Annual report pursuant to Section 13 and 15(d)

Intangible assets and liabilities other than goodwill

v3.23.1
Intangible assets and liabilities other than goodwill
 12 Months Ended
Dec. 31, 2022
Intangible Assets, Net (Excluding Goodwill) [Abstract]  
Intangible assets and liabilities other than goodwill Intangible Assets and Liabilities Other Than Goodwill
During the years ended December 31, 2022 and 2021 we capitalized $11,615 and $39,691, respectively, of product certification costs. Also included in intangible assets are legal costs incurred by us to obtain patents for our intellectual property. These patents, once they are placed in service, are amortized on a straight-line basis over the estimated economic life of the associated product, which ranges from approximately 7-10 years. We capitalized $17,890 and $23,406 of patent-related costs during the years ended December 31, 2022 and 2021, respectively. We did not capitalize any cost incurred for trademarks during the years ended December 31, 2022 and 2021, respectively.
Intangible assets and liabilities at December 31, 2022 and 2021 consist of the following:

December 31, 2022 December 31, 2021
Intangible assets Cost Accumulated Amortization Net Cost Accumulated Amortization Net
Product certifications $ 777,465  $ (584,863) $ 192,602  $ 765,850  $ (532,676) $ 233,174 
Patents 888,910  (405,140) 483,770  871,021  (314,997) 556,024 
Developed technology 240,000  (156,000) 84,000  240,000  (140,000) 100,000 
Trademarks 26,896  —  26,896  26,896  —  26,896 
In process R&D 263,936  (65,984) 197,952  263,936  (28,279) 235,657 
Favorable contract assets 384,465  (372,091) 12,374  384,465  (355,193) 29,272 
$ 2,581,672  $ (1,584,078) $ 997,594  $ 2,552,168  $ (1,371,145) $ 1,181,023 
Intangible liability
Unfavorable contract liability $ 2,618,168  $ (1,797,951) $ 820,217  $ 3,056,655  $ (1,797,149) $ 1,259,506 

The aggregate amortization expense related to intangible assets exclusive of contract related intangibles was $201,043 and $197,788 during the years ended December 31, 2022 and 2021, respectively. The net credit to cost of sales related to the amortization of the contract related intangible asset and liability for the years ended December 31, 2022 and 2021 was $274,112 and $319,084, respectively. We abandoned certain patent applications and recorded non-cash charges of $0 and $7,400 as long-lived asset impairment in the consolidated statement of operations for the years ended December 31, 2022 and 2021, respectively.
Contract Asset and Liability
The favorable contract asset and unfavorable contract liability in the foregoing table represent the fair value of ADGE's customer contracts (both positive for favorable contracts and negative for unfavorable contracts) which were acquired by us on May 18, 2017 (see Note 4. "Acquisition of American DG Energy Inc."), reduced by those sold during Q1 2019. See Note 5."Sale of Energy Producing Assets and Goodwill Impairment".
During the year ended December 31, 2022, we determined that certain of the ADGE customer contracts terminated due to the customers failure to perform their obligations pursuant to the contractual agreements and accordingly reversed $151,981
of unfavorable contract liability related to these contacts. The adjustments are included in the consolidated statement of operations for the year ended December 31, 2022, as non-cash benefits within long-lived asset impairment.
Amortization of intangibles including contract related amounts is calculated using the straight line method over the remaining useful life or contract term, which range from approximately 1-11 years, and is charged against cost of sales in the accompanying consolidated statement of operations. Aggregate future amortization over the next five years is estimated to be as follows:
Non-contract related intangibles Contract related intangibles Total
2023 $ 203,295  $ (236,705) $ (33,410)
2024 182,413  (160,325) 22,088 
2025 177,841  (113,449) 64,392 
2026 173,702  (65,232) 108,470 
2027 172,468  (57,591) 114,877 
Thereafter 60,979  (186,915) (125,936)
  $ 970,698  $ (820,217) $ 150,481