View Filing Data

Year Ending

September 30, 2020

September 30, 2021

September 30, 2022

September 30, 2023

Document and Entity Information - USD ($)	9 Months Ended
Document and Entity Information - USD ($)	Sep. 30, 2019	Dec. 12, 2019	Mar. 29, 2019
Document And Entity Information
Entity Registrant Name	Edesa Biotech, Inc.
Entity Central Index Key	0001540159
Document Type	10-KT
Document Period End Date	Sep. 30, 2019
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	true
Entity Small Business	true
Entity Shell Company	false
Entity Public Float			$ 5,757,940
Entity Common Stock, Shares Outstanding		7,504,468
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2019

Consolidated Balance Sheets - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 5,030,583	$ 3,367,098
Accounts and other receivable	217,101	7,339
Prepaid expenses and deposits	397,022	16,487
Total current assets	5,644,706	3,390,924
Property, plant and equipment, net	73,058	7,386
Total assets	5,717,764	3,398,310
Current liabilities:
Accounts payable and accrued liabilities	461,634	183,820
Total current liabilities	461,634	183,820
Commitments (Note 5)
Shareholders' equity:
Authorized unlimited common and preferred shares without par value issued and outstanding: 7,504,468 common shares (2018 - 3,239,902)	12,005,051	1,111,253
Preferred shares	0	6,064,013
Additional paid-in capital	327,768	230,792
Accumulated other comprehensive loss	(342,074)	(429,973)
Accumulated deficit	(6,734,615)	(3,761,595)
Total shareholders' equity	5,256,130	3,214,490
Total liabilities and shareholders' equity	$ 5,717,764	$ 3,398,310

Consolidated Balance Sheets (Parenthetical) - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Capital shares, par value	$ 0	$ 0
Capital shares, authorized	Unlimited	Unlimited
Capital shares, issued	7,504,468	3,239,902
Capital shares, outstanding	7,504,468	3,239,902
Preferred stock shares, issued	0	1,007,143
Preferred stock shares, outstanding	0	1,007,143

Consolidated Statements of Operations and Comprehensive Loss - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2018
Revenues:
Product sales	$ 410,870	$ 0
Expenses:
Cost of sales	101,286	0
Research and development	1,096,426	1,075,491
General and administrative	2,045,296	543,155
Total expenses	3,243,008	1,618,646
Loss from operations	(2,832,138)	(1,618,646)
Other income (loss):
Interest income	56,840	64,307
Foreign exchange gain (loss)	(1,436)	17,783
Total other income (loss)	55,404	82,090
Net loss	(2,776,734)	(1,536,556)
Exchange differences on translation	87,899	(328,838)
Net loss and comprehensive loss	$ (2,688,835)	$ (1,865,394)
Weighted average number of common shares	5,036,331	3,239,902
Loss per share - basic and diluted	$ (0.55)	$ (0.47)

Consolidated Statements of Cash Flows - USD ($)	9 Months Ended	12 Months Ended
Consolidated Statements of Cash Flows - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Cash flows from operating activities:
Net loss	$ (2,776,734)	$ (1,536,556)
Adjustments for:
Depreciation	4,779	1,655
Gain on disposition of fixed assets	(2,172)	0
Share-based compensation	35,074	81,344
Change in working capital items:
Accounts and other receivable	9,737	4,029
Prepaid expenses and other assets	(311,466)	81,658
Inventory	77,913	0
Accounts payable and accrued liabilities	(1,882,918)	79,040
Net cash used in operating activities	(4,845,787)	(1,288,830)
Cash flows from investing activities:
Cash acquired during reverse acquisition	6,389,322	0
Purchases of property and equipment	(8,095)	(6,869)
Proceeds on sales of property and equipment	36,741	0
Net cash provided by (used in) investing activities	6,417,968	(6,869)
Effect of exchange rate changes on cash	91,304	(337,325)
Net change in cash and cash equivalents	1,663,485	(1,633,024)
Cash and cash equivalents, beginning of period or year	3,367,098	5,000,122
Cash and cash equivalents, end of period or year	5,030,583	3,367,098
Supplemental disclosure of Non-cash investing and financing activities:
Non-cash assets acquired and liabilities assumed in reverse acquisition - See Note 11	(1,693,921)	0
Preferred shares exchanged for common shares in reverse acquisition	$ 6,260,299	$ 0

Consolidated Statements of Changes in Shareholders' Equity - USD ($)	Common Shares	Class A Preferred Shares	Additional Paid-in Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit	Total
Beginning balance, shares at Dec. 31, 2017	3,239,902	1,007,143
Beginning balance, amount at Dec. 31, 2017	$ 1,111,253	$ 5,616,801	$ 149,448	$ (101,135)	$ (1,777,827)	$ 4,998,540
Preferred return for Class A preferred shares		447,212			(447,212)	0
Effect of reverse acquisition, shares
Effect of reverse acquisition, amount
Share-based compensation			81,344			81,344
Net loss and comprehensive loss				(328,838)	(1,536,556)	(1,865,394)
Ending balance, shares at Dec. 31, 2018	3,239,902	1,007,143
Ending balance, amount at Dec. 31, 2018	$ 1,111,253	$ 6,064,013	230,792	(429,973)	(3,761,595)	3,214,490
Preferred return for Class A preferred shares		$ 196,286			(196,286)	0
Effect of reverse acquisition, shares	888,454	(1,007,143)
Effect of reverse acquisition, amount	$ 4,633,499	$ (6,260,299)	61,902			4,695,401
Share-based compensation			35,074			35,074
Net loss and comprehensive loss				87,899	(2,776,734)	(2,688,835)
Ending balance, shares at Sep. 30, 2019	7,504,468	0
Ending balance, amount at Sep. 30, 2019	$ 12,005,051	$ 0	$ 327,768	$ (342,074)	$ (673,615)	$ 5,256,130

Nature of Operations

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations

Edesa Biotech, Inc. (the “Company” or “Edesa”) is a biopharmaceutical company focused on acquiring, developing and commercializing clinical stage drugs for dermatological and gastrointestinal indications with clear unmet medical needs. The Company is organized under the laws of British Columbia, Canada and is headquartered in Markham, Ontario.

In June 2019, the Company changed its name from Stellar Biotechnologies, Inc. to Edesa Biotech, Inc. following a reverse acquisition with Edesa Biotech Research, Inc., formerly known as Edesa Biotech Inc., a company organized under the laws of the province of Ontario. At the closing of the transaction, which occurred on June 7, 2019, the Company acquired the entire issued share capital of Edesa Biotech Research, Inc., with Edesa Biotech Research, Inc., becoming a wholly-owned subsidiary of the Company. Also, on June 7, 2019, in connection with and following the completion of the reverse acquisition, the Company effected a 1- for-6 reverse split of its common shares.

The Company’s common shares trade on The Nasdaq Capital Market in the United States under the symbol “EDSA”.

Liquidity

Our operations have historically been funded through issuances of preferred shares that were converted into common shares, loans that were converted into common shares and government grants. For the short-period fiscal year September 30, 2019 and year ended December 31, 2018, the Company reported net losses of approximately $2.78 million and $1.54 million, respectively. At September 30, 2019, we had cash and cash equivalents of $5.03 million, working capital of $5.17 million, shareholders’ equity of $5.26 million and an accumulated deficit of $6.73 million.

We plan to finance company operations for at least the next twelve months with cash and investments on hand and sales of surplus product inventory obtained in the reverse acquisition. Management expects to continue incurring losses for the foreseeable future and will need to raise additional capital to pursue our business plan beyond December 2020. Management has flexibility to adjust this timeline by making changes to planned expenditures related to, among other factors, the size and timing of clinical trial expenditures, staffing levels, and the acquisition or in-licensing of new product candidates. Management also expects to seek additional financing through debt and/or equity financings, including transactions with strategic companies that may include debt and/or equity arrangements.

Basis of Preparation

9 Months Ended

Sep. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Preparation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and include the accounts of the Company and its wholly-owned subsidiaries, Edesa Biotech Research, Inc., an Ontario corporation, and Stellar Biotechnologies, Inc., a California corporation in the U.S. All intercompany balances and transactions have been eliminated in consolidation.

