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Commitments and Contingencies
3 Months Ended
Apr. 30, 2023
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 9 - Commitments and Contingencies

 

Litigation, Claims and Assessments

 

From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm its business. The Company is currently not aware of any such legal proceedings or claims that they believe will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results.

 

 

Licensing and Royalty Agreements

 

On March 1, 2010, the Company was assigned a Development and License agreement, dated January 1, 2009, with Daniel Daugherty. (the “License Agreement”) Under the terms of the License Agreement the licensor shall exclusively develop for the Company a line of beef meatballs with sauce, turkey meatballs with sauce and other similar meats and sauces for commercial manufacture, distribution and sale (each a “Licensor Product” and collectively the “Licensor Products”). Licensor shall work with the Company to develop Licensor Products that are acceptable to the Company. Upon acceptance of a Licensor Product by Licensee, Licensor’s trade secret recipes, formulas methods and ingredients for the preparation and production of such Licensor Products (the “Recipes”) shall be subject to the License Agreement.

 

The exclusive term began on January 1, 2009 (the “Effective Date”) and ends on the 50th anniversary of the Effective Date.

 

The royalty rate payable by the Company is: 6% of net sales up to $500,000 of net sales for each year under the License Agreement year; 4% of Net Sales from $500,000 up to $2,500,000 of Net Sales for each year under the License Agreement; 2% of Net Sales from $2,500,000 up to $20,000,000 of Net Sales for each License Agreement year; and 1% of Net Sales in excess of $20,000,000 of Net Sales for each year under the License Agreement.

 

In order to continue exclusivity, the Company shall pay a minimum royalty of $125,000 each year.

 

The Company incurred $189,484 and $150,035 of royalty expenses for the three months ended April 30, 2023 and 2022, respectively. Royalty expenses are included in general and administrative expenses on the condensed consolidated statements of operations.