In 2020, the Company began developing MARKET, the next generation of interactive livestream ecommerce, and has capitalized $4,348,000 of internal and external development costs as of December 31, 2021. In October 2021, the Company entered into a License and Services Agreement with a third party (the “Primary Contractor”) engaged to develop certain components of MARKET. The Primary Contractor’s fees for developing such components, including the license fee for such components, is $5,750,000. As of December 31, 2021, the Company had capitalized $4,100,000 of fees billed by the Primary Contractor, of which $2,000,000 was paid in 2021 and $2,100,000 was paid in January 2022. The Company’s remaining software development commitment to the Primary Contractor at December 31, 2021 was $1,150,000. The Primary Contractor has the ability to earn an additional $500,000 in bonus payments if it satisfies certain conditions. In addition, as of December 31, 2021, the Company had paid or accrued $248,000 of other capitalized software development costs.

There has been no depreciation expense related to capitalized software development costs for the years ended December 31, 2021 and 2020.

Option to Acquire Primary Contractor

In August 2021, the Company entered into an agreement providing the Company the option to purchase the Primary Contractor. In November 2021, the Company exercised this option. As of December 31, 2021, the Company and the Primary Contractor have reached an agreement on the terms for the Company’s acquisition of the Primary Contractor, which is subject to the execution of a share purchase agreement (the “SPA”) and the completion of an audit of the Primary Contractor (the “Primary Contractor Audit”). As of the date of the issuance of these financial statements, the Primary Contractor Audit is ongoing. If the Company enters into the SPA and successfully completes the Primary Contractor Audit and thereafter determines not to consummate the acquisition of the Primary Contractor, the Company may be liable for a $1,000,000 break-up fee payable to the Primary Contractor. The purchase price for the Primary Contractor is $12,000,000, which can be paid in cash and/or stock, subject to the parties’ mutual agreement.