NOTE F

—

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

$2,640,000

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 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.

A total of

$1,556,687

and

$1,909

was expensed during the

2017

and

2016

years, respectively. Since the license purchase, a cumulative amount of

$1,558,596

has been expensed, with a carrying balance of

$10,441,404

as of

December 31, 2017.

The

2017

amortization expense was based on the economic use model as this was the greater of the

three

methods.

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

$35,916

and

$19,680

was expensed for actual sales during the

2017

and

2016

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

$47,596

has been expensed, with a carrying balance of

$132,404

as of

December 31, 2017.

During

2017,

the Company also purchased

$8,000

of another

third

-party software licenses. The Company has classified these balances as non-current until a larger deployment occurs. Software license rights is comprised of the following as of:

	2017		2016

Current software license rights	$	2,640,000	$	1,560,000
Non-current software license rights		7,933,808		10,598,411
Total software license rights	$	10,573,808	$	12,158,411

During the year ended

December 31,

201

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, 2017

and

2016.

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
2018			2,640,000
2019			3,000,000
2020			2,400,000
2021			1,200,000
2022			720,000
Thereafter			613,808