Fair Value Measurements
The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.
The following are the hierarchical levels of inputs to measure fair value:
- Level 1:Quoted prices in active markets for identical instruments;
- Level 2:Other significant observable inputs (including quoted prices in active markets for similar instruments);
- Level 3:Significant unobservable inputs (including assumptions in determining the fair value of certain investments).
The carrying values for cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued liabilities, and deferred revenue approximate their fair value due to their short maturities.
NOTE 3 - PURCHASED INTANGIBLE ASSETS, NET
On November 26, 2019, the Company entered into a binding term sheet to merge with Leo Riders Company (“Leo”). Pursuant to the Agreement, Leo would become a wholly-owned subsidiary of Bio.
Under the Agreement, Bio would acquire all of the outstanding capital stock of Leo in exchange for shares of Bio common stock to be issued to the shareholders of Leo in an amount equal to up to 40% of the post-transaction outstanding capital stock the Company. The Company would also provide interim financing to Leo and will assist Leo in additional capital raising efforts. The combined company, to be led by Baruch Adika, CEO of Bio-En Holdings, would be headquartered in Secaucus, New Jersey. In accordance with the Term Sheet, Leo was to raise up to $2,000,000 within 120 days of the merger contemplated by the Agreement.
After signing the final agreement and before raising the funds, Bio would transfer to Leo up to $460,000 as a loan (the “Loan”), which will be paid back by Leo upon raising the funds. If Leo would like to terminate the Agreement for any reason, Leo will transfer 50% of the Leo company shares to Bio as a penalty. If Bio is unable to raise the $2,000,000 for Leo, the $400,000 which has been given to Leo as a loan will be transferred repaid with the transfer of 5% of the outstanding capital stock of Leo at a $9,000,000 valuation.
$185,000 of the Loan had been already transferred prior to signature of the Agreement and a further $50,000 was transferred prior to December 31, 2021 resulting in a total advanced of $235,000.
Prior to the date of the Agreement, Bio had no interactions with Leo, other than the negotiation of the Term Sheet and the Amendment. The agreement was entered into at an arm’s-length.
However, due to certain information regarding the financial position of Leo, which has come to light since the announcement of the Term Sheet, Bio has informed Leo that it is terminating the Term Sheet, and the merger with Leo is not expected to take place. Bio is taking steps to recover from Leo the monies it has advanced to date. A provision of $235,000 was made to write down the value of the advances to Leo to $nil and the amount of the provision has been reduced to take account of the payments received from Leo according to the agreement described in the following paragraph.
On September 13, 2021 an agreement between the Company and Leo was signed under which Leo agreed to pay the Company the sum of $72,000 by way of monthly amounts of $5,000 from October 13, 2020 to September 13, 2021 and to pay a further $160,000 by January 13, 2022. Leo has failed to make the payments due according to the agreement. As at September 30, 2022 the balance due to the company was $156,950 and a full provision for non-payment has been made