Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES

17. INCOME TAXES

 

For the year ended December 31, 2023 and 2022, loss before income tax provision consisted of the following:

 

    December 31, 2023     December 31, 2022  
             
Domestic operations – Canada   $ (10,981,917 )   $ (11,753,662 )
Foreign operations - United States     (751,293 )     (1,119,440 )
Total loss before taxes   $ (11,733,210 )   $ (12,873,102 )

 

Income tax expense (benefit) consists of the following for the years ended December 31, 2023 and 2022:

 

    December 31, 2023     December 31, 2022  
             
Loss before taxes   $ (11,733,210 )   $ (12,873,102 )
Statutory tax rate     27.00 %     27.00 %
Income taxes at the statutory rate   $ (3,167,967 )   $ (3,475,738 )
Change in fair value of derivative liabilities     (2,525,761 )     (1,032,824 )
Non-deductible accretion interest     1,665,506       747,719  
Debt conversion and extinguishment losses    

509,945

       -  
Stock-based compensation     314,023       484,035  
Share issue costs     (167,075 )     (108,685 )
Foreign currency translation     (185,096 )     298,876  
Other     1,893       63,035  
Total   $ (3,554,532 )   $ (3,023,582 )
                 
Change in valuation allowance   $ 3,554,532     $ 3,023,582  
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, 2023 and 2022 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, 2023     December 31, 2022  
Deferred tax assets:                
Unused net operating losses carry forward - Canada and United States   $ 10,964,564     $ 7,572,932  
Share issue costs     285,654       130,732  
Other     2,692       (5,286 )
Total deferred tax assets     11,252,910       7,698,378  
Valuation allowance     (11,252,910 )     (7,698,378 )
Net deferred tax assets   $ -     $ -  

 

The Company has non-capital losses of $37.4 million as of December 31, 2023 and $25.8 million as of December 31, 2022, which can be used to offset future taxable income in Canada are due to expire in the following years:

 

         
2038   $ 2,013,889  
2039     4,562,121  
2040     2,351,635  
2041     6,394,857  
2042     11,124,183  
Thereafter     10,914,515  
    $ 37,361,200  

 

For foreign operations in United States, aggregate net operating losses are $3.0 million as of December 31, 2023 and $2.2 million as of December 31, 2022 which can be carried forward indefinitely. 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, 2023, no tax authority audits are currently underway.

 

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