The Company entered into a licensing agreement with an arm’s length party (the “Licensee”) allowing the Licensee, for a fixed term, to utilize the Company’s lipid infusion technology (the “Technology”) to create, test, manufacture, and sell marijuana-infused consumable and/or topical products (the “Territorial License”). The Company also earns a usage fee (the “Usage Fee”) for the different products developed by the Licensee using the Company’s Technology. In addition to the granting of the license, the Company is required to provide support services to the Licensee in connection with the use of the Company’s Technology during the term of the licensing agreement.

The Company determined that the provision of the support services is a separate deliverable under the licensing agreement. As the support services will not be sold on a stand-alone basis, the Company is unable to establish a vendor-specific objective evidence of fair value of such services to be able to objectively allocate the Territory License fee receipts between the license and the support services. Accordingly, the Company recognizes revenue ratably over the term of the Licensing agreement. During the three months ended November 30, 2016, the Company recognized $6,250 of Territorial License fee and also recognized $2,000 in Usage Fee (2015 - $nil, and $nil, repectively). As at November 30, 2016 a total of $12,000 in Territorial License and Usage Fee is receivable from the Licensee (August 31, 2016 - $10,000).

As at November 30, 2016, the Company also received $4,900 in advance payments for future delivery of its manufactured products.