Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.4
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income (losses) before income taxes for the years ended December 31, 2022, 2021 and 2020 was as follows:
(in thousands) 2022 2021 2020
Canada $ (112,359) $ (180,374) $ (61,024)
Foreign 6,007  168  (41,750)
$ (106,352) $ (180,206) $ (102,774)
The components of income tax expense (benefit) consisted of the following for the years ended December 31, 2022, 2021 and 2020:
(in thousands) 2022 2021 2020
Current:
Canada $ —  $ —  $ — 
Foreign 1,828  760  (94)
1,828  760  (94)
Deferred:
Canada —  —  — 
Foreign —  —  — 
Total deferred —  —  — 
Income tax expense (benefit) $ 1,828  $ 760  $ (94)
The Company's parent entity is located in Canada and therefore the Canadian statutory rate is utilized. The provision for income taxes varied from the income taxes provided based on the Canadian statutory rate of 26.7%, 26.8%, and 26.8% for the years ending December 31, 2022, 2021 and 2020, respectively. The Company's increase in tax expense is primarily driven by withholding tax payments of $1.2 million paid during 2022.
2022 2021 2020
Canada statutory income tax benefit 26.7  % 26.8  % 26.8  %
Effect of tax rates on foreign jurisdictions 0.3  —  (2.4)
Withholding taxes (1.1) —  — 
Impact of future rates and tax rate changes (0.1) (0.1) 6.1 
Foreign tax credit 1.1  —  — 
Non-deductible share-based compensation (8.1) (4.5) (4.5)
Change in valuation allowance (21.5) (21.8) (26.0)
Scientific Research and Experimental Development (SRED) 1.1  0.3  0.4 
Other (0.1) (1.1) (0.3)
Effective tax rate (1.7) % (0.4) % 0.1  %
The net deferred tax assets (liabilities) consisted of the following for the years ending December 31, 2022 and 2021:
(in thousands) 2022 2021
Deferred tax assets:
Net operating loss carry-forwards $ 141,020  $ 120,274 
Share issue costs 4,209  6,016 
Intangible assets 1,400  1,086 
SRED (Scientific Research and Experimental Development) 7,462  6,059 
Capitalized research and development 1,663  — 
Deferred compensation 3,391  3,980 
Accruals 2,887  2,653 
Other 4,287  3,473 
Gross deferred tax assets 166,319  143,541 
Valuation allowance (164,514) (141,348)
Total deferred tax assets 1,805  2,193 
Deferred tax liabilities:
Other (1,128) (1,356)
Property and equipment and intangible assets (677) (837)
Total deferred tax liabilities (1,805) (2,193)
Net deferred tax assets (liabilities) $ —  $ — 

The Company’s valuation allowance increased by $23.2 million in 2022 as compared to 2021 as a result of the additional pre-tax book losses.

As of December 31, 2022, the Company has $518.1 million of Canada gross net operating loss (NOL) carryforwards with an expiration period of 2029 through 2042. As of December 31, 2022, the Company has approximately $5.8 million of Canada Investment Tax Credits and British Columbia Scientific Research and Experimental Development (SRED) with an expiration period of 2029 through 2042. As of December 31, 2022 the Company has approximately $10.1 million of U.S. federal gross NOL carryforwards that carryforward indefinitely, although limited to eighty percent of taxable income annually.
Additionally, the Company has approximately $0.1 million of various state net operating loss carryforwards with varying expiration periods including carryforwards with indefinite carryforward periods and has approximately $0.4 million of U.K. gross net operating loss carryovers that carryforward indefinitely.

Uncertain Tax Positions
The Company was under examination by the Canadian Revenue Agency for years 2017 and 2018. In March 2022, the Company was notified by the Canadian Revenue Agency that the examination is now complete and there were no findings and as a result, there is no additional tax expense or benefit recognized in regards to the audit. There are no outstanding tax audits ongoing at December 31, 2022. The Company is subject to examination in the U.S., U.K. and Canada. In the U.S. and U.K., tax periods remain open in 2015 through 2022 and 2020 through 2022, respectively. Canada's tax periods remain open from 2009 due to the tax attribute carryforwards