Long-term Receivables

3 Months Ended

Mar. 31, 2024

Receivables [Abstract]

Long-term Receivables

Note 5. Long-term Receivables

As of March 31, 2024, the Company had long-term receivables of $1,701,300 from two of the three licensees representing the present value of fixed guaranteed royalty payments that will be payable over varying periods of two through five years that commenced in the second half of 2022 and terminate in the second quarter of 2028. The fixed guaranteed royalty payments result from amendments to license agreements with two existing licensees and a license agreement with a new licensee. The receivable represents the present value of the fixed minimum annual payments due under the license agreements, discounted at the Company's incremental borrowing rate of 4%. 

The three agreements grant licenses for the use of certain patented ink technology as it exists at the time that it is granted which is considered functional intellectual property. Under Topic 606, a performance obligation to transfer a license for functional intellectual property is satisfied at a point in time and the fixed consideration could be recognized upfront when the Company transfers control of the licensee if certain criteria are met. Specifically, the minimum royalty guarantee could be recognized upfront if the following conditions are met:

· The royalty payment is fixed or determinable

· Collection of the royalty payment is considered probable

· The licensee has the ability to benefit from the licensed technology

The Company determined that the above conditions were met upon execution of the new 2022 license agreements and recognized $2,810,600 of royalty revenue net of imputed interest of $132,300 for the year ended December 31, 2022. The commissions are payable over the term of the license agreements and are due when payments are received by the Company. As of March 31, 2024, the accrued commission payable balance was approximately $161,200.

The current portion of the three license agreements in the amount of $604,800 and $624,600, is included in accounts receivable on the balance sheets as of March 31, 2024 and December 31, 2023, respectively.

The following table summarizes the future minimum payments due under the three license agreements as of March 31, 2024:

Year Ending December 31:
	2024	$	642,000
	2025		570,000
	2026		570,000
	2027		557,500
	2028		260,000
	Total	$	2,599,500

The Company has evaluated the collectability of the long-term receivables and believes them to be fully collectible as of March 31, 2024. However, there can be no assurance that the receivables will not be impaired in the future due to changes in the licensees’ financial condition or other factors. 

The long-term receivables are recorded at its present value as of March 31, 2024, and will be amortized over the term of the license agreements using the effective interest method. The unamortized balance of the long-term receivables as of March 31, 2024 is $1,701,300.