8-K: Cryomass Technologies Amends Licensing Agreement with RubberRock, Eliminates Minimum Royalties

Cryomass Technologies and RubberRock Inc. have amended their patent license and equipment rental agreement, removing minimum quarterly royalties and introducing a revenue-sharing provision.

Summary

• Cryomass Technologies Inc. and RubberRock Inc. have modified their existing agreement, effective January 9, 2024.
• The amendment removes all references to Minimum Quarterly Royalties.
• A Territory License Fee of $100,000 is now payable by RubberRock to Cryomass.
• Cryomass will share 10% of revenue from additional units deployed in the territory with RubberRock.
• Monthly royalties are set at 10% of RubberRock's Gross Revenues.
• Cryomass will have increased access to RubberRock's financial records for auditing purposes.
• RubberRock is required to issue its first financial report by January 29, 2024, and pay all accrued monthly royalties by February 2, 2024.

Sentiment

Score: 7

Explanation: The amendment appears to be a positive step for both companies, with a shift towards a more flexible revenue-sharing model. However, there are some risks associated with the new structure, which tempers the overall sentiment.

Positives

• The removal of minimum quarterly royalties provides RubberRock with more flexibility.
• The revenue-sharing agreement could provide RubberRock with additional income from Cryomass's expansion.
• Cryomass gains better auditing access to RubberRock's financials, ensuring compliance and revenue verification.
• The agreement clarifies payment terms and deadlines for RubberRock, promoting financial transparency.

Negatives

• The removal of minimum quarterly royalties could reduce Cryomass's guaranteed income.
• The 10% revenue share for RubberRock is dependent on Cryomass's deployment of additional units, which is at Cryomass's sole discretion.
• The $100,000 territory license fee is a new upfront cost for RubberRock.

Risks

• Cryomass's revenue is now more dependent on RubberRock's gross revenues and the deployment of additional units.
• The success of the revenue-sharing model depends on Cryomass's ability to deploy additional units effectively.
• There is a risk that RubberRock may not meet the financial reporting and payment deadlines.
• The agreement relies on the accuracy of RubberRock's financial reporting, which is subject to audit.

Future Outlook

The company's future performance is subject to risks and uncertainties, including its ability to achieve or maintain profitability and effectively manage growth. The company does not assume any obligation to update forward-looking statements.

Management Comments

• The amendment reflects the parties' mutual desire to adjust the agreement to better suit their current business needs.
• Cryomass is focused on ensuring compliance and revenue verification through increased access to RubberRock's financial records.

Industry Context

This amendment reflects a shift in the licensing agreement towards a revenue-sharing model, which is becoming more common in technology licensing agreements. It also highlights the importance of financial transparency and auditing in such partnerships.

Comparison to Industry Standards

• The move away from minimum quarterly royalties is a common practice in early-stage licensing agreements to provide flexibility to the licensee.
• The 10% revenue share is within the typical range for technology licensing agreements, although the specific percentage can vary widely based on the technology and market.
• The increased access to financial records for auditing is a standard practice to ensure compliance and accurate revenue reporting.
• Companies like Xometry and Proto Labs also use licensing agreements with revenue sharing, but the specific terms vary based on the technology and market.

Stakeholder Impact

• Shareholders of Cryomass may see a change in revenue streams due to the removal of minimum royalties and the introduction of revenue sharing.
• RubberRock may benefit from the removal of minimum royalties and the potential for revenue sharing.
• Employees of both companies may be impacted by the changes in the agreement.

Next Steps

• RubberRock needs to issue its first financial report by January 29, 2024.
• RubberRock needs to pay all accrued monthly royalties by February 2, 2024.
• Cryomass will likely begin auditing RubberRock's financial records.
• Cryomass will determine the deployment of additional units in the territory.

Key Dates

Keywords

Patent License, Equipment Rental, Royalties, Revenue Sharing, Licensing Agreement, Cryomass Technologies, RubberRock Inc, Territory License Fee