Nanosphere Master Licence Agreement and Product Development
On January 23, 2019, the Company entered into a master license agreement with Nanosphere (the "Nanosphere Agreement") pursuant to which Nanosphere has granted a master license for Nanosphere's technology to the Company for all of Canada. Nanosphere's technology is a delivery system for cannabinoids that works by nano-encapsulating active ingredients in phospholipid membranes for transportation through the skin and mucosa into the bloodstream of a person within minutes. The cannabis applications of the technology include transdermal viscous gels, intranasal products and intraoral products, all of which provide rapid results, precise dosages and high bioavailability. Nanosphere's delivery system can eliminate the need for inhalation or ingestion of cannabis offering users a potentially safer and more effective way of consumption.
Under the Nanosphere Agreement, Nanosphere will equip the Company's production lab and train the Company's staff in the production of Nanosphere's technology and the Company and Nanosphere will each receive 50 per cent of the net revenue from the sales of Nanosphere products in Canada. The Company has the right to sub-contract distribution to third-party license holders in Canada where the opportunity exists. Under those circumstances, the Company would receive a portion of that sub- licensee's net profit, and remit 50 per cent of the net revenue to Nanosphere.
The initial term of the Nanosphere Agreement is 36 months following the date upon which Health Canada approves the licensed Nanosphere products for sale.
The Nanosphere Agreement provides that the Company shall pay Nanosphere a licensing fee of $500,000. The first installment of $250,000 was paid by the Company upon the execution of the Nanosphere Agreement and the remaining $250,000 is due and payable by the Company upon the Company receiving approval from Health Canada for production and sale of the products licensed under the Nanosphere Agreement.
On March 9, 2020, the Company and Nanosphere entered into an amending agreement with respect to the Nanosphere Agreement (the "Nanosphere Amending Agreement"). The Nanosphere Amending Agreement clarifies the terms of the exclusivity of the Company's license under the Nanosphere Agreement and provides that the $250,000 balance of the licensing fee will be satisfied by the Company by issuing Common Shares to Nanosphere upon the Company receiving approval from Health Canada for production and sale of the products licensed under the Nanosphere Agreement. The number of Common Shares to be issued by the Company under the Nanosphere Agreement will be based on the closing price of the Common Shares on the TSX on the date of the Nanosphere Amending Agreement, and will be subject to the approval of the TSX.