| Note 2. Summary of Significant Accounting Policies and Restatement of Previously Issued Financial Statements | Restatement
of previously issued financial statements The
Companys unaudited condensed consolidated balance sheet as of August 31, 2017, and condensed consolidated statement of
shareholders equity for the six month period ended August 31, 2017, have been restated for an error with regard to the
accounting for stock based compensation in fiscal 2017. Adjustment
We
identified and corrected an error related to the measurement of stock-based compensation associated with the grant of common shares
to the Companys President and Chief Executive Officer in June 2015. The share-based award vests based on the achievement
of specified performance conditions, which pursuant to ASC 718 impacts the timing of recognition of stock-based compensation expense,
but which does not affect the determination of the fair value of the award. The fair value of the equity-classified
award should be determined on the grant date. Previously,
the Company had determined the fair value of the award on the date at which it became probable that the first of four performance
conditions had been met, resulting in the recognition of $5,500,000 of non-cash stock based compensation expense in the fourth
quarter and fiscal year ended February 28, 2017. The Company has recognized an adjustment to record stock-based compensation of
$800,000, which is the amount of the award expected to vest in fiscal 2017, and is based on the grant date fair value of the award
as at June 29, 2015. The
adjustment had no impact on the condensed consolidated statements of operations and comprehensive loss and cash flows for the
three and six-month periods ended August 31, 2017.
The
following table illustrates the impact of the correction to the condensed consolidated balance sheets:
As
at February 28, 2017
As
previously reported Adjustment Restated
Common
stock issuable 5,500,000 (4,700,000 ) 800,000
Accumulated
deficit (11,937,803 ) 4,700,000 (7,237,803 )
As
at August, 2017
As
previously reported Adjustment Restated
Common
stock issuable 5,500,000 (4,700,000 ) 800,000
Accumulated
deficit (15,636,857 ) 4,700,000 (10,936,857 )
The
following table illustrates the impact of the correction on the condensed consolidated statement of shareholders equity:
Six
month period ended August 31, 2017
As
previously reported Adjustment Restated
Accumulated
deficit at Feb 28, 2017 (11,937,803 ) 4,700,000 (7,237,803 )
Accumulated
deficit at August 31, 2017 (15,636,857 ) 4,700,000 (10,936,857 )
Common
stock issuable 5,500,000 (4,700,000 ) 800,000 Use
of Estimates The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. Those estimates and assumptions include estimates for depreciable lives of property
and equipment, analysis of impairments of recorded intellectual property, accruals for potential liabilities and assumptions made
in calculating the fair value of certain stock instruments. Foreign
Currency Translations and Transactions The
accompanying consolidated financial statements are presented in United States dollars, the functional currency of the Company.
Capital accounts of foreign subsidiaries are translated into US Dollars from foreign currency at their historical exchange rates
when the capital transactions occurred. Assets and liabilities are translated at the exchange rate as of the balance sheet date.
Income and expenses are translated at the average exchange rate of the period. As a result, currency exchange fluctuations may
impact our revenue and the costs of our operations. We currently do not engage in any currency hedging activities. The
following table summarizes the exchange rates used:
Six
Months Ended August 31,
2017 2016
Period
end Canadian $: US Dollar exchange rate $ 0.80 $ 0.76
Average
period Canadian $: US Dollar exchange rate $ 0.76 $ 0.77 Expenditures
are translated at the average exchange rate for the period presented. Value
added tax, tax credits and other receivables The
Company is registered for the Canadian Federal and Provincial Goods and Services Taxes. As a registrant, the company is obligated
to collect, and is entitled to claim sale taxes paid on its expenses and capital expenditures incurred in Canada. As at the Balance
Sheet date of August 31 and February 28, 2017, the computed net recoverable sale taxes amounted to $79,723 and $198,830, respectively. Research
and Development Costs Research
and development expenses relate primarily to the development, design, testing of preproduction samples, prototypes and models,
compensation, and consulting fees, and are expensed as incurred. Total research and development costs recorded amounted to $950,775
and $433,629 for the three months ended August 31, 2017 and 2016, respectively, and to $1,447,309 and $849,198 for the six months
ended August 31, 2017 and 2016, respectively. Research and development costs are net of $4,472 of grants received and research
and development tax credit of $127,713 claimed during the period ended August 31, 2017. Net
Loss per Share The
Company computes net loss per share in accordance with FASB ASC 260 Earnings per share. Basic earnings (loss) per share is computed
by dividing the net income (loss) applicable to Common Stockholders by the weighted average number of shares of Common Stock outstanding
during the year. Diluted earnings (loss) per share is computed by dividing the net income (loss) applicable to Common Stockholders
by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding
if all dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are excluded
from the computation if their effect is antidilutive. For
the three and six months ended August 31, 2017 and 2016, the calculations of basic and diluted loss per share are the same because
potential dilutive securities would have an anti-dilutive effect. The potentially dilutive securities consisted of 1,000,000 common
shares issuable and 2,004,582 outstanding warrants as of August 31, 2017 and 2,035,004 outstanding warrants as of August 31, 2016. Stock
Compensation In
March 2016, the FASB issued ASU 2016-09, CompensationStock Compensation (Topic 718) Recently
Issued Accounting Pronouncements In
May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2014-09 (ASU 2014-09), Revenue
from Contracts with Customers. ASU 2014-09 will eliminate transaction- and industry-specific revenue recognition guidance under
current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. On August 12, 2015, FASB
delayed the required implementation to fiscal years beginning after December 15, 2017 but now permitted organizations such the
Company to adopt earlier. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or
services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty
of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets
recognized from costs incurred to obtain or fulfill a contract. Entities can transition to the standard either retrospectively
or as a cumulative-effect adjustment as of the date of adoption. As the Company does not currently have any revenues from contracts
with customers, the adoption of ASU 2014-09 on March 1, 2018 will not to have an impact, on transition. In
February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases |
