COMMITMENTS AND CONTINGENCIES

3 Months Ended

Feb. 28, 2022

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 claim 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

On November 17, 2021, The Company entered Into a Stipulation (“Stipulation”) of the litigation captioned Everlast World’s Boxing Headquarters Corp. (“Everlast”). Plaintiff vs. Trident Brands, Inc. and Manchester Capital Inc., Defendants, Waukesha County Court Case No. 21 TJ 90. Under the terms of the Stipulation, the Company agreed to pay Everlast on or before February 15, 2022, the sum of $650,000 in full satisfaction of the Everlast’s judgment against the Company in the amount of $738,946. Under the Stipulation, except for the first $250,000 of capital raised, the Company is required to pay Everlast 20% of the gross amount of any capital raising transaction, until the full $650,000 is paid, provided however that the full $650,000 was required to have been paid no later than February 15, 2022.

The Company failed to pay Everlast the full $650,000 by February 15, 2022, as a result of which the Company is obligated to pay Everlast the judgment amount of $738,945, plus applicable interest (a total of $750,713 as of August 21, 2021) and attorney’s fees, less any payments made. The estimated liability as of February 28, 2022 due to accrued interest is $879,073 which the Company has fully accrued. The Company is currently in litigation with Everlast regarding Everlast’s methods to collect the judgement.

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 has not filed an answer to this complaint. On February 22, 2021, the plaintiff requested that the Court enter a default judgment against the Company. The Company intends to engage counsel and defend against this claim.

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 Jersey 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. The bankruptcy is completed and the Company no longer has a claim on the new company that has since emerged from bankruptcy.

Contingencies

The Company may be subject to various legal proceedings and claims that arise in the ordinary course of business. The Company records a liability when it is probable that a loss has been incurred and the amount is reasonably estimable. There is significant judgment required in both the probability determination and as to whether an exposure can be reasonably estimated. If any legal matter, that may arise, were resolved against the Company in a reporting period for amounts in excess of management’s expectations, the Company’s would reflect any potential claim in the consolidated financial statements for that reporting period.

Trident Brands Inc 10-Q