Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Use of estimates

(a) Use of estimates:

The preparation of the consolidated 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 assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant areas of estimates include, but are not limited to, the timing of revenue recognition, the determination of stock-based compensation and the amounts recorded as accrued liabilities. Actual results could differ materially from those estimates. Estimates and assumptions are reviewed quarterly. All revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.

Cash and cash equivalents

(b) Cash and cash equivalents:

Cash equivalents are highly liquid investments that are readily convertible into cash with terms to maturity of three months or less when acquired. Cash equivalents are recorded at cost plus accrued interest. The carrying value of these cash equivalents approximates their fair value.

Marketable Securities

(c) Marketable securities:

Marketable securities are investments with original maturities exceeding three months, and have remaining maturities of less than one year. Marketable securities accrue interest based on a fixed interest rate for the term. The carrying value of marketable securities is recorded at cost plus accrued interest, which approximates their fair value.

Intellectual Property

(d) Intellectual Property

The costs incurred in establishing and maintaining patents for intellectual property developed internally are expensed in the period incurred.

Property, plant and equipment

(e) Property, plant and equipment:

Property, plant and equipment are stated at cost less accumulated depreciation and/or accumulated impairment losses, if any. Repairs and maintenance costs are expensed in the period incurred.

Property, plant and equipment are amortized over their estimated useful lives using the straight-line method based on the following rates:

Asset	Rate
Research equipment	5 years
Office furniture and equipment	5 years
Computer equipment	3 years
Leasehold improvements	Over the lesser of lease term or estimated useful life

Impairment of long-lived assets

(f) Impairment of long-lived assets:

The Company monitors its long-lived assets for indicators of impairment. If such indicators are present, the Company assesses the recoverability of affected assets by determining whether the carrying value of such assets is less than the sum of the undiscounted future cash flows of the assets. If such assets are found not to be recoverable, the Company measures the amount of such impairment by comparing the carrying value of the assets to the fair value of the assets, with the fair value generally determined based on the present value of the expected future cash flows associated with the assets. No impairment of long-lived assets was noted during the years ended December 31, 2016 and 2015.

Concentration of credit risk and of significant customers

(g) Concentration of credit risk and of significant customers:

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. Cash and cash equivalents were held at two major financial institutions in Canada. Such deposits may be in excess of insured limits in the event of non-performance by the institutions; however, the Company does not anticipate non-performance.

Collaborators whose collaboration research and development revenue accounted for 10% or more of total revenues were as follows:

	Year ended December 31,
	2016		2015		2014
Genentech	$	1,651	$	4,563	$	15,764
Teva		116		11,010		12,588

Financial instruments and fair value

(h) Financial instruments and fair value:

We measure certain financial instruments and other items at fair value.

To determine the fair value, we use the fair value hierarchy for inputs used to measure fair value of financial assets and liabilities. This hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels: Level 1 (highest priority), Level 2, and Level 3 (lowest priority).

• Level 1 - Unadjusted quoted prices in active markets for identical instruments.

• Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

• Level 3 - Inputs are unobservable and reflect the Company’s assumptions as to what market participants would use in pricing the asset or liability. The Company develops these inputs based on the best information available.

Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

The Company’s Level 1 assets include cash and cash equivalents and marketable securities with quoted prices in active markets. The carrying amount of accounts receivables, accounts payable and accrued expenses approximates fair value due to the nature and short-term of those instruments. As quoted prices for the liability classified stock options are not readily available, the Company has used a Black-Scholes pricing model to estimate fair value using Level 3 inputs as defined above.

Revenue recognition

(i) Revenue recognition:

The Company recognizes revenue when all of the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred or services have been rendered; (iii) the Company’s price to the collaborator is fixed or determinable; and (iv) collectability is reasonably assured.

The Company generates revenue primarily through collaboration agreements.

Under these collaboration agreements, the Company is eligible to receive non-refundable upfront payments, funding for research and development services, milestone payments, other contingent payments and royalties. In assessing the appropriate revenue recognition related to a collaboration agreement, the Company first determines whether an arrangement includes multiple elements, such as the delivery of intellectual property rights and research and development services. Revenues associated with multiple element arrangements are attributed to the various elements based on their relative fair values or are recognized as a single unit of accounting when relative fair values are not determinable.

Non-refundable upfront payments are recorded as deferred revenue on the balance sheet and are recognized as collaboration revenue over the estimated period of research performance that is consistent with the terms of the research and development obligations contained in the collaboration agreement. The Company periodically reviews the estimated period of performance based on the progress made under each arrangement.

The Company recognizes funding related to full-time equivalent staffing funded through collaboration agreements as revenue on a gross basis as it performs or delivers such related services in accordance with the agreement terms, provided that it will receive payment for such services upon standard payment terms.

The Company recognizes revenue contingent upon its achievement of a milestone in its entirety, in the period the milestone is achieved, only if the milestone meets certain criteria and is considered to be substantive. Payments received upon the occurrence of milestones that are non-substantive are deferred and recognized as revenue over the estimated period of performance applicable to the associated collaborative agreement.

Research and development costs

(j) Research and development costs:

Research and development costs are expensed in the period incurred.

Certain development activity costs, such as preclinical costs, manufacturing costs and clinical trial costs, are a component of research and development costs and include fees paid to contract research organizations, investigators and other vendors who conduct certain product development activities on behalf of the Company. The amount of expenses recognized in a period related to service agreements is based on estimates of the work performed using an accrual basis of accounting. These estimates are based on patient enrollment, services provided and goods delivered, contractual terms and experience with similar contracts. The Company monitors these factors and adjusts the estimates accordingly. Payments made to third parties under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses until the services are rendered.

Stock-based compensation

(k) Stock-based compensation:

The Company grants stock options to employees, directors and officers pursuant to a stock option plan described in note 7c.

