Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

Income Taxes
3 Months Ended
Mar. 31, 2024
Income Taxes [Abstract]  



The Company had a net deferred tax asset of $68.9 million as of December 31, 2023, including a tax benefit of $62.6 million from net operating loss carry-forwards. A valuation allowance of $68.9 million was provided against this asset resulting in deferred assets, net of valuation allowance of $0.


As of December 31, 2023, the Company and Ondas Networks had Federal NOLs of approximately $1 million and $15 million, respectively, generated in 2007 to 2017 which will begin to expire in 2027 through 2037. Additionally, as of December 31, 2023, the Company and Ondas Networks had Federal NOLs of $59 million and $50 million, respectively, generated in 2018 through 2023 that have no expiration. As of December 31, 2023, the Company and Ondas Networks had State NOLs available to offset future taxable income of $43 million and $92 million, respectively, expiring from 2038 through 2043. As of December 31, 2023, the Company had approximately $127 million of Israeli NOL’s. The Company’s Federal income tax returns for the 2020 to 2022 tax years remain open to examination by the IRS. Upon utilization of Federal NOLs in the future, the IRS may examine records from the year the loss occurred, even if outside the three-year statute of limitations. The Company’s State tax returns also remain open to examination. The Company’s Israeli income tax returns for the 2019 to 2022 tax years remain open to examination.


In assessing the realizability of deferred tax assets, including the net operating loss carry forwards, the Company assesses the positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize its existing deferred tax assets. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period when those temporary differences become deductible. Based on its assessment, the Company has provided a full valuation allowance against its deferred tax assets since their future utilization remains uncertain at this time.


In accordance with Section 382 of the Internal Revenue Code, the usage of the Company’s net operating loss carry forwards could be limited in the event a change of control has occurred. As of December 31, 2021, the Company completed an analysis and determined that there were multiple ownership changes. Provided sufficient taxable income is generated the annual base limitation plus increased limitation calculated pursuant to IRS Notice 2003-65 will allow the Company to utilize all existing losses within the carryover periods.


The Company applies the FASB’s provisions for uncertain tax positions. The Company utilizes the two-step process to determine the amount of recognized tax benefit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the Consolidated Financial Statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes interest and penalties associated with uncertain tax positions as a component of income tax expense.


As of March 31, 2024 and December 31, 2023, management does not believe the Company has any material uncertain tax positions that would require it to measure and reflect the potential lack of sustainability of a position on audit in its financial statements. The Company will continue to evaluate its uncertain tax positions in future periods to determine if measurement and recognition in its financial statements is necessary. The Company does not believe there will be any material changes in its unrecognized tax positions over the next year.