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Note 10 - Resalable Software License Rights | 9 Months Ended
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Sep. 30, 2020
Notes to Financial Statements |
Research, Development, and Computer Software Disclosure [Text Block] |
10. | RESALABLE SOFTWARE LICENSE RIGHTS
On 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 Company initially 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 10 -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 December 31, 2018, the license rights were amortized over the greater of the following amounts: 1 ) an estimate of the economic use of such license rights, 2 ) the amount calculated by the straight line method over ten years or 3 ) the actual cost basis of sales usage of such rights. After re-evaluation of the expected timeline of future license transactions, commencing January 1, 2019, the Company changed its amortization methodology to the greater of the straight-line methodology or actual unit cost per license sold based on net remaining software licenses as of January 1, 2019. The Company categorized the amortization expense under Cost of Sales as it more closely reflected the nature of the license right arrangement and the use of the technology. During the fourth quarter of 2019, the Company re-evaluated the recoverability of the carrying amount of the balance of license rights, and concluded that there were no significant undiscounted cash flows expected to be generated from the future sale of the license rights. Accordingly, an impairment charge of $6,957,516 was recorded in the fourth quarter of 2019, which reduced the carrying amount of the FingerQ license rights to zero. Throughout 2019, the Company attempted to sell the technology into the mobile market in Asia, but due to, among other things, the trade tension between the US and China, management concluded that the future amortization would not represent an accurate cost to the ongoing business, without corresponding revenue. A total of $281,137 and $113 was charged to cost of sales during the three -month period ended September 30, 2019 for amortization and the cost basis of the actual sales, respectively. A total of $843,287 and $463 was charged to cost of sales during the nine -month period ended September 30, 2019 for amortization and the cost basis of the actual sales, respectively. On 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 greater of the two approaches being the actual unit cost per license sold. A total of $16 and $5,701 was charged to cost of sales during the three month periods ended September 30, 2020 and 2019, respectively. A total of $5,044 and $40,394 was charged to cost of sales during the nine month periods ended September 30, 2020 and 2019, respectively. Since the license purchase, the actual per unit cost (actual usage) of such license rights in the cumulative amount of $111,242 has been charged to cost of sales, with a carrying balance of $68,758 and $73,802 as of September 30, 2020 and December 31, 2019, respectively.

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- 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 Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 985 -SubTopic 730 -URI http://asc.fasb.org/subtopic&trid=2197926 + Details
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