3.	Summary of Significant Accounting Policies

Consolidation

The consolidated balance sheet at December 31, 2015 and 2014 consolidates the accounts of Canterbury, Hygeia, Paloma, VasculoMedics and ProElite, Inc. The consolidated statements of operations for the year ended December 31, 2015 and 2014 consolidate the accounts of Paloma and VasculoMedics from March 28, 2014, their date of acquisition. All significant intercompany balances were eliminated in consolidation.

Use of Estimates

The preparation of the Company’s consolidated financial statements in accordance with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes. Although these estimates are based on the Company’s knowledge of current events and actions that the Company may undertake in the future, actual results may differ from such estimates and assumptions.

Cash

and

Cash Equivalents

The Company considers all highly liquid investments purchased with maturities of three months or less to be cash equivalents.

Fair Value of Financial Instruments

The carrying value of certain of the Company’s financial instruments, including cash and cash equivalents and accounts payable, approximate fair value due to their short maturities. Other information about the Company’s assets and liabilities recorded at fair value is included in note 4.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. The Company records depreciation using the straight-line method over the following estimated useful lives:

Equipment ( years)	3	–	5
Furniture and fixtures ( years)		5
Leasehold improvements	Lesser of lease term or life of improvements

Long-Lived Assets

Long-lived assets are reviewed for potential impairment whenever events indicate that the carrying amount of such assets may not be recoverable. The Company does this by comparing the carrying value of the long-lived assets with the estimated future undiscounted cash flows expected to result from the use of the assets, including cash flows from disposition. If it is determined an impairment exists, the asset is written down to its estimated fair value.

Business Combinations

For all business combinations, the Company records all assets and liabilities of the acquired business, including goodwill and other identified intangible assets, at their fair values starting in the period when the acquisition is completed. Acquisition-related transaction costs are expensed as incurred.

Intangible Assets

Intangible assets as of December 31, 2015 and 2014 consisted of an identifiable in-process research and development (“IPR&D”) project intangible asset arising from the acquisition of Paloma. Purchased intangible assets subject to amortization, are reviewed for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. Such events or circumstances include, but are not limited to, a significant decrease in the fair value of the underlying business, a significant decrease in the benefit realized from an acquired business, difficulties or delays in integrating the business or a significant change in the operations of an acquired business. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. An impairment charge is recognized by the amount by which the carrying amount of the asset exceeds its fair value.

The fair value of IPR&D projects acquired in a business combination are capitalized and accounted for as indefinite-lived intangible assets until the underlying project receives regulatory approval, at which point the intangible asset will be accounted for as a definite-lived intangible asset, or discontinuation, at which point the intangible asset will be recognized as an impairment charge. Research and development costs incurred after the acquisition are expensed as incurred.

Goodwill

Goodwill is the excess of the cost of an acquired entity over the net amounts assigned to tangible and intangible assets acquired and liabilities assumed. Goodwill is not amortized, but is subject to an annual impairment test. The Company has a single reporting unit and all goodwill relates to that reporting unit.

The Company performs its annual goodwill impairment test during the fourth quarter of its fiscal year or more frequently if changes in circumstances or the occurrence of events suggest that an impairment exists. If the fair value of the reporting unit is less than its carrying value, an impairment loss is recorded to the extent that the implied fair value of the reporting unit’s goodwill is less than the carrying value of the reporting unit’s goodwill.

Research and Development

All research and development costs are expensed as incurred.

Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.

Stock-Based Compensation

Compensation cost is measured and recognized at fair value for all stock-based payments, including stock options. For stock options, the Company estimates fair value using the Black-Scholes option-pricing model, which requires assumptions, such as expected volatility, risk-free interest rate, expected life, and dividends. Stock-based compensation expense is recognized net of estimated forfeitures on a straight-line basis over the related service period of the awards taking into account the effects of the employees’ expected exercise and post-vesting employment termination behavior, and is included in general and administrative expenses in the Company’s consolidated statements of operations. For 2015 and 2014, the Company estimated a forfeiture rate of nil when computing stock based compensation expense and reassesses its estimated forfeiture rate periodically based on new facts and circumstances. The Company accounts for equity instruments issued to non-employees in accordance with ASC Topic 718 and Emerging Issues Tax Force (“EITF”) Issue No. 96-18. The fair value of each stock option and warrant granted is estimated as of the grant date using the Black-Scholes option pricing model.

Basic and Diluted Loss Per Share

Basic loss per share is computed by dividing the net loss attributable to the Company by the weighted average number of shares of common stock outstanding for the period. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if all of the Company’s potential shares, warrants and stock options had been issued and if the additional shares were dilutive. The computation of diluted loss per share does not include the Company’s stock options or warrants as such securities have an antidilutive effect on loss per share.

Because of their anti-dilutive effect, 7,793,072 and 8,472,013 shares of the Company’s common stock equivalents comprised of stock options and warrants for the years ended December 31, 2015 and 2014, respectively, have been excluded from the calculation of diluted earnings per share.

Comprehensive Income (Loss)

The Company does not have items of other comprehensive income (loss) for the years ended December 31, 2015 or 2014; and therefore, comprehensive loss equals net loss for those years.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, “

Revenue from Contracts with Customers

”

(ASC Topic 606). The core principle

of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps:

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligation in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

In July 2015, the FASB delayed the effective date of this guidance. As a result, this ASU will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. Entities have the option of applying either a full retrospective approach or a modified approach to adopt the guidance in the ASU. Although the Company currently does not have any revenues, it is evaluating the impact that this guidance will have on its results of operations, financial position and cash flows.

In August 2014, the FASB issued ASU 2014-15,

Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern

(“ASU 2014-15”). This pronouncement provides additional guidance surrounding the disclosure of going concern uncertainties in the financial statements and implementing requirements for management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. The Company will adopt this guidance as of December 31, 2016. The Company will begin performing the periodic assessments required by ASU 2014-15 on its effective date.

In February 2016, the FASB issued ASU 2016-02,

Leases

. This pronouncement provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements of both lessees and lessors. The most significant impact of this new pronouncement is the removal of the distinction between operating and capital leases with assets and liabilities recognized in respect of all leases, subject to limited exceptions for short-term leases and leases of low value assets. Management is still assessing the full impact of adopting ASU 2016-02, and cannot yet assess if the impact will be material to the Company’s financial position, results of operations or cash flows. The new guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.