Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES

 

13. INCOME TAXES

 

For the year ended December 31, 2021 and 2020, loss before income tax provision consisted of the following:

 

    December 31, 2021     December 31, 2020  
             
Domestic operations - Canada   $ (6,202,837 )   $ (2,732,888 )
Foreign operations - United States     (440,279 )     (488,638 )
Total loss before taxes   $ (6,643,116 )   $ (3,221,526 )

 

Income tax expense (benefit) consists of the following for the years ended December 31, 2021 and December 31, 2020:

 

    December 31, 2021     December 31, 2020  
             
Loss before taxes   $ (6,643,116 )   $ (3,221,526 )
Statutory tax rate     27.00 %     27.00 %
Income taxes at the statutory rate   $ (1,793,641 )   $ (869,812 )
Change in fair value of warrants    

(321,674

 )     -  
Other permanent differences     93,375     -  
Stock-based compensation     253,556       154,227  
Share issue costs     (112,812 )     (45,854 )
Others     18,499       (41,388 )
Total   $ (1,862,697 )   $ (720,051 )
                 
Change in valuation Allowance   $ 1,862,697     $ 720,051  
Total income tax expense (benefit)   $ -     $ -  

 

The Company is subject to Canadian federal and provincial tax for the estimated assessable profit for the years ended December 31, 2020 and 2021 at a rate of 27%.

 

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not that we will not realize those tax assets through future operations. Significant components of the Company’s deferred taxes are as follows:

 

    December 31, 2021     December 31, 2020  
Deferred tax assets:                
Unused net operating losses carry forward - Canada and United States   $ 4,459,457     $ 2,669,781  
Unused capital losses carry forward    

40,962

       -  
Share issue costs     174,377       142,318  
Property and equipment     -       -  
Total deferred tax assets   $ 4,674,796     $ 2,812,099  
Deferred tax asset not recognized     -       -  
                 
Net deferred tax assets     4,674,796       2,812,099  
                 
Deferred tax liability:                
                 
Total deferred tax liability     -       -  
                 
Valuation Allowance   $ (4,674,796 )   $ (2,812,099 )
Net deferred tax assets (liabilities)   $ -     $ -  

 

The Company has Non-Capital Losses of $15.7 million as of December 31, 2021 and $9.3 million as of December 31, 2020, which are due to expire between 2039 and 2041 and which can be used to offset future taxable income in Canada. For foreign operations in United States, aggregate net operating losses are $0.9 million as of December 31, 2021 (2020 - $0.6 million) which can be carried forward indefinitely. The Company has Capital Losses of $0.2 million as of December 31, 2021 and $Nil as of December 31, 2020, which expires after 5 years and can be used to offset future taxable capital gains in the United States. Non-Capital Losses in Canada can be carried forward after change of ownership, if the particular business which gave rise to the loss is carried on by the company for profit or with a reasonable expectation of profit. Certain accumulated net operating losses in United States are subject to an annual limitation from equity shifts, which constitute a change of ownership as defined under Internal Revenue Code (“IRC”) Section 382. These rules will limit the utilization of the losses.

 

The Company files income tax returns in Canada and the United States and is subject to examination in these jurisdictions for all years since the Company’s inception in 2017. As at December 31, 2021, no tax authority audits are currently underway.  

 

The Company currently has no uncertain tax position and is therefore not reflecting any adjustments.