ONCOLYTICS BIOTECH INCONCY
ONCOLYTICS BIOTECH INC Income Taxes Disclosure
Income Taxes
The Company carries on business in Canada and foreign jurisdictions. Our subsidiaries file income tax returns in Canada and the U.S. and Barbados. The income taxes of the Company and our subsidiaries are presented on a separate return basis for each tax-paying entity.
The components of our loss before income taxes were as follows:
| Year Ended December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Domestic - Canada | $ | (15,605) | $ | (5,237) | ||||||||||
| Foreign - outside of Canada | (13,075) | (17,462) | ||||||||||||
| Loss before income taxes | $ | (28,680) | $ | (22,699) | ||||||||||
Our income tax expense consists of the following:
| Current | Deferred | Total | ||||||||||||||||||
| Year ended December 31, 2025: | ||||||||||||||||||||
| Domestic - Canada | $ | — | $ | — | $ | — | ||||||||||||||
| Foreign - outside of Canada | 79 | — | 79 | |||||||||||||||||
| Total income tax expense | $ | 79 | $ | — | $ | 79 | ||||||||||||||
| Year ended December 31, 2024: | ||||||||||||||||||||
| Domestic - Canada | $ | — | $ | — | $ | — | ||||||||||||||
| Foreign - outside of Canada | 95 | — | 95 | |||||||||||||||||
| Total income tax expense | $ | 95 | $ | — | $ | 95 | ||||||||||||||
Income tax expense attributable to our loss before income taxes differs from the amounts computed using the applicable income tax rates as a result of the following factors as of December 31:
| 2025 | 2024 | |||||||||||||||||||||||||
| Anticipated tax recovery - Canadian federal | $ | (4,302) | 15.0 | % | $ | (3,405) | 15.0 | % | ||||||||||||||||||
| Anticipated tax recovery - Canadian provincial | (2,294) | 8.0 | % | (1,816) | 8.0 | % | ||||||||||||||||||||
| Foreign tax effects: | ||||||||||||||||||||||||||
| Barbados: | ||||||||||||||||||||||||||
| Statutory tax rate difference between Barbados and Canada | 1,832 | (6.4) | % | 2,428 | (10.7) | % | ||||||||||||||||||||
| Expiration of loss carryforwards | 1,055 | (3.7) | % | 1,186 | (5.2) | % | ||||||||||||||||||||
| Effects of foreign exchange | (30) | 0.1 | % | 33 | (0.1) | % | ||||||||||||||||||||
| Changes in valuation allowances | 153 | (0.5) | % | 341 | (1.5) | % | ||||||||||||||||||||
| Other | — | — | % | 5 | — | % | ||||||||||||||||||||
| United States: | ||||||||||||||||||||||||||
| Statutory tax rate difference between United States and Canada | (23) | 0.1 | % | (8) | — | % | ||||||||||||||||||||
| Stock-based payment awards | 161 | (0.6) | % | 187 | (0.8) | % | ||||||||||||||||||||
| Effects of foreign exchange | 37 | (0.1) | % | (59) | 0.3 | % | ||||||||||||||||||||
| Imputed interest amounts | 71 | (0.2) | % | 86 | (0.4) | % | ||||||||||||||||||||
| Changes in valuation allowances | 114 | (0.4) | % | 24 | (0.1) | % | ||||||||||||||||||||
| Investment tax credits | (204) | 0.7 | % | (112) | 0.5 | % | ||||||||||||||||||||
| Changes in valuation allowances | 1,890 | (6.6) | % | 893 | (3.9) | % | ||||||||||||||||||||
| Nontaxable or nondeductible items: | ||||||||||||||||||||||||||
| Stock-based payment awards | 1,597 | (5.6) | % | 299 | (1.3) | % | ||||||||||||||||||||
| Warrant revaluation | (35) | 0.1 | % | (269) | 1.2 | % | ||||||||||||||||||||
| Effects of foreign exchange | 68 | (0.2) | % | 276 | (1.2) | % | ||||||||||||||||||||
| Other | (11) | — | % | 6 | — | % | ||||||||||||||||||||
| Income tax expense / effective tax rate | $ | 79 | (0.3) | % | $ | 95 | (0.4) | % | ||||||||||||||||||
Deferred income taxes have not been recorded on the basis differences for investments in consolidated subsidiaries as these basis differences are indefinitely reinvested or will reverse in a non-taxable manner. Quantification of the deferred income tax liability, if any, associated with indefinitely reinvested basis differences is not practicable.
As of December 31, 2025 and 2024, we have loss carryforwards of $202,778 and $182,229, respectively, and investment tax credits of $3,624 and $3,581, respectively. No deferred income tax asset has been recorded with respect to these amounts. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the deferred income tax assets. A significant piece of objective negative evidence evaluated was the cumulative losses and unutilized investment tax credits. On the basis of this evaluation, a valuation allowance of $40,053 and $36,145 has been recorded. The amount of the deferred income tax asset considered realizable could be adjusted if additional objectively verifiable positive evidence materializes in future reporting periods. These loss carryforwards expire between 2026 and 2045, and investment tax credits expire between 2026 and 2045.
Deferred taxes result from the temporary differences between financial reporting carrying amounts and the tax basis of existing assets and liabilities. The significant components of our deferred tax assets and liabilities are as follows:
| December 31, 2025 | December 31, 2024 | |||||||||||||
| Deferred tax assets : | ||||||||||||||
| Loss carryforwards | $ | 31,523 | $ | 27,859 | ||||||||||
| Lease liabilities | 152 | 195 | ||||||||||||
| Research and development expenditures, net of investment tax credits | 7,769 | 7,518 | ||||||||||||
| Property and equipment | 295 | 288 | ||||||||||||
| Share issuance costs | 459 | 463 | ||||||||||||
| Deferred tax assets | 40,198 | 36,323 | ||||||||||||
| Valuation allowance | (40,053) | (36,145) | ||||||||||||
| Offset of tax | (145) | (178) | ||||||||||||
| Net deferred tax asset | — | — | ||||||||||||
| Deferred tax liabilities : | ||||||||||||||
| Property and equipment | (22) | (1) | ||||||||||||
| Right-of-use assets | (123) | (177) | ||||||||||||
| Deferred tax liabilities | (145) | (178) | ||||||||||||
| Offset of tax | 145 | 178 | ||||||||||||
| Net deferred tax liability | $ | — | $ | — | ||||||||||
The Company operates in a number of tax jurisdictions and is subject to examination of its income tax returns by tax authorities in those jurisdictions who may challenge any item on these returns. Because the tax matters challenged by tax authorities are typically complex, the ultimate outcome of these challenges is uncertain. The Company recognized the benefit of uncertain tax positions in the consolidated financial statements after determining that it is more-likely-than-not the uncertain tax positions will be sustained. We are not aware of any material income tax examinations currently in progress by any taxing jurisdiction.
Cash paid for taxes during the years ended December 31, 2025 and 2024 was $67 and $134, respectively, all of which related to U.S. federal and state taxes.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.