Summary of Significant Accounting Policies
|9 Months Ended|
Sep. 30, 2017
|Summary of Significant Accounting Policies [Abstract]|
|Summary of Significant Accounting Policies||
Note 3 - Summary of Significant Accounting Policies
Basis of Presentation
All amounts are presented in U.S. Dollars.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the periods presented. Actual results could differ from these estimates. The Company’s significant estimates and assumptions include the fair value of financial instruments, stock-based compensation and the valuation allowance relating to the Company’s deferred tax assets.
As of September 30, 2017, investments consisted of U.S. Treasury Bills of $4,042,990, which are classified as held-to-maturity, and Certificates of Deposit of $3,984,324. The Company determines the appropriate balance sheet classification of its investments at the time of purchase and evaluates the classification at each balance sheet date. All of the Company’s U.S. Treasury Bills mature within the next twelve months. Unrealized gains and losses are de minimis. As of September 30, 2017, the carrying value of the Company’s U.S. Treasury Bills approximates their fair value.
Deferred Offering Costs
The Company capitalizes amounts related to an equity offering in progress as of the balance sheet date as Deferred Offering Costs. During the nine months ended September 30, 2017, the Company incurred $132,338 of offering related costs. The related offering closed in July 2017 and these costs were recorded as a reduction in additional paid-in capital in the accompanying condensed balance sheets.
Capitalization of Patent Costs
The Company capitalizes the costs of its patents which consists of legal and filing fees related to the prosecution of patent filings. The patents will be amortized using the straight-line method over the estimated remaining lives of the patents which is 20 years from the initial filing of the patent. Amortization for the nine months ended September 30, 2017 was de minimis to the condensed financial statements.
The Company accounts for share-based payments using the fair value method. For employees and directors, the fair value of the award is measured, as discussed below, on the grant date. For non-employees, fair value is generally valued based on the fair value of the services provided or the fair value of the equity instruments on the measurement date, whichever is more readily determinable and re-measured on each financial reporting dates until the service is complete. The Company has granted stock options at exercise prices equal to the higher of (i) the closing price of the Company’s common stock as reported on the OTCQX marketplace or (ii) the closing price of the Company’s common stock as reported by the TSX Venture Exchange on the date of grant.
The weighted-average fair value of options and warrants has been estimated on the date of grant using the Black-Scholes option-pricing model. The fair value of each instrument is estimated on the date of grant utilizing certain assumptions for a risk-free interest rate, volatility and expected remaining lives of the awards. Since the Company has a limited history of being publicly traded, the fair value of stock-based payment awards issued was estimated using a volatility derived from an index of comparable entities. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company’s stock-based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the number of vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period.
The weighted-average Black-Scholes assumptions are as follows:
As of September 30, 2017, total unrecognized stock based compensation expense was $2,087,473 which will be recognized as that equity vests over a period of approximately five years. The amount of future stock option compensation expense could be affected by any future equity grants or by any option holders leaving the Company before their grants are fully vested.
Net Loss Per Share of Common Stock
Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net earnings per share reflects the potential dilution that could occur if securities or other instruments to issue common stock were exercised or converted into common stock. Potentially dilutive securities are excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive and consist of the following:
The entire disclosure for all significant accounting policies of the reporting entity.
Reference 1: http://www.xbrl.org/2003/role/presentationRef