COMMITMENTS AND CONTINGENCIES

9 Months Ended

Aug. 31, 2021

NOTE 8. COMMITMENTS AND CONTINGENCIES

Everlast License Agreement

On December 23, 2013, the Company entered into a Deed of Assignment Agreement with Everlast World’s Boxing Headquarters Corporation, International Brand Management Limited, Sports Nutrition Products Incorporated and Manchester Capital Incorporated wherein Everlast, International Brand, Sports Nutrition and Manchester Capital are parties to a trade mark license and Sports Nutrition, a New York corporation, has assigned its interest in the trade mark license to the Company. Pursuant to the terms of the assignment agreement, Sports Nutrition Products Incorporated, a wholly owned subsidiary of Trident Brands Incorporated, assigned all of its rights, title, interest and benefit to the trade mark license to the Company effective December 23, 2013 and the Company assumed all of the obligations of Sports Nutrition Products Incorporated under the license agreement. The Company shall remain responsible to Everlast and International Brand for all acts and omissions of the subsidiary, Sports Nutrition Products Inc.

The Everlast License Agreement includes a clause stating that Manchester Capital Incorporated will guarantee that the Licensee shall perform all of its obligations and duties under the License Agreement. If the Licensee defaults in the payment when due of any amount it is obliged to pay to Licensor under the License Agreement, or arising from its termination, Manchester Capital is unconditionally responsible to pay that amount to Licensor in the manner prescribed in the License Agreement as if it were the Licensee.

The Royalty Calculation, as per the terms of the agreement, are as follows: In 2013, 7% of Net Retail Sales and 7% of 60% of Direct Response Sales Revenue; in 2014, 8% of Net Retail Sales and 8% of 60% of Direct Response Sales Revenue; in 2015, 9% of Net Retail Sales and 9% of 60% of Direct Response Sales Revenue; in 2016 onwards, 10% of Net Retail Sales and 10% of 60% of Direct Response Sales Revenue. The Annual Minimum Guaranteed Royalty is $120,000 in 2014, $235,000 in 2015, $320,000 in 2016, $345,000 in 2017 and in 2018 onwards, if the Agreement remains in force, will be 75% of the previous Year’s Royalty Calculation or the previous Year’s Annual Minimum Guaranteed Royalty plus 10%, whichever is greater.

The agreement was terminated on December 31, 2017. On January 17, 2019, Everlast World’s Boxing Headquarters Corp. (“Everlast”) filed a counter civil lawsuit against the Company and other defendants. In that lawsuit, Everlast seeks payment from the defendants under a License Agreement dated June 4, 2013, for $425,555 in unpaid royalties allegedly due and owing under the License Agreement and interest on the allegedly unpaid royalties of $96,265, which interest allegedly continues to accrue. Everlast has also sought all costs, expenses, and legal fees incurred by Everlast in collecting monies that it claims are due under the License Agreement. On February 26, 2020, the court in the Everlast matter issued an Opinion and Order granting a motion to dismiss all of the Company’s claims against Everlast and granting a motion for judgment on the pleadings as to liability against the Company. The Court left open the question of damages to be awarded to Everlast. The Company had requested that the parties participate in settlement discussions before a magistrate judge or, in the alternative, that Everlast engage in limited discovery on these matters. No settlement was reached. On October 15, 2020, the Court in the Everlast case ordered, adjudged and decreed that Plaintiff Everlast have judgment and recover a total of $738,946 from the Company as follows:

1.	$425,000 representing royalty payments due to Everlast;
2.	Interest on royalty payments computed through October 15, 2020, in the sum of $242,920;
3.	Costs and attorneys’ fees in the sum of $71,026

The Company has fully accrued the $738,946 liability as of November 30, 2020.

On or about June 30, 2021, the Company, as Debtor, and Trident Sports Nutrition, Inc. and Brain Armor Inc., as garnishee defendants, were served with garnishment summons and complaint in Fond du Lac County, Wisconsin Circuit Court, (Case No. 2021FJ0003). The Plaintiff is Everlast, who is seeking to collect upon a judgment entered in the United States District Court for the Southern District of New York (Case No. 19-CV-503). According to Everlast, the judgment as of June 29, 2021 is in the amount of $745,814.61.

On July 16, 2021, the Company filed an Answer asserting that its assets are subject to the security interest of LDF (MCTECH) Investment Corp. and should not be subject to garnishment. Trident Sports Nutrition, Inc. and Brain Armor Inc. both filed garnishee answers denying that either corporation had control or possession of assets belonging to Trident Brands, Inc. or was otherwise indebted to the Company. The time period for Everlast to respond to these pleadings expires on August 5, 2021.

In addition, Everlast has commenced a proceeding in Waukesha County, Wisconsin Circuit Court (Case No. 21-TJ-90) and the Hon. Daniel P. Murray, Court Commissioner, has ordered the Company, Anthony M. Pallante and Peter Salvo to appear at his office for a supplemental examination on July 29, 2021 to answer under oath concerning the property and financial affairs of the Company. The Company and Messrs. Pallante and Salvo plan on defending against the Order issued by the Court Commissioner on jurisdictional and/or other grounds.

Banc of America Leasing and Capital

On December 1, 2020, Bank of America Leasing and Capital, LLC filed a legal action against the Company in the Superior Court for the State of California, County of San Mateo (Case NO. 20-CIV-05306), alleging breach of contract. The claim arises out of a software services contract between the Company and Oracle Corporation. Bank of America Leasing and Capital, LLC acquired Oracle’s rights under the agreement. The plaintiff claims the Company is liable for damages in the amount of $217,000 plus interests and costs. The Company did not file an answer to this complaint. On February 22, 2021, the plaintiff requested that the Court enter a default against the Company, which the court has done.

PIT Mycell

On June 3, 2019, the Company filed a lawsuit against PIT Mycell, LLC, William E. Peterson III, New Age Ventures, LLC, Volker Berl, and Mycell Technologies, LLC (“Mycell”) in the Superior Court in Bergen County, New Jersey, Civil Action No. BER-L-004198-19, in which the Company seeks to require the defendants to perform under and allow the enforcement of certain notes made by Mycell and acquired by the Company in September 2017. The notes are past their stated maturity date of December 31, 2016. The Company also alleges that the parties had entered into a written Settlement Agreement Letter of Intent dated March 14, 2019 (the “Settlement”), but that the defendants repudiated it shortly thereafter. The notes had been the subject of an earlier lawsuit in Virginia in state court in Fairfax County between the Company and PIT Mycell, LLC that the Settlement was intended to resolve. The Company seeks to enforce the notes and the Settlement in the New Jersey lawsuit and requests actual damages in an amount to be proven at trial, attorneys’ fees and litigation costs, specific performance requiring certain defendants to enforce obligations under the notes against Mycell, specific performance requiring the defendants to execute a final Settlement Agreement consistent with the Settlement, an order permitting foreclosure on the collateral for the notes, and declaratory relief. On January 24, 2020, the New Jesey court denied Defendant’s Motions to dismiss the case. The parties have engaged in written discovery and exchanged productions of documents. Mycell filed for bankruptcy on November 25, 2020.

Please see Item 3. Legal Proceedings of this Quarterly Report for updates which occurred subsequent to August 31, 2021.

Trident Brands Inc 10-Q