| NOTE 8 - | TAXES ON INCOME |
| a. | At December 31, 2017, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $14,497 available to reduce future taxable income. Utilization of the U.S. net operating losses may be subject to substantial limitations due to the change of ownership provisions of the Internal Revenue Code of 1986. |
The U.S Company has final tax assessments through 2012.
On December 22, 2017, the Tax Reform Act was signed into law. The legislation significantly changes U.S. tax law by, among other things, lowering the U.S. corporate income tax rate from a maximum of 35% to a flat 21% rate, effective January 1, 2018. As a result of the decrease in the corporate income tax rate, the Company revalued the ending net deferred tax assets at December 31, 2017, but did not recognize any incremental income tax expense in 2017 due to the revaluation of the valuation allowance.
| b. | Foreign tax: |
| 1. | Tax rates: |
Presented hereunder are the tax rates relevant to the Company’s Israeli subsidiary:
| 2015 - 26.5% | ||
| 2016 - 25% | ||
| 2017 - 24% |
On January 4, 2016, the Knesset plenum passed the Law for the Amendment of the Income Tax Ordinance (Amendment 216) - 2016, by which, inter alia, the corporate tax rate would be reduced by 1.5% to a rate of 25% as from January 1, 2016.
Furthermore, on December 22, 2016, the Knesset plenum passed the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in the Years 2017 and 2018) – 2016, by which, inter alia, the corporate tax rate would be reduced from 25% to 23% in two steps. The first step will be to a rate of 24% as from January 2017 and the second step will be to a rate of 23% as from January 2018.
As a result of the reduction in the tax rate to 23% in two steps, the deferred tax balances as at December 31, 2016 and 2017 were calculated according to the new tax rate specified in the Economic Efficiency Law (Legislative Amendments for Achieving Budget Objectives in the Years 2017 and 2018), at the tax rate expected to apply on the date of reversal.
| 2. | The Company’s subsidiaries have estimated total available carryforward operating tax losses for Israeli income tax purposes of approximately $49,813 as of December 31, 2017. Of these losses, a total of $42,484 are owned by Topspin Medical (Israel) Ltd. These losses will likely not be offset by future income due to the fact that Israeli tax law does not allow the offset of tax losses generated while a company was held by other shareholders and had no operations. The other losses are owned by My Size Israel 2014 Ltd and may be carryforward to offset against future income for an indefinite period of time. |
| 3. | Topspin Medical (Israel) ltd. has final tax assessments through 2013 and My Size (Israel) 2014 Ltd. has no final tax assessments. |
| c. | U.S. and foreign components of loss from continuing operations, before income taxes consisted of: |
| December 31, | |||||||||
| 2017 | 2016 | ||||||||
| U.S | (1,419 | ) | (2,617 | ) | |||||
| Non-U.S. (foreign) | (3,985 | ) | (1,717 | ) | |||||
| (5,404 | ) | (4,334 | ) | ||||||
| d. | Deferred taxes: |
Deferred 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. Significant components of the Company’s deferred tax assets are as follows:
| December 31, | |||||||||
| 2017 | 2016 | ||||||||
| Deferred tax assets: | |||||||||
| Operating loss carryforwards | 14,327 | 14,097 | |||||||
| Warrants | (314 | ) | - | ||||||
| options | 303 | - | |||||||
| Marketable securities | 519 | 418 | |||||||
| Deferred tax assets before valuation allowance | 14,835 | 14,515 | |||||||
| Valuation allowance | (14,835 | ) | (14,515 | ) | |||||
| Net deferred tax asset | - | - | |||||||
The following table presents a reconciliation of the beginning and ending valuation allowance:
| December 31, | |||||||||
| 2017 | 2016 | ||||||||
| Balance at beginning of the year | 14,515 | 14,835 | |||||||
| Additions in valuation allowance to the income statement | 1,120 | 587 | |||||||
| Additions in valuation allowance allocated to OCI | - | 418 | |||||||
| Reductions in valuation allowance due to exchange rate differences and change in tax rate | (800 | ) | (1,325 | ) | |||||
| Balance at end of the year | 14,835 | 14,515 | |||||||
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized.
The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuation allowance at December 31, 2017 and 2016.
| e. | Theoretical tax |
The following presents the adjustment between the theoretical tax amount and the tax amount included in the financial statements:
| December 31, | |||||||||
| 2017 | 2016 | ||||||||
| Loss before income taxes | 5,404 | 4,334 | |||||||
| Statutory tax rate | 34 | % | 34 | % | |||||
| Theoretical tax benefit | 1,837 | 1,474 | |||||||
| Foreign tax rate differences and exchange rate differences | (445 | ) | (189 | ) | |||||
| Nondeductible expenses | (272 | ) | (698 | ) | |||||
| Change in valuation allowance | (1,120 | ) | (587 | ) | |||||
| Taxes on income | - | - | |||||||