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Significant Accounting Policies: License Agreement Policy (Policies)
12 Months Ended
Dec. 31, 2018
Policies  
License Agreement Policy

License Agreements

 

At the time of the Merger, Sustainable had a series of agreements including an exclusive, renewable 20-year engine technology license agreement (the “Agreement”) with a third party licensor that had developed engines capable of converting heat into other forms of energy.  The agreements were assigned to the Company.  Under the terms of the Agreement, it could be cancelled by the Company during the term once the patents upon which it was based expired.  The newer of two patents expired in August of 2017, and the Company elected at that time to exercise its right to cancel the Agreement.

 

The third party licensor had been classified in 2010 as dissolved by the Delaware Division of Corporations, and similarly by the Arizona Corporation Commission, and has not reinstated its charters.  Despite this status, during July, 2017, the Company received a demand letter from the principal of that firm claiming that an aggregate total of $1,104,367 was due the firm under the Agreement, and to the principal for consulting work.  The Company and its counsel believe that the claims are without merit and would vigorously defend any potential lawsuit.  The Company believes it has no outstanding obligation to either party, and took the remaining unamortized asset value of the Agreement, $20,307, as a charge against earnings in the third quarter of 2017.

 

Subsequently, in December, 2017, the Company entered into an intellectual property license agreement with Thermal Tech Holdings, LLC, a Delaware limited liability company (“TTH”).  TTH is an entity owned equally by two entities affiliated, respectively, with two officers and directors of the Company, who also serve in management positions with TTH.

 

TTH is the owner of certain patent applications as well as the inventions relating to the Company’s proprietary engine technology (the “Licensed Patents and Technical Information”).  The Licensed Patents and Technical Information were developed by an independent non-profit research institute (the “Contractor”).  All work done by the Contractor for the patent applications and inventions licensed thereunder was paid for by TTH in order that TTH, rather than the Company, would be at risk if the research, development, engineering and design work were of little or no value.  Furthermore, the work performed by the Contractor for TTH was confidential for competitive business reasons.

 

The Patent License grants the Company a worldwide non-exclusive license to use the Technical Information to make, use or sell any products and/or services which would be covered by these specific Licensed Patents.  However, TTH may not license any Licensed Patents and Technical Information to any competitive entity, or to any other entity without the prior written consent of the Company.

 

The Company will pay TTH a royalty equal to five (5%) percent of the Net Revenue (as defined) of all Licensed Products covered by a Licensed Patent sold by the Company and its affiliates, as well as an initial license fee of $135,000, of which $94,500 has been paid. In March of 2019, the Company completed the license fee with a payment of the remaining $40,500. The Patent License will terminate upon the expiration of all Licensed Patents. The Company may terminate the agreement on ninety (90) days’ prior written notice. TTH may terminate the agreement on ninety (90) days’ prior written notice for uncured defaults (as defined).