NOTE C

—

PISTOLSTAR, INC. ACQUISITION

June 30, 2020,

the Company acquired PistolStar, Inc., a private company based in the United States, which provides enterprise-ready identity access management solutions, including multi-factor authentication, identity-as-a-service, single sign-on and self-service password reset to commercial, government and education customers throughout the United States and internationally.

From

April 10, 2020

until the Company acquired PistolStar, it licensed PortalGuard®, PistolStar's authentication software, which the Company combines with its biometric authentication solutions offered to existing and prospective customers.

The total purchase price of

$2.5

million included cash payment of

$2.0

million and the issuance of a

$500,000

promissory note.

The acquisition of PistolStar has been accounted for as a business combination and, in accordance with ASC

805,

the Company has recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition date. The following table summarizes the final purchase price allocation:

Purchase consideration:
Total cash paid, net of acquired cash	$	2,000,000
Present value of 4% Promissory note		464,000
Total purchase price consideration	$	2,464,000

Fair value of assets acquired and liabilities assumed:
Cash and cash equivalents	$	100,747
Accounts receivable		184,792
Prepaid expenses and other current assets		9,485
Fixed assets		36,467
Intangible assets		1,480,000
Goodwill		1,262,526
Total assets acquired		3,074,017

Accrued expenses and other current liabilities		738
Accrued payroll		19,279
Deferred revenue		590,000
Total fair value of assets acquired and liabilities assumed	$	2,464,000

The promissory note, which was issued to the previous owner of PistolStar, carries interest at

per annum and is payable in

four

installments over the

-month period following the closing. The balance of the note at

December 31, 2020

was

$232,000,

net of the unamortized debt discount. On

January 21, 2021,

the Company paid the

$250,000

balance due on the note.

In the year ended

December 31, 2020,

acquisition-related expenses were immaterial. Acquisition-related expenses have been included primarily in general and administrative expenses in the consolidated statements of operations. The operating results of PistolStar have been included in the consolidated statements of operations beginning on

July 1, 2020.

Revenue from PistolStar for the period from

July 1, 2020

through

December 31, 2020

totaled

$1,064,384.

The income from PistolStar for the period from

July 1, 2020

through

December 31, 2020

was

$202,558.

The significant intangible assets identified in the purchase price allocation discussed above include the trade name, proprietary software, and customer relationships. To value the trade name and proprietary software, the Company utilized the Relief from Royalty Method, which quantifies the cost savings associated with asset ownership via a discounted cashflow analysis. To value the customer relationships, the Company utilized the Excess Earnings Method, which isolates the value of the specific intangible asset by discounting its income stream to present value.

The fair value of the assets acquired and liabilities assumed reflected in the tables above is less than the purchase price, resulting in the recognition of goodwill. The goodwill reflects the value of the synergies the Company expects to realize and the assembled workforce.

The following table presents the final fair values and useful lives of the identifiable intangible assets acquired:

	Amount		Estimated useful life (in years)
Trade Name	$	130,000		15
Proprietary Software		420,000		5
Customer relationships		930,000	8	-	10
Total identifiable intangible assets	$	1,480,000