Note 6 - Promissory Notes

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Debt Disclosure [Text Block]

6.

  Promissory notes:

The Company has issued unsecured promissory notes from shareholders of the Company. The notes were repayable on

March 31,

2018.

The interest on the notes are

2%

per annum, calculated and compounded annually and paid annually.  Interest in arrears shall accrue interest. The unpaid principal amount due hereunder

may

be reduced to

zero

from time to time without affecting the validity of this note.

The promissory notes are accounted for by discounting the notes in a manner that reflects the entity's borrowing rate when interest cost is recognized in subsequent periods. The Company applied an estimated market rate of

15%

to the pr

omissory notes. In doing so, the Company used the discounted cash flow approach to value the present value of the notes. The cash flow stream from the coupon interest payments and the final principal payment were discounted at

15%

to arrive at the valuations. The Company used a deemed rate of

15%

as the appropriate discount rate after examining the interest rates for similar instruments issued in the same time frame for similar companies without the conversion feature. During the year ended

December 31, 2016,

the Company issued

$400,000

promissory notes and recognized a discount on the promissory notes of

$58,284

and

$5,171

of interest accretion.

During the quarter ended

March 31, 2017,

the Company issued

$188,136

promissory notes and recognized a discount o

n the promissory notes of

$23,461.

The Company recognized interest accretion of

$53,698

for the

nine

months ended

September 30, 2017

and

$19,145

for the quarter ended

September 30, 2017.

These notes were issued with the same terms and conditions as the pr

omissory notes issued in the year ended

December 31, 2016.

On

March 31, 2017,

the maturity date on the promissory notes was extended to

April 1, 2020.

The Company treated the change as an extinguishment and reissuance of the notes. The Company recognized a

discount on the promissory notes of

$94,191

from the extinguishment and reissuance of the notes.

	September 30, 2017			December 31, 2016
Opening balance	$	347,698		$	-
Promissory note issued		188,136			400,000
Discount on promissory note		(23,461	)		(58,284	)
Gain on extinguishment and reissuance of promissory notes with related parties		(94,191	)		-
Extinguishment of promissory notes to related parties		(418,181	)		-
Reissuance of promissory notes to related parties		418,181			-
Accrued interest		8,323			811
Interest accretion		53,698			5,171
Closing balance	$	480,203		$	347,698