Quarterly report pursuant to Section 13 or 15(d)

Intangible Assets and Liabilities Other Than Goodwill

Intangible Assets and Liabilities Other Than Goodwill

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets and Liabilities Other Than Goodwill

As of September 30, 2023 and December 31, 2022 we had the following amounts related to intangible assets and liabilities other than goodwill:


	September 30, 2023						December 31, 2022
Intangible assets	Cost		Accumulated Amortization		Total		Cost		Accumulated Amortization		Total
Product certifications	$	777,465	$	(639,073)	$	138,392	$	777,465	$	(584,863)	$	192,602
Patents	888,910		(474,882)		414,028		888,910		(405,140)		483,770
Developed technology	240,000		(168,000)		72,000		240,000		(156,000)		84,000
Trademarks	26,896		—		26,896		26,896		—		26,896
In Process R&D	263,936		(94,263)		169,673		263,936		(65,984)		197,952
Favorable contract asset	384,465		(375,213)		9,252		384,465		(372,091)		12,374
Customer contract	1,591,327		(113,666)		1,477,661		—		—		—
	$	4,172,999	$	(1,865,097)	$	2,307,902	$	2,581,672	$	(1,584,078)	$	997,594

Intangible liability
Unfavorable contract liability	$	2,618,168	$	(1,968,383)	$	649,785	$	2,618,168	$	(1,797,951)	$	820,217

The aggregate amortization expense related to intangible assets and liabilities exclusive of unfavorable contract related intangibles for the three and nine months ended September 30, 2023 and 2022 was $113,477 and $280,671 and $49,885 and $150,376, respectively. The net credit to cost of sales related to the amortization of the unfavorable contract related intangible asset and liability for the three and nine months ended September 30, 2023 and 2022 was $54,576 and $170,084 and $69,370 and $202,753, respectively.

Favorable/Unfavorable Contract Assets and Liabilities and Customer Contract Assets

The favorable contract asset and unfavorable contract liability in the foregoing table represent the estimated fair value of American DG Energy's customer contracts (both positive for favorable contracts and negative for unfavorable contracts) which were acquired by us in May 2017 and include the customer relationship contract acquired by us in April 2023 as part of the Aegis acquisition. The American DG Energy's favorable and unfavorable contract contracts are being amortized on a straight-line basis over the contract term, which varies by customer contract. The Aegis customer relationship contract is being amortized on a straight-line basis over a period of seven (7) years which is consistent with the projected revenue recognition.

Amortization of intangibles including contract related amounts is calculated using the straight-line method over the remaining useful life or contract term. Aggregate future amortization over the next five years and thereafter as of September 30, 2023 is estimated to be as follows:


	Non-contract Related Intangibles		Contract Related Intangibles		Total
Year 1	$	172,412	$	26,242	$	198,654
Year 2	178,779		111,624		290,403
Year 3	174,763		153,964		328,727
Year 4	172,340		167,176		339,516
Year 5	63,940		175,750		239,690
Thereafter	41,111		193,120		234,231
Total	$	803,345	827,876		$	1,631,221

We recognized a gain on termination of unfavorable contract liability of $71,375 in the nine months ended September 30, 2022 due to the closing of certain energy production sites.