Annual report pursuant to Section 13 and 15(d)

4. Sale of Assets

v3.20.2
4. Sale of Assets
12 Months Ended
Mar. 31, 2020
Discontinued Operations and Disposal Groups [Abstract]  
Sale of Assets to Petagon Limited

NOTE 4 – Sale of Assets

 

Sale of Assets to Petagon Limited

 

On May 20, 2019, the Company closed on an Asset Purchase Agreement for the sale of certain animal health product rights and assets for the Asian and European markets to Petagon, Limited, (“Petagon”) an international importer and distributor of quality pet food and products. The sales price for the assets was $2,700,000. The Company agreed that it will continue to supply products to Petagon for five years at certain agreed upon transfer prices. The sale involves certain Asian patents and trademarks, and the exclusive right to distribute animal health care products in Asia and Europe.

 

The Company determined that there were two separate performance obligations under the Asset Purchase Agreement. These performance obligations were the delivery of production equipment to Petagon as a security and the transfer of the intellectual property and territory rights.

 

The Company estimated the value of the production equipment by determining the cost and applying a mark up to the selling price at a market participant margin. The Company then applied the residual approach to derive the fair value of the intellectual property and territory rights.

 

The Company will provide product under a reduced price from its prior list price. The Company incurred costs of approximately $163,000 to fulfill its obligations to deliver certain production equipment to Petagon.

 

The proceeds from the sale were allocated to the components of the sale utilizing the residual approach as follows:

 

Total proceeds   $ 2,700,000  
Less - Production equipment     (228,000 )
Residual attributable to the intellectual property and territory rights   $ 2,472,000  

 

The proceeds related to the production equipment were recognized upon delivery of the equipment in March 2020. The proceeds related to the intellectual property and territory rights were included in gain on sale on the closing date.

 

For a certain period after closing, Petagon shall have first refusal rights to acquire other certain marketing territories.

 

Sale of Product Rights to Microsafe Group, DMCC

 

On February 21, 2020, the Company closed on an Asset Purchase Agreement for the sale of certain wound care and animal health product rights and assets for the Middle East and disinfectant rights for the European and Australian markets to Microsafe Group, DMCC (“Microsafe”), an international distributor. The purchase price for the product rights and assets was $1,100,000.

 

The Company agreed that it will continue to supply products to Petagon for five years at certain agreed upon transfer prices. The sale involves certain Asian patents and trademarks, and the exclusive right to distribute animal health care products in Asia and Europe.

 

The Company determined that there were two separate performance obligations under the Asset Purchase Agreement. These performance obligations were the delivery of production equipment to Petagon as a security and the transfer of the intellectual property and territory rights.

 

The Company estimated the value of the production equipment by determining the cost and applying a mark up to the selling price at a market participant margin. The Company then applied the residual approach to derive the fair value of the intellectual property and territory rights.

 

The Company will provide product under a reduced price from its prior list price. The Company will incur costs of approximately $75,000 to fulfill its obligations to deliver certain production equipment to Microsafe.

 

The proceeds from the sale were allocated to the components of the sale utilizing the residual approach as follows:

 

Total proceeds   $ 1,100,000  
Less - Production equipment     (150,000 )
Residual attributable to the intellectual property and territory rights   $ 950,000  

 

The proceeds related to the production equipment are included in deferred revenue and will be recognized upon delivery of the equipment. The proceeds related to the intellectual property and territory rights are included in gain on sale on the closing date.