10. Income taxes

Income tax recovery varies from the amounts that would be computed by applying the expected Canadian income tax rate (26%) and U.S. income tax rates (35%). The combined Canadian and U.S. income tax rates of 27.4% (2014 – 27.3%; 2013 – 25.6%) was applied to loss before income taxes as shown in the following table:


	DECEMBER 31, 2015			DECEMBER 31, 2014			DECEMBER 31, 2013
Computed taxes at combined Canadian and U.S. tax rates	$	(5,997	)	$	(6,561	)	$	(2,235	)
Change in Canadian tax rate		26			—			(364	)
Non-deductible expenses		446			185			94
Investment tax credits ⁽ⁱ⁾		—			—			(5	)
Change in valuation allowance		5,525			4,519			2,500
Reversal of tax benefit related to taxable preferred stock		—			1,685			—
Other impact upon conversion of taxable preferred stock		—			172			5

Income tax recovery ⁽ⁱ⁾	$	—		$	—		$	(5	)

⁽ⁱ⁾

Income tax recovery for the years ended December 31, 2015, 2014 and 2013 were all related to AQXP Canada’s Canadian investment tax credits. For periods prior to June 2010, AQXP Canada was able to claim Canadian refundable investment tax credits. As described in Note 2(i), when investment tax credits subsequently received are less or more than originally recorded, the difference is treated as a change in estimate and recorded as part of current income tax recovery.


	DECEMBER 31, 2015			DECEMBER 31, 2014			DECEMBER 31, 2013
Net (loss) income before taxes:
Canada	$	(18,382	)	$	(20,538	)	$	(8,881	)
U.S.		(3,478	)		(3,489	)		147

Total	$	(21,860	)	$	(24,027	)	$	(8,734	)

Deferred income tax assets and liabilities result from the temporary differences between the amount of assets and liabilities recognized for financial statement and income tax purposes. The significant components of the deferred income tax assets are as follows:


	DECEMBER 31, 2015			DECEMBER 31, 2014
Canadian net operating losses	$	18,282		$	13,858
U.S. net operating losses		2,499			1,403
Research and development deductions and credits		4,947			4,947
Other		410			405
Less: valuation allowance		(26,138	)		(20,613	)

Net deferred income tax assets	$	—		$	—

At December 31, 2015, the Company had net Canadian operating losses carried forward for tax purposes which were available to reduce taxable income of future years of approximately $70,316 (December 31, 2014 – approximately $53,302) expiring commencing in 2026 through 2035, and net US operating losses carried forward for tax purposes which were available to reduce taxable income of future years of approximately $7,140 (December 31, 2014 – approximately $4,009).

The Company also had unclaimed Canadian tax deductions with no expiry for scientific research and experimental development expenditures of approximately $10,532 at December 31, 2015 (December 31, 2014 –approximately $10,532). In addition, at December 31, 2015, the Company had approximately $2,698 (December 31, 2014 – approximately $2,698) of investment tax credits available to offset Canadian federal and provincial taxes payable expiring commencing in 2019 through 2033.

Prior to the reorganization on March 12, 2014, the Company accrued non-current tax payable with respect to Canadian tax rules which impose a tax on Canadian corporation taxable preferred shares and their liquidation rights (See Note 7). Upon the stock converting into common shares at the time of the reorganization (See Note 7(d)), the accrued tax payable amount was derecognized in the financial statements. At December 31, 2015, the Company had accrued a non-current tax payable on preferred stock of $0 (December 31, 2014 – $0).

Under ASC 740, the benefit of an uncertain tax position that is more likely than not of being sustained upon audit by the relevant taxing authority must be recognized at the largest amount that is more likely than not to be sustained. No portion of the benefit of an uncertain tax position may be recognized if the position has less than a 50% likelihood of being sustained. The Company currently does not have any unrecognized tax benefits of uncertain tax positions. The Company does not expect any significant increases to its unrecognized tax benefits within twelve months of the reporting date.

The Company currently files income tax returns in the United States and Canada, the jurisdictions in which the Company believes that it is subject to tax. Further, while the statute of limitations in each jurisdiction where an income tax return has been filed generally limits the examination period, as a result of loss carry-forwards, the limitation period for examination generally does not expire until several years after the loss carry-forwards are utilized. Other than routine audits by tax authorities for tax credits and tax refunds that the Company has claimed, management is not aware of any other material income tax examination currently in progress by any taxing jurisdiction.