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Note 9 - Income Taxes | 12 Months Ended
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Dec. 31, 2021
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | 9. Income Taxes The components of income before income taxes are as follows (in thousands):
|  |  | Years Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
United States |  | $ | 5,301 |  |  | $ | (851 | ) |  | $ | 53,971 |
Canada |  |  | (30,127 | ) |  |  | (12,553 | ) |  |  | 664,689 |
Other Foreign |  |  | (632 | ) |  |  | 577 |  |  |  | (207 | )
Total |  | $ | (25,458 | ) |  | $ | (12,827 | ) |  | $ | 718,453 |
The components of the provision for income taxes are as follows for the years ended December 31, 2021, 2020, and 2019 (in thousands):
Current |  | 2021 |  |  | 2020 |  |  | 2019 |
United States |  | $ | 17 |  |  | $ | 262 |  |  | $ | 1,806 |
Canada |  |  | (9,486 | ) |  |  | (1,821 | ) |  |  | 48,031 |
Other Foreign |  |  | 14 |  |  |  | - |  |  |  | - |
Total |  | $ | (9,455 | ) |  | $ | (1,559 | ) |  |  | 49,837 |
Deferred |  |  |  |  |  |  |  |  |  |  |  |
United States |  |  | - |  |  |  | - |  |  |  | - |
Canada |  |  | 1,505 |  |  |  | (155 | ) |  |  | (13 | )
Other Foreign |  |  | (94 | ) |  |  | 108 |  |  |  | - |
Total |  |  | 1,411 |  |  |  | (47 | ) |  |  | (13 | )
Total income tax expense |  | $ | (8,044 | ) |  | $ | (1,606 | ) |  | $ | 49,824 |
The provision for income taxes differs from the amount computed by applying the Canada statutory rate to pre-tax income as follows for the years ended December 31, 2021, 2020, and 2019:
|  | 2021 |  |  | 2020 |  |  | 2019 |
Income tax benefit computed at federal tax rate |  |  | 27.0 | % |  |  | 27.0 | % |  |  | 27.0 | %
Capital gains and foreign exchange |  |  | 0.0 | % |  |  | 1.2 | % |  |  | (13.0 | )%
Change in valuation allowance |  |  | 4.1 | % |  |  | (37.3 | )% |  |  | (6.3 | )%
Tax Credits generated |  |  | 1.6 | % |  |  | 34.5 | % |  |  | - |
Prior year adjustments |  |  | 1.1 | % |  |  | 1.7 | % |  |  | (0.4 | )%
Changes in Uncertain Tax Positions |  |  | (1.5 | )% |  |  | (7.7 | )% |  |  | 0.2 | %
Stock compensation and other |  |  | (0.7 | )% |  |  | (6.9 | )% |  |  | (0.6 | )%
Total |  |  | 31.6 | % |  |  | 12.5 | % |  |  | 6.9 | %
Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2021, 2020, and 2019 are as follows (in thousands):
|  | 2021 |  |  | 2020 |
Deferred tax assets: |  |  |  |  |  |  |  |
Noncapital losses |  | $ | 112 |  |  | $ | 60 |
Research and other credits |  |  | 3,360 |  |  |  | 3,020 |
Stock based compensation |  |  | 3,235 |  |  |  | 4,036 |
Share issue costs |  |  | 425 |  |  |  | 610 |
Accrued liabilities |  |  | 227 |  |  |  | 194 |
Foreign Exchange |  |  | 206 |  |  |  | 950 |
Total deferred tax assets |  |  | 7,565 |  |  |  | 8,870 |
Less: Valuation allowance |  |  | (6,474 | ) |  |  | (7,585 | )
Total deferred tax asset including valuation allowance |  |  | 1,091 |  |  |  | 1,285 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation |  |  | 824 |  |  |  | 592 |
Prepaid assets |  |  | 69 |  |  |  | 52 |
Uncollectible debts |  |  | 1,057 |  |  |  | - |
Foreign exchange |  |  | 14 |  |  |  | 108 |
Total deferred tax liabilities |  |  | 1,964 |  |  |  | 752 |
Net deferred tax asset (liabilities) |  | $ | (873 | ) |  | $ | 533 |
As of December 31, 2021 and 2020, the Company had unused net operating losses of approximately $0 million and $0.1 million each year in both Switzerland and Japan, $0 million in Canada for the 2-year period, and $0.5 million and $0 million in the U.S., respectively, available to reduce taxable income of future years. The subsidiaries in Switzerland and Japan dissolved in 2021, therefore their net operating losses were released. The tax benefit of the U.S. net operating losses does not have an expiration period. As of December 31, 2021 and 2020, the Company had unused gross research and other tax credits of approximately $4.4 million and $4.0 million in the U.S. available to reduce tax in future years. The tax benefit of the credits begins to expire in 2036 if unused. The valuation allowance decreased by $1.1 million during the year ended December 31, 2021 primarily due to changes in stock compensation in the U.S and foreign exchange losses in Canada. The valuation allowance increased by $4.8 million during the year ended December 31, 2020 primarily due to changes in stock compensation and the generation of additional tax credit carryforwards. