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Intangibles Assets

12 Months Ended

Dec. 31, 2022

10. Intangible Assets

The Company’s intangible assets are comprised of purchased intangibles consisting of customer relationships, channel relationships, telecommunications software, trade names and trademarks and non-compete agreements. Intangible assets acquired in connection with a business combination are valued at fair value and amortized on a straight-line basis over the expected useful life which may range from three (3) to fifteen (15) years or more depending on the intangible asset characteristics.

The Company’s intangible assets also include internally developed software used in the sales and delivery of its information technology service offerings. The Company capitalizes certain internal costs related to software development to deliver its information technology services including but not limited to its Intelligent Telecommunications Management System (ITMS™), Public Key Infrastructure (PKI) and Optimiser Telecom Data Intelligence (TDI™) applications. Significant development costs are capitalized from the point of demonstrated technological feasibility until the point in time that the product is available for general release to customers. Once the product is available for general release, capitalized costs are amortized based on units sold, or on a straight-line basis generally over the expected functional life which may range from two (2) to five (5) years.

The following tables summarize purchased and internally developed intangible assets subject to amortization as of the periods presented below:

DECEMBER 31, 2022

Gross Carrying

Accumulated

Net Book

Amount

Amortization

Value

Customer Relationships

2,392,000

(299,000

)

2,093,000

Channel Relationships

2,628,080

(1,518,446

)

1,109,634

Internally Developed Software

5,665,957

(2,546,407

)

3,119,550

Trade Name and Trademarks

1,330,472

(254,496

)

1,075,976

12,016,509

(4,618,349

)

7,398,160

	DECEMBER 31, 2021
	Gross Carrying		Accumulated			Net Book
	Amount		Amortization			Value

Customer Relationships	$	2,392,000	$	(61,650	)	$	2,330,350
Channel Relationships		2,628,080		(1,343,241	)		1,284,839
Internally Developed Software		3,082,705		(1,633,516	)		1,449,189
Trade Name and Trademarks		1,330,472		(165,964	)		1,164,508

	$	9,433,257	$	(3,204,371	)	$	6,228,886

Purchased Intangibles

For the year ended December 31, 2022, there were no disposals or sales of purchased intangible assets. For the year ended December 31, 2021, the Company disposed of fully amortized purchased intangible assets with a historical cost and accumulated amortization of approximately $1,980,000.

Internally Developed

For the year ended December 31, 2022, the Company capitalized $3.2 million of internally developed software costs, primarily associated with upgrading our ITMS™ (Intelligent Technology Management System), next generation TDI™ application, secure identity management technology and secure network operations center of which $2.6 million was transferred from capital work in progress to internally developed software and $316,900 was transferred from capital work in progress to property and equipment during the year. Capital work in progress is included in other long-term assets in the consolidated balance sheet.

For the year ended December 31, 2021 the Company capitalized $2.5 million of internally developed software costs, primarily associated with upgrading our ITMS™ secure identity management technology and secure network operations center of which $1.2 million was transferred from capital work in progress to internally developed software during the year and $348,300 was transferred from capital work in progress to property and equipment during the year. Capital work in progress is included in other long-term assets in the consolidated balance sheet.

The aggregate amortization expense recorded was approximately $1,451,100 and $632,400 for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022, estimated annual amortization for our intangible assets for each of the next five years is approximately:

2023	$	1,918,641
2024		1,704,101
2025		1,030,318
2026		511,170
2027		511,170
Thereafter		1,722,760
Total	$	7,398,160