10. INCOME TAX

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Note 10. INCOME TAX

The provision for income tax expense (benefit) is compromised of the following:

	2013			2012
Current tax, federal	$	(110,302	)	$	921,247
Current tax, state		(24,418	)		205,221
Current tax, foreign		-			-
Current tax, total		(134,720	)		1,126,468
Deferred income tax, federal		(79,178	)		(73,111	)
Deferred income tax, state		-			-
Deferred income tax, foreign		(2,329,217	)		-
Deferred income tax, total		(2,408,395	)		(73,111	)
Total	$	(2,543,115	)	$	1,053,357

The following table reconciles the income tax benefit at the U.S. Federal statutory rate to income tax benefit at the Company's effective tax rates.

	2013			2012
Loss before taxes		(721,481	)		(31,090	)
US statutory tax rate		38.62	%		34.00	%
Expected income tax (recovery)		(278,635	)		(10,571	)
Non-deductible items		(396,793	)		(71,650	)
Change in estimates		(163,928	)		758
Change in enacted tax rate		91,711			-
Option expired during the year		20,878			-
Functional currency adjustments		164,890			(40,925	)
Foreign tax rate difference		365,377			217,576
Change in valuation allowance		(2,346,616	)		752,948
Total income taxes (recovery)		(2,543,115	)		848,136
Current income tax expenses (recovery)		(134,720	)		1,126,468
Deferred tax expenses (recovery)		(2,408,395	)		(73,111	)
Total income taxes (recovery)		(2,543,115	)		1,053,357

Deferred taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes. Deferred tax assets (liabilities) at December 31, 2013 and 2012 are comprised of the following:

Canada	2013		2012
Non capital loss carryforwards		1,596,755		2,119,669
Patents		33,936		(118	)
Fixed Assets		698,526		199,983
		2,329,217		2,319,534
Valuation Allowance		-		2,319,534
Net Deferred tax asset (liability)		2,329,217		-
USA
		2013		2012
Net operating loss carryforwards		-		108,969
Fixed Assets		348,517		272,062
Stock-Based Compensation		213,662		147,051
		580,178		528,082
Deferred tax asset not recognized		208,889		235,971
Net Deferred tax asset		371,289		292,111

The Company has non operating loss carryforwards of approximately $6,387,020 (2012 - $6,378,112) which may be carried forward to apply against future year income tax for Canadian income tax purposes, subject to the final determination by taxation authorities, expiring in the following years:

Expiry	Loss
2014		-
2015		75,153
2026		878,698
2027		789,096
2028		707,062
2029		973,931
2030		1,017,150
2031		1,171,186
2032		765,836
2033		8,908
Total		6,387,020

As at December 31, 2013, the Company's deferred tax asset attributable to its net operating loss carry forward is nil (2012 – $nil).

Accounting for uncertainty for Income Tax

Effective January 1, 2009, the Company adopted the interpretation for accounting for uncertainty in income taxes which was an interpretation of the accounting standard accounting for income taxes. This interpretation created a single model to address accounting for uncertainty in tax positions. This interpretation clarifies the accounting for income taxes, by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.

As at December 31, 2013 and 2012, the Company’s consolidated balance sheets did not reflect a liability for uncertain tax positions, nor any accrued penalties or interest associated with income tax uncertainties.  The Company is subject to income taxation at the federal and state levels.  The Company is subject to US federal tax examinations for the tax years 2008 through 2011.  Loss carryforwards generated or utilized in years earlier than 2008 are also subject to examination and adjustment.  The Company has no income tax examinations in process.

The operating income shown in the income statement is on a consolidated basis.   As shown in the income tax reconciliation in this Note 10, net income and net loss has been segregated so that the financial statement reader can see that the Company has a significant net income before tax in the United States, and a significant loss before tax in 'foreign' jurisdictions.  On a consolidated basis, the net income earned in the United States is being offset by the losses in Canada.