Upon the completion of the reverse acquisition, Edesa Biotech Research, Inc. changed its fiscal year end from December 31 to September 30 to align with the Company’s fiscal year end. The accompanying consolidated financial statements include the short-period fiscal year ended September 30, 2019 and the year ended December 31, 2018.

Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Accounting Policies [Abstract]

Significant Accounting Policies

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 assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period or year. Actual results could differ from those estimates. Areas where significant judgment is involved in making estimates are valuation of accounts receivable; valuation and useful lives of property and equipment; deferred income taxes; classification of Class A convertible preferred shares as liability or equity; the determination of fair value of share-based compensation; the determination of fair value of shares and replacement warrants for the reverse acquisition; and forecasting future cash flows for assessing the going concern assumption.

Functional and reporting currencies

The consolidated financial statements of the Company are presented in U.S. dollars, unless otherwise stated. The functional currency of the Company and its wholly-owned subsidiary, Edesa Biotech Research, Inc., as determined by management, is Canadian dollars. The functional currency of the Company’s wholly-owned subsidiary, Stellar Biotechnologies, Inc. is U.S. dollars.

Cash and cash equivalents

Cash and cash equivalents consist of demand deposits with financial institutions and highly liquid investments which are readily convertible into cash with maturities of three months or less when purchased. The carrying amount of cash and cash equivalents approximates its fair value due to its short-term nature.

Investments

Investments during the year consisted of U.S. Treasury bills with original maturities between 13 and 52 weeks. They are classified as held-to-maturity and are reported at amortized cost, which approximates fair value. The Company regularly reviews these investments to determine whether any decline in fair value below the amortized cost basis has occurred that is other than temporary. If a decline in fair value has occurred that is determined to be other than temporary, the cost basis of the investment is written down to fair value. There were no investments outstanding at September 30, 2019 or December 31, 2018.

Accounts receivable

The Company assesses the collectability of its accounts receivable through a review of its current aging, as well as an analysis of its historical collection rate, general economic conditions and credit status of its customers. Accounts receivable include Harmonized Sales Tax (HST) refunds receivable. As of September 30, 2019, all outstanding accounts and HST refunds receivable were deemed to be fully collectible, and therefore, no allowance for doubtful accounts was recorded.

Property and equipment

Property and equipment are recorded at historical cost less accumulated depreciation and any accumulated impairment losses. Depreciation is recorded to write off the cost of assets less their residual values over their useful lives, using the declining balance and straight-line methods. Assets not in use and on consignment for sale are carried at the expected net proceeds value. Maintenance and repair expenditures that do not improve or extend the life are expensed in the period incurred. Any gain or loss arising on the disposal or retirement of an item of property and equipment is recognized as the difference between the sales proceeds and the carrying amount of the asset. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each year, with the effect of any changes in estimate accounted for on a prospective basis.

Impairment of long-lived assets

Long-lived assets are tested for impairment when indicators of impairment exist. When a significant change in the expected timing or amount of the future cash flows of the financial asset is identified, the carrying amount of the financial asset is reduced and the amount of the write-down is recognized as a loss. A previously recognized impairment loss may be reversed to the extent of the improvement, provided it is not greater than the amount that would have been reported at the date of the reversal had the impairment not been recognized previously, and the amount of the reversal is recognized in net income (loss).

Fair value measurement

The Company uses the fair value measurement framework for valuing financial assets and liabilities. See Note 8.

Revenue Recognition

Revenues and accounts receivable are recognized when the promised goods or services are transferred to customers, in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those goods or services. Revenues consist of sales of product inventory obtained in the reverse acquisition completed in June 2019, which are recognized upon shipment when the customer obtains control of the product and the Company has no further performance obligations.

Research and development

Research and development expenses principally consist of (i) contract research organizations for clinical trial management services, (ii) contract manufacturing organizations for manufacturing the drug compound(s) for use in clinical trials and (iii) salaries of employees directly involved in research and development efforts. Research and development costs are expensed as incurred.

Share-based compensation

The Company measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted since the fair value of the goods or services received by the Company cannot be reliably estimated.

The Company grants options to buy common shares of the Company to its directors, officers, employees and consultants, and grants other equity-based instruments such as warrants to non-employees. The fair value of share-based compensation is measured on the date of grant, using the Black-Scholes option valuation model and is recognized over the vesting period net of estimated forfeitures for employees or the service period for non-employees. The provisions of the Company's share-based compensation plans do not require the Company to settle any options by transferring cash or other assets, and therefore the Company classifies the awards as equity. The Black-Scholes option valuation model requires the input of subjective assumptions, including price volatility of the underlying stock, risk-free interest rate, dividend yield, and expected life of the option.

Translation of foreign currency transactions

The Company's reporting currency is the U.S. dollar. The financial statements of the parent Company and its wholly-owned Canadian subsidiary are measured using the Canadian dollar as the functional currency. Assets and liabilities of the Canadian operations have been translated at year-end exchange rates and related revenue and expenses have been translated at average exchange rates for the year. Accumulated gains and losses resulting from the translation of the financial statements of the Canadian operations are included as part of accumulated other comprehensive loss, a separate component of shareholders' equity.

For other transactions denominated in currencies other than the Company’s functional currency, the monetary assets and liabilities are translated at the year-end rates. Revenue and expenses are translated at rates of exchange prevailing on the transaction dates. Non-monetary balance sheet and related income statement accounts are remeasured into U.S. dollar using historical exchange rates. All of the exchange gains or losses resulting from these other transactions are recognized in the statements of operations and comprehensive loss.

Income taxes

Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the tax bases of assets and liabilities and their financial statement reported amounts using enacted tax rates and laws in effect in the year in which the differences are expected to reverse. A valuation allowance is provided against deferred tax assets when it is determined to be more likely than not that the deferred tax asset will not be realized.

The Company assesses the likelihood of the financial statement effect of a tax position that should be recognized when it is more likely than not that the position will be sustained upon examination by a taxing authority based on the technical merits of the tax position, circumstances, and information available as of the reporting date. The Company is subject to examination by taxing authorities in Canada and the U.S. Management does not believe that there are any uncertain tax positions that would result in an asset or liability for taxes being recognized in the accompanying financial statements. The Company recognizes tax-related interest and penalties, if any, as a component of income tax expense.

The Company accounts for income taxes on a tax jurisdictional basis. The Company files income tax returns in Canada, the provinces of British Columbia and Ontario, the U.S. and the state of California.

Earnings (loss) per share

Basic earnings (loss) per share is calculated by dividing income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period.

The computation of diluted earnings (loss) per share assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on earnings (loss) per share. The dilutive effect of convertible securities is reflected in diluted earnings per share by application of the “if converted” method. The dilutive effect of outstanding options and warrants and their equivalents is reflected in diluted earnings per share by application of the treasury stock method. Conversion of outstanding options and warrants would have an antidilutive effect on loss per share for the nine-month transition period ended September 30, 2019 and year ended December 31, 2018 and are therefore excluded from the computation of diluted loss per share.

Segmented Information

The Company's operations comprise a single reportable segment engaged in the research and development, manufacturing and commercialization of innovative pharmaceutical products. As the operations comprise a single reportable segment, amounts disclosed in the consolidated financial statements for loss, comprehensive loss, depreciation and total assets also represent segmented amounts.

Adoption of Recent Accounting Pronouncements

On October 1, 2018, the Company adopted Accounting Standards Codification (ASC) 606 Revenue Recognition – Revenue from Contracts with Customers using the modified retrospective method applied to those contracts which were not completed as of this date. Results for reporting periods beginning after October 1, 2018 are presented under ASC Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with the historical accounting under ASC Topic 605. There was no impact to the historical consolidated financial statements resulting from the Company’s adoption of ASC Topic 606. There are no revenues in the accompanying consolidated financial statements prior to the completion of the reverse acquisition on June 7, 2019.

The Company recognizes revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The Company recognizes revenue following the five-step model prescribed under ASC Topic 606: (1) identify contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenues when (or as) the Company satisfies the performance obligation(s). Revenues consist of sales of product inventory obtained in the reverse acquisition, which are recognized upon shipment when the customer obtains control of the product and the Company has no further performance obligations.

Future accounting pronouncements

In February 2016, the FASB issued new guidance, ASU No. 2016-02, Leases (Topic 842). The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. Additional qualitative and quantitative disclosures are also required by the new guidance. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. Topic 842 is effective for annual reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company will adopt the new standard on October 1, 2019 and use the effective date as its date of initial application.

