INCOME TAXES

12 Months Ended

Aug. 31, 2019

INCOME TAXES [Text Block]

6. INCOME TAXES

The Company is subject to United States federal and state income taxes at an approximate rate of 21.0% and to Canadian federal and British Columbia provincial taxes in Canada at an approximate rate of 27.0% . The reconciliation of the provision (recovery) for income taxes at the United States federal statutory rate compared to the Company’s income tax expense is as follows:

	2019		2018
	$		$
Tax at U.S. statutory rates	128,000		138,000
Permanent differences	2,000		1,000
Stock option compensation	11,000		11,000
Effect of higher foreign tax rates in Canada	47,000		52,000
Effect of research tax credits claims filed in respect of prior years	(361,000	)	29,000
Effect of a change in statutory tax rates	—		443,000
Foreign exchange and other adjustments	(73,000	)	190,000
Recovery of previously unrecognized tax assets	—		(233,000	)
Change in valuation allowance	246,000		(631,000	)
Provision for deferred income taxes	—		—

Included in other adjustments and change in valuation allowance for the year ended August 31, 2019 is $33,000 (2018: $(74,000)) for the effect of changes in foreign exchange rates and $(74,000) (2018: $115,000) in respect of a change in estimates and provisions.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company has recognized a valuation allowance for those deferred tax assets for which realization is not likely to occur.

Significant components of the Company’s deferred tax assets as of August 31 are as follows:

	2019		2018
	$		$
Deferred tax assets:
Net operating loss carryforwards	886,000		789,000
Excess of book over tax depreciation	884,000		729,000
Tax Credit Carryforwards	1,013,000		1,019,000
Total deferred tax asset	2,783,000		2,537,000
Valuation allowance	(2,783,000	)	(2,537,000	)
Net deferred tax asset	—		—

Net income (loss) before income tax by geographic region is as follows:

	2019		2018
	$		$
United States	(118,503	)	(166,037	)
Canada	729,281		822,307
	610,778		656,270

If not utilized to reduce future taxable income, the Company’s net operating loss carryforwards will expire as follows:

	Canada	United States
	$	$
2021 and thereafter	—	4,217,000
	—	4,217,000

If not utilized to reduce future taxable payable, the Company’s investment tax credit carryforwards will expire as follows:

	Canada	United States
	$	$
2029 and thereafter	1,233,000	—
	1,233,000	—