On March 24, 2016, Patriot (licensee) entered into a contract with McMaster University (the “McMaster Agreement”). This is a standard license agreement and includes a 3.5% net sales royalty. The termination date is 20 years from the effective date (March 24, 2036) or upon the last to expire or become abandoned of the licensed patents. Change of control and assignment is permitted with the prior written consent of McMaster University.
In consideration, the Company paid an up-front license fee of $10,000 and issued 1,560,000 common shares with a fair value of $78,000 to McMaster. In addition, the Company agreed to pay a royalty percentage of 3.5% on net sales and from time to time, issue common shares of the Company to McMaster so that in the aggregate, shares held by McMaster represent 5% of the Company’s issued and outstanding common shares calculated on a fully diluted basis. Such issuance shall continue until and including the date upon which a total of $2,000,000 in cash shall be received by the Company in exchange for the Company’s capital stock. Thereafter, no additional shares shall be due to McMaster. As well, the Company agreed to make minimum annual royalty payments as follows:
- first year $2,500
- second year 2,500
- third year 5,000
- fourth and subsequent years 7,500.
McMaster University carries out scientific research and has developed the intellectual property in the patents that are described in the McMaster Agreement. The McMaster Agreement grants Patriot an exclusive royalty bearing license to use and practice the licensed patents with the exclusive license to make, use, or sell the licensed products or transfer the licensed products. Patriot currently has a license agreement with McMaster University that covers the worldwide rights to the following University Patents:
- CA 2,895,795
- US 14/751,796
- EP 15174116
- UA a201506349
- HK 16106764.3
The following is a list of material contracts of Patriot, other than contracts entered into in the ordinary course of business, entered into by Patriot within the two years before the date of this Filing Statement:
1) Patriot, the Issuer, Bullrun Capital Inc. (“Bullrun”) and Rajni Singhera entered into a royalty agreement dated October 26, 2016 (the “Royalty Agreement”) pursuant to which Patriot will grant Bullrun and Rajni Singhera 2% (as to 1% each) net sales royalty on Patriot’s use of the technology licensed from McMaster University pursuant to the McMaster Agreement (as more particularly set out above).
2) On March 24, 2016, Patriot (licensee) entered into a contract with McMaster University (the “McMaster Agreement”). This is a standard license agreement and includes a 3.5% net sales royalty. The termination date is 20 years from the effective date (March 24, 2036) or upon the last to expire or become abandoned of the licensed patents. Change of control and assignment is permitted with the prior written consent of McMaster University.
3) On May 30, 2016, Patriot executed a contract with Macadamian relating to the October 2016 pilot for software development. There is no termination date but Patriot has the right to terminate the contract with 30 days written notice to Macadamian. There are no change of control or assignment provisions in the agreement. Macadamian is a software and design firm based in the United States but with offices in Canada. The pilot project involves testing Patriot’s threat detection technology at two different test facilities. The discovery phase is estimated to cost $40,800-$60,000 and the design and development phases is estimated to cost $232,000-$316,000.
4) Phase 1: Statement of Work between Sensoft and Patriot dated May 30, 2016 in respect of a Phase 1 prototype system for demonstration and field testing of Patriot’s technology. The aggregate quoted cost of work pursuant to this agreement is $280,000.