The new standard provides a number of optional practical expedients in transition. The Company expects to elect the ‘package of practical expedients’, which permits the Company not to reassess under the new standard prior conclusions about lease identification, lease classification and initial direct costs.

The Company expects that this standard will have a material effect on the consolidated financial statements. The Company has assessed that the most significant effects relate to (1) the recognition of new ROU assets and lease liabilities on the balance sheet for the Company’s operating leases; and (2) providing significant new disclosures about the Company’s leasing activities. The Company does not expect a significant change in leasing activities between now and adoption. Currently, the Company estimates that the discounted value of operating lease commitments at September 30, 2019 totaling approximately $305,000 will be recognized as a right-of-use asset and corresponding lease liability at the transition date, with no impact to opening retained earnings at that date.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which includes provisions that require financial assets measured at amortized cost basis to be presented at the net amount expected to be collected and credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses, which requires recognition of an estimate of all current expected credit losses. The guidance is effective for public entities for fiscal years beginning after December 15, 2019, including interim periods within those years, with early adoption permitted for fiscal years beginning after December 15, 2018. These standards are effective for the Company during the fiscal year ending September 30, 2021. Management is in the process of assessing the impact of ASU 2016-13 on the Company’s consolidated financial statements.

Property and Equipment

9 Months Ended

Sep. 30, 2019

Property, Plant and Equipment [Abstract]

Property and Equipment

Property and equipment, net consisted of the following:

	September 30,			December 31,
	2019			2018
Computer equipment	$	42,910		$	4,828
Furniture and equipment		7,932			5,578
		50,842			10,406
Less: accumulated depreciation		(29,194	)		(3,020	)
Depreciable assets, net		21,648			7,386
Assets not in service		51,410			—
Total property and equipment, net	$	73,058		$	7,386

Assets not in service represent equipment acquired in the reverse acquisition and held for sale on consignment by a third party.

Depreciation expense amounted to approximately $4,800 and $1,700 for the nine-month transition period ended September 30, 2019 and year ended December 31, 2018, respectively.

Commitments

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments

Operating leases

The Company leases facilities used for executive offices from a related company for a six-year term through December 2022, with options to renew for another two-year term.

The Company leases buildings and facilities used by its California subsidiary under three lease agreements. The Company intends to allow the leases to expire at the end of their current respective terms in June 2020, September 2020 and October 2020.

Aggregate future minimum lease payments at September 30, 2019 are as follows:

Total rent was approximately $126,000 and $79,000 for the nine-month transition period ended September 30, 2019 and year ended December 31, 2018, respectively.

Related party commitments

On August 14, 2002, through its California subsidiary, the Company entered into a patent royalty agreement with a director of the Company, whereby he would receive royalty payments in exchange for assignment of his patent rights to the Company. The royalty is 5% of gross receipts from products using this invention in excess of $500,000 annually.

Other license and royalty commitments

In 2016, through its Ontario subsidiary, the Company entered into a license agreement with a third party to obtain exclusive rights to certain know-how, patents and data relating to a pharmaceutical product. The Company will use the exclusive rights to develop the product for therapeutic, prophylactic and diagnostic uses in topical dermal applications and anorectal applications. No intangible assets have been recognized under the license agreement with the third party as of September 30, 2019 and December 31, 2018. Under the license agreement, the Company is committed to payments of various amounts to the third party upon meeting certain milestones outlined in the license agreement, up to an aggregate amount of $18.6 million. Upon divestiture of substantially all of the assets of the Company, the Company shall pay the third party a percentage of the valuation of the licensed technology sold as determined by an external objective expert. The Company also has a commitment to pay the third party a royalty based on net sales of the product in countries where the Company, or an affiliate, directly commercializes the product and a percentage of sublicensing revenue received by the Company and its affiliates in the countries where it does not directly commercialize the product. No license or royalty payments were made to the third party during the nine-month transition period ended September 30, 2019 and year ended December 31, 2018.

In 2016, also through its Ontario subsidiary, the Company entered into an exclusive license agreement with another third party to obtain exclusive rights to certain know-how, patents and data relating to a pharmaceutical product. No intangible assets have been recognized under the license agreement as of September 30, 2019 and December 31, 2018. Under the license agreement, the Company is committed to payments of up to a total of $18.5 million upon meeting certain milestones outlined in the license agreement. The Company also has a commitment to pay a royalty based on net sales of the product in the countries where the Company directly commercializes the product and a percentage of sublicensing revenue received by the Company and its affiliates in the countries where it does not directly commercialize the product. No license or royalty payments were made to the third party during the nine-month transition period ended September 30, 2019 and year ended December 31, 2018.

Other commitments

The Company contracted research organizations who perform clinical trials for the Company’s on-going clinical studies and other service providers. Aggregate future contractual payments to those service organizations at September 30, 2019 are as follows:

Retirement savings plan 401(k) contributions

Executive officers and employees of our California subsidiary are eligible to receive the Company’s non-elective safe harbor employer contribution of 3% of eligible compensation under a 401(k) plan to provide retirement benefits. Employees are 100% vested in employer contributions and in any voluntary employee contributions. Contributions to the 401(k) plan were approximately $5,000 during the nine-month transition period ended September 30, 2019. There are no 401(k) contributions in the accompanying consolidated financial statements prior to the completion of the reverse acquisition on June 7, 2019.

Capital Shares

9 Months Ended

Sep. 30, 2019

Stockholders' Equity Note [Abstract]

Capital Shares

Reverse Share Split

On June 7, 2019, the Company effected a reverse split of the Company's common shares at a ratio of 1-for-6. As a result of the reverse split, every six shares of the issued and outstanding common shares, without par value, consolidated into one newly issued outstanding common share, without par value, after fractional rounding. All shares and exercise prices are presented on a post-split basis in these consolidated financial statements.

Black-Scholes option valuation model

The Company uses the Black-Scholes option valuation model to determine the fair value of share-based compensation for share options and compensation warrants granted. Option valuation models require the input of highly subjective assumptions including the expected price volatility. The Company has used historical volatility to estimate the volatility of the share price. Changes in the subjective input assumptions can materially affect the fair value estimates, and therefore the existing models do not necessarily provide a reliable single measure of the fair value of the Company’s warrants and share options.

Warrants

A summary of the Company’s warrants activity is as follows:

				Weighted
	Number of			Average
	Warrants (#)			Exercise Price
Balance – December 31, 2018 and 2017		—		$	—
Effect of reverse acquisition		362,430			31.60
Black-Scholes value payout		(313,516	)		33.01
Balance – September 30, 2019		48,914		$	11.19

The fair value of warrants acquired in the reverse acquisition that subsequently had a Black-Scholes value payout totaled $1,187,124. The weighted average contractual life remaining on the outstanding warrants at September 30, 2019 is 49 months.

The following table summarizes information about the warrants outstanding at September 30, 2019:

Number of Warrants (#)		Exercise Prices		Expiry Dates
	28,124	$	15.90	May 2023
	20,790		4.81	June 2024
	48,914

Share Options

The Company adopted an Equity Incentive Compensation Plan in 2019 (the 2019 Plan) administered by the Board of Directors, which amended and restated the 2017 Incentive Compensation Plan (the 2017 Plan). Options, restricted shares and restricted share units are eligible for grant under the 2019 Plan. The number of shares available for issuance under the 2019 Plan is 1,153,147, including shares available for the exercise of outstanding options under the 2017 Plan. Option holders under the Edesa Share Option Plan received substitute options upon completion of the reverse acquisition.

The Company's 2019 Plan allows options to be granted to directors, officers, employees and certain external consultants and advisers. Under the 2019 Plan, the option term is not to exceed 10 years. The term, vesting and exercise price of each option is determined by the independent members of the Board of Directors upon grant.

Options have been granted allowing the holders to purchase common shares of the Company as follows:

				Weighted
	Number of			Average
	Options (#)			Exercise Price
Balance – December 31, 2017		289,203		$	1.65
Granted		25,920			1.65
Balance – December 31, 2018		315,123		$	1.65
Effect of reverse acquisition		7,787			124.80
Expired		(3,265	)		125.75
Balance – September 30, 2019		319,645		$	3.39

The weighted average contractual life remaining on the outstanding options at September 30, 2019 is 96 months.

