8.	RESALABLE 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 amortized in the following

months is

$1,125,000

and is classified as current, with remainder as non-current.

The Company originally 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 that the economic use model was front-end focused as a 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 greater of the straight-line methodology or actual unit cost per license sold will more closely align the expense with the remaining useful life of the product. The change in amortization was effective beginning on

January 1, 2019

based on the net remaining software license rights balance. 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

$281,250

and

$660,000

was charged to cost of sales during the

three

-month periods ended

September 30, 2019

and

2018,

respectively, and of this amount

$113

and

$210,

represent the cost basis of the actual sales, respectively. A total of

$843,750

and

$1,980,000

was charged to cost of sales during the

nine

-month periods ended

September 30, 2019

and

2018,

respectively and of this amount

$463

and

$1,651

represent the cost basis of the actual sales, respectively. Since the license purchase, a cumulative amount of

$5,042,346

has been charged to cost of sales, with a carrying balance of

$6,957,654

as of

September 30, 2019.

The Company's change in methodology was determined to be a change in accounting estimate that is effected by a change in accounting principle. Pursuant to ASC

250

guidance, this accounting change will

not

be accounted for as a cumulative effect adjustment on the statement of operations in the period of change and there will be

retroactive application or restatement of prior periods. Instead, the Company allocates the remaining unamortized balance over the remaining life of the assets using the newly adopted method.

The following compares line items on the statement of operations had the change in amortization methodology

not

been made:

	As reported			Prior methodology			As reported			Prior methodology
	3 months ended			3 months ended			9 months ended			9 months ended
	September 30, 2019			September 30, 2019			September 30, 2019			September 30, 2019
Amortization of software license rights	$	281,137		$	749,887		$	843,287		$	2,249,537
Total operating expenses	$	1,215,197		$	1,683,947		$	4,326,236		$	5,732,486
Operating loss	$	(1,271,136	)	$	(1,739,886	)	$	(4,385,645	)	$	(5,791,895	)
Net loss	$	(1,829,567	)	$	(2,298,317	)	$	(5,058,818	)	$	(6,465,068	)
Basic & diluted loss per share	$	(0.13	)	$	(0.16	)	$	(0.36	)	$	(0.46	)

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

two

approaches being the actual unit cost per license sold. A total of

$5,701

and

$8,358

was expensed during the

three

month periods ended

September 30, 2019

and

2018,

respectively. A total of

$40,394

and

$16,460

(net of credits of

$14,400

) was expensed during the

nine

-month periods ended

September 30, 2019

and

2018,

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

$106,188

has been charged to cost of sales, with a carrying balance of

$73,812

as of

September 30, 2019.

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

	September 30,		December 31,
	2019		2018


Current resalable software license rights	$	1,125,000	$	1,125,000
Non-current resalable software license rights		5,906,466		6,790,610
Total resalable software license rights	$	7,031,466	$	7,915,610