Transition report pursuant to Rule 13a-10 or 15d-10

INCOME TAXES

v3.5.0.1
INCOME TAXES
3 Months Ended
Mar. 31, 2016
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
11.
INCOME TAXES
 
Components of net (loss) income before income taxes consists of the following:
 
 
 
3 months
ended
March 31,
2016
 
Year
ended
March 31,
2016
 
Year ended
December
31, 2015
 
Nine
months
ended
December
31, 2014
 
 
 
 
$
 
 
$
 
 
$
 
 
$
 
U.S.
 
 
183,461
 
 
4,706,413
 
 
(2,372,510)
 
 
-
 
Canada
 
 
(1,187,553)
 
 
(3,670,265)
 
 
(3,221,396)
 
 
(2,464,747)
 
 
 
 
(1,004,092)
 
 
1,036,148
 
 
(5,593,906)
 
 
(2,464,747)
 
 
Reconciliation of the statutory tax rate of 35% (2014 - 26.5%) and income tax benefits at those rates to the effective income tax rates and income tax benefits reported in the statement of operations and comprehensive loss is as follows:
 
 
 
3 months
ended
March 31,
2016
 
 
Year ended
March 31,
2016
 
 
Year ended
December
31, 2015
 
 
Nine
months
ended
December
31, 2014
 
 
 
 
$
 
 
 
$
 
 
 
$
 
 
 
$
 
Net (loss) income for the period before recovery of income taxes
 
 
(1,004,092)
 
 
 
1,036,148
 
 
 
(5,593,906)
 
 
 
(2,464,747)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Statutory rate
 
 
35
%
 
 
35
%
 
 
35
%
 
 
26.5
%
Expected income tax (recovery) expense
 
 
(351,432)
 
 
 
362,652
 
 
 
(1,957,867)
 
 
 
(653,158)
 
Tax rate changes and other basis adjustments
 
 
(162,267)
 
 
 
195,108
 
 
 
364,651
 
 
 
(29,109)
 
Change in fair value of derivative liability
 
 
(304,835)
 
 
 
(2,709,894)
 
 
 
(169,443)
 
 
 
 
 
Stock-based compensation
 
 
55,350
 
 
 
512,693
 
 
 
587,381
 
 
 
-
 
Non-deductible expenses
 
 
(99,642)
 
 
 
(12,073)
 
 
 
227,068
 
 
 
193,305
 
Change in valuation allowance
 
 
862,826
 
 
 
1,651,514
 
 
 
948,210
 
 
 
488,962
 
Recovery of income taxes
 
 
-
 
 
 
-
 
 
 
-
 
 
 
-
 
 
Deferred tax reflects the tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities and consisted of the following:
 
 
 
March 31,
2016
 
March 31,
2015
 
December 31,
2015
 
December 31,
2014
 
 
 
$
 
$
 
$
 
$
 
Property and equipment
 
 
52,331
 
 
34,556
 
 
47,495
 
 
36,940
 
Share issue costs
 
 
3,586
 
 
5,838
 
 
3,877
 
 
162,350
 
SR&ED pool
 
 
400,557
 
 
103,799
 
 
340,585
 
 
7,137
 
Other
 
 
215,202
 
 
32,447
 
 
39,947
 
 
18,621
 
Non-capital losses – Canada
 
 
1,587,439
 
 
977,178
 
 
1,149,389
 
 
812,522
 
Net operating losses - U.S.
 
 
589,491
 
 
43,274
 
 
404,487
 
 
-
 
Valuation allowance
 
 
(2,848,606)
 
 
(1,197,092)
 
 
(1,985,780)
 
 
(1,037,570)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
-
 
 
-
 
 
-
 
 
-
 
 
The Company has non-capital losses in its Canadian subsidiary of approximately $5,990,000, which will expire between 2031 and 2036. The Company has net operating losses in the U.S. parent Company of $1,684,261, which will expire in 2036.
 
Income taxes are provided based on the liability method, which results in deferred tax assets and liabilities arising from temporary differences. Temporary differences are differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements that will result in taxable or deductible amounts in future years. The liability method requires the effect of tax rate changes on current and accumulated deferred taxes to be reflected in the period in which the rate change was enacted. The liability method also requires that deferred tax assets be reduced by a valuation allowance unless it is more likely than not that the assets will be realized.
 
The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company recognizes interest accrued on uncertain tax positions as well as interest received from favorable tax settlements within interest expense. The Company recognizes penalties accrued on unrecognized tax benefits within general and administrative expenses. As of March 31, 2016, the Company had no uncertain tax positions.
 
In many cases the Company’s uncertain tax positions are related to tax years that remain subject to examination by tax authorities. The following describes the open tax years, by major tax jurisdiction, as of March 31, 2016: 
 
United States - Federal
 
2013 – present
United States – State
 
2013 – present
Canada – Federal
 
2012 - present
Canada – Provincial
 
2012 - present