The following table summarizes information about the options under the 2019 Plan outstanding and exercisable at September 30, 2019:

		Exercisable at		Range of
Number of Options (#)		September 30, 2019 (#)		Exercise Prices		Expiry Dates

	315,123		242,428	C$	2.16	Aug 2027-Dec 2028
	333		333	C$	105.00-243.60	Dec 2019-May 2020
	214		214	C$	638.40	Nov 2021
	3,499		3,499	$	35.28-93.24	Sep 2023-Mar 2025
	238		238	$	304.08	Dec 2022
	238		238	$	768.60	Nov 2020
	319,645		246,950

The fair value of options granted during the year ended December 31, 2018 was estimated using the Black-Scholes Option Pricing Model using the following assumptions:

Risk free interest rate	1.98	%
Expected life (years)	4
Expected share price volatility	79.46	%
Expected dividend yield	0	%

No share options were granted during the nine-month transition period ended September 30, 2019, however share options were assumed in the reverse acquisition.

The Company recorded approximately $35,000 and $81,000 of share-based compensation expenses for the nine-month transition period ended September 30, 2019 and year ended December 31, 2018 respectively.

As of September 30, 2019, the Company had approximately $30,000 of unrecognized share-based compensation expense, which is expected to be recognized over a period of 27 months.

Issued and outstanding common shares:

	Number of Common Shares (#)		Common Shares
Balance – December 31, 2018 and 2017		3,239,902	$	1,111,253

Conversion of preferred shares upon reverse acquisition		3,376,112		6,260,299
Share consideration transferred upon reverse acquisition		888,454		4,633,499

Balance – September 30, 2019		7,504,468	$	12,005,051

Issued and outstanding preferred shares:

	Class A Preferred			Class A Preferred
	Shares (#)			Shares
Balance – December 31, 2017		1,007,143		$	5,616,801
Preferred return on Class A preferred shares		—			447,212
Balance – December 31, 2018		1,007,143		$	6,064,013
Preferred return on Class A preferred shares		—			196,286
Conversion upon reverse acquisition		(1,007,143	)		(6,260,299	)
Balance – September 30, 2019		—		$	—

The Class A preferred shares are voting and convertible into common shares at the option of the holder at any time. Upon the occurrence of a liquidation event, as defined in the resolutions of the shareholders dated August 28, 2017, the Class A preferred shares have a liquidation amount preference over the rights of holders of common shares or any class of shares ranking junior to Class A preferred shares. The Class A preferred shares also contain an 8% preferred return that accrues daily and compounds annually and is payable in shares upon conversion.

The Company has evaluated the convertible preferred shares and the embedded conversion option. The embedded conversion option does not meet the criteria for bifurcation and has therefore been classified to equity.

Following the completion of the reverse acquisition on June 7, 2019, all the outstanding Class A preferred shares and accumulated accrued preferred return were fully converted to 3,376,112 common shares based on the fair market value upon conversion.

Income Tax

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Income Tax

The reconciliation of the combined Canadian federal and provincial statutory income tax rate to the approximate effective tax rate is as follows:

	Nine-month Period Ended September 30, 2019			Year Ended December 31, 2018

Net loss before recovery of income taxes	$	(2,776,734	)	$	(1,536,556)
Canadian federal and provincial statutory income tax rate		26.5	%		26.5	%

Expected income tax recovery	$	(736,000	)	$	(407,000	)
Permanent differences		11,000			41,000
Effect of foreign currency and foreign tax rate differences		(60,000	)		—
Change in valuation allowance		785,000			366,000

Income tax (recovery) expense	$	—		$	—

Unrecognized deferred tax assets

Deferred taxes are provided as a result of temporary differences that arise due to the difference between the income tax values and the carrying amount of assets and liabilities. Approximate deferred tax assets are as follows:

	September 30, 2019			December 31, 2018

Non-capital losses carried forward - Canada	$	3,592,000		$	575,000
Non-capital losses carried forward - U.S.		1,587,000			—
Share issuance and financing costs		517,000			26,000
Research and development tax credits		626,000			121,000
Other temporary differences		28,000			15,000

Total deferred tax assets	$	6,350,000		$	737,000
Valuation allowance		(6,350,000	)		(737,000	)

Net deferred taxes	$	—		$	—

Realization of the deferred tax assets is dependent upon the generation of future taxable income, the amount and timing of which are uncertain. It is more likely than not that a tax benefit will not be realized. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance.

Non-capital losses, capital losses, and research and development credits generated by Stellar Biotechnologies, Inc. prior to changes in share ownership that occurred as a result of the reverse acquisition are substantially limited. It is unlikely that tax losses totaling $25.5 millin and credits totaling $0.6 million will be utilized to offset potential future taxable income before expiration and they are excluded from deferred tax assets above.

The approximate Canadian non-capital losses carried forward at September 30, 2019 expire as follows:

2028	C$	21,000
2029		56,000
2030		346,000
2031		688,000
2032		860,000
2033		685,000
2034		780,000
2035		1,369,000
2036		1,705,000
2037		1,909,000
2038		3,243,000
2039		6,058,000

Total	C$	17,720,000

Share issuance and financing costs will be fully amortized in 2024.

The U.S. non-capital losses carried forward at September 30, 2019 totalled approximately $7,536,000, which do not expire for federal taxes and include $70,000 that expires in 2039 for state taxes.

Financial Instruments

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Financial Instruments

(a)

Fair values

The Company uses the fair value measurement framework for valuing financial assets and liabilities measured on a recurring basis in situations where other accounting pronouncements either permit or require fair value measurements.

Fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The Company follows the fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are inputs that reflect assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs 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.

There are three levels of inputs that may be used to measure fair value:

●	Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

●

Level 2 - Inputs other than quoted prices included in 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, or quoted prices for identical or similar assets and liabilities in markets that are not active.

●	Level 3 - Unobservable inputs for the asset or liability that are supported by little or no market activity.

The carrying value of certain financial instruments such as cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximates fair value due to the short-term nature of such instruments. Short-term investments in U.S. Treasury Bills are recorded at amortized cost, which approximates fair value using level 1 inputs.

(b)

Interest rate and credit risk

Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in interest rates. The Company does not believe that the results of operations or cash flows would be affected to any significant degree by a significant change in market interest rates, relative to interest rates on cash and cash equivalents due to the short-term nature of these balances.

The Company is also exposed to credit risk at period end from the carrying value of its cash and cash equivalents and accounts and other receivables. The Company manages this risk by maintaining bank accounts with Canadian Chartered Banks, U.S. banks believed to be credit worthy and U.S. Treasury Bills. The Company’s cash is not subject to any external restrictions. The Company assesses the collectability of accounts receivable through a review of the current aging, as well as an analysis of historical collection rates, general economic conditions and credit status of customers. Credit risk for HST refunds receivable is not considered significant since amounts are due from the Canada Revenue Agency.

(c)

Foreign exchange risk

The Company and its subsidiary have balances in Canadian dollars that give rise to exposure to foreign exchange (“FX”) risk relating to the impact of translating certain non-U.S. dollar balance sheet accounts as these statements are presented in U.S. dollars. A strengthening U.S. dollar will lead to a FX loss while a weakening U.S. dollar will lead to a FX gain. The Company has not entered into any agreements or purchased any instruments to hedge possible currency risks. At September 30, 2019, the Company and its Canadian subsidiary had assets of C$2.4 million and the U.S. dollar was equal to 1.324 Canadian dollars. Based on the exposure at September 30, 2019, a 10% annual change in the Canadian/U.S. exchange rate would impact the Company’s loss and other comprehensive loss by approximately $182,000.

(d)

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty raising liquid funds to meet commitments as they fall due. In meeting its liquidity requirements, the Company closely monitors its forecasted cash requirements with expected cash drawdown.

Related Party Transactions

9 Months Ended

Sep. 30, 2019

Related Party Transactions

During the periods presented, the Company incurred the following related party transactions:

●

During the nine-month transition period ended September 30, 2019 and year ended December 31, 2018, the Company incurred rent expense of approximately $58,000 and $79,000 from a related company, respectively. These transactions are in the normal course of operations and are measured at the exchange amount, which is the amount of consideration established and agreed to by both parties. Included in accounts payable and accrued liabilities at December 31, 2018 was rent payable of approximately $14,000. No rent was payable at September 30, 2019.

