| PATENT RIGHTS |
| 10. |
PATENT RIGHTS
On April 13, 2018, the Company entered
into a purchase and sale agreement with Buys, its CTO, pursuant to which the Company purchased certain intellectual property relating
to air and/or gas fired long guns or pistols, including pump action launchers and munitions used with such pistols and long guns,
including self-stabilizing shaped or “finned” rounds. As consideration for the Buys Portfolio, the Company paid Buys
$100,000, and incurred $10,000 in legal costs to transfer these patent rights. This consideration of $110,000 was capitalized and
represents the minimum rights to a license arrangement as patent rights as the Agreement included an option for full acquisition
of the rights, conditional upon certain future events taking place. The Company also agreed to pay Buys either $500,000 in cash
or $750,000 worth of Company stock within two years at Buys’ discretion, if the Company elected to retain certain patents
within the Buys Portfolio, which terms were changed by subsequent amendment. Pursuant to an amendment of the Agreement effective
December 18, 2019, the Company made two additional payments to Buys totaling of $776,799, consisting of the Second Payment of $696,799
through the issuance of 3,866,810 shares of common stock and Final Payment of $80,000 in cash. The Final Payment was paid during
the quarter ended May 31, 2020. Buys no longer retains any reversion rights or security interests in the Buys Portfolio.
|
Pursuant to
the amended agreement related to the Final Payment to Buys for the Buys Portfolio, the Company is committed to a minimum royalty
payment of $25,000 per year. Royalties on CO2 pistols are to be paid for so long as patents remain effective beginning at 2 ½%
of the agreed upon a net price of $167.60 (“Stipulated Net Price”) for the first year and reduced by .1% each year
thereafter until it reaches 1%. For each substantially new product in this category, the rate will begin again at 2 ½%. Royalties
on the fintail projectiles (and any improved versions thereof) will be paid so long as patents remain effective at a rate of 4%
of the agreed upon Stipulated Net Price for fintail projectile products.
The patent
rights have a maximum life of 20 years, expiring on various dates beginning from November 2033 to 2038, and are amortized on a
straight-line basis over a period of 15 years. The Company amortized $64,873 and $7,332 during the years ended November 30, 2020
and 2019, respectively.
The below table summarizes amortization
of the Company’s patents as of November 30, 2020 for the next five years and thereafter:
| Fiscal Year |
|
|
|
|
| 2021 |
|
|
$ |
64,874 |
|
| 2022 |
|
|
|
64,874 |
|
| 2023 |
|
|
|
64,874 |
|
| 2024 |
|
|
|
64,874 |
|
| 2025 |
|
|
|
64,874 |
|
| Thereafter |
|
|
|
486,558 |
|
| Total |
|
|
$ |
810,928 |
|
|