Annual report pursuant to Section 13 and 15(d)

Note 15 - Income Taxes

v3.23.1
Note 15 - Income Taxes
 12 Months Ended
Dec. 31, 2022
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,

  
   

2022

    

2021

  

Deferred tax assets (liabilities):

                

Non-capital losses carried forward

   $ 21,000     $ 17,596  

Research and development expenditures

     817       817  

Share issue costs

     338       608  

Patents and other

     320       309  

Accruals

     213       76  

Share-based compensation

     166       —  

Property and equipment

     (117 )     (13 )

Total deferred tax asset, net

     22,737       19,393  

Valuation allowance

     (22,737 )     (19,393 )

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,

  
   

2022

    

2021

  

Statutory income tax rate

     27.0 %     27.0 %

Income tax recovery based on statutory rate

   $ (3,685 )   $ (3,656 )

Share-based compensation

     340       421  

Prior-year true-ups

     (33 )     134  

Share issuance costs

     —       (41 )

Other

     62       44  

Change in valuation allowance

     3,344       3,126  

Income tax expense

   $ 28     $ 28  

 

Net operating losses and tax credit carryforwards as of December 31, 2022, are as follows:

   

Amount

(In thousands)

  

Expiration Years

Non-capital income tax losses, net

     74,479  

Beginning 2026

Research and development expense carry forwards

     3,027  

Indefinitely

Tax credits

     474  

Beginning 2024

 

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.