●

During the nine-month transition period ended September 30, 2019, the Company incurred royalty expenses of approximately $20,000 to a director related to products sales by the California subsidiary. Included in accounts payable and accrued liabilities at September 30, 2019 was royalty payable of approximately $23,000 to that director, including for products sales by the California subsidiary prior to the completion of the reverse acquisition.

Comparative Figures

9 Months Ended

Sep. 30, 2019

Comparative Figures

Comparative Figures

Certain reclassifications have been made to the prior year’s financial statements to enhance comparability with the current year’s financial statements. In the accompanying year ended December 31, 2018 Statement of Operations and Comprehensive Loss, depreciation of $1,655 was reclassified to general and administrative expenses and share based compensation expense of $27,139 and $54,205 was reclassified to research and development expenses and general and administrative expenses, respectively.

Unaudited summary comparative financial information for the transition period is as follows:

	(Unaudited)
	Nine Months Ended
	September 30, 2018
Total Expenses	$	(1,212,905	)
Other Income		41,198
Net Loss		(1,171,707	)
Exchange differences on translation		(346,598	)
Net Loss and Comprehensive Loss	$	(1,518,305	)

Weighted average number of common shares		3,239,902
Loss per share - basic and diluted	$	(0.36	)

Business Combination

9 Months Ended

Sep. 30, 2019

Business Combinations [Abstract]

Business Combination

On June 7, 2019, the Edesa Biotech Research, Inc., formerly known as Edesa Biotech Inc., a company organized under the laws of the province of Ontario, Canada (“Edesa Research”), completed its business combination with Stellar Biotechnologies, Inc. a company organized under the laws of British Columbia, Canada (“Stellar”), in accordance with the terms of the Share Exchange Agreement, dated March 7, 2019 (the “Exchange Agreement”), by and among Stellar, Edesa Research and the shareholders of Edesa Research (the “Edesa Research Shareholders”). At the closing of the transaction (the “Closing”), Stellar acquired the entire issued share capital of Edesa Research, with Edesa Research becoming a wholly-owned subsidiary of Stellar (the “Exchange”). The Edesa Research Shareholders exchanged their shares for 88% of the outstanding shares of Stellar on a fully diluted basis. Edesa Research is considered the accounting acquirer of Stellar. Upon closing, Stellar changed its name to Edesa Biotech, Inc. Edesa Research entered into the Exchange primarily to provide greater liquidity to its shareholders, broaden its investment base, increase its profile, and facilitate the process of raising capital as the Company contemplates pursuing new growth opportunities including acquisition of new clinical assets.

The fair value of consideration transferred in the reverse acquisition is calculated as follows:

Fair value of 888,454 share consideration transferred, net of liquidity discount	$	4,633,499
Excess fair value of replacement warrants		61,902
Total acquisition date fair value of consideration transferred	$	4,695,401

The fair value of the replacement warrants was determined using Black-Scholes valuation model based on exercise price of C$6.45, expected life of 5 years, risk free rate of 1.34% and volatility of 130%.

The major classes of assets acquired and liabilities assumed in the reverse acquisition are as follows:

Cash and cash equivalents	$	6,389,322
Other current assets		418,837
Noncurrent assets		42,045
Fair value of warrants payable		(1,187,124	)
Other current liabilities		(967,679	)
Net assets of Stellar	$	4,695,401

The following are the unaudited supplemental pro forma results of operations for the nine-month period ended September 30, 2019 and year ended December 31, 2018. These pro forma results are reported as if the reverse acquisition had been completed on January 1, 2018 and include estimates and assumptions that management believes are reasonable. Since these pro forma results include all one-time reverse acquisition costs and do not include any anticipated cost savings or other effects of the planned integration of the entities, they are not necessarily indicative of the actual results that would have occurred if the combined business had been in effect beginning January 1, 2018.

	(Unaudited) Supplemental Pro Forma Combined Financial Information
	Nine-month Period Ended	Year Ended
	September 30, 2019	December 31, 2018

Total Revenues	$ 930,565	$ 244,395

Net Loss	$ (8,126,749)	$ (6,580,463)

Weighted average number of common shares	7,504,468	7,504,468

Loss per share - basic and diluted	$ (1.08)	$ (0.88)

