Income taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income taxes

20. Income taxes

The Company is current in its US tax filings, except for its 2018 filing, as of December 31, 2019 and is not current in its Canadian tax filings with the 2016 and 2017 returns still outstanding. 

The income tax provision/ (benefit) is different from that which would be obtained by applying the statutory Federal income tax rate of 21% and applicable state tax rates of 5% to income before income tax expense. The items causing this difference for the years ended December 31, 2019 and 2018 are as follows: 

	Year ended December 31, 2019			Year ended December 31, 2018
Tax credit at the federal and state statutory rate		(3,854,992	)		(2,219,152	)
Foreign taxation		(62,163	)		121,579
Permanent differences		1,569,469			1,280,902
Foreign net operating losses utilized		—			(19,347	)
Foreign tax rate differential		1,173			—
Valuation allowance		2,346,513			938,250
		—			102,232

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred tax assets and liabilities at December 31, 2019 and 2018 are as follows:

	December 31, 2019			December 31, 2018
Net operating losses
Net operating loss carry forward		24,023,480			20,556,758
Net operating loss utilized		—			(73,007	)
Foreign exchange differential		68,923			(68,925	)
Net taxable loss		8,876,008			3,608,654
Valuation allowance		(32,968,411	)		(24,023,480	)
		—			—

The company has established a valuation allowance against its gross deferred tax assets sufficient to bring its net deferred tax assets to zero due to the uncertainty surrounding the realization of such assets. Management has determined it is more likely than not that the net deferred tax assets are not realizable due to the Company’s historical loss position. The valuation allowance for the year ended December 31, 2019 increased by $9,228,503 due to the additional operating losses incurred for the year ended December 31, 2019 and adjustments made to prior year opening balances.

As of December 31, 2019, the prior three tax years remain open for examination by the federal or state regulatory agencies for purposes of an audit for tax purposes.

Pursuant to the Internal Revenue Code of 1986, as amended (“IRC”), §382, the Company’s ability to use its net operating loss carry forwards to offset future taxable income is limited if the Company experiences a cumulative change in ownership of more than 50% within a three-year period.

As of December 31, 2019, the Company is in arrears on certain US and Canadian tax filings and the amounts presented above are based on estimates. The actual losses available could differ from these estimates. In addition, the Company could be subject to penalties for these unfiled tax returns.

As of December 31, 2019 and 2018, the Company has accrued $250,000 in penalties and interest attributable to delinquent tax returns. Management believes the Company has adequately provided for any ultimate amounts that are likely to result from audits of these returns once filed; however, final assessments, if any, could be significantly different than the amounts recorded in the financial statements.

The Company operates in foreign jurisdictions and is subject to audit by taxing authorities. These audits may result in the assessment of amounts different than the amounts recorded in the consolidated financial statements. The Company liaises with the relevant authorities in these jurisdictions in regard to its income tax and other returns. Management believes the Company has adequately provided for any taxes, penalties and interest that may fall due.

The Tax Cuts and Jobs Act (the “Act”) was signed into law on December 22, 2017 and significantly changes tax law in the United States by, among other items, reducing the federal corporate income tax rate from a maximum of 35% to 21% (effective January 1, 2018). The Act embraces a territorial system for the taxation of future foreign earnings and modifies certain business deductions by, among other changes, repealing the domestic production activities deduction, further limiting the deductibility of certain executive compensation and increasing the limitation on the deductibility of certain meals and entertainment expenses. On the other hand, the Act permits 100% bonus depreciation on assets placed in service through 2022 (with a phase-out period through 2026). The full effects of these changes will be reflected for the first time in the determination of income tax expense for the year ending December 31, 2018. The Company determined that it had no liability as of December 31, 2018 for the one-time transition tax on deemed repatriated earnings of foreign subsidiaries imposed by the Act.