Employee stock-based compensation expense is measured at the grant date, based on the estimated fair value of the award, and is recognized as an expense, net of actual forfeitures, over the requisite service period with a corresponding increase in additional paid-in capital. Stock-based compensation expense is amortized on a straight-line basis over the requisite service period for the entire award, which is generally the vesting period of the award. Any consideration received on exercise of stock options is credited to share capital.

(l) Liability classified stock options:

Stock option awards accounted for under Accounting Standards Codification (“ASC”) 718 - Compensation - Stock Options (“ASC 718”) that provide for an exercise price that is not denominated in: (a) the currency of the market in which a substantial portion of the Company’s equity securities trades, (b) the currency in which the optionee’s pay is denominated, or (c) the Company’s functional currency, are classified as liabilities. Following the change in functional currency on January 1, 2015, described in (n) below, options granted to members of the Company’s board of directors and certain consultants with exercise prices denominated in Canadian dollars were subject to liability accounting, resulting in a reclassification of these awards from additional paid-in capital to liability classified stock options.

In September 2015, the Company modified certain compensation arrangements to be denominated in Canadian dollars. Following this modification, options denominated in Canadian dollars that were granted to members of the Company’s board of directors and certain consultants met the criteria for equity classification with fair value at the modification date calculated using the Black-Scholes option-pricing model and reclassified from liability classified stock options back to additional paid-in capital. The modified awards are accounted for as equity awards from the date of modification.

Stock options awards accounted for under ASC 815 - Derivatives and Hedging (“ASC 815”), that provide for an exercise price which is not denominated in the Company’s functional currency are required to be classified as liabilities. Certain stock option awards with exercise prices denominated in Canadian dollars are accounted for under ASC 815 and classified as liabilities. As of December 31, 2016, such liability classified stock options totaled $261 (2015 - $nil) and are included in the consolidated balance sheet as accounts payable and accrued expenses.

Liability classified stock options are re-measured at fair value using the Black-Scholes option-pricing model at each balance sheet date until exercised or cancelled, with changes in fair value recognized as general and administrative stock-based compensation expense or additional paid-in capital for ASC 718 awards or general and administrative stock-based compensation expense for ASC 815 awards for the period. The Black-Scholes option pricing model uses various inputs to measure fair value, including fair value of the Company’s underlying common shares at the grant date, expected term, expected volatility, risk-free interest rate and expected dividend yield of the Company’s common shares.

Net income (loss) per common share

(m) Net income (loss) per common share:

Basic net income (loss) per common share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding for the period. Diluted net income (loss) per common share is computed by adjusting the numerator and denominator of the basic net income (loss) per share calculation for the potential impact of dilutive securities.

For the years ended December 31, 2016 and December 31, 2015, all stock options were anti-dilutive and were excluded from the diluted weighted average common shares outstanding for those periods. For the year ended December 31, 2014, 154,057  stock options were excluded from the calculation of net income per common share because their inclusion would be anti-dilutive.

Foreign currency translation

(n) Foreign currency translation:

The Company’s reporting currency is the U.S. dollar. The functional currency of the Company changed to U.S. dollars from Canadian dollars on January 1, 2015 based on management’s analysis of the changes in the primary economic environment in which the Company operates. The Company’s reporting currency did not change. The change in functional currency is accounted for prospectively from January 1, 2015 and prior year financial statements have not been restated for the change in functional currency.

For all relevant periods, foreign currency revenue and expense transactions were recorded using the exchange rates prevailing at the dates of the transactions.

For periods prior to January 1, 2015, the effects of exchange rate fluctuations on translating foreign currency monetary assets and liabilities into Canadian dollars were included in the statement of operations and comprehensive income (loss) as foreign exchange gain (loss). Revenue and expense transactions were translated into the U.S. dollar reporting currency at the balance sheet date at average exchange rates during the period, and assets and liabilities were translated at end of period exchange rates, except for equity transactions, which were translated at historical exchange rates. Translation gains and losses from the application of the U.S. dollar as the reporting currency while the Canadian dollar was the functional currency are included as part of the cumulative foreign currency translation adjustment, which is reported as a component of shareholders’ equity under accumulated other comprehensive income (loss).

For periods commencing January 1, 2015, monetary assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates in effect at the balance sheet date. Opening balances related to non-monetary assets and liabilities are based on prior period translated amounts, and nonmonetary assets and nonmonetary liabilities incurred after January 1, 2015 are translated at the approximate exchange rate prevailing at the date of the transaction. Revenue and expense transactions are translated at the approximate exchange rate in effect at the time of the transaction. Foreign exchange gains and losses are included in the consolidated statement of operations and comprehensive income (loss) as foreign exchange gain (loss).

Income taxes

(o) Income taxes:

Deferred income taxes are recognized for the future tax consequences attributable to differences between the carrying amounts of assets and liabilities and their respective tax bases and net operating loss and credit carryforwards. Deferred income tax assets and liabilities are measured at enacted rates expected to apply to taxable income in the years in which those temporary differences and carryforwards are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in the consolidated statement of operations and comprehensive income (loss) in the period that includes the enactment date. A valuation allowance is provided when realization of deferred income tax assets does not meet the more-likely-than-not criterion for recognition.

Deferred tenant inducements

(p) Deferred tenant inducements:

Deferred tenant inducements, which include leasehold improvements paid for by the landlord and free rent, are recorded as liabilities on the balance sheet and recognized as a reduction of rent expense on a straight-line basis over the term of the lease.

Segment and geographic information

(q) Segment and geographic information:

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one operating segment.

Comparative figures

(r) Comparative figures:

Certain comparative figures have been reclassified to conform to the consolidated financial statement presentation adopted for the current year.