| Summary of Significant Accounting Policies | Use of estimates The preparation of financial statements in conformity
with US GAAP 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 expenses during
the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include estimates for depreciable
lives of property, plant and equipment, intangible assets, analysis of impairments of long-lived assets and intangibles, accruals
for potential liabilities and assumptions made in calculating the fair value of stock-based compensation and the fair value of
convertible notes and related warrants. Fair value of financial instruments The Company applies Financial Accounting Standards
Board (“FASB”) Codification (“ASC”) 820, Fair Value Measurement There are three levels within the hierarchy
that may be used to measure fair value:
Level 1– A quoted price in an active market for identical assets or liabilities.
Level 2– Significant pricing inputs are observable inputs, which are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources.
Level 3– Significant pricing inputs are unobservable inputs, which are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value measurements level of an asset
or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
Valuation techniques used should maximize the use of observable inputs and minimize the use of unobservable inputs. The valuation methodologies described above
may produce a fair value calculation that may not be indicative of future net realizable value or reflective of future fair values. The fair value of cash and accounts payable
and accrued liabilities approximate their carrying values due to their short-term maturity. Convertible notes Distinguishing Liabilities from Equity Instruments
Issued The Company applies the guidance in ASC Topic
480 to determine the classification of financial instruments issued. The Company first determines if the instruments should be
classified as liabilities under this guidance based on the redemption features, if mandatorily redeemable or not, and the method
of redemption, if in cash, a variable number of shares or a fixed number of shares. If the terms proved that an instrument is mandatorily
redeemable in cash, or the holder can compel a settlement in cash, or will be settled in a variable number of shares predominantly
based on a fixed monetary amount, the instrument is generally classified as a liability. Instruments that are settled by issuing
a fixed number of shares are generally classified as equity instruments. In some cases, the instruments issued contain
settlement features that differ depending upon the prevailing price of the Company’s shares at the date of settlement. Depending
on the share price, the instrument will be settled either in a manner consistent with ASC Topic 480 liability treatment, by issuing
a variable number of shares based on a fixed monetary amount, or in a manner consistent with ASC Topic 480 treatment for an equity
instrument, by issuing a fixed number of shares if the share price is above or below certain levels. In these cases, the Company
assesses the likelihood of the various possible settlement outcomes at the inception of the instrument. The classification of the
instrument is based on the outcome that is more likely than not to occur. Factors that the Company considers in evaluating the
likelihood of the outcomes include:
● The terms of the instrument, including its maturity date and the formula for adjustments to the range.
● The volatility of the Company’s stock.
● The relationship between the price of the Company’s stock on the inception date and fixed prices or ranges the low and high end of the original range.
● Historical and expected dividend levels. When warrants or similar instruments are issued,
the Company applies the guidance in ASC Topic 815 to determine if the warrants should be classified as equity instruments or as
derivative instruments. Generally, warrants that are both indexed to the Company’s own stock and that would be classified
as equity instruments are not classified as derivative instruments under this guidance. A key element to consider in determining
if a warrant would be considered indexed to the Company’s own stock is if the warrants settlement amount is equal to the
difference between the fair value of a fixed number of equity shares and a fixed monetary amount. This criterion is sometimes known
as the “fixed-for fixed” criteria. In cases where the fixed for fixed criteria are not met, the warrants are classified
as derivative instruments. Convertible liabilities are also assessed to
determine if they contain a beneficial conversion feature. A beneficial conversion feature (“BCF”) of a convertible
note is normally characterized as the convertible portion feature that provides a rate of conversion that is below market value
or “in-the-money” when issued. A BCF related to the issuance of a convertible note is recorded at is intrinsic value
at the issue date. Initial measurement Instruments are initially measured at fair value.
If multiple instruments are issued together, the aggregate proceeds are allocated first to derivative instruments or any instrument
that will be subsequently accounted for at fair value and the remainder is allocated to the various instruments based on their
relative fair value. Subsequent measurement Instruments initially classified as liabilities
are subsequently measured at the present value of the amount to be paid, either in cash or by issuing a variable number of shares
based on a fixed monetary amount, and at settlement, accruing interest cost using the rate implicit at inception. Derivative instruments are recorded at fair
value at each reporting period and the variations in fair value recorded in income. Government grants US GAAP for profit-oriented entities does not
define government grants; nor is there specific guidance applicable to government grants. Under the Company’s accounting
policy for government grants and consistent with non-authoritative guidance, grants are recognized on a systematic basis over the
periods in which the entity recognizes as expenses the related costs for which the grants are intended to compensate. Grants that relate to the acquisition of an
asset are recognized as a reduction of the cost of the asset and in the statement of operations and comprehensive loss as the asset
is depreciated or amortized. A grant that is compensation for expenses or
losses already incurred, or for which there are no future related costs, is recognized in the statement of operations and comprehensive
loss in the period in which it becomes receivable. Low-interest loans or interest-free loans from
a government are initially measured at fair value and interest expense is recognized on the loan subsequently under the effective
interest method, with the difference recognized as a government grant Deferred financing costs and other transaction
costs Deferred financing costs represent commitment
fees, legal fees and other costs associated with obtaining commitments for financing. These fees are amortized as a component of
interest expense over the terms of the respective financing agreements, including convertible notes, on a straight-line basis.
