NOTE

—RESALABLE SOFTWARE LICENSES RIGHTS

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

months is

$1,125,000

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

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.

Through

2018,

the remaining license rights were amortized over the greater of the following amounts:

) an estimate of the economic use of such license rights,

) the amount calculated by the straight line method over

ten

years or

) the actual cost basis of sales 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

$2,640,000

and

$1,556,687

was expensed during the

twelve

month periods ended

December 31, 2018

and

2017,

respectively. The

2018

expense was recorded based on the economic use model. Since the license purchase, a cumulative amount of

$4,198,596

has been expensed, with a carrying balance of

$7,801,404

as of

December 31, 2018.

Based on current sales, the Company believes that the economic use was front-end focused as the majority of the expected up-take of the FingerQ technology was predicted to occur during the

first

years of the

-year life cycle of the product. Based on current sales trends, the company now believes future transactions will be more evenly dispersed over the remaining life cycle of the product, indicating that the straight-line methodology, or greater of actual sales, will more closely align the expense with the remaining useful life of the product. The change in amortization will be effective beginning on

January 1, 2019

based on the net remaining software license rights balance.

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 actual sales through

2018.

A total of

$18,198

(net of credits of

$14,400

) and

$35,916

was expensed during the

twelve

month periods ended

December 31, 2018

and

2017,

respectively. Since the license purchase, the actual per unit cost (actual usage) of such license rights in the cumulative amount of

$65,794

net of credits has been expensed, with a carrying balance of

$114,206

as of

December 31, 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:

	201 8		201 7

Current software license rights	$	1,125,000	$	2,640,000
Non-current software license rights		6,790,610		7,933,808
Total software license rights	$	7,915,610	$	10,573,808

During the year ended

December 31, 2018,

there were

events or changes in circumstances that indicated the carrying amount of the software license rights

may

not

be recoverable from their undiscounted cash flows. Consequently, we did

not

perform an impairment test. The Company did

not

record an impairment loss related to the software license rights during the years ended

December 31, 2018

and

2017.

Estimated minimum amortization expense based on straight line amortization of the software license rights for each of the next

five

years and thereafter approximates the following:

Years ending December 31
2019	1,125,000	*
2020	1,114,500
2021	1,114,500
2022	1,114,500
2023	1,114,500
Thereafter	2,332,610

* - Includes increase vs. straight line due to expected deployment of

second

tranche of licenses from

fourth

quarter

2018

order.