Significant Accounting Policies (Policies)	9 Months Ended
Significant Accounting Policies (Policies)	Sep. 30, 2019
Accounting Policies [Abstract]
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 assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period or year. Actual results could differ from those estimates. Areas where significant judgment is involved in making estimates are valuation of accounts receivable; valuation and useful lives of property and equipment; deferred income taxes; classification of Class A convertible preferred shares as liability or equity; the determination of fair value of share-based compensation; the determination of fair value of shares and replacement warrants for the reverse acquisition; and forecasting future cash flows for assessing the going concern assumption.
Functional and Reporting Currencies	The consolidated financial statements of the Company are presented in U.S. dollars, unless otherwise stated. The functional currency of the Company and its wholly-owned subsidiary, Edesa Biotech Research, Inc., as determined by management, is Canadian dollars. The functional currency of the Company’s wholly-owned subsidiary, Stellar Biotechnologies, Inc. is U.S. dollars.
Cash and Cash Equivalents	Cash and cash equivalents consist of demand deposits with financial institutions and highly liquid investments which are readily convertible into cash with maturities of three months or less when purchased. The carrying amount of cash and cash equivalents approximates its fair value due to its short-term nature.
Investments	Investments during the year consisted of U.S. Treasury bills with original maturities between 13 and 52 weeks. They are classified as held-to-maturity and are reported at amortized cost, which approximates fair value. The Company regularly reviews these investments to determine whether any decline in fair value below the amortized cost basis has occurred that is other than temporary. If a decline in fair value has occurred that is determined to be other than temporary, the cost basis of the investment is written down to fair value. There were no investments outstanding at September 30, 2019 or December 31, 2018.
Accounts Receivable	The Company assesses the collectability of its accounts receivable through a review of its current aging, as well as an analysis of its historical collection rate, general economic conditions and credit status of its customers. Accounts receivable include Harmonized Sales Tax (HST) refunds receivable. As of September 30, 2019, all outstanding accounts and HST refunds receivable were deemed to be fully collectible, and therefore, no allowance for doubtful accounts was recorded.
Property and Equipment	Property and equipment are recorded at historical cost less accumulated depreciation and any accumulated impairment losses. Depreciation is recorded to write off the cost of assets less their residual values over their useful lives, using the declining balance and straight-line methods. Assets not in use and on consignment for sale are carried at the expected net proceeds value. Maintenance and repair expenditures that do not improve or extend the life are expensed in the period incurred. Any gain or loss arising on the disposal or retirement of an item of property and equipment is recognized as the difference between the sales proceeds and the carrying amount of the asset. The estimated useful lives, residual values and depreciation methods are reviewed at the end of each year, with the effect of any changes in estimate accounted for on a prospective basis.
Impairment of Long-lived Assets	Long-lived assets are tested for impairment when indicators of impairment exist. When a significant change in the expected timing or amount of the future cash flows of the financial asset is identified, the carrying amount of the financial asset is reduced and the amount of the write-down is recognized as a loss. A previously recognized impairment loss may be reversed to the extent of the improvement, provided it is not greater than the amount that would have been reported at the date of the reversal had the impairment not been recognized previously, and the amount of the reversal is recognized in net income (loss).
Fair Value Measurement	The Company uses the fair value measurement framework for valuing financial assets and liabilities. See Note 8.
Revenue Recognition	Revenues and accounts receivable are recognized when the promised goods or services are transferred to customers, in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for those goods or services. Revenues consist of sales of product inventory obtained in the reverse acquisition completed in June 2019, which are recognized upon shipment when the customer obtains control of the product and the Company has no further performance obligations.
Research and development	Research and development expenses principally consist of (i) contract research organizations for clinical trial management services, (ii) contract manufacturing organizations for manufacturing the drug compound(s) for use in clinical trials and (iii) salaries of employees directly involved in research and development efforts. Research and development costs are expensed as incurred.
Share-based Compensation	The Company measures the cost of equity-settled transactions by reference to the fair value of the equity instruments at the date at which they are granted since the fair value of the goods or services received by the Company cannot be reliably estimated. The Company grants options to buy common shares of the Company to its directors, officers, employees and consultants, and grants other equity-based instruments such as warrants to non-employees. The fair value of share-based compensation is measured on the date of grant, using the Black-Scholes option valuation model and is recognized over the vesting period net of estimated forfeitures for employees or the service period for non-employees. The provisions of the Company's share-based compensation plans do not require the Company to settle any options by transferring cash or other assets, and therefore the Company classifies the awards as equity. The Black-Scholes option valuation model requires the input of subjective assumptions, including price volatility of the underlying stock, risk-free interest rate, dividend yield, and expected life of the option.
Translation of Foreign Currency Transactions	The Company's reporting currency is the U.S. dollar. The financial statements of the parent Company and its wholly-owned Canadian subsidiary are measured using the Canadian dollar as the functional currency. Assets and liabilities of the Canadian operations have been translated at year-end exchange rates and related revenue and expenses have been translated at average exchange rates for the year. Accumulated gains and losses resulting from the translation of the financial statements of the Canadian operations are included as part of accumulated other comprehensive loss, a separate component of shareholders' equity. For other transactions denominated in currencies other than the Company’s functional currency, the monetary assets and liabilities are translated at the year-end rates. Revenue and expenses are translated at rates of exchange prevailing on the transaction dates. Non-monetary balance sheet and related income statement accounts are remeasured into U.S. dollar using historical exchange rates. All of the exchange gains or losses resulting from these other transactions are recognized in the statements of operations and comprehensive loss.
Income Taxes	Deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the tax bases of assets and liabilities and their financial statement reported amounts using enacted tax rates and laws in effect in the year in which the differences are expected to reverse. A valuation allowance is provided against deferred tax assets when it is determined to be more likely than not that the deferred tax asset will not be realized. The Company assesses the likelihood of the financial statement effect of a tax position that should be recognized when it is more likely than not that the position will be sustained upon examination by a taxing authority based on the technical merits of the tax position, circumstances, and information available as of the reporting date. The Company is subject to examination by taxing authorities in Canada and the U.S. Management does not believe that there are any uncertain tax positions that would result in an asset or liability for taxes being recognized in the accompanying financial statements. The Company recognizes tax-related interest and penalties, if any, as a component of income tax expense. The Company accounts for income taxes on a tax jurisdictional basis. The Company files income tax returns in Canada, the provinces of British Columbia and Ontario, the U.S. and the state of California.
Earnings (Loss) per Share	Basic earnings (loss) per share is calculated by dividing income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. The computation of diluted earnings (loss) per share assumes the conversion, exercise or contingent issuance of securities only when such conversion, exercise or issuance would have a dilutive effect on earnings (loss) per share. The dilutive effect of convertible securities is reflected in diluted earnings per share by application of the “if converted” method. The dilutive effect of outstanding options and warrants and their equivalents is reflected in diluted earnings per share by application of the treasury stock method. Conversion of outstanding options and warrants would have an antidilutive effect on loss per share for the nine-month transition period ended September 30, 2019 and year ended December 31, 2018 and are therefore excluded from the computation of diluted loss per share.
Segmented Information	The Company's operations comprise a single reportable segment engaged in the research and development, manufacturing and commercialization of innovative pharmaceutical products. As the operations comprise a single reportable segment, amounts disclosed in the consolidated financial statements for loss, comprehensive loss, depreciation and total assets also represent segmented amounts.
Accounting Pronouncements	Adoption of Recent Accounting Pronouncements On October 1, 2018, the Company adopted Accounting Standards Codification (ASC) 606 Revenue Recognition – Revenue from Contracts with Customers using the modified retrospective method applied to those contracts which were not completed as of this date. Results for reporting periods beginning after October 1, 2018 are presented under ASC Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with the historical accounting under ASC Topic 605. There was no impact to the historical consolidated financial statements resulting from the Company’s adoption of ASC Topic 606. There are no revenues in the accompanying consolidated financial statements prior to the completion of the reverse acquisition on June 7, 2019. The Company recognizes revenue when the customer obtains control of promised goods or services, in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The Company recognizes revenue following the five-step model prescribed under ASC Topic 606: (1) identify contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenues when (or as) the Company satisfies the performance obligation(s). Revenues consist of sales of product inventory obtained in the reverse acquisition, which are recognized upon shipment when the customer obtains control of the product and the Company has no further performance obligations. Future accounting pronouncements In February 2016, the FASB issued new guidance, ASU No. 2016-02, Leases (Topic 842). The new standard establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. Additional qualitative and quantitative disclosures are also required by the new guidance. A modified retrospective transition approach is required, applying the new standard to all leases existing at the date of initial application. Topic 842 is effective for annual reporting periods beginning after December 15, 2018. Early adoption is permitted. The Company will adopt the new standard on October 1, 2019 and use the effective date as its date of initial application. The new standard provides a number of optional practical expedients in transition. The Company expects to elect the ‘package of practical expedients’, which permits the Company not to reassess under the new standard prior conclusions about lease identification, lease classification and initial direct costs. The Company expects that this standard will have a material effect on the consolidated financial statements. The Company has assessed that the most significant effects relate to (1) the recognition of new ROU assets and lease liabilities on the balance sheet for the Company’s operating leases; and (2) providing significant new disclosures about the Company’s leasing activities. The Company does not expect a significant change in leasing activities between now and adoption. Currently, the Company estimates that the discounted value of operating lease commitments at September 30, 2019 totaling approximately $305,000 will be recognized as a right-of-use asset and corresponding lease liability at the transition date, with no impact to opening retained earnings at that date. In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which includes provisions that require financial assets measured at amortized cost basis to be presented at the net amount expected to be collected and credit losses relating to available-for-sale debt securities to be recorded through an allowance for credit losses, which requires recognition of an estimate of all current expected credit losses. The guidance is effective for public entities for fiscal years beginning after December 15, 2019, including interim periods within those years, with early adoption permitted for fiscal years beginning after December 15, 2018. These standards are effective for the Company during the fiscal year ending September 30, 2021. Management is in the process of assessing the impact of ASU 2016-13 on the Company’s consolidated financial statements.

Property and Equipment (Tables)

9 Months Ended

Sep. 30, 2019

Property, Plant and Equipment [Abstract]

Property and equipment

	September 30,			December 31,
	2019			2018
Computer equipment	$	42,910		$	4,828
Furniture and equipment		7,932			5,578
		50,842			10,406
Less: accumulated depreciation		(29,194	)		(3,020	)
Depreciable assets, net		21,648			7,386
Assets not in service		51,410			—
Total property and equipment, net	$	73,058		$	7,386

Commitments (Tables)

9 Months Ended

Sep. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Future minimum lease payments

Future contractual payments

Capital Shares (Tables)

9 Months Ended

Sep. 30, 2019

Stockholders' Equity Note [Abstract]

Warrant activity

				Weighted
	Number of			Average
	Warrants (#)			Exercise Price
Balance – December 31, 2018 and 2017		—		$	—
Effect of reverse acquisition		362,430			31.60
Black-Scholes value payout		(313,516	)		33.01
Balance – September 30, 2019		48,914		$	11.19

Warrants outstanding

Number of Warrants (#)		Exercise Prices		Expiry Dates
	28,124	$	15.90	May 2023
	20,790		4.81	June 2024
	48,914

Stock option activity

				Weighted
	Number of			Average
	Options (#)			Exercise Price
Balance – December 31, 2017		289,203		$	1.65
Granted		25,920			1.65
Balance – December 31, 2018		315,123		$	1.65
Effect of reverse acquisition		7,787			124.80
Expired		(3,265	)		125.75
Balance – September 30, 2019		319,645		$	3.39

Stock options outstanding

		Exercisable at		Range of
Number of Options (#)		September 30, 2019 (#)		Exercise Prices		Expiry Dates

	315,123		242,428	C$	2.16	Aug 2027-Dec 2028
	333		333	C$	105.00-243.60	Dec 2019-May 2020
	214		214	C$	638.40	Nov 2021
	3,499		3,499	$	35.28-93.24	Sep 2023-Mar 2025
	238		238	$	304.08	Dec 2022
	238		238	$	768.60	Nov 2020
	319,645		246,950

