Note F - Software Licenses and Rights

12 Months Ended

Dec. 31, 2016

Research, Development, and Computer Software Disclosure [Text Block]

NOTE F—SOFTWARE LICENSE

S AND

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 sold to customers in the following

months is

$1,560,000

and is classified as a current asset, and the balance 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 our products was not generally available until

January

2017.

Accordingly, amortization will begin in the

first

quarter of

2017.

During

2016

we embedded some of the licensed software in our products and expensed the actual per unit cost (actual usage) of such license rights in the amount of

$1,909.

There was no amortization expense in

2015.

The remaining license rights are to be amortized over the greater of the following:

an estimate of the economic use of such license rights,

straight line method over

ten

years or

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.

December

31,

2015,

the Company purchased

third

party software licenses in amount of

$180,000

in anticipation of a large pending deployment that has yet to materialize. During

2016

we expensed the actual per unit cost (actual usage) of such license rights in the amount of

$19,680.

Therefore, although some of the licenses have been sold during

2016,

the Company has classified the balance as non-current until a larger deployment occurs.

	2016		2015

Current software license rights	$	1,560,000	$	5,000,000
Non-current software license rights		10,598,411		7,000,000
Total software license rights	$	12,158,411	$	12,000,000

During the year ended

December

31,

2016,

there were no 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,

2016

and

2015.

Estimated amortization expense based on economic use of the software license rights for each of the next

five

years and thereafter approximates the following:

Years ending December 31
2017	$	1,560,000
2018		2,640,000
2019		3,000,000
2020		2,400,000
2021		1,200,000
Thereafter		1,358,411

- Definition

The entire disclosure for research, development, and computer software activities, including contracts and arrangements to be performed for others and with federal government. Includes costs incurred (1) in a planned search or critical investigation aimed at discovery of new knowledge with the hope that such knowledge will be useful in developing a new product or service, a new process or technique, or in bringing about a significant improvement to an existing product or process; or (2) to translate research findings or other knowledge into a plan or design for a new product or process or for a significant improvement to an existing product or process whether intended for sale or the entity's use, during the reporting period charged to research and development projects, including the costs of developing computer software up to the point in time of achieving technological feasibility and in-process research and development acquired in a business combination consummated during the period.

+ References + Details