Quarterly report pursuant to Section 13 or 15(d)

Note 6 - DEFERRED REVENUE

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Note 6 - DEFERRED REVENUE
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
Note 6 - DEFERRED REVENUE

Effective on April 5, 2013, the Company granted a sub-license agreement for ten years amongst the Company, Kryptonite Investments LLC (“Kryptonite Investments”) and Trinity dated April 8, 2013 for the state of Arizona.

 

In accordance with the terms and provisions of the license agreement: (i) the license shall be granted by the Company to Kryptonite Investments upon payment of $425,000 to the Company as evidenced by that certain convertible debenture agreement (the “Debenture”); and (ii) the Company shall grant to Kryptonite Investments the exclusive rights to the License to use, sell and offer for sale in the state of Arizona.

 

Kryptonite Investments shall pay the following amounts to the Company; a license fee of $300,000, (the “License Fee”), which shall be payable as either: (i) an upfront License Fee less 10% discount for total of $270,000 if paid within 30 days of date that all principal and interest is repaid by the Company for the Debenture; or (ii) payable as the licensee performs procedures to begin within 30 days of principal and interest being paid in full for the Debenture by the Company. The remaining unrecognized balance as of March 31, 2014 and December 31, 2013 was $248,248 and $255,640, respectively.

 

On August 2, 2013, the Company granted licensing rights perpetually for the 48 most northern counties in the state of California for an aggregate of $773,000, of which $140,000 added during the three months ended March 31, 2014. The licensing fees are amortized to income over the estimated expected useful life of five years. The remaining deferred revenue balance as of March 31, 2014 and December 31, 2013 was $691,711 and $586,319, respectively.

 

On December 13, 2013, the Company granted licensing rights for ten years in the state of Connecticut for $350,000 payable upfront. The licensing fees are amortized to income over the term on the license agreement. The remaining deferred revenue balance as of March 31, 2014 and December 31, 2013 was $339,650 and $348,275, respectively.

 

On January 27, 2014, the Company entered into a binding Letter of Intent with Sobriety and Addiction Solutions for the territory of Washington D.C., Maryland, Virginia and West Virginia. Subsequently, on February 4th the Company entered into an amended and restated binding Letter of Intent to include the state of North Carolina as an additional territory. In addition, the Company received $150,000 and $nil in advance licensing fees as of March 31, 2014 and December 31, 2013, respectively. The unrecognized balance as of March 31, 2014 and December 31, 2013 was $150,000 and $nil, respectively.