SONOMA PHARMACEUTICALS, INC. (NASDAQ:SNOA) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01
As previously announced, we are relocating our manufacturing from Petaluma, California to Guadalajara, Mexico and transitioning our corporate functions to Woodstock, Georgia, and are closing our facility in Petaluma. We made the decision to close the Petaluma location because our Petaluma factory was in one of the most expensive areas in the United States to manufacture and our equipment and facility were aging and needed upgrades. By relocating our U.S. manufacturing to our existing state-of-the-art facility in Guadalajara, Zapopan, Mexico, we avoided costly upgrades and eliminated significant overhead expenses. We will be able to manufacture all of our products in Mexico and produce high quality products for a much lower price. Lowering our manufacturing and overhead costs will strengthen our company financially. Being able to manufacture our products at a lower cost will allow us to introduce new products that we couldn’t market in the past because our prices were too high for the markets we were seeking. It will also allow us to seek new distribution partners that are interested in high volume opportunities for certain of our products that were previously manufactured in California. Additionally, we relocated and consolidated our corporate functions to our existing offices in Woodstock, Georgia which will also reduce overhead expenses while allowing us to be more efficient by combining most of our corporate functions in one location.
As part of this process, on June 24, 2020, we closed on an asset purchase agreement for the sale of our MicroMed laboratory division and testing facility, including all of MicroMed’s assets, such as testing equipment, certain office furniture and customer list, with Infinity Labs SD Inc. for an aggregate purchase price of $850,000. On the closing date we received $610,000 in cash from this sale which was adjusted for working capital, $100,000 for future testing services we obtain from Infinity Labs over the next two years, and $60,000 is held in escrow for one year, subject to adjustment for certain indemnity claims or purchase price adjustments. We also retained our accounts receivables outstanding on the date of closing in the amount of approximately $81,000 and a small amount of liabilities. As part of the transaction, Infinity Labs also assumed the Petaluma lease for the office space and lab space. We retained the warehouse space to store inventory and assets until we complete our move.
This report contains forward-looking statements. Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements related to our future activities or future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performances and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those risks discussed in our Annual Report on Form 10-K and in other documents that we file from time to time with the SEC. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this report, except as required by law.
Item 9.01. Financial Statements and Exhibits.