• Filing Date: 2016-07-15
  • Form Type: 10-Q
  • Description: Quarterly report
v3.5.0.2
Intellectual Property, net
3 Months Ended
May 31, 2016
Notes to Financial Statements  
Note 4. Intellectual Property, net

                   
    Estimated Useful     May 31,     February 29,  
    Life     2016     2016  
    (years)              
                   
In-process research & development   7     $ 445,050     $ 445,050  
Less: accumulated amortization           (95,728 )     (73,471 )
Intellectual Property, net         $ 349,322     $ 371,579  

 

On October 27, 2014, the Company entered into an intellectual property agreement with Mr. Hatem Essaddam wherein the Company purchased a certain technique and method (In-process research and development) for $445,050 allowing for the depolymerization of polyethylene terephthalate at ambient temperature and atmospheric pressure. The Company will use such technique in its processing plant. The technology is being amortized using the straight-line method over the estimated used life of the patents.

 

In addition to the $445,050 paid by the Company under the Intellectual Property Assignment Agreement, the Company is required to make additional payments totaling CDN$800,000 Mr. Essaddam within sixty (60) days of each of the following milestones (the "Milestones") having been met, as follows:

 

  (i) CDN$200,000 when an average of twenty (20) metric tons per day of terephthalic acid meeting the is produced by the Company for twenty (20) operating days;
     
  (ii) CDN$200,000 when an average of thirty (30) metric tons per day of terephthalic acid is produced by the Company for thirty (30) operating days;
     
  (iii) CDN$200,000 when an average of sixty (60) metric tons per day of terephthalic acid is produced by the Company for sixty (60) operating days; and
     
  (iv) CDN$200,000 when an average of one hundred (100) metric tons per day of terephthalic acid is produced by the Company for sixty (60) operating days.

 

As of May 31, 2016 the Company is still in its test pilot program, none of the Milestones have been met, and accordingly no additional CDN$200,000 payment has been made.

 

Additionally, the Company is obligated to make royalty payments of up to CDN$27,000,000, payable as follows:

 

 

  (a) 10% of gross profits on the sale of all products derived by the Company from the technology assigned to the Company under the agreement;
     
  (b) 10% of any license fee paid to the Company in respect of any licensing or other right to use the technology assigned to the Company and granted to a third party by the Assignee;
     
  (c) 5% of any royalty or other similar payment made to the Company by a third party to whom a license or other right to use the technology assigned to the Company has been granted by the Company; and
     
  (d) 5% of any royalty or other similar payment made to the Company by a third party in respect of a sub-license or other right to use the technology assigned to the Company granted by the third party.

 

As of May 31, 2016, the Company did not make any royalty payments under the Intellectual Property Assignment Agreement.

 

Amortization expense is recorded as an operating expense in the consolidated statements of operations and comprehensive loss and amounted to $22,257 and $7,419 for the three months ended May 31, 2016 and 2015, respectively.