Unamortized deferred financing fees are expensed in full when the associated debt is refinanced or repaid before maturity. Costs
incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing
will not be successful. Deferred financing fees related to the liability portion of Convertible Notes are deducted from their related
liabilities on the balance sheet. Transaction costs associated with the equity
portion of convertible notes are reflected as a charge to deficit or as a reduction of accumulated paid-in-capital. The cost of
issuing equity is reflected as a reduction of accumulated paid-in-capital. Foreign currency translations and transactions The accompanying consolidated financial statements
are presented in U.S. dollars, the functional currency of the Company. Assets and liabilities of subsidiaries that have a functional
currency other than that of the Company are translated to U.S. dollars at the exchange rate as at the balance sheet date. Income
and expenses are translated at the average exchange rate of the period. The resulting translation adjustments are included in other
comprehensive income and loss (“OCI”). As a result, foreign currency exchange fluctuations may impact operating expenses.
The Company currently has not engaged in any currency hedging activities. For transactions and balances, monetary assets
and liabilities denominated in foreign currencies are translated into the functional currency of the entity at the prevailing exchange
rate at the reporting date. Non-monetary assets and liabilities, and revenue and expense items denominated in foreign currencies
are translated into the functional currency using the exchange rate prevailing at the dates of the respective transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions are recognized in the consolidated statements of operations
and comprehensive loss, except for gains or losses arising from the translation of intercompany balances denominated in foreign
currencies that forms part in the net investment in the subsidiary which are included in OCI. Property, plant and equipment Property, plant and equipment are recorded at
cost and are amortized over their estimated useful lives, unless the useful life is indefinite, using the straight-line method
over the following periods:
Building 30 years
Land Indefinite
Office equipment and furniture 8 years
Machinery and equipment 3-8 years
Building improvements 5 years Costs related to repairs and maintenance of
property, plant and equipment are expensed in the period in which they are incurred. Upon sale or disposal, the Company writes
off the cost of the asset and the related amount of accumulated depreciation. The resulting gain or loss is included in the consolidated
statement of operations and comprehensive loss. Management reviews the carrying values of its
property, plant and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an
asset or asset group might not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largely
independent when testing for, and measuring for, impairment. In performing its review of recoverability, the Company estimates
the future cash flows expected to result from the use of the asset or asset group and its eventual disposition. If the sum of the
expected undiscounted future cash flows is less than the carrying amount of the asset or asset group, an impairment loss is recognized
in the consolidated statements of operations. Measurement of the impairment loss is based on the excess of the carrying amount
of the asset or asset group over the fair value calculated using discounted expected future cash flows. As at February 29, 2020,
and February 28, 2019 and 2018, the Company determined that there were no indicators of impairment and therefore, did not recognize
any impairment of its property, plant and equipment. Intangible assets Intangible assets are recorded at cost and are
amortized over their estimated useful lives, unless the useful life is indefinite, using the straight-line method over 7 years. The Company reviews the carrying value of intangible
assets subject to amortization whenever events or changes in circumstances indicate that the carrying amount of an intangible asset
might not be recoverable, or a change in the remaining useful life of an intangible asset. If the carrying value of an asset exceeds
its undiscounted cash flows, the Company writes down the carrying value of the intangible asset to its fair value in the period
identified. If the carrying value of assets is determined not to be recoverable, the Company records an impairment loss equal to
the excess of the carrying value over the fair value of the assets. The Company’s estimate of fair value is based on the
best information available, in the absence of quoted market prices. The Company generally calculates fair value as the present
value of estimated future cash flows that the Company expects to generate from the asset. If the estimate of an intangible asset’s
remaining useful life is changed, the Company amortizes the remaining carrying value of the intangible asset prospectively over
the revised remaining useful life. Stock-based compensation The Company periodically issues stock options
and restricted stock units to employees and directors as part of their compensation. The Company accounts for stock options and
restricted stock units granted to employees and directors based on the authoritative guidance provided by the FASB wherein the
fair value of the award is measured on the grant date and where there are no performance conditions, recognized as compensation
expense on the straight-line basis over the vesting period and where performance conditions exist, recognize compensation expense
when it becomes probable that the performance condition will been met. Forfeitures on share-based payments are accounted for by
recognizing forfeitures as they occur. The Company estimates the fair value of restricted
