2. Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

2.     Summary of Significant Accounting Policies

   a)     Basis of Presentation and Principles of Consolidation

The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") and are expressed in U.S. dollars. These consolidated financial statements comprise the accounts of the Company and its wholly-owned subsidiary, Safety Technologies Inc., a Nevada company. All intercompany transactions have been eliminated on consolidation.  The Company's fiscal year end is December 31.

b)  Interim Consolidated Financial Statements

These interim unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company's consolidated financial position, results of operations and cash flows for the periods shown. The results of operations for such periods are not necessarily indicative of the results expected for a full year or for any future period. These unaudited condensed consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Therefore, these financial statements should be read in conjunction with the financial statements and accompanying notes filed with the U.S. Securities and Exchange Commission in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

c)Accounts Receivable

Accounts receivable represents amounts owed from customers for the sale of product. Amounts are presented net of the allowance for doubtful accounts, which represents the Company's best estimate of the amount of probable credit losses in the existing accounts receivable balance. The Company determines allowance for doubtful accounts based upon historical experience and current economic conditions.  The Company reviews the adequacy of its allowance for doubtful accounts on a regular basis.  As of September 30, 2016, and December 31, 2015, the Company had no allowances for doubtful accounts.

d)Inventory

Inventory is comprised of stealth cards purchased for resell, and is recorded at the lower of cost or net realizable value on a first-in first-out basis.  The Company establishes inventory reserves for estimated obsolete or unsaleable inventory equal to the difference between the cost of inventory and the estimated realizable value based upon assumptions about future and market conditions.

e)     Intangible Assets

Intangible assets are stated at cost less accumulated amortization and are comprised of customer accounts acquired with an useful life of three years and amortized straight line over three years and patent and trademark development costs, which are currently being developed and has not been placed in use. During the period ended September 30, 2016, the Company incurred $110,471 (2015 - $110,068) in amortization expense.

f)Basic and Diluted Net Loss per Share

The Company computes net loss per share in accordance with ASC 260, Earnings per Share. ASC 260 requires presentation of both basic and diluted earnings per share ("EPS") on the face of the income statement. Basic EPS is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As at September 30, 2016, the Company had 15,211,557 (December 31, 2015 – 28,280,185) potentially dilutive common shares from potential shares issuable for outstanding convertible debentures.

g)     Revenue Recognition

The Company recognizes and accounts for revenue in accordance with ASC 605 as a principal on the sale of goods. Pursuant to ASC 605, Revenue Recognition, revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the amount is fixed and determinable, risk of ownership has passed to the customer and collection is reasonably assured. The Company considered ASC 605-45, Principal Agent Considerations, and determined that the Company acts as a principal in its revenue-earnings activities as they are responsible for the production of goods purchased by the customer, can determine the pricing costs, goods purchased are paid directly by the Company, and has a credit risk with respect to collection of amounts owed by its customers.

The Company considered ASC 605-45, Principal Agent Considerations, and determined that the Company does not act as the principal in its revenue-earnings activities related to certain service revenues where the Company does not bear enough of the risks in the transaction to record them on the gross basis. Revenues for these activities are recorded based on the net amount earned by the Company.

h)     Cost of Revenue

For the Company's product sales, cost of revenue consists of inventory sold in each transaction. For the Company's service sales, cost of revenue consists of engineering services provided by a related party.

i)      Financial Instruments

The following table represents assets and liabilities that are measured and recognized in fair value as of September 30, 2016, on a recurring basis:

	Level 1 $			Level 2 $		Level 3 $			Total gains and (losses)
Cash		917,535			–		–			–
Liability for shares issuable – related party		(1,126,513	)		–		–			(295,280	)
Derivative liabilities		–			–		(72,371	)		418,878
Total		(208,978	)		–		(72,371	)		123,598

The following table represents assets and liabilities that are measured and recognized in fair value as of December 31, 2015, on a recurring basis:

	Level 1 $			Level 2 $		Level 3 $			Total gains and (losses)
Cash		388,183			–		–			–
Liabilities for shares issuable – related party		(831,233	)		–		–			(318,132	)
Derivative liabilities		–			–		(491,249	)		(341,192	)
Total		(443,050	)		–		(491,249	)		(659,324	)

i)    Financial Instruments (continued)

As of September 30, 2016, the Company had a derivative liability amount of $72,371 (December 31, 2015 – $491,249) which was classified as a Level 3 financial instrument, and a gain on change in fair value of derivative liabilities of $418,878 (December 31, 2015 – loss of $341,192).