"CRA" CASE IS ALREADY ACKNOWLEDGED A DEFEAT BY MANAGEMENT In its March 2024 Management Discussion and Analysis and Q1 March 2024 News Release, the company has already acknowledged defeat of its' CRA case.
Uncertain tax position
In relation to the tax notices of reassessments and assessments from the Canada Revenue Agency (CRA), and unfavourable rulings in similar cases heard in the Supreme Court of Canada and in the Court of Appeal in 2023,
the company has recorded a full provision of the $23.5-million against the carrying value of the deposits and deferred tax assets related to unused carryforward amounts and a liability of approximately $47.3-million for unpaid taxes and estimated interest for the reassessment. The total of these amounts, $70.8-million, was recognized in the statement of operations and was recorded as income tax expense for the provision of uncertain tax positions of $52.2-million and an estimated interest expense on uncertain tax positions of $18.7-million. CONTINGENCY
During 2014-2018 an affiliate of the Company (“the affiliate”) received, from the Canada Revenue Agency and provincial tax authorities, tax notices of reassessments and assessments relating to the taxation years 2008-2017.
The notices deny the application of non-capital losses, capital losses, scientific research and experimental development (“SR&ED”) pool deductions and SR&ED tax credits claimed. As at March 31, 2024, this resulted in additional taxes payable including interest and penalties are assessed at approximately $71.8 million.
The affiliate has filed notices of objection with the CRA and provincial taxing authorities. In connection with filing the notices of objection, the affiliate is required to make a 50% deposit of the amounts claimed by the CRA and
provincial authorities as assessed. The affiliate has paid substantially all the required deposit of $23.5 million. No further amounts are due at this time for the 2008-2017 taxation years as the appeal process continues.
As the result of unfavourable rulings in similar tax cases heard in the Supreme Court of Canada and in the Court of Appeal in 2023, the Company, the affiliate, and its legal counsel made the decision that a favourable outcome is
no longer more likely than not. As such, based on the related similar court decisions and other related factors, including the accounting criteria under IFRS regarding tax contingencies and uncertain tax positions, the Company
has recorded a liability of $48.3 million approximating unpaid taxes, estimated interest, and awarded legal costs for the reassessment. For the three months ended March 31, 2024, the interest recorded on the uncertain tax
position was $1.0 million. The eventual amount owing is uncertain and is not payable at this time; therefore, it has been recorded as a non-current liability.
The Company, the affiliate and its counsel still believe that the filing positions adopted by the affiliate in all years are appropriate and in accordance with the law. The affiliate continues to defend such positions and the ultimate outcome is uncertain; however, there is a possibility that the affiliate will be required to pay the remaining balance of taxes owing plus applicable interest.
You can see that management made shareholders believed that it was initially hopeful but is now throwing the towel. Pure dishonesty towards minority shareholders.
The share price looks like will be slipping in the $0.08 range, by CIBC World Markets, i believe the company's bank.