Allarity Therapeutics, Inc. Income Taxes Disclosure
13. Income Tax
The reconciliation of the statutory rate to the effective tax rate is as follows:
| 2024 | ||||
| Tax computed on the loss before tax at a tax rate of 21.0% for the year ended December 31, 2024 | $ | (5,228 | ) | |
| Foreign rate differential | (164 | ) | ||
| Tax value of derivative warrants | (562 | ) | ||
| Special tax deduction on research and development expenses | (645 | ) | ||
| Loss offset to research and development incentive | 798 | |||
| Other adjustments | 106 | |||
| Adjustment of tax concerning previous years | 320 | |||
| Change in valuation allowance | 4,994 | |||
| $ | (381 | ) | ||
As ASU 2023-09 has been prospectively adopted, the reconciliation of the statutory rate to the effective tax rate for 2025 is as follows:
| 2025 | Percent | |||||||
| Tax computed on the loss before tax at a tax rate of 21.0% for the year ended December 31, 2025 | $ | ) | 21.00 | % | ||||
| Foreign Taxes | ||||||||
| Denmark | ||||||||
| Loss offset to research and development incentive | 833 | (7.42 | ) | |||||
| Other adjustments | 150 | (1.34 | ) | |||||
| Change in Denmark valuation allowance | 215 | (1.91 | ) | |||||
| Change in US valuation allowance | 1,161 | (10.33 | ) | |||||
| Effective tax rate | - | - | ||||||
The components of net loss before income taxes were as follows:
| Year ended | ||||||||
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| Denmark | $ | (5,669 | ) | $ | (16,376 | ) | ||
| United States | (5,562 | ) | (8,520 | ) | ||||
| $ | (11,231 | ) | $ | (24,896 | ) | |||
The components of the provision for income taxes from operations were as follows:
| Year ended | ||||||||
| December 31, | ||||||||
| 2025 | 2024 | |||||||
| Current: | ||||||||
| Denmark | $ | — | $ | — | ||||
| United States | — | — | ||||||
| Total | — | — | ||||||
| Deferred: | ||||||||
| Denmark | — | (381 | ) | |||||
| United States | — | — | ||||||
| Total | — | (381 | ) | |||||
| $ | — | $ | (381 | ) | ||||
| Deferred tax comprises: | 2025 | 2024 | ||||||
| Property, plant and equipment | $ | (2 | ) | $ | (24 | ) | ||
| Intangible assets | 613 | 719 | ||||||
| Stock compensation | 829 | 800 | ||||||
| Other accruals | — | 15 | ||||||
| Capitalized R&E costs | 124 | 243 | ||||||
| Net operating losses | 22,617 | 19,325 | ||||||
| Total deferred tax | 24,181 | 21,078 | ||||||
| Valuation allowance | (24,181 | ) | (21,078 | ) | ||||
| Net deferred tax liabilities | $ | — | $ | — | ||||
| Tax on profit/loss for the year: | 2025 | 2024 | ||||||
| Change in deferred tax | $ | — | $ | (381 | ) | |||
| Tax (benefit) expense | $ | — | $ | (381 | ) | |||
As of December 2025, the Company has tax losses carried forward of approximately $38.9 million for US Federal income tax, and $65.3 million for Denmark income tax purposes. $1.4 million of the US federal tax loss carryforwards can be forward for 20 years and will begin to expire in 2037, while the remaining $37.5 million can be carried forward indefinitely. Our Denmark tax loss carryforwards can be carried forward indefinitely. Deferred tax has been provided corresponding to the statutory tax rate applied.
The statute of limitations for re-assessment of tax returns in Denmark is three years and five years for transfer pricing. As of December 31, 2025, the tax years that by the major tax jurisdictions, under the statute of limitations, are from the year ended December 31, 2020, forward. The Company does not believe it has any uncertain tax positions that would result in the Company having a liability to the taxing authorities.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 30, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
| 2023 | Mar 8, 2024 | |
| 2022 | Mar 13, 2023 | |
| 2021 | May 17, 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.