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Income Taxes
12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes

Note 11 - Income Taxes

A.Tax rates

Ordinary taxable income in Israel is subject to a corporate tax rate of 23%.

The Company’s US subsidiary, Chemomab Therapeutics Inc. ("Chemomab Inc.) is taxed separately under the U.S. tax laws.

Chemomab Inc. is subject to a federal flat tax rate of 21% and state tax as applicable.

Capital gain is subject to capital gain tax according to the corporate tax rate in the year the assets are sold.

B.Tax assessments

As of December 31, 2022, the Company’s tax reports through December 31, 2017 are considered closed to audit inspections by the Israeli Tax Authority (“ITA”) due to statute of limitation rules effective in Israel.

The Company has not yet been assessed by the ITA since inception.

C.Losses for tax purposes carried forward to future years

As of December 31, 2022, the Company and its subsidiaries had approximately $159 million (approximately $143 million as of December 31, 2021) of net operating loss carryforwards which are available to reduce future taxable income with no limitation on the period of use.

On March 27, 2020 and December 27, 2020, the President of the United States signed and enacted into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the Consolidated Appropriations Act, 2021 (CAA). Among other provisions, the CARES Act and the CAA provide relief to U.S. federal corporate taxpayers through temporary adjustments to net operating loss rules, changes to limitations on interest expense deductibility, and the acceleration of available refunds for minimum tax credit carryforwards. The CARES Act also includes provisions for a carryback of any net operating loss (NOL) arising in a taxable year beginning after December 31, 2017, and before January 1, 2021, to each of the five taxable years preceding the taxable year in which the loss arises (carryback period).

Chemomab Therapeutics Inc., a wholly owned subsidiary of the Company, filed an application with the US Internal Revenue Service to carryback net operating losses. Chemomab Therapeutics Inc received $351 thousand in December 2022 on account of 2016 and 2017 and expects to receive the remainder $183 thousand in 2023. Accordingly, a tax benefit in the total amount of $534 thousand was recorded in the Company’s statement of operations during 2022.

D.Deferred taxes

In respect of:

   

December 31,

   

December 31,

 
   

2022

   

2021

 
   

USD thousands

   

USD thousands

 

Net operating loss carry-forwards

   

36,550

     

33,396

 

Share-based compensation expense

   

1,774

     

1,147

 

Research and development costs

   

2,858

     

1,449

 

Other

   

13

     

38

 

Gross deferred tax assets

   

41,195

     

36,030

 

Less - Valuation allowance

   

(41,195

)

   

(36,030)

 

 

               

Net deferred tax assets

   

-

     

-

 

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. A valuation allowance is provided when it is more likely than not that the deferred tax assets will not be realized.

The Company has established a valuation allowance to offset deferred tax assets on December 31, 2022 and 2021 due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets. The net change in the total valuation allowance for the year ended at December 31, 2022 was an increase of approximately $5.2 million.

E.Roll forward of valuation allowance

Balance at January 1, 2021

 

$

6,200

 

Currency transaction loss

   

2,425

 

Tax assets acquired through merger

    24,535  

Income tax expense

   

2,870

 

Balance at December 31, 2021

 

$

36,030

 

Currency transaction Income

   

(1,316

)

Income tax expense

   

6,481

 

Balance at December 31, 2022

 

$

41,195

 

F.Reconciliation of theoretical income tax expense to actual income tax expense

A reconciliation of the Company’s theoretical income tax expense to actual income tax expense is as follows:

   

December 31,

   

December 31,

 
   

2022

   

2021

 
   

USD thousands

   

USD thousands

 

Loss before income taxes

   

(28,180

)

   

(12,478

)

Statutory tax rate

   

23

%

   

23

%

Theoretical tax benefit

   

(6,481

)

   

(2,870

)

 

               

Change in temporary differences for which deferred taxes were not recognized

   

(1,696

)    

(1,332

)

Tax rate differential

   

20

     

(101

)

Non-deductible expenses

   

744

     

239

 

Losses and other items for which a valuation allowance was provided or benefit from loss carryforwards

   

6,879

     

4,064

 

Actual income tax expense (Benefit)

   

(534

)

   

-

 

G.Accounting for uncertainty in income taxes

For the year ended December 31, 2022, the Company did not have any unrecognized tax benefits and does not expect that the amount of unrecognized tax benefits will change significantly within the next 12 months. The Company’s accounting policy is to accrue interest and penalties related to unrecognized tax benefits as a component of income tax expense.