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ASSET PURCHASE AGREEMENT | 12 Months Ended
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Sep. 30, 2016
Asset Purchase Agreement [Abstract] |
ASSET PURCHASE AGREEMENT | NOTE C - ASSET PURCHASE AGREEMENT On September 11, 2015, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”), with Vandalia Research, Inc. a West Virginia corporation (“Vandalia”), and Derek A. Gregg, Vandalia’s Chief Executive Officer and a director of Vandalia, providing for the purchase of substantially all the assets (“Assets”) of Vandalia. The Company completed the acquisition of such Assets on the same date (“Vandalia Asset Acquisition”). The Vandalia Assets relate to the business of producing specific, DNA sequences with the polymerase chain reaction production system known as Triathlon™, including machinery, equipment, inventory, registered and other intellectual property, including patents, trademarks, trade secrets, domain names, copyrights and rights to software, and customer contracts. The Assets also include Vandalia’s rights under a patent license agreement between Marshall University Research Corporation (“Marshall”) and Vandalia pursuant to which the Company will pay to Marshall a royalty of one percent (1%) of the net revenues received by it from the sale of the licensed product. The purchase price for the Assets was $1,500,000, which amount was determined through arms-length negotiation. Of this amount, $500,000 was placed in an escrow account for a period of nine months following the closing to satisfy Vandalia’s indemnification obligations of which $350,000 was released to Vandalia after sixty days. On June 30, 2016, the Company received $50,000 of the remaining funds in escrow to satisfy indeminification obligations and the balance of $100,000 was released to Vandalia. Vandalia and Derek Gregg agreed not to compete with the Company and not to solicit the Company’s employees or customers for a period of five years following the closing. Derek Gregg also entered into a consulting agreement with the Company for a term of twelve months subject to earlier termination by either party upon thirty days’ notice. Pursuant to the Asset Purchase Agreement, the Company entered into a month to month sublease with Vandalia of approximately 5,000 square feet at Vandalia’s office facility at an aggregate monthly rent of $5,416, which the Company terminated during December 2015. Purchase orders of $237,000 were assigned by Vandalia to the Company. Prior to the Vandalia Asset Acquisition, the Company was a customer of Vandalia, paying approximately $230,300 during the fiscal year ended September 30, 2014. The Company entered into this Asset Purchase Agreement in order to be able to increase its capacity for producing DNA, as well as to expand its business and product offerings. The asset purchase agreement was accounted for using the acquisition method under ASC 805, Business Combinations, which requires the acquired assets to be recorded at fair values as of the acquisition date of September 11, 2015. The following table summarizes the purchase price and the values of assets acquired:
Allocation of Purchase Price: |  | September 11, 2015 |
Inventory |  | $ | 30,000 |
Fixed assets |  |  | 36,614 |
Security deposit |  |  | 10,000 |
Identifiable intangible assets: |  |  |  |
Contract in place |  |  | 69,000 |
Intellectual property |  |  | 448,000 |
Customer relationships |  |  | 621,000 |
Goodwill |  |  | 285,386 |
Fair value of assets acquired |  | $ | 1,500,000 |
The goodwill acquired is the result of expected synergies as well as intangible assets that did not qualify for separation. During the fiscal year ended September 30, 2015, the Company expensed $184,319 of acquisition-related legal costs. The costs are included in the line item Selling, General & Administrative costs in the accompanying consolidated statements of operations for the fiscal year ended September 30, 2015 . The amounts of revenue and net income of Vandalia included in the Company’s consolidated statements of operations for the fiscal year ended September 30, 2015 was $175,000 and $102,398, respectively. The goodwill of $285,386 is fully deductible for tax purposes.

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