Annual report pursuant to Section 13 and 15(d)

Note 15 - Income Taxes

v3.20.4
Note 15 - Income Taxes
12 Months Ended
Dec. 31, 2020
Notes to Financial Statements  
Income Tax Disclosure [Text Block]
15.
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,
 
   
2020
   
2019
 
Deferred tax assets (liabilities):
               
Non-capital losses carried forward
  $
14,321
    $
11,211
 
Research and development expenditures
   
817
     
817
 
Share issue costs
   
837
     
395
 
Patents and other
   
300
     
294
 
Accruals
   
6
     
13
 
Property and equipment
   
(14
)    
3
 
Total deferred tax asset, net
   
16,267
     
12,733
 
Valuation allowance
   
(16,267
)    
(12,733
)
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:
 
   
December 31,
 
   
2020
   
2019
 
Statutory income tax rate
   
27.0
%    
27.0
%
Income tax recovery based on statutory rate
  $
(3,274
)   $
(2,841
)
Share issuance costs
   
(728
)    
 
Share-based compensation
   
498
     
315
 
Australian research and development incentive
   
(102
)    
137
 
Prior-year true-ups
   
84
     
 
Other
   
15
     
(9
)
Change in valuation allowance
   
3,534
     
2,429
 
Income tax expense
  $
27
    $
31
 
 
Net operating losses and tax credit carryforwards as of
December 31, 2020,
are as follows:
 
   
Amount
(In thousands)
 
Expiration Years
Non-capital income tax losses, net
  $
48,815
 
Beginning 2026
Research and development expense carry forwards
   
3,027
 
Indefinitely
Tax credits
   
484
 
Beginning 2020
 
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.