.7 million and state net operating loss carryforwards of $198.7 million. Of the $376.7 million in federal NOLs, $280.7 million will not expire and will be able to offset 80% of taxable income in future years. Of the $198.7 million in state NOLs, $31.0 million will not expire and will be able to offset 80% of taxable income in future years. The remaining federal NOL carryforwards will expire between 2026 and 2037, and the remaining state NOL carryforwards will expire between 2026 and 2045. In addition, the Company also
had federal credit carry forwards of $14.6 million and state credit carry forwards of $12.9 million as of December 31, 2025, which may be available to offset future tax liabilities. The federal credits will expire between 2037 and 2045, and the state credits do not expire.
Utilization of the net operating loss carryforwards may be subject to substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), as well as similar state provisions. These ownership changes may limit the amount of net operating loss carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an “ownership change,” as defined by Section 382 of the Code, results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups.
Pursuant to Internal Revenue Code (“IRC”) Sections 382 and 383, annual use of the Company’s net operating loss and R&D credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has not completed an IRC Sections 382 and 383 analysis regarding the limitation of net operating loss and R&D credit carryforwards as of December 31, 2025. The Company has not completed a formal R&D study but has estimated the federal and California credit for purposes of the tax footnote as of December 31, 2025. However, the Company has not reflected a benefit in the consolidated financial statements due to the recorded valuation allowance.
The following reconciliation of the beginning and ending amount of gross unrecognized tax benefits, excluding interest and penalties, is as follows (in thousands):
|
|
Year ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Beginning balance of unrecognized tax benefits |
|
$ |
5,547 |
|
|
$ |
4,244 |
|
|
$ |
3,494 |
|
Additions for current year tax positions |
|
|
796 |
|
|
|
1,303 |
|
|
|
683 |
|
Reductions for prior year tax positions |
|
|
65 |
|
|
|
— |
|
|
|
67 |
|
Ending balance |
|
$ |
6,408 |
|
|
$ |
5,547 |
|
|
$ |
4,244 |
|
None of the unrecognized tax benefits, if recognized, would impact the annual effective rate, due to the valuation allowance. The Company’s unrecognized tax benefits are recorded as a reduction in deferred tax assets. The Company does not expect any significant increases or decreases to the Company’s unrecognized tax benefits within the next 12 months. Due to the existence of the valuation allowance, future changes in the Company's unrecognized tax benefits will not impact the Company's effective tax rate. The Company has not incurred any material interest or penalties as of the current reporting date with respect to income tax matters.
The Company is subject to U.S. federal and various states' income taxes. The federal returns for tax years 2022 through 2025 remain open to examination and the state returns remain subject to examination for tax years 2021 through 2025. Carryforward attributes that were generated in years where the statute of limitations is closed may still be adjusted upon examination by the Internal Revenue Service or other respective tax authorities. All other state jurisdictions remain open to examination.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Mar 6, 2023 | |
| 2021 | Mar 8, 2022 | |
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.