Note 8 - Resalable Software License Rights |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes to Financial Statements | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Research, Development, and Computer Software Disclosure [Text Block] |
On November 11, 2015, the Company entered into a license agreement for the rights to all software and documentation regarding the technology currently known as or offered under the FingerQ name. The license agreement grants the Company the exclusive right to reproduce, create derivative works and distribute copies of the FingerQ software and documentation, create new FingerQ related products, and grant sub-licenses of the licensed technology to end users. The license rights have been granted to the Company in perpetuity, with a stated number of end-user resale sub-licenses allowed under the contract for a total of $12,000,000. The cost of sub-license rights expected to be amortized in the following 12 months is $2,820,000 and is classified as current, with remainder as non-current.The Company has determined the software license rights to be a finite lived intangible asset, and estimated that the software license rights shall be economically used over a 10 year period, with a weighting towards the beginning years of that time-frame. The license rights were acquired during the fourth quarter of 2015, but the usage of such rights in the Company’s products was not generally available until January 2017. Accordingly, amortization began in the first quarter of 2017. The remaining license rights are to be amortized over the greater of the following: 1 ) an estimate of the economic use of such license rights, 2 ) straight line method over ten years or 3 ) the actual usage of such rights. The Company believes categorizing the amortization expense under Cost of Sales more closely reflects the nature of the license right arrangement and the use of the technology. A total of $660,000 and $390,000 was expensed during the three month periods ended June 30, 2018 and 2017, respectively. A total of $1,320,000 and $778,092 was expensed during the six month periods ended June 30, 2018 and 2017, respectively. The 2018 expense was recorded based on the economic use model. Since the license purchase, a cumulative amount of $2,878,596 has been expensed, with a carrying balance of $9,121,404 as of June 30, 2018. On December 31, 2015, the Company purchased third -party software licenses in the amount of $180,000 in anticipation of a large pending deployment that has yet to materialize. The Company is amortizing the total cost over the same methodology described above with the greatest of the three approaches being the amortization for the periods. A total of $20,642 and $22,020 was expensed during the three month periods ended June 30, 2018 and 2017, respectively. A total of $8,102 (net of credits of $14,400 ) and $28,716 was expensed during the six month periods ended June 30, 2018 and 2017, respectively. Since the license purchase, the actual per unit cost (actual usage) of such license rights in the cumulative amount of $55,698 net of credits has been expensed, with a carrying balance of $124,302 as of June 30, 2018. The Company has classified the balance as non-current until a larger deployment occurs. Software license rights is comprised of the following as of:
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