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

Note 16 - Income Taxes

v3.26.1
Note 16 - Income Taxes
 12 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

16.         Income Taxes

 

The domestic and foreign components of gain (loss) from continuing operations before provision for income taxes are as follows:

 

   

Year Ended December 31,

  
   

2025

    

2024

  

Domestic (Canada)

   $ (33,119 )   $ (24,452 )

Foreign

     381       38  

Loss before income tax expense

   $ (32,738 )   $ (24,414 )

 

The Company has computed its provision for income taxes based on the actual effective tax rate for the year as the Company believes this is the best estimate for the annual effective tax rate. The Company is subject to income taxes in Canada, the United States and Australia.

 

Significant judgment is required in evaluating the Company’s uncertain tax positions and determining the provision for income taxes. The Company recognizes benefits from uncertain tax positions based on the cumulative probability method whereby the largest benefit with a cumulative probability of greater than 50% is recorded. An uncertain tax position is not recognized if it has less than a 50% likelihood of being sustained.

 

The provision for income taxes consists of:

 

   

December 31,

  
   

2025

    

2024

  

Current

                

Federal

   $ 24     $ 28  

State

     —       —  

Foreign

     4       2  

Total current

   $ 28     $ 30  
                 

Deferred

                

Federal

   $ —     $ —  

State

     —       —  

Foreign

     —       —  

Total deferred

   $ —     $ —  
                 

Total income tax expense

   $ 28     $ 30  

 

The following table reconciles the expected Canadian statutory federal income tax to the actual income tax expense:

 

   

December 31, 2025

    

December 31, 2024

  
   

Amount

    

Percent

    

Amount

    

Percent

  

Loss before income tax expense

   $ (32,738 )           $ (24,414 )        
                                 

Canadian federal statutory rate

     (4,911 )     15.0 %     (3,662 )     15.0 %

Canadian provincial and local income tax rate

     (3,640 )     11.1 %     (2,719 )     11.1 %

Foreign tax effects

     (74 )     0.2 %     13       (0.1 )%

Nontaxable or nondeductible items

                                

Share-based compensation

     515       (1.6 )%     273       (1.1 )%

Share issuance costs

     (149 )     0.5 %     (8 )     0.1 %

Other

     (4 )     0.0 %     —       0.0 %

Changes in valuation allowance

     8,291       (25.3 )%     6,133       (25.1 )%
                                 

Actual income tax expense

   $ 28       (0.1 )%   $ 30       (0.1 )%

 

As the operations of the Company are predominantly conducted through its Canadian parent company, the Company has prepared the tax rate table using the Canadian federal tax rate of 15%.

 

The principal component of deferred taxes are as follows:

 

   

December 31,

  
   

2025

    

2024

  

Deferred tax assets (liabilities):

                

Non-capital losses carried forward

   $ 40,316     $ 32,240  

Research and development expenditures

     817       817  

Patents and other

     460       400  

Share-based compensation

     419       284  

Share issue costs

     379       275  

Accruals

     92       256  

Property and equipment

     (71 )     (89 )

Total deferred tax asset, net

     42,412       34,183  

Valuation allowance

     (42,412 )     (34,183 )

Net deferred tax asset

   $ —     $ —  

 

The following table presents a reconciliation of the valuation allowance:

 

   

December 31,

    

December 31,

  
   

2025

    

2024

  

Balance at beginning of the year

   $ 34,183     $ 28,039  

Increase based on tax positions related to current period

     8,229       6,144  

Increase based on tax positions related to prior periods

     —       —  

Balance at end of the year

   $ 42,412     $ 34,183  

 

The Company assesses available positive and negative evidence to estimate if it is more likely than not to use certain jurisdiction-based deferred tax assets including net operating loss carryovers. On the basis of this assessment, the Company continues to maintain a valuation allowance on its net deferred tax assets for the year ended December 31, 2025.

 

Pursuant to Internal Revenue Code (“IRC”) Sections 382 and 383, annual use of the Company’s net operating loss (“NOL”) and credit carryforwards may be limited by statute because of a cumulative change in ownership of more than 50%. Pursuant to Sections 382 and 383 of the IRC, the annual use of the Company’s NOLs and credit carryforwards would be limited if there is a cumulative change of ownership (as that term is defined in Section 382(g) of the IRC of greater than 50% in a three-year period). Management has not performed an analysis to determine if the Company has had a cumulative change in ownership of greater than 50%.

 

Net operating losses and tax credit carryforwards as of December 31, 2025, are as follows:

 

   

Amount

(In thousands)

  

Expiration Years

Non-capital income tax losses, net – domestic

   $ 145,679  

Beginning 2027

Non-capital income tax losses, net – foreign

     —    

Research and development expense carry forwards

     3,027  

Indefinitely

Tax credits

     473  

Beginning 2026