Definium Therapeutics, Inc. Income Taxes Disclosure

Note that the Company is domiciled in Canada; however, predominant operations are in the United States, and under the Company’s tax structure the parent entity files tax returns in both the United States and Canada. Therefore, the Company is reconciling to the United States federal statutory rate. Upon adoption of ASU 2023-09, the reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the year ended December 31, 2025 was as follows (in thousands, except for percentages):

The difference between the statutory federal income tax rate and the Company’s effective tax rate in 2025 and 2024 is primarily attributable to the change in valuation allowance, foreign rate differential, executive compensation, and capitalized research expenses.

As of December 31, 2025 and 2024, management assessed the realizability of deferred tax assets and evaluated the need for a valuation allowance for deferred tax assets on a jurisdictional basis. This evaluation utilizes the framework contained in ASC 740, Income Taxes, wherein management analyzes all positive and negative evidence available at the balance sheet date to determine whether all or some portion of the Company’s deferred tax assets will not be realized. Under this guidance, a valuation allowance must be established for deferred tax assets when it is more-likely-than-not that the asset will not be realized. In assessing the realization of the Company’s deferred tax assets, management considers all available evidence, both positive and negative.

In concluding on the evaluation, management placed significant emphasis on guidance in ASC 740, which states that “a cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome.” Based upon available evidence, it was concluded on a more-likely-than-not basis that all deferred tax assets were not realizable as of December 31, 2025 and 2024. Accordingly, a valuation allowance of $109.7 million has been recorded to offset this deferred tax asset. The valuation allowance increased by $39.8 million for the year ended December 31, 2025.

As of December 31, 2025, the Company has accumulated federal and state net operating loss (“NOL”) carryforwards of $323.4 million and $20.0 million, respectively. The federal NOL carryforwards can be carried forward indefinitely, subject to 80% taxable income limitation. The state NOL carryforwards will begin to expire in 2037, unless previously utilized.

As of December 31, 2025, the Company had combined foreign net operating loss carryforwards available to reduce future taxable income of approximately $36.0 million, of which $0.8 million carryforward indefinitely, $29.9 million begin to expire in 2040, and $5.3 million begin to expire in 2028.

Utilization of the Company’s net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. Such an annual limitation could result in the expiration or elimination of the net operating loss and tax credit carryforwards before utilization. Management believes that the limitation will not limit utilization of the carryforwards prior to their expiration.

The Company is subject to taxation in the United States, various states, Canada, Australia and Switzerland. The Company has not been notified that it is under audit by the IRS or any state or foreign taxing authorities, however, due to the presence of NOL carryforwards, all of the income tax years remain open for examination in each of these jurisdictions.

Deferred income taxes have not been provided for undistributed earnings of the Company’s consolidated foreign subsidiaries because of the Company’s intent to reinvest such earnings indefinitely in active foreign operations.

As of December 31, 2025 and 2024, the Company did not have a liability for unrecognized tax benefits.

The Company did not pay income taxes in any jurisdiction for the year ended December 31, 2025.

The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. During the years ended December 31, 2025 and 2024, there were no interest and penalties recognized.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The new standard requires a company to expand its existing income tax disclosures, specifically related to the rate reconciliation and income taxes paid. The standard is effective for the Company beginning in fiscal year 2025.The Company has adopted ASU 2023-09 for the tax year ended December 31, 2025, applying the new standard prospectively. The impact of ASU 2023-09 to the Company's income tax footnote included expanded rate reconciliation detail disclosing additional information related to foreign tax effects and income taxes paid (net of refunds), by jurisdiction.

The One Big Beautiful Bill Act of 2025 ("OBBBA") was signed into law on July 4, 2025. The OBBBA makes changes to the U.S. corporate income tax rules including immediate expensing of domestic research and development costs while foreign expenditures will continue to be capitalized and amortized over 15 years, and modifications to the timing of the deduction for interest expense. The enactment of the legislation did not have a material impact on the Company's income tax rate during the year ended December 31, 2025 and is not expected to have a material impact on the Company's income tax rate in future years.