v3.26.1
INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES

16. INCOME TAXES

 

For the years ended December 31, 2025 and 2024, loss before income tax provision consisted of the following:

 

   December 31, 2025   December 31, 2024 
Domestic operations – Canada  $(25,482,135)  $(15,395,415)
Foreign operations - United States   (7,713,071)   (879,400)
Loss before income taxes  $(33,195,206)  $(16,274,815)

 

The following table reconciles income taxes calculated at the Canadian statutory rate with the actual income tax expense for the year ended December 31, 2025.

 

           
   December 31, 2025 
Loss before taxes  $(33,195,206)     
Statutory tax rate  27.00%   
Income taxes at the statutory rate  $(8,962,706)   27%
Foreign tax effects          
United States:          
Statutory tax rate difference between US and Canada   462,784    -1%
Foreign currency translation   (38,054)   0%
Other adjustments   134,940    0%
Change in valuation allowance   1,522,860    -5%
Non-taxable or non-deductible items:          
Debt conversion and extinguishment losses   2,712,062    -8%
Non-deductible accretion interest   843,158    -3%
Share issuance costs   (454,114)   1%
Stock-based compensation   410,442    -1%
Foreign currency translation   (716,327)   2%
Change in fair value of warrants   (803,766)   2%
Other permanent differences   7,292    0%
Changes in valuation allowance   4,556,376    -13%
Other adjustments   325,053    -1%
Income tax expense (recovery)  $-    0%

 

The following table reconciles income taxes calculated at the Canadian statutory rate with the actual income tax expense for the year ended December 31, 2024.

 

           
   December 31, 2024 
Loss before taxes  $(16,274,815)     
Statutory tax rate   27.00%     
Income taxes at the statutory rate  $(4,394,200)   27%
Change in fair value of derivative liabilities   (377,536)   2%
Non-deductible accretion interest   671,064    -4%
Debt conversion and extinguishment losses   1,195,929    -7%
Stock-based compensation   109,803    -1%
Share issue costs   (126,529)   1%
Foreign currency translation   1,159,454    -7%
Other   (80,453)   0%
Total  $(1,842,468)   11%
Change in valuation allowance   1,842,468    -11%
Total income tax expense (benefit)  $-    0%

 

 

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not that we will not realize those tax assets through future operations. Significant components of the Company’s deferred taxes are as follows:

 

 

   December 31, 2025   December 31, 2024 
Deferred tax assets:          
Unused net operating losses carry forward - Canada  $14,365,607   $10,904,961 
Unused net operating losses carry forward - US Federal and State   930,193    1,036,463 
Share issue costs - Canada   155,787    261,984 
Unrealized loss on market revaluation - US   1,630,987    - 
Intangible capital assets - Canada   2,695,255    1,388,075 
Intangible capital assets - US   258    - 
SR&ED pool - Canada   61,301    - 
Total deferred tax assets  $19,839,388   $13,591,483 
           
Deferred tax liabilities:          
Tangible capital assets - Canada  $(217,943)  $(51,391)
Other - US   (2,113)   - 
Total deferred tax liabilities  $(220,056)  $(51,391)
           
Deferred tax asset  $19,619,332   $13,540,092 
Valuation allowance   (19,619,332)   (13,540,092)
Net deferred tax assets (liabilities)  $-   $- 

 

The Company has unclaimed Canadian SR&ED expenditures of approximately $311,180 (in Canadian dollars) as of December 31, 2025 and 2024 which can be carried forward indefinitely to reduce future years’ taxable income. The balance is included as a reduction of research and development expense.

 

As of December 31, 2025 and 2024, the Company had unused US Federal net operating losses of $3,723,575 and $3,838,758, which can be carried forward indefinitely to reduce future years’ taxable income, and unused US State net operating losses of $705,914 and nil, which can be carried forward to the year 2041 to reduce future years’ taxable income.

 

The Company has Canadian non-capital losses for the years ended December 31, 2025 and 2024 of $72,924,079 and $57,969,965, respectively (in Canadian dollars). The non-capital losses as of December 31, 2025 can be used to offset future taxable income in Canada, and are due to expire in the following years (in Canadian dollars):

 

      
2038  $2,663,570 
2039   6,033,861 
2040   3,110,273 
2041   8,457,838 
2042   14,712,845 
Thereafter   37,945,692 
Non-capital losses  $72,924,079 

 

Non-capital losses in Canada can be carried forward after a change of ownership, if the particular business which gave rise to the loss is carried on by the company for profit or with a reasonable expectation of profit. Certain accumulated net operating losses in United States are subject to an annual limitation from equity shifts, which constitute a change of ownership as defined under Internal Revenue Code Section 382. As a result of the Offering, a change of ownership as defined under IRC Section 382 occurred which will limit the Company’s ability to utilize the net operating losses to $67,915 per year.

 

The Company files income tax returns in Canada and the United States and is subject to examination in these jurisdictions for all years since the Company’s inception in 2017. As at December 31, 2025, no tax authority audits are currently underway. The Company currently has no uncertain tax position and is therefore not reflecting any adjustments.