Fair value of options granted assumptions

Risk free interest rate	1.98	%
Expected life (years)	4
Expected share price volatility	79.46	%
Expected dividend yield	0	%

Issued and outstanding common and preferred shares

Issued and outstanding common shares:

	Number of Common Shares (#)		Common Shares
Balance – December 31, 2018 and 2017		3,239,902	$	1,111,253

Conversion of preferred shares upon reverse acquisition		3,376,112		6,260,299
Share consideration transferred upon reverse acquisition		888,454		4,633,499

Balance – September 30, 2019		7,504,468	$	12,005,051

Issued and outstanding preferred shares:

	Class A Preferred			Class A Preferred
	Shares (#)			Shares
Balance – December 31, 2017		1,007,143		$	5,616,801
Preferred return on Class A preferred shares		—			447,212
Balance – December 31, 2018		1,007,143		$	6,064,013
Preferred return on Class A preferred shares		—			196,286
Conversion upon reverse acquisition		(1,007,143	)		(6,260,299	)
Balance – September 30, 2019		—		$	—

- Definition

Tabular disclosure of an entity's stock, including par or stated value per share, number and dollar amount of share subscriptions, shares authorized, shares issued, shares outstanding, number and dollar amount of shares held in an employee trust, dividend per share, total dividends, share conversion features, par value plus additional paid in capital, the value of treasury stock and other information necessary to a fair presentation, and EPS information. Stock by class includes common, convertible, and preferred stocks which are not redeemable or redeemable solely at the option of the issuer. Includes preferred stock with redemption features that are solely within the control of the issuer and mandatorily redeemable stock if redemption is required to occur only upon liquidation or termination of the reporting entity. If more than one issue is outstanding, state the title of each issue and the corresponding dollar amount; dollar amount of any shares subscribed but unissued and the deduction of subscriptions receivable there from; number of shares authorized, issued, and outstanding.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 45
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=65888546&loc=d3e21300-112643

Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02(28))
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 10
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21553-112644

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 480
-SubTopic 10
-Section S99
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=65877616&loc=d3e177068-122764

Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21538-112644

Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
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+ Details

Income Tax (Tables)

9 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

Income tax rate reconciliation

	Nine-month Period Ended September 30, 2019			Year Ended December 31, 2018

Net loss before recovery of income taxes	$	(2,776,734	)	$	(1,536,556)
Canadian federal and provincial statutory income tax rate		26.5	%		26.5	%

Expected income tax recovery	$	(736,000	)	$	(407,000	)
Permanent differences		11,000			41,000
Effect of foreign currency and foreign tax rate differences		(60,000	)		—
Change in valuation allowance		785,000			366,000

Income tax (recovery) expense	$	—		$	—

Deferred tax assets

	September 30, 2019			December 31, 2018

Non-capital losses carried forward - Canada	$	3,592,000		$	575,000
Non-capital losses carried forward - U.S.		1,587,000			—
Share issuance and financing costs		517,000			26,000
Research and development tax credits		626,000			121,000
Other temporary differences		28,000			15,000

Total deferred tax assets	$	6,350,000		$	737,000
Valuation allowance		(6,350,000	)		(737,000	)

Net deferred taxes	$	—		$	—

Non-capital income tax losses

2028	C$	21,000
2029		56,000
2030		346,000
2031		688,000
2032		860,000
2033		685,000
2034		780,000
2035		1,369,000
2036		1,705,000
2037		1,909,000
2038		3,243,000
2039		6,058,000

Total	C$	17,720,000

Comparative Figures (Tables)

9 Months Ended

Sep. 30, 2019

Comparative Figures

Comparative financial information

	(Unaudited)
	Nine Months Ended
	September 30, 2018
Total Expenses	$	(1,212,905	)
Other Income		41,198
Net Loss		(1,171,707	)
Exchange differences on translation		(346,598	)
Net Loss and Comprehensive Loss	$	(1,518,305	)

Weighted average number of common shares		3,239,902
Loss per share - basic and diluted	$	(0.36	)

Business Combination (Tables)

9 Months Ended

Sep. 30, 2019

Business Combinations [Abstract]

Consideration transferred

Fair value of 888,454 share consideration transferred, net of liquidity discount	$	4,633,499
Excess fair value of replacement warrants		61,902
Total acquisition date fair value of consideration transferred	$	4,695,401

Assets acquired and liabilites assumed

Cash and cash equivalents	$	6,389,322
Other current assets		418,837
Noncurrent assets		42,045
Fair value of warrants payable		(1,187,124	)
Other current liabilities		(967,679	)
Net assets of Stellar	$	4,695,401

Supplemental Pro Forma Information

	(Unaudited) Supplemental Pro Forma Combined Financial Information
	Nine-month Period Ended	Year Ended
	September 30, 2019	December 31, 2018

Total Revenues	$ 930,565	$ 244,395

Net Loss	$ (8,126,749)	$ (6,580,463)

Weighted average number of common shares	7,504,468	7,504,468

Loss per share - basic and diluted	$ (1.08)	$ (0.88)

Nature of Operations (Details Narrative) - USD ($)	9 Months Ended		12 Months Ended
Nature of Operations (Details Narrative) - USD ($)	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018	Dec. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Net loss	$ (2,776,734)	$ (1,171,707)	$ (1,536,556)
Cash and cash equivalents	5,030,583		3,367,098	$ 5,000,122
Working capital	5,170,000
Shareholders' equity	5,256,130		3,214,490	$ 4,998,540
Accumulated deficit	$ (6,734,615)		$ (3,761,595)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Property and Equipment (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Property and equipment, gross	$ 50,842	$ 10,406
Less: accumulated depreciation	(29,194)	(3,020)
Total property and equipment, net	73,058	7,386
Computer Equipment
Property and equipment, gross	42,910	4,828
Furniture and Equipment
Property and equipment, gross	7,932	5,578
Depreciable Assets, Net
Total property and equipment, net	21,648	7,386
Assets Not in Service
Total property and equipment, net	$ 51,410	$ 0

Property and Equipment (Details Narrative) - USD ($)	9 Months Ended	12 Months Ended
Property and Equipment (Details Narrative) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 4,800	$ 1,700

Commitments (Details)	Sep. 30, 2019 USD ($)
Year Ending September 30,
2020	$ 245,000
2021	85,000
2022	80,000
2023	20,000
Total	$ 430,000

Commitments (Details 1)	Sep. 30, 2019 USD ($)
Year Ending September 30,
2020	$ 2,253,000
2021	18,000
2022	5,000
Total	$ 2,276,000

Commitments (Details Narrative) - USD ($)	9 Months Ended	12 Months Ended
Commitments (Details Narrative) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Commitments and Contingencies Disclosure [Abstract]
Rent expense	$ 126,000	$ 79,000

Capital Shares (Details) - $ / shares	9 Months Ended	12 Months Ended
Capital Shares (Details) - $ / shares	Sep. 30, 2019	Dec. 31, 2018
Stockholders' Equity Note [Abstract]
Number of warrants, beginning balance	0	0
Effect of reverse acquisition	362,430
Black-Scholes value payout	(313,516)
Number of warrants, ending balance	48,914	0
Weighted average exercise price, beginning balance	$ .00	$ .00
Effect of reverse acquisition	31.60
Black-Scholes value payout	33.01
Weighted average exercise price, ending balance	$ 11.19	$ .00

Capital Shares (Details 1) - $ / shares	9 Months Ended
Capital Shares (Details 1) - $ / shares	Sep. 30, 2019	Dec. 31, 2018	Dec. 31, 2017
Number of warrants	48,914	0	0
Exercise price	$ 11.19	$ .00	$ .00
Warrant 1
Number of warrants	28,124
Exercise price	$ 15.90
Expiry date	May 2023
Warrant 2
Number of warrants	20,790
Exercise price	$ 4.81
Expiry date	June 2024

Capital Shares (Details 2) - $ / shares	9 Months Ended	12 Months Ended
Capital Shares (Details 2) - $ / shares	Sep. 30, 2019	Dec. 31, 2018
Stockholders' Equity Note [Abstract]
Number of options, beginning balance	315,123	289,203
Number of options granted		25,920
Number of options effect of reverse acquisition	7,787
Number of options expired	(3,265)
Number of options, ending balance	319,645	315,123
Weighted average exercise price, beginning balance	$ 1.65	$ 1.65
Weighted average exercise price granted		1.65
Weighted average exercise price effect of reverse acquisition	124.80
Weighted average exercise price expired	125.75
Weighted average exercise price, ending balance	$ 3.39	$ 1.65

