Note 7 - Software Licenses and Rights

6 Months Ended

Jun. 30, 2017

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

7.	SOFTWARE LICENSE 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

$2,100,000

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 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:

) 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. During the

three

month period ended

June 30, 2017

the Company sold licenses costing

$1,405

and amortized

$388,595.

During the

six

month period ended

June 30, 2017

the Company sold licenses costing

$48,337

and amortized

$729,755.

The license rights had a carrying balance of

$11,221,404

as of

June 30, 2017.

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 over the same methodology described above with the greatest of the

three

approaches being the amortization for the periods. A total of

$22,020

and

$28,716

was expensed for actual sales during the

three

and

six

months ended

June 30, 2017,

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

$48,396

has been expensed, with a carrying balance of

$131,604

as of

June 30, 2017.

The Company has classified the balance as non-current until a larger deployment occurs. Software license rights is comprised of the following as of:

	June 30,		December 31,
	2017		2016


Current software license rights	$	2,100,000	$	1,560,000
Non-current software license rights		9,253,008		10,598,411
Total software license rights	$	11,353,008	$	12,158,411