Subsequent to initial recognition, convertible notes are carried at amortized cost using the effective interest method, Conversion Feature is adjusted to fair value estimated using the Black Scholes option pricing model, and FX Component is adjusted to fair value using indicative foreign exchange forward contract spot rate. 

Derivatives are adjusted to fair value at each reporting period with the corresponding gain or loss reported in the consolidated statement of operations. The corresponding transaction costs are expensed against operations during the period the transaction closed. 

The value of any equity component remains unchanged in future periods except upon the exercise of warrants when the value is reclassified to share capital. The corresponding transaction costs are recorded against the equity component. 

The carrying amounts of cash and cash equivalents, restricted cash, investments, accounts receivable and accounts payable and accrued liabilities are considered to be reasonable approximations of their fair values due to the short-term nature of these instruments 

The Company employs foreign exchange forward contracts from time to time to mitigate the risk of changes in currency exchange rates. The Company does not apply hedge accounting and accordingly changes in fair value of the contracts are recorded in net income in the period they occur. The fair value of those contracts is estimated by reference to quoted market prices for actual or similar instruments where available. 

p. Warrants 

Unit issuances that include a common share and warrant are bifurcated into the share and warrant component for accounting purposes. The share and warrant components are bifurcated by allocating unit proceeds equal to the market price of the Company’s stock to the share component and the residual amount of the unit proceeds to the warrant component. The warrant component is recorded in contributed surplus and is transferred to capital stock upon exercise of the underlying warrant. 

q. Leases 

The determination whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date. 

Capital leases, which transfer to the Company substantially all rights and benefits incidental to ownership of the leased item, are capitalized at the commencement of the lease at fair value of the leased item or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between finance charges and reduction in lease liabilities so as to achieve a constant rate of interest of the remaining balance of liability. Finance charges are recognized in cost of goods sold in statement of operations. 

A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainly that the Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset or the lease term. 

Operating lease payments are recognized as an operating expense in the statement of operations on a straight-line basis over the lease term. 

## 3. Recent pronouncements 

Business combinations 

In January 2009, the CICA issued Section 1582, “Business Combinations”, Section 1601, “Consolidated Financial Stat ements”, and Section 1602, “Non‐Controlling Interests”. These sections replace former Section 1581,” Business Combinations”, and Section 1600, “Consolidated Financial Statements”, and establish a new section for accounting for a non‐controlling interest in  a subsidiary. 

