Note 2 - Discontinued Operations

3 Months Ended

Dec. 31, 2015

Notes

Note 2 - Discontinued Operations

Note 2 - Discontinued Operations

Based upon recent regulatory activity related to imposition of restrictions and limitations on the sale of hemp-based health products for pets, we elected to terminate our license agreement with Canna-Pet effective as of October 1, 2015, and to cease all operations relating to sale of hemp-based products for pets.

On October 12, 2015, we entered into an agreement for the termination (“Termination Agreement”) of the Canna-Pet License Agreement, effectively selling the discontinued operations. The Termination Agreement contained the following provisions:

• Termination of License. The parties agreed to terminate the Canna-Pet License Agreement effective as of October 1, 2015.  This termination was made by mutual agreement of the parties pursuant to and in accordance with the provisions of the License Agreement.

• Return of Licensed Intellectual Property.  We agreed to return all Licensed Intellectual Property to the Licensor, Canna-Pet, LLC, and our right to use all, or any portion, of the Licensed Intellectual Property ceased effective as of October 1, 2015.  Pursuant to the terms of the License Agreement, the Licensed Intellectual Property included the brand name “Canna-Pet” and certain related intellectual property, including, but not limited, trademarks and copyrights, formulations, recipes, production processes and systems, websites, domain names, customer lists, supplier lists trade secrets and know-how, and other related intellectual property.  

• Return of Other Property.  In addition to return of the Licensed Intellectual Property, we agreed to transfer to Licensor all product inventory, Colorado hemp with permits and authorization, all production/fulfillment contracts, all e-commerce accounts and processing, all NDA and Research Agreements and any and all other property in our possession which was used by us in the conduct of our business related to production and sale of medical cannabis products for pets made from hemp and low-THC cannabis plants.

• Office Space, Equipment and Employees.  In conjunction with the execution of the Termination Agreement, we granted the Licensor the right to use our office space, for the three-month period from October 1, 2015 through December 31, 2015, on a rent-free basis.

• Consideration.  As consideration for the cancellation of the Canna-Pet License Agreement and the return of other property, as described above, the Licensor agreed to waive payment by us and to release us from liability for payment of any and all unpaid royalties, invoices and other amounts which were otherwise currently due and payable by us to Licensor for sales of Canna-Pet products for all periods through and including September 30, 2015.

• Collections. On October 15, 2015, we forwarded to Licensor all payments received by us after September 30, 2015 (net of amounts received by us for taxes, duties, governmental charges, freight or shipping charges, and the like) for Canna-Pet products sold on or after October 1, 2015.

The following is a summary of the net assets sold as initially determined at Septembers 30, 2015 and updated October 15, 2015:

	October 15, 2015		September 30, 2015
Inventory	$	45,436	$	41,705
Prepaid expenses		8,821		-
Deposits		8,179		8,678
Total assets		62,436		50,383
Accounts payable		103,548		124,396
Royalty payable		39,506		39,506
Accrued liabilities		285		15,341
		143,339		179,243
	$	80,903	$	128,860

The income from discontinued operations presented in the statements of operations consist of the following for the three-month periods ended December 31, 2015 and 2014, respectively:

	2015		2014
Revenues	$	-	$	184,024
Cost of goods sold		-		(43,972)
General and administrative expenses		(9,804)		(111,780)
Gain on disposal of discontinued operations		80,903		-
	$	71,099	$	28,272