NOTE 5 - INCOME TAXES
The following table summarizes the activities for the year ended December 31,:
| 2016 | 2015 | |||||||
| Statutory tax rate: | ||||||||
| U.S. | 34 | % | 34 | % | ||||
| Foreign | 26.5 | % | 26.5 | % | ||||
| Loss from operations before recovery of income taxes: | ||||||||
| U.S. | $ | (5,498,587 | ) | $ | (4,312,121 | ) | ||
| Foreign | (201,448 | ) | (12,189 | ) | ||||
| (5,700,035 | ) | $ | (4,324,310 | ) | ||||
| Expected income tax recovery | (1,834,259 | ) | $ | (1,449,550 | ) | |||
| Permanent differences | 1,771 | 10,557 | ||||||
| Tax rate changes and other adjustments | 853,583 | (345,834 | ) | |||||
| Increase in valuation allowance | 978,905 | 1,784,827 | ||||||
| Income tax recovery from continuing operations | - | $ | - | |||||
The Company’s income tax recovery is allocated as follows:
The Company’s deferred tax assets and liabilities as at December 31, 2016 and 2015 are as follows:
| 2016 | 2015 | |||||||||
| Deferred Tax Assets | ||||||||||
| Non-capital losses | $ | 19,787,656 | $ | 17,908,732 | ||||||
| Reserve – Contingency | 151,613 | 171,410 | ||||||||
| Property, plant and equipment | 394,348 | 335,475 | ||||||||
| Accounts receivable | 237,944 | 237,944 | ||||||||
| Accrued expenses | 514 | 514 | ||||||||
| Fees and Payroll in Stocks and Options | 361,399 | 319,528 | ||||||||
| Impairment Reserve | 788,789 | 455,190 | ||||||||
| Other | 2,032 | 2,032 | ||||||||
| 21,724,295 | 19,430,825 | |||||||||
| Deferred Tax Liabilities | ||||||||||
| Property, plant and equipment | (768,111 | ) | (408,602 | ) | ||||||
| Less: Valuation allowance | (20,956,184 | ) | (19,022,223 | ) | ||||||
| $ | - | $ | - | |||||||
The Company’s non-capital income tax losses expire as follows:
| U.S. | 2029 | $ | 526,411 | |||||||
| 2030 | 6,080,091 | |||||||||
| 2031 | 9,240,965 | |||||||||
| 2032 | 10,853,750 | |||||||||
| 2033 | 10,436,738 | |||||||||
| 2034 | 5,929,097 | |||||||||
| 2035 | 1,717,918 | |||||||||
| 2036 | 955,708 | |||||||||
| $ | 45,740,678 | |||||||||
| Foreign | 2030 | $ | 1,224,680 | |||||||
| 2031 | 1,818,894 | |||||||||
| 2032 | 1,284,807 | |||||||||
| 2033 | 607,349 | |||||||||
| 2034 | 670,890 | |||||||||
| 2035 | 66,909 | |||||||||
| 2036 | 23,198 | |||||||||
| $ | 5,696,727 |
The Company calculates its income tax expense by estimating the annual effective tax rate and applying that rate to the year-to-date ordinary income (loss) at the end of the period. The Company records a tax valuation allowance when it is more likely than not that it will not be able to recover the value of its deferred tax assets. For the years ended December 31, 2016 and 2015, the Company calculated its estimated annualized effective tax rate at 0% and 0%, respectively, for both the United States and Canada. The Company had no income tax expense on its $5,439,315 and $4,523,762 losses from continuing operations and $0 and $199,452 gain, from discontinued operations for the years ended December 31, 2016 and 2015, respectively.
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 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 selling, general and administrative expenses. As of December 31, 2016 and 2015, the Company had no uncertain tax positions.
The Company does not anticipate any significant changes to the total amounts of unrecognized tax benefits in the next twelve months. The years ended December 31, 2013 through December 31, 2016 are open tax years.