Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.21.2
Income Taxes
12 Months Ended
Jun. 30, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

9

Income taxes

For the years ended June 30, 2021, and 2020, the Company did not record a provision for income taxes due to a full valuation allowance against the deferred tax assets.

Significant components of the Company’s deferred tax assets and deferred tax liabilities are shown below:

 

 

 

June 30,

2021

$

 

 

June 30,

2020

$

 

Deferred tax assets:

 

 

 

 

 

 

 

 

Non-capital losses carried forward

 

 

20,148

 

 

 

11,871

 

Stock-based compensation

 

 

155

 

 

 

 

Capital losses carried forward

 

 

18

 

 

 

18

 

Financing costs

 

 

326

 

 

 

221

 

Scientific research and development

 

 

761

 

 

 

604

 

Scientific research and development – Investment

   Tax Credits (“ITC”)

 

 

665

 

 

 

534

 

 

 

 

22,073

 

 

 

13,248

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

Scientific research and development – ITC

 

 

(110

)

 

 

(88

)

 

 

 

21,963

 

 

 

13,160

 

Valuation allowance

 

 

(21,963

)

 

 

(13,160

)

Net future tax assets

 

 

 

 

 

 

 

 

The income tax benefit of these tax attributes has not been recorded in these consolidated financial statements because of the uncertainty of their recovery. The Company’s effective income tax rate differs from the statutory income tax rate of 21% (2020 – 21%).

The differences arise from the following items:

 

 

 

June 30,

2021

$

 

 

June 30,

2020

$

 

Tax recovery at statutory income tax rates

 

 

(8,015

)

 

 

(1,916

)

Permanent differences

 

 

4,506

 

 

 

142

 

Effect of rate differentials between jurisdictions

 

 

(551

)

 

 

(239

)

Effect of foreign exchange rates

 

 

(954

)

 

 

347

 

Non-capital losses acquired with Adgero

 

 

(4,114

)

 

 

 

Scientific research and development – ITC

 

 

97

 

 

 

(38

)

Adjustment to prior year's provision versus statutory tax returns

 

 

228

 

 

 

323

 

Change in valuation allowance

 

 

8,803

 

 

 

1,381

 

 

 

 

 

 

 

 

 

The Company has no current income tax expense for the year ended June 30, 2021, as there was a taxable loss for this period. The components of the Company’s loss before income taxes for the year ended June 30, 2021 were allocated as to $29.0 million in the U.S. and $9.2 million in Canada. As of June 30, 2021, the Company had combined U.S. and Canadian net operating loss (“NOL”) carry forwards of $77.7 million (2020 – $47.8 million). The U.S. federal NOL carryforwards consist of $15.8 million generated before July 1, 2018, which begin expiring in 2026, and $20.4 million that can be carried forward indefinitely, but are subject to the 80% taxable income limitation. The Canadian NOL carryforwards of $41.5 million begin expiring in 2030. In addition, the Company has non-refundable Canadian federal investment tax credits of $407 (2020 - $329) that expire between 2031 and 2040 and non-refundable British Columbia investment tax credits of $258 (2020 – $205) that expire between 2021 and 2030. The Company also has Canadian scientific research and development tax incentives of $2.8 million (2020 – $2.2 million) that do not expire.

 

The Company files U.S. federal, U.S. state, and Canadian income tax returns with varying statues of limitations. The tax years from 2007 to 2021 remain open to examination due to the carryover of unused NOL carryforwards and tax credits. The Company currently is not under examination by any tax authority.

 

Internal Revenue Code (“IRC”) Section 382 and 383 places a limitation on the amount of taxable income that can be offset by NOL and credit carryforwards after a change in control (generally greater than 50% change in ownership within a three-year period) of a loss corporation. Generally, after a change in control, a loss corporation cannot deduct NOL and credit carryforwards in excess of the IRC Section 382 and 383 limitation. The limitation in the federal and state NOL and research and development credit carryforwards reduce the deferred tax assets, which are further offset by a full valuation allowance. The limitation can result in the expiration of the NOLs and research and development credit carryforwards available. The Company has performed an IRC Section 382 and 383 analysis and determined there was an ownership change in 2013. The Company has not performed any section 382 and 383 analyses since 2013. An assessed change in ownership subsequent to 2013 could limit future use of NOL and research and development credit carryforwards. The acquisition of Adgero Biopharmaceuticals Holdings, Inc. also triggers IRC Section 382 on the pre-acquisition NOLs. An analysis for IRC Section 382 has not been performed at this time on the pre-acquisition NOLs.  

 

The CARES Act, was enacted March 27, 2020. Among the business provision, the CARES Act provided for various payroll tax incentives, changes to net operating loss carryback and carryforward rules, business interest expense limitation increases, and bonus depreciation on qualified improvement property. Additionally, the Consolidated Appropriations Act of 2021 was signed on December 27, 2020 which provided additional COVID-19 relief provisions for businesses. The Company has evaluated the impact of both the Acts and has determined that any impact is not material to its financial statements.