Commitments and Contingencies	6 Months Ended
Jun. 30, 2020
Commitments and Contingencies
Commitments and Contingencies	Note 13 – Commitments and Contingencies Litigation Contingencies On April 4, 2018, Med Vets, Inc. and Bay Medical Solutions Inc. (collectively “Plaintiffs”) filed suit in the United States District Court for the Northern District of California against PetIQ and VIP Petcare Holdings, Inc. for alleged unlawful merger and other antitrust violations. On June 29, 2020, the 9^th Circuit Court of Appeals issued an opinion affirming the dismissal of Med Vets’ merger challenge. The Plaintiffs have filed for an en banc hearing. As no impact to the Company is considered probable or estimable, no litigation reserve has been accrued. The Company has a supplier who has alleged PetIQ has breached its supply agreement due to the acquisition of Perrigo Animal Health. During July 2020, the Company entered into a Termination, Settlement and Asset Purchase Agreement (“Agreement”). The Agreement called for PetIQ to pay $20.6 million, $2.6 million at signing and $1 million per quarter thereafter. The Agreement terminated the supply agreement that was previously in place, settled all outstanding claims and operations, and allowed PetIQ to purchase certain intellectual property related assets. The Company has estimated the fair value of the payment obligation as $17.5 million, and determined the fair value of the acquired assets to be $9.7 million. The Agreement will allow the Company to manufacture and distribute products out of the Omaha facility (versus previously purchasing them from the supplier), thereby directly benefitting from Omaha’s product manufacturing process and improving company profitability. The remainder of the obligation is considered to be a payment to settle the alledged breech of the supply agreement, and as it represents circumstances that existed at June 30, 2020, the Company has accrued the amount as settlement expense included in general and aministrative expenses on the condensed consolidated statement of operations and the related liability as an ather accrued expenses and other non-current liability on the condensed consolidated balance sheet. The Company records a liability when a particular contingency is probable and estimable and provides disclosure for contingencies that are at least reasonably possible of resulting in a loss including an estimate which we currently cannot make. The Company has not accrued for any contingency at June 30, 2020 and December 31, 2019 as the Company does not consider any contingency to be probable or estimable. The Company expenses legal costs as incurred within general and administrative expenses on the consolidated condensed statements of operations. Commitments During the three months ended March 31, 2020, the Company executed an Asset Purchase Agreement (the “Purchase Agreement”) to acquire the U.S. rights to Capstar® and CapAction® and related assets (the “Capstar Acquisition”) from Elanco US Inc. (“Elanco”) for $95 million, plus the cost of certain outstanding finished goods inventory in saleable condition. The Acquisition was completed on July 31, 2020, using cash on hand as a result of the issuance of the Notes in May 2020.

Commitments and Contingencies

6 Months Ended

Jun. 30, 2020

Note 13 – Commitments and Contingencies

Litigation Contingencies

On April 4, 2018, Med Vets, Inc. and Bay Medical Solutions Inc. (collectively “Plaintiffs”) filed suit in the United States District Court for the Northern District of California against PetIQ and VIP Petcare Holdings, Inc. for alleged unlawful merger and other antitrust violations. On June 29, 2020, the 9^th Circuit Court of Appeals issued an opinion affirming the dismissal of Med Vets’ merger challenge. The Plaintiffs have filed for an en banc hearing. As no impact to the Company is considered probable or estimable, no litigation reserve has been accrued.

The Company has a supplier who has alleged PetIQ has breached its supply agreement due to the acquisition of Perrigo Animal Health. During July 2020, the Company entered into a Termination, Settlement and Asset Purchase Agreement (“Agreement”). The Agreement called for PetIQ to pay $20.6 million, $2.6 million at signing and $1 million per quarter thereafter. The Agreement terminated the supply agreement that was previously in place, settled all outstanding claims and operations, and allowed PetIQ to purchase certain intellectual property related assets. The Company has estimated the fair value of the payment obligation as $17.5 million, and determined the fair value of the acquired assets to be $9.7 million. The Agreement will allow the Company to manufacture and distribute products out of the Omaha facility (versus previously purchasing them from the supplier), thereby directly benefitting from Omaha’s product manufacturing process and improving company profitability. The remainder of the obligation is considered to be a payment to settle the alledged breech of the supply agreement, and as it represents circumstances that existed at June 30, 2020, the Company has accrued the amount as settlement expense included in general and aministrative expenses on the condensed consolidated statement of operations and the related liability as an ather accrued expenses and other non-current liability on the condensed consolidated balance sheet.

The Company records a liability when a particular contingency is probable and estimable and provides disclosure for contingencies that are at least reasonably possible of resulting in a loss including an estimate which we currently cannot make. The Company has not accrued for any contingency at June 30, 2020 and December 31, 2019 as the Company does not consider any contingency to be probable or estimable. The Company expenses legal costs as incurred within general and administrative expenses on the consolidated condensed statements of operations.

Commitments

During the three months ended March 31, 2020, the Company executed an Asset Purchase Agreement (the “Purchase Agreement”) to acquire the U.S. rights to Capstar® and CapAction® and related assets (the “Capstar Acquisition”) from Elanco US Inc. (“Elanco”) for $95 million, plus the cost of certain outstanding finished goods inventory in saleable condition. The Acquisition was completed on July 31, 2020, using cash on hand as a result of the issuance of the Notes in May 2020.