|12 Months Ended|
Dec. 31, 2020
Note 6 — Licenses, Net
On October 4, 2018, the Company invested $250,000 in a private corporation in the augmented reality software tool market. The Company participated in a financing round with other investors that resulted in the Company acquiring less than a 1% ownership interest, in the form of preferred stock, and a commercial agreement allows the Company to provide 60-day free licenses to their AR software tool to up to 100,000 of the Company’s developers and customers. The Company considers this investment as a prepaid licensing arrangement over a 36-month term; as such, this addition will be amortized over three years and included in Cost of Sales – Products in the Consolidated Statement of Operations.
The Company acquired two licenses in 2017. The first related to the renegotiation of an existing license at a cost of $114,967, which resulted in lower royalty rates being paid by the Company over the next 10 years. This license went into effect as of January 1, 2018. The second license was a result of the Company entering into a Technology Acquisition Agreement where it acquired all the seller’s right, title and interest in certain Transferred Intellectual
Property (IP). Pursuant to the agreement, the Company paid approximately $75,702 as reimbursement of related patent application costs incurred by the seller to date, which are included in Patents and Trademarks. The Company also issued 25,000 shares, valued at $128,750, upon the closing and will issue (i) a further 25,000 shares after the Company has successfully developed a working demonstrator system utilizing the IP; and (ii) 50,000 shares once the Company completes the successful commercialization of products containing the IP for sale in the marketplace. The Company estimates that, by end of 2022, it may be able to achieve the first development milestone of a functional demonstrator model and that it will need to spend a further $250,000 in additional R&D.
The Company acquired certain prepaid licenses in the gross amount of $544,000 to certain software applications designed to run on our smart glasses products under which the Company maybe resell such software with its smart glasses over a 24 month period. These licenses are being expensed at the greater of units sold or straightline over the 24 month period.
Total amortization expense related to licenses in the years ended December 31, 2020, 2019 and 2018 was $393,174, $122,704, and $56,597, respectively.