Note 4. Long-term Receivables

As of March 31, 2026 and December 31, 2025, the Company had long-term receivables of $639,600 and $775,000, respectively, from four 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 and a license agreement with a new licensee. 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 a licensee that renewed in January 2025 and 5.52% for a new licensee in June 2025.

These 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 four license agreements. The present value of the fixed guaranteed costs of obtaining the license agreements (sales commissions) was recorded upon renewal of three existing license agreements and a new license agreement with a new licensee. The sales commissions are amortized on a systematic basis consistent with the pattern of revenue recognition for the underlying these license agreements. The unamortized balance as of March 31, 2026 and December 31, 2025, for accrued commission payable was $85,600 and $96,100, respectively, included on the balance sheet in accrued expenses and accrued expenses, non-current. 

The current portion of the license agreements in the amount of $584,100 and $599,400, is included in accounts receivable on the balance sheets as of March 31, 2026 and December 31, 2025, respectively.

The following table summarizes the future minimum payments due under the remaining three license agreements as of March 31, 2026:

The Company has evaluated the collectability of the long-term receivables and concluded that expected credit losses related to the receivables remain immaterial as of March 31, 2026. 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, 2026, and the receivable and imputed interest will be amortized over the term of the license agreements using the effective interest method. The book value approximates the fair value for long-tern receivables. The unamortized balance of the long-term receivables as of March 31, 2026 and December 31, 2025 was $639,600 and $775,000, respectively. The unamortized imputed interest balance as of March 31, 2026 and December 31, 2025 was $83,000 and $90,200, respectively, which will be recognized as interest income through June 30, 2028. Interest income derived from long-term receivables was $7,200 and $4,900 for the three months ended March 31, 2026 and 2025, respectively, included in the statements of comprehensive (loss) income.