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Intellectual Property

3 Months Ended

May 31, 2017

On October 27, 2014, the Company entered into an intellectual property agreement with Mr. Hatem Essaddam (the "Intellectual Property Assignment Agreement") wherein the Company purchased a certain technique and method for $445,050 allowing for the depolymerization of polyethylene terephthalate at ambient temperature and atmospheric pressure. The Company will use such technique and know-how in its manufacturing facility. The technology is being amortized using the straight-line method over the 7 years estimated useful life of the patents.

In addition to the $445,050 paid by the Company under the Intellectual Property Assignment Agreement, the Company is required to make additional payments totaling CDN$800,000 to Mr. Essaddam within sixty (60) days of each of the following milestones (the “Milestones”) having been met, as follows:

	(i)	CDN$200,000 when an average of twenty (20) metric tons per day of terephthalic acid is produced by the Company for twenty (20) operating days;

	(ii)	CDN$200,000 when an average of thirty (30) metric tons per day of terephthalic acid is produced by the Company for thirty (30) operating days;

	(iii)	CDN$200,000 when an average of sixty (60) metric tons per day of terephthalic acid is produced by the Company for sixty (60) operating days; and

	(iv)	CDN$200,000 when an average of one hundred (100) metric tons per day of terephthalic acid is produced by the Company for sixty (60) operating days.

As of May 31, 2017, the Company is still in its test pilot program, none of the Milestones have been met, and accordingly no additional payments have been made.

Additionally, the Company is obligated to make royalty payments of up to CDN$25,700,000, payable as follows:

(a)

10% of gross profits on the sale of all products derived by the Company from the technology assigned to the Company under the Intellecutal Property Assignment Agreement;

	(b)	10% of any license fee paid to the Company in respect of any licensing or other right to use the technology assigned to the Company and granted to a third party by the Assignee;

	(c)	5% of any royalty or other similar payment made to the Company by a third party to whom a license or other right to use the technology assigned to the Company has been granted by the Company; and

	(d)	5% of any royalty or other similar payment made to the Company by a third party in respect of a sub-license or other right to use the technology assigned to the Company granted by the third party.

As of May 31, 2017, the Company has not made any royalty payments under the Intellectual Property Assignment Agreement.

Amortization expense is recorded as an operating expense in the consolidated statements of operations and comprehensive loss and amounted to $15,895, and $22,257 for the three months ended May 31, 2017 and 2016, respectively. As of May 31 and February 28, 2017, accumulated amortization was $152,945 and $137,050, respectively.