Annual report pursuant to Section 13 and 15(d)

Note 15 - Income Taxes

v3.21.1
Note 15 - Income Taxes
 12 Months Ended
Dec. 31, 2020
Notes to Financial Statements  
Income Tax Disclosure [Text Block]
15.
 Income taxes:
(a)
 Recent tax legislation
In
December 2017
the U.S. government enacted comprehensive tax legislation, the Tax Cuts and Jobs Act (the "Tax Act"), which significantly revises the U.S. tax code, generally effective
January 1, 2018,
by lowering the U.S. federal corporate income tax rate from
35%
to
21%,
implementing a territorial tax system and setting limitations on the deductibility of certain costs (e.g. Interest expenses) among other things. As a Canadian entity, we generally would be classified as a foreign entity (and, therefore, a non-U.S. tax resident) under general rules of U.S. federal income taxation. However, we have a branch and U.S. subsidiary subject to U.S. federal income taxation.
 
(b)
 Income taxes
For the years ended
December 31, 2019
and
2020,
the total comprehensive loss is as follows:
 
      December 31, 2020       December 31, 2019  
                 
                 
Loss attributed to US foreign operations   $
(39,757
 )   $
(20,470
 )
Loss attributed to Canadian operations    
(15,481
 )    
(5,807
 )
Income (loss) before income taxes   $
(55,238
 )   $
(26,277
 )
 
(c)
 Tax rate reconciliation
Major items causing the Company's income tax rate to differ from the statutory rate of approximately
26.5%
(
December 
31,
2019
–
26.5%
) are as follows:
 
      Year ended
December 31, 2020		       Year ended
December 31, 2019		  
                 
Net loss   $
(55,238
 )   $
(26,277
 )
Statutory Canadian corporate tax rate    
26.5
 %    
26.5
 %
                 
Computed expected tax recovery   $
(14,638
 )   $
(6,963
 )
Non-deductible permanent differences    
4,959
      
(1,305
 )
Change in valuation allowance    
10,383
      
12,146
  
Foreign tax rate differential    
(428
 )    
(286
 )
Foreign exchange differences    
-
      
-
  
Prior year true-up adjustments    
(230
 )    
(3,563
 )
Other    
(46
 )    
(29
 )
    $ -     $ -  
 
(d)
 Significant components of deferred taxes
The tax effects of temporary differences that give rise to significant portions of the unrecognized deferred tax assets are presented below:
      December 31, 2020       December 31, 2019  
                 
                 
Net operating losses carried forward   $
37,362
     $
26,786
  
Research and development expenditures    
5,032
      
5,031
  
Property, equipment, and other intangible assets    
3,760
      
4,191
  
Research and development tax credits    
3,597
      
3,685
  
Financing costs    
2,336
      
2,010
  
Right-of-use assets    
40
      
41
  
Total deferred tax assets    
52,127
      
41,744
  
Valuation allowance    
(52,127
 )    
(41,744
 )
Net deferred tax asset   $
-
     $
-
  
 
The valuation allowance at
December 31, 2020
was primarily related to net operating loss carryforwards that, in the judgment of management, are
not
more-likely than-
not
to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more-likely than-
not
that all or some portion of the deferred assets will
not
be realized. This ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those deductible temporary difference become deductible. Based on the history of losses and projections for future taxable income, management believes that it is
not
more-likely than-
not
that the Company will realize the benefits of these deductible temporary differences (e.g. deferred tax assets).
 
The Company has Canadian undeducted research and development expenditures, totaling
$19.0
million that can be carried forward indefinitely. The Company also has Canadian non-refundable federal and provincial investment tax credits of approximately
$3.6
million which are available to reduce future federal taxes payable and begin to expire in
2021,
as well as non-refundable US research and development tax credits of approximately
$0.9
million which are available to reduce future US taxes payable and begin to expire in
2038.
 
In addition, the Company has Canadian non-capital loss carryforwards of
$135.2
million. To the extent that the non-capital loss carryforwards are
not
used, they begin to expire in
2026.
The Company also has US non-capital loss carryforward of
$0.7
million, To the extent that the non-capital loss carryforwards are
not
used, they begin to expire in
2034.
 
The Company files income tax returns with Canada and its provinces and territories. Generally, we are subject to routine examinations by the Canada Revenue Agency ("CRA"). Income tax returns filed with various provincial jurisdictions are generally open to examination for periods of
four
to
five
years subsequent to the filing of the respective return.
 
The Company also files income tax returns for our U.S. operations and subsidiary with the U.S. federal and state tax jurisdictions. Generally, we are subject to routine examination by taxing authorities in the U.S. jurisdictions. There are presently
no
examination of our U.S. federal and U.S. state returns. We believe that our tax positions comply with the applicable tax law.