Note 16 - Fair Value Disclosures

3 Months Ended

Mar. 31, 2020

NOTE

– FAIR VALUE DISCLOSURES

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework that prioritizes and ranks the level of observability of inputs used in measuring fair value.

The fair value of the Company’s financial instruments are as follows:

			Fair Value Measured at Reporting Date Using
	Carrying Amount		Level 1		Level 2		Level 3		Fair Value
At March 31, 2020:
Cash and cash equivalents	$	1,544	$	-	$	1,544	$	-	$	1,544
Other receivables	$	426,164	$	-	$	-	$	426,164	$	426,164
Note receivable - related party	$	44,859	$	-	$	-	$	44,859	$	44,859
Advances to CEN Biotech
Ukraine, LLC - related party	$	1,065,328	$	-	$	-	$	1,065,328	$	1,065,328
Loans payable	$	10,096,386	$	-	$	-	$	10,096,386	$	10,096,386
Loans payable – related parties	$	1,359,439	$	-	$	-	$	-	$	-
Patent acquisition liability	$	720,000	$	-	$	-	$	720,000	$	720,000
Convertible notes payable	$	6,330,519	$	-	$	-	$	7,090,083	$	7,090,083
Convertible notes payable – related parties	$	2,558,681	$	-	$	-	$	-	$	-

	Carrying Amount		Level 1		Level 2		Level 3		Fair Value
At December 31, 2019:
Cash and cash equivalents	$	3,757	$	-	$	3,757	$	-	$	3,757
Other receivables	$	424,110	$	-	$	-	$	424,110	$	424,110
Note receivable - related party	$	44,859	$	-	$	-	$	44,859	$	44,859
Advances to CEN Biotech
Ukraine, LLC - related party	$	1,065,328	$	-	$	-	$	1,065,328	$	1,065,328
Loans payable	$	10,121,411	$	-	$	-	$	10,121,411	$	10,121,411
Loans payable – related parties	$	1,362,600	$	-	$	-	$	-	$	-
Patent acquisition liability	$	720,000	$	-	$	-	$	720,000	$	720,000
Convertible notes payable	$	6,224,325	$	-	$	-	$	6,918,486	$	6,918,486
Convertible notes payable – related parties	$	2,558,681	$	-	$	-	$	-	$	-

The fair values of other receivables (including related accrued interest), note receivable - related party, and advances to CEN Biotech Ukraine, LLC approximate carrying value due to the terms of the instruments.

The fair value of the loans payable approximates carrying value due to the terms of such instruments and applicable interest rates.

The fair value of convertible notes payable is based on the par value plus accrued interest through the date of reporting due to the terms of such instruments and interest rates.

It is

not

practicable to estimate the fair value of loans payable – related parties and convertible notes payable – related parties due to their related party nature.

The fair value of the patent acquisition liability is based upon a valuation report obtained from a

party valuation specialist. This valuation report utilized a cash-free asset value model to estimate enterprise value based upon similar companies.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details