NOTE 6 - INTANGIBLE SOFTWARE TECHNOLOGY, NET

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

NOTE 6 - INTANGIBLE SOFTWARE TECHNOLOGY, NET

On April 29, 2011, we purchased software technology for $2 million in cash and issuance of 163,934 shares of our common stock, valued at $1 million on the date of purchase.  Acquisition costs of $89,000 were capitalized as part of the transaction.  The transaction was accounted for as an asset purchase.

For a period of five years we will pay the seller royalties of 4% of directly associated revenues relating to this acquired software technology.  We will expense the royalty payments when they are incurred as we cannot reasonably estimate the future royalty payment amount at the time of acquisition.  For the first three years we will pay an additional royalty of 2.5% of directly associated revenues relating to this acquired software technology to the original developer of the technology.  No royalty expense was recognized for the years ended December 31, 2011 and 2012.

A year end impairment analysis was performed due to indicators of impairment from changes in our use and plans for Azido technology and our market capitalization being below our net book value. During the fourth quarter of 2012, changes in Azido projects and projected cash flows, which decreased or eliminated our expected future cash flows related to Azido technology’s use or disposition, resulted in an impairment charge of $2.3 million and a carrying value of $35,000 at year end.

The following is a summary of the Company’s intangible software technology:

	December 31, 2012		December 31, 2011
(in thousands)
Intangible software technology	$	3,089	$	3,089
Less impairment charge		2,318		-
Less accumulated amortization		736		296
Intangible software technology, net	$	35	$	2,793

Future amortization expense related to this intangible asset is as follows:

	Amortization
(in thousands)
2013	$	4
2014		4
2015		4
2016		4
2017		4
Thereafter		15
Total	$	35