Note 5. Long-term Receivables

As of March 31, 2025 and December 31, 2024, the Company had long-term receivables of $1,196,800 and $1,292,800, respectively, from three and two licensees, respectively, representing the present value of fixed guaranteed royalty payments that will be payable over varying periods of two through five years that commenced in the second half of 2022 and terminate in the second quarter of 2028. The fixed guaranteed royalty payments result from amendments to license agreements with three existing licensees. The receivable represents the present value of the fixed minimum annual payments due under the license agreements, discounted at the Company's incremental borrowing rate of 6.32% for two licensees that renewed in 2022 and 8.14% for one licensee that renewed in January 2025.

The three agreements grant licenses for the use of certain patented ink technology as it exists at the time that it is granted which is considered functional intellectual property. Under Topic 606, a performance obligation to transfer a license for functional intellectual property is satisfied at a point in time and the fixed consideration could be recognized upfront when the Company transfers control of the licensee if certain criteria are met. Specifically, the minimum royalty guarantee could be recognized upfront if the following conditions are met:

The Company determined that the above conditions were met upon execution of the three license agreements. The commissions are payable over the term of the license agreements and are due when payments are received by the Company. As of March 31, 2025 and December 31, 2024, the accrued commission payable balance was $125,200 and $128,500, respectively, included on the balance sheet in accrued expenses and accrued expenses, non-current.

The current portion of the three license agreements in the amount of $593,700 and $545,700, is included in accounts receivable on the balance sheets as of March 31, 2025 and December 31, 2024, respectively.

The following table summarizes the future minimum payments due under the three license agreements as of March 31, 2025:

The Company has evaluated the collectability of the long-term receivables and believes them to be fully collectible as of March 31, 2025. However, there can be no assurance that the receivables will not be impaired in the future due to changes in the licensees’ financial condition or other factors. 

The long-term receivables are recorded at its present value as of March 31, 2025, and the receivable and imputed interest will be amortized over the term of the license agreements using the effective interest method. The unamortized balance of the long-term receivables as of March 31, 2025 and December 31, 2024 was $1,196,800 and $1,292,800, respectively. The unamortized imputed interest balance as of March 31, 2025 and December 31, 2024 was $108,400 and $110,500, respectively, which will be recognized as interest income through June 30, 2028. Interest income derived from long-term receivables was $4,900 and $3,200 for the three months ended March 31, 2025 and 2024, respectively, included in the statements of comprehensive income (loss).