Capital Shares (Details 3)	9 Months Ended
Capital Shares (Details 3)	Sep. 30, 2019 $ / shares shares	Sep. 30, 2019 $ / shares shares	Dec. 31, 2018 $ / shares shares	Dec. 31, 2017 $ / shares shares
Options outstanding	319,645	319,645	315,123	289,203
Options exercisable	246,950	246,950
Range of exercise prices \| $ / shares	$ 3.39		$ 1.65	$ 1.65
Stock Option 1
Options outstanding	315,123	315,123
Options exercisable	242,428	242,428
Range of exercise prices \| $ / shares		$ 2.16
Expiry dates	August 2027 - December 2028
Stock Option 2
Options outstanding	333	333
Options exercisable	333	333
Expiry dates	December 2019 - May 2020
Stock Option 2 \| Minumum
Range of exercise prices \| $ / shares		$ 105.00
Stock Option 2 \| Maxumum
Range of exercise prices \| $ / shares		$ 243.60
Stock Option 3
Options outstanding	214	214
Options exercisable	214	214
Range of exercise prices \| $ / shares		$ 638.40
Expiry dates	November 2021
Stock Option 4
Options outstanding	3,499	3,499
Options exercisable	3,499	3,499
Expiry dates	September 2023 - March 2025
Stock Option 4 \| Minumum
Range of exercise prices \| $ / shares	$ 35.28
Stock Option 4 \| Maxumum
Range of exercise prices \| $ / shares	$ 93.24
Stock Option 5
Options outstanding	238	238
Options exercisable	238	238
Range of exercise prices \| $ / shares	$ 304.08
Expiry dates	December 2022
Stock Option 6
Options outstanding	238	238
Options exercisable	238	238
Range of exercise prices \| $ / shares	$ 768.60
Expiry dates	November 2020

Capital Shares (Details 4)	9 Months Ended
Capital Shares (Details 4)	Sep. 30, 2019
Stockholders' Equity Note [Abstract]
Risk free interest rate	1.98%
Expected life (years)	4 years
Expected share price volatility	79.46%
Expected dividend yield	0.00%

Capital Shares (Details 5) - USD ($)	9 Months Ended	12 Months Ended
Capital Shares (Details 5) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Beginning balance, amount	$ 3,214,490	$ 4,998,540
Preferred return for Class A preferred shares, amount	0	0
Share consideration transferred upon reverse acquisition, amount	4,695,401
Ending balance, amount	$ 5,256,130	$ 3,214,490
Common Shares
Beginning balance, shares	3,239,902	3,239,902
Beginning balance, amount	$ 1,111,253	$ 1,111,253
Conversion of preferred shares upon reverse acquisition, shares	3,376,112
Conversion of preferred shares upon reverse acquisition, amount	$ 6,260,299
Share consideration transferred upon reverse acquisition, shares	888,454
Share consideration transferred upon reverse acquisition, amount	$ 4,633,499
Ending balance, shares	7,504,468	3,239,902
Ending balance, amount	$ 12,005,051	$ 1,111,253
Class A Preferred Shares
Beginning balance, shares	1,007,143	1,007,143
Beginning balance, amount	$ 6,064,013	$ 5,616,801
Preferred return on Class A preferred shares, shares
Preferred return for Class A preferred shares, amount	$ 196,286	$ 447,212
Share consideration transferred upon reverse acquisition, shares	(1,007,143)
Share consideration transferred upon reverse acquisition, amount	$ (6,260,299)
Ending balance, shares	0	1,007,143
Ending balance, amount	$ 0	$ 6,064,013

Capital Shares (Details Narrative) - USD ($)	9 Months Ended	12 Months Ended
Capital Shares (Details Narrative) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Stockholders' Equity Note [Abstract]
Weighted average contractual life remaining on outstanding warrants	49 months
Shares remaining under 2019 Plan	1,153,147
Weighted average contractual life remaining on outstanding options	96 months
Share-based compensation	$ 35,074	$ 81,344
Unrecognized share-based compensation	$ 30,000
Unrecognized share-based compensation recognition period	27 months

Income Tax (Details) - USD ($)	9 Months Ended		12 Months Ended
Income Tax (Details) - USD ($)	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Income Tax Disclosure [Abstract]
Net loss before recovery of income taxes	$ (2,776,734)	$ (1,171,707)	$ (1,536,556)
Canadian federal and provincial statutory income tax rate	26.50%		26.50%
Expected income tax recovery	$ (736,000)		$ (407,000)
Permanent differences	11,000		41,000
Effect of foreign currency and foreign tax rate differences	(60,000)		0
Change in valuation allowance	785,000		366,000
Income tax (recovery) expense	$ 0		$ 0

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Income Tax (Details 1) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Income Tax Disclosure [Abstract]
Non-capital losses carried forward - Canada	$ 3,592,000	$ 575,000
Non-capital losses carried forward - US	587,000	0
Share issuance and financing costs	517,000	26,000
Research and development tax credits	626,000	121,000
Other temporary differences	28,000	15,000
Total deferred tax assets	6,350,000	737,000
Valuation allowance	(6,350,000)	(737,000)
Net deferred taxes	$ 0	$ 0

Income Tax (Details 2)	Sep. 30, 2019 USD ($)
Non-capital income tax losses	$ 17,720,000
2028
Non-capital income tax losses	21,000
2029
Non-capital income tax losses	56,000
2030
Non-capital income tax losses	346,000
2031
Non-capital income tax losses	688,000
2032
Non-capital income tax losses	860,000
2033
Non-capital income tax losses	685,000
2034
Non-capital income tax losses	780,000
2035
Non-capital income tax losses	1,369,000
2036
Non-capital income tax losses	1,705,000
2037
Non-capital income tax losses	1,909,000
2038
Non-capital income tax losses	3,243,000
2039
Non-capital income tax losses	$ 6,058,000

Related Party Transactions (Details Narrative) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2019	Dec. 31, 2019	Dec. 31, 2018
Related Party Transactions [Abstract]
Rent expense	$ 58,000	$ 79,000
Rent payable	0		$ 14,000
Royalty expenses	20,000
Royalty payable	$ 23,000

Comparative Figures (Details) - USD ($)	9 Months Ended		12 Months Ended
Comparative Figures (Details) - USD ($)	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Comparative Figures
Total expenses	$ 3,243,008	$ 1,212,905	$ 1,618,646
Other income	55,404	41,198	82,090
Net loss	(2,776,734)	(1,171,707)	(1,536,556)
Exchange differences on translation	87,899	(346,598)	(328,838)
Net loss and comprehensive loss	$ (2,688,835)	$ (1,518,305)	$ (1,865,394)
Weighted average number of common shares	5,036,331	3,239,902	3,239,902
Loss per share - basic and diluted	$ (0.55)	$ (0.36)	$ (0.47)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Business Combination (Details)	9 Months Ended
Business Combination (Details)	Sep. 30, 2019 USD ($)
Business Combinations [Abstract]
Fair value of 888,454 share consideration to be transferred, net of liquidity discount	$ 4,633,499
Excess fair value of replacement warrants	61,902
Total acquisition date fair value of consideration transferred	$ 4,695,401

Business Combination (Details 1)	9 Months Ended
Business Combination (Details 1)	Sep. 30, 2019 USD ($)
Business Combinations [Abstract]
Cash and cash equivalents	$ 6,389,322
Other current assets	418,837
Noncurrent assets	42,045
Fair value of warrants payable	(1,187,124)
Other current liabilities	(967,679)
Estimated fair value of share consideration to be transferred	$ 4,695,401

Business Combination (Details 2) - USD ($)	9 Months Ended	12 Months Ended
Business Combination (Details 2) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Business Combinations [Abstract]
Total Revenues	$ 930,565	$ 244,395
Net Loss	$ (8,126,749)	$ (6,580,463)
Weighted average number of common shares	7,504,468	7,504,468
Loss per share - basic and diluted	$ (1.08)	$ (0.88)