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. With the exception of certain items that will generate cash refunds through loss carryback claims in the next year, the Company has established a full valuation allowance in the U.S and Canada due to uncertainties regarding the realization of these deferred tax assets based upon the Company’s lack of earnings history and the Company’s expectation to continue incurring significant expenses for the foreseeable future. The valuation allowances in Japan and Switzerland were released in 2021 as both companies were dissolved during 2021. The Company has not provided Canadian income taxes or withholding taxes on the undistributed earnings of the U.S. subsidiary or the excess of the financial reporting over the tax basis of our investment in the U.S. subsidiary as of December 31, 2021 because these amounts are considered to be indefinitely reinvested in the U.S. The Company intends to use available cash to expand our research and development and manufacturing facilities, and also fund the development of our manufacturing processes. The amount of the outside basis difference that is indefinitely reinvested is $10.7 million as of December 31, 2021. Determination of the amount of any unrecognized deferred income tax liability on this temporary difference is not practicable. The Company applies the accounting guidance in ASC 740 related to accounting for uncertainty in income taxes. The Company’s reserves related to taxes are based on a determination of whether, and how much of, a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. A reconciliation of the beginning and ending amount of unrecognized tax benefits as of December 31, 2021, 2020 and 2019 is as follows (in thousands):
|  | 2021 |  |  | 2020 |  |  | 2019 |
Balance as of January 1 |  |  | 2,060 |  |  |  | 1,056 |  |  |  | - |
Additions based on tax positions related to the current year |  |  | 42 |  |  |  | 49 |  |  |  | 46 |
Additions for tax positions of prior years |  |  | 287 |  |  |  | 955 |  |  |  | 1,010 |
Reductions for tax positions of prior years |  |  | - |  |  |  | - |  |  |  | - |
Settlements |  |  | - |  |  |  | - |  |  |  | - |
Balance at December 31 |  |  | 2,389 |  |  |  | 2,060 |  |  |  | 1,056 |
The Company recognized interest and penalties related to unrecognized tax benefits of $56 thousand, $27 thousand, and $0 as a component of income tax expense for the years ended December 31, 2021, 2020, and 2019, respectively. As of December 31, 2021, 2020, and 2019, there are $2.4 million, $2.1 million, and $1.1 million, respectively, of unrecognized tax benefits that if recognized would affect the annual effective tax rate. None of the positions are expected to significantly increase or decrease within 12 months. The Company files federal income tax returns in Canada, U.S, Switzerland, Germany, and Japan. The Company filed final tax returns in Switzerland and Japan during 2021. The Company also files income tax returns in the state of Texas in the U.S. The statute of limitations for assessment by local taxing authorities is open for tax years ended after December 2012 and all years since 2008 for the U.S. remain open until such time the 2019 tax year statute of limitation closes. There are currently no federal or state income tax audits in progress.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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