Note 7 - Promissory Notes

6 Months Ended

Jun. 30, 2019

Notes to Financial Statements

Debt Disclosure [Text Block]

7.

  Promissory notes:

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

June 30, 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 promissory 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.

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.

During the quarter ended

June 30, 2018,

the promissory notes were settled in exchange for the exercise of warrants and the notes were extinguished. Since the extinguishment of the promissory note is with related parties, then in accordance with ASC

470

-

50

-

40

-

2,

the extinguishment transactions is in essence a capital transaction. The Company recognized accretion interest and accrued interest of

$nil

(

June 30, 2018 -

$18,796

).

	June 30, 2019		December 31, 2018
Opening balance	$	-	$	502,313
Reduction of capital on extinguishment of promissory notes with related parties		-		65,955
Extinguishment of promissory notes to related parties		-		(605,358	)
Accrued interest		-		5,124
Interest accretion		-		31,966
Closing balance	$	-	$	-