2. SIGNIFICANT ACCOUNTING POLICIES (cont’d.)
Stock-based compensation
The Company has adopted the fair value method of accounting for stock-based compensation as recommended by ASC 718 Compensation –Stock Compensation. The Company has granted stock options to directors and certain employees for services provided to the Company under this method. The Company recognizes compensation expense for stock options awarded based on the fair value of the options at the grant date using the Black-Scholes option pricing model. The fair value of the options is amortized over the vesting period.
Recently adopted accounting pronouncements
In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) (“ASU 2020-01”), which is intended to clarify the interaction of the accounting for equity securities under Topic 321 and investments accounted for under the equity method of accounting in Topic 323 and the accounting for certain forward contracts and purchased options accounted for under Topic 815. ASU 2020-01 is effective for the Company beginning January 1, 2021. The Company has adopted of the new guidance for the fiscal year beginning January 1, 2021 and the adoption has no impact on the Company’s financial statements.
3. NOTES RECEIVABLE
As at April 28, 2014, the Company received a promissory note of CAD $831,031 (US $618,952) from Ningbo International Limited, a non-related party, as result of the disposal all the issued and outstanding shares in NAI, all the issued and outstanding shares of CWN HK and 23.8% of the issued and outstanding shares of CWN Capital. The promissory note is non-interest bearing, unsecured with a maturity date of one year, and the option to extend upon mutual agreement. On April 28, 2015, the Company extended the payment date of the promissory note to April 28, 2016. On April 28, 2016, the Company further extended the payment date to April 28, 2018 and imposed an 8% per annum interest rate payable on the repayment date of the principal amount. On April 16, 2017, the Company amended the promissory note to non-interest bearing and changed the payment schedule as follows:
| ● | CDN $150,000 on or before April 30, 2017; |
| ● | CDN $100,000 on or before December 31, 2018; |
| ● | CDN $100,000 on or before December 31, 2019; |
| ● | The remaining principal amount of CDN $481,031 will be payable on or before December 31, 2020. |
As at December 31, 2018, the Company received payment of CAD $404,360 from Ningbo International Limited. No repayment was received in 2019 and 2020. On November 27, 2020, Ningbo has entered an Amendment of the Agreement (the “Amendment”) with the Company. In relation to this Amendment, the remaining promissory note balance of CAD$426,671 shall be repaid on or before December 31, 2022.
As at December 31, 2021, the note receivable balance is recorded at a fair value of $291,727 (2020: $271,147 and 2019: $257,714). The note is valued using a discounted cash flow model that utilizes a discount rate that reflects the Company’s current pricing for loans with similar characteristics and maturity, adjusted by liquidity premium and company specific premium at the balance sheet date.
The Company recognized $Nil loss on note receivable [2020 - loss of $57,485 and 2019 - $Nil], interest income on the note receivable of $Nil (2020: $Nil and 2019: $Nil) and accretion income of $19,646 [2020 - $63,290 and 2019 - $68.869]. The effective interest rate of the note receivable is 11%. During the year ended December 31, 2021, the Company recorded foreign exchange gain of $933 [2020 - foreign exchange gain: $7,628 and 2019 - foreign exchange gain: $10,472].
4. STOCKHOLDERS’ EQUITY
Share Capital
The Company has authorized 100,000,000 common shares at par value of $0.001 per share. As at December 31, 2021 and 2020, the Company has 10,950,000 common shares issued and outstanding.