stock unit awards to employees and directors based on the closing market price of its common stock on the date of grant. The fair value of the stock options granted
are estimated using the Black-Scholes-Merton Option Pricing (“Black-Scholes”) model, which uses certain assumptions
related to risk-free interest rates, expected volatility, expected life of the stock options, and future dividends. Stock-based
compensation expense is recorded based on the value derived from the Black-Scholes model and on actual experience. The assumptions
used in the Black-Scholes model could materially affect stock-based compensation expense recorded in the current and future periods. Income taxes The Company calculates its provision for income
tax on the basis of the tax laws enacted at the balance sheet date in the countries where the Company and its subsidiaries operate
and generate taxable income, in accordance with FASB ASC 740, Income Taxes Research and development expenses 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 during the years ended February 29, 2020, February 28, 2019
and February 28, 2018 amounted to $4.72 million,$3.45 million and $6.69 million, respectively, and are net of government research
and development tax credits and government grants from the federal and provincial taxation authorities accrued and recorded during
the year based on qualifying expenditures incurred during the fiscal year. Net loss per share The Company computes net loss per share in accordance
with FASB ASC 260, Earnings Per Share For the years ended February 29, 2020, February
28, 2019 and February 28, 2018, the calculations of basic and diluted loss per share are the same because potential dilutive securities
would have an antidilutive effect. As at February 29, 2020, the potentially dilutive securities consisted of 1,587,081 outstanding
stock options (2019 –1,962,400; 2018 – 2,374,581), 4,218,802 outstanding restricted stock units (2019 – 402,868;
20178– 34,102), 5,059,331 outstanding warrants (2019 – 802,469; 2018 – 140,667) and nil outstanding issuable
common stock (2019 – 1,000,000; 2018 – 1,000,000). Recently adopted accounting pronouncements In February 2018, the FASB issued ASU 2018-02,
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income In June 2018, the FASB issued ASU 2018-07, Compensation
– Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting Revenue from Contracts with Customers In July 2018, the FASB issued ASU 2018-09, Codification
Improvements , Compensation – Stock Compensation – Income Taxes In February 2016, the FASB issued ASU 2016-02,
“Leases,” amended in July by ASU 2018-10, “Codification Improvements to Topic 842, Leases,” ASU 2018-11,
“Targeted Improvements,” and ASU 2018-20, “Narrow-Scope Improvements for Lessors,” which requires lessees
to recognize leases on the balance sheet while continuing to recognize expenses in the income statement in a manner similar to
current accounting standards. For lessors, the new standard modifies the classification criteria and the accounting for sales-type
and direct financing leases. Enhanced disclosures will also be required to give financial statement users the ability to assess
the amount, timing, and uncertainty of cash flows arising from leases. This ASU may either be adopted on a modified retrospective
approach at the beginning of the earliest comparative period, or through a cumulative-effect adjustment at the adoption date. This
update is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The
Company adopted these standards effective March 1, 2019 through a cumulative-effect adjustment at the adoption date. The adoption
of the standard had no impact on the consolidated financial statements of the Company. Recently issued accounting pronouncements
not yet adopted In June 2016, the FASB issued ASU 2016-13, “Financial
Instruments—Credit Losses”. This ASU added a new impairment model (known as the current expected credit loss (“CECL”)
model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes an allowance
for its estimate of expected credit losses and applies to most debt instruments, trade receivables, lease receivables, financial
guarantee contracts, and other loan commitments. The CECL model does not have a minimum threshold for recognition of impairment
losses and entities will need to measure expected credit losses on assets that have a low risk of loss. This update is effective
for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for smaller reporting companies.
We are still evaluating the impact of this accounting guidance on our results of operations and financial position. In August 2018, the FASB issued ASU 2018-15,
“Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that Is a Service Contract,”
which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract
with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements
that include an internal-use software license). This update is effective for fiscal years beginning after December 15, 2019, including
interim periods within those fiscal years. We are still evaluating the impact of this accounting guidance on our results of operations
and financial position. In December 2019, the FASB issued ASU 2019-12,
“Simplifying the Accounting for Income Taxes”, which removes specific exceptions to the general principles in ASC 740,
“Income Taxes,” and clarifies certain aspects of the existing guidance. This update is effective for fiscal years beginning
after December 15, 2020, including interim periods within those fiscal years, with early adoption being permitted as of the beginning
of an interim or annual reporting period. All amendments to this ASU must be adopted in the same period on a prospective basis,
with certain exceptions. We are still evaluating the impact of this accounting guidance on our results of operations and financial
position. |
