NOTE 4. PREPAID EXPENSES AND T STAMP LICENSING ARRANGEMENT

The Company’s prepaid expenses consist principally of the prepaid T Stamp Inc. (d/b/a Trust Stamp) license described in Notes 2 and 5 to the audited consolidated financial statements for the year ended December 31, 2025. Pursuant to the August 2024 license, the Company has recorded a $5,000,000 prepaid asset and is amortizing it to expense on a straight-line basis over the 36-month license term at a contractual monthly rate of $138,889. Because the license commenced on August 6, 2024, amortization is recognized over 37 monthly periods from August 2024 through August 2027, comprising a partial-month charge of $112,007 in August 2024, full monthly charges of $138,889 thereafter, and a final partial-month charge of $26,878 in August 2027.

Carrying amounts of the prepaid licensing balance at June 30, 2026 and December 31, 2025, were as follows. The current portion represents amounts expected to be amortized within twelve months after the balance sheet date:

Amortization of the prepaid T Stamp license recognized in licensing-fee expense (a component of general and administrative expenses) was $416,667 for each of the three months ended June 30, 2026 and 2025 and $833,334 for each of the six months ended June 30, 2026 and 2025. Under the straight-line schedule of $138,889 per month described in Note 4, three months of amortization equals $416,667 and six months equals $833,334.