Annual report [Section 13 and 15(d), not S-K Item 405]

Note 16 - Income Taxes

v3.25.1
Note 16 - Income Taxes
 12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

16.

Income Taxes

 

The Company has incurred net operating losses since inception. The Company has not reflected the benefit of net operating loss carryforwards in the accompanying consolidated financial statements and has established a full valuation allowance against its deferred tax assets.

 

Deferred income 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 as well as operating losses and tax credit carryforwards.

 

The significant components of our deferred tax assets and liabilities are as follows (in thousands):

 

   

December 31,

  
   

2024

    

2023

  

Deferred tax assets (liabilities):

                

Non-capital losses carried forward

   $ 32,240     $ 26,044  

Research and development expenditures

     817       817  

Patents and other

     400       358  

Share-based compensation

     284       212  

Share issue costs

     275       495  

Accruals

     256       214  

Property and equipment

     (89 )     (102 )

Total deferred tax asset, net

     34,183       28,038  

Valuation allowance

     (34,183 )     (28,038 )

Net deferred tax asset

   $ —     $ —  

 

Realization of the future tax benefits is dependent on our ability to generate sufficient taxable income within the carryforward period. Because of our history of operating losses, management believes that the deferred tax assets arising from the above-mentioned future tax benefits are currently not likely to be realized and, accordingly, we have provided a full valuation allowance.

 

The reconciliation of the Canadian statutory income tax rate applied to the net loss for the year to the income tax expense is as follows (in thousands):

 

   

December 31,

  
   

2024

    

2023

  

Statutory income tax rate

     27.0 %     27.0 %

Income tax recovery based on statutory rate

   $ (6,592 )   $ (5,225 )

Share-based compensation

     491       409  

Prior-year true-ups

     2       (71 )

Share issuance costs

     (14 )     (388 )

Other

     (2 )     17  

Change in valuation allowance

     6,145       5,301  

Income tax expense

   $ 30     $ 43  

 

Net operating losses and tax credit carryforwards as of December 31, 2024, are as follows:

 

   

Amount

(In thousands)

    

Expiration Years

Non-capital income tax losses, net

   $ 116,064    

Beginning 2026

Research and development expense carry forwards

     3,027    

Indefinitely

Tax credits

     473    

Beginning 2025

 

The Company is subject to taxation in Canada, the United States and Australia. Tax returns, since the inception of DiaMedica Therapeutics Inc., are subject to examinations by Canadian tax authorities and may change upon examination. Tax returns of DiaMedica USA, Inc., since its inception in 2012 and thereafter, are subject to examination by the U.S. federal and state tax authorities. Tax returns of DiaMedica Therapeutics Australia Pty Ltd., since its inception in 2016 and thereafter, are subject to examination by the Australian tax authorities.