Annual and transition report of foreign private issuers pursuant to Section 13 or 15(d)

20. INCOME TAXES

v3.21.2
20. INCOME TAXES
12 Months Ended
Dec. 31, 2020
Notes  
20. INCOME TAXES

20.INCOME TAXES 

The Company owns a wholly owned subsidiary, RWB Platinum Vape Inc., that operate in the cannabis industry.  As such, the Company is subject to the limits of IRC Section 280E under which they are only allowed to deduct expenses directly related to the cost of producing the products or cost of production.

Income tax expense (recovery) for the years ended December 31, 2020 and 2019 is comprised of:

 

 

 

  2020

 

2019

Income tax expense (recovery)

 

 

 

 

Current tax

$

3,125,261

$

-

Deferred tax

 

(6,243,668)

 

-

 

$

(3,118,407)

$

-

 

Income tax recovery differs from the amount that would be computed by applying Canadian statutory income tax rate of 26.5% (2019 - 26.5%) to income before taxes. The reasons for the differences are as follows:

 

 

 

 

  2020

 

2019

Loss before income taxes

$

(21,695,274)

$

(12,513,900)

Statutory income tax rate

 

26.5%

 

26.5%

 

 

 

 

 

Expected income tax recovery

 

(5,749,248)

 

(3,316,184)

Effect of change in tax rates

 

(186,145)

 

5,674

Non-deductible recoveries and other

 

253,284

 

1,005,965

Listing expense

 

8,436,570

 

-

Stock based compensation

 

1,048,334

 

-

Foreign exchange

 

467,291

 

-

Fair value adjustments

 

(14,209,158)

 

-

280E expenses

 

670,731

 

-

Amortization of intangibles

 

2,824,413

 

-

Share issuance costs booked through equity

 

(530,595)

 

-

Under (over) provided in prior years

 

-

 

44,209

Changes in unrecognized deductible temporary differences

 

3,856,116

 

341,622

Unused tax losses and tax offsets not recognized

 

-

 

1,918,714

Income tax recovery

$

(3,118,407)

$

-

 

The following table summarizes the movement in deferred tax assets and liabilities:

 

 

 

Balance at December 31, 2018

$

-

Future income tax recovery (expense)

 

-

Income tax recovery on share issuance costs

 

-

Acquired through business combination

 

-

Balance at December 31, 2019

 

-

Future income tax recovery (expense)

 

6,243,668

Income tax recovery on share issuance costs

 

595,393

Acquired through business combination

 

(33,997,312)

Balance at December 31, 2020

$

(27,158,251)

 

The following table summarizes the components of deferred tax assets (liabilities):

 

 

 

  2020

 

2019

Deferred tax assets

 

 

 

 

Non-capital loss carry forward

$

2,611,138

$

-

Earn-out

 

2,701,412

 

-

Deferred tax liabilities

 

 

 

 

Biological assets and inventory

 

(188,905)

 

-

Property plant & equipment

 

(23,648,336)

 

-

Intangible assets

 

(8,015,186)

 

-

Note payable

 

(438,366)

 

-

Investments

 

(180,008)

 

-

Total

$

(27,158,251)

$

-

 

The unrecognized temporary differences as of December 31, 2020 and 2019 are comprised of:

 

 

 

  2020

 

2019

  Property and equipment

$

207,000

$

102,000

  Non-capital loss carry forward

 

17,274,000

 

5,693,000

  Capital loss carry forward

 

1,853,000

 

-

  Unamortized share issuance cost

 

3,200,000

 

449,000

Total

$

22,534,000

$

6,244,000

 

As at December 31, 2020, the Company has unrecognized non-capital loss carryforwards of approximately $17,274,000, which are available to offset future years' taxable income. These losses expire as follows:

 

 

 

Canada

       2037

$

30,000

       2038

 

507,000

       2039

 

5,156,000

       2040

 

11,581,000

 

 

 

  Total

$

17,274,000