Intangible Assets

12 Months Ended

Jul. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS

NOTE 3 – INTANGIBLE ASSETS

During FY 2008, Digerati made a loan of $150,000 to NetSapiens Inc. The note receivable had a maturity date of June 26, 2008 with interest at 8% per year. The note was secured by NetSapiens' proprietary Starter Platform License and SNAPsolution modules. On June 26, 2008 Digerati converted the outstanding interest and principal balance into a lifetime and perpetual NetSapiens' License. The License provides Digerati with the ability to offer Hosted PBX (Private Branch eXchange), IP Centrex application, prepaid calling, call center, conferencing, messaging and other innovative telephony functionality necessary to offer standard and/or custom services to enterprise markets. The NetSapiens' License, in the amount of $150,000, is being amortized equally over a period of 10 years. For the years ended July 31, 2019 and 2018, amortization totaled approximately $0 and $13,750, respectively. As of July 31, 2019 the NetSapiens' License is fully amortized.

On December 1, 2017, Shift8 and Synergy Telecom, Inc., a Delaware corporation ("Synergy"), closed a transaction to acquire all the assets, assumed all customers, and critical vendor arrangements from Synergy. The total purchase price was $425,000, the acquisition was accounted for under the purchase method of accounting, with Digerati identified as the acquirer. Under the purchase method of accounting, the aggregate amount of consideration assumed by Digerati was allocated to customer contracts acquired, software licenses, and goodwill based on their fair values as of December 1, 2017.

The following information summarizes the allocation of the fair values assigned to the assets. The allocation of fair values is based on an extensive analysis and is subject to changes in the future during the measurement period.

			Useful life
	Synergy		(years)
Customer relationship	$	40,000	5
License - software		105,000	3
Goodwill		280,000	-
Total Purchase price	$	425,000

For the years ended July 31, 2019 and 2018, amortization expense for the acquired intangible was $60,500 and $25,000, respectively.

On May 2, 2018, the Company closed on the Merger Agreement with T3 Communications, Inc. to increase its customer base and obtain higher efficiency of its existing infrastructure.

The total purchase price was $3,211,945 paid in cash at closing. The acquisition was accounted for under the purchase method of accounting, with the Company identified as the acquirer. Under the purchase method of accounting, the aggregate amount of consideration assumed by the Company was allocated to cash, customer contracts acquired, current assets, property plant and equipment and assumed payables based on their estimated fair values as of May 2, 2018.

The following information summarizes the allocation of the purchase price assigned to intangible assets. The allocation of fair values is based on an extensive analysis and is subject to changes in the future during the measurement period.

			Useful life
	T3		(years)
Customer relationships	$	1,480,000	7
Marketing & Non-compete		800,000	5
Goodwill		530,353	-
Total	$	2,810,353

For the years ended July 31, 2019 and 2018, amortization expense for the acquired assets totaled approximately $371,000 and $93,000, respectively.

Intangible assets at July 31, 2019 and 2018 are summarized in the tables below:

July 31, 2019	Gross Carrying Value		Accumulated Amortization			Net Carrying Amount
NetSapiens - license, 10 years	$	150,000	$	(150,000	)	$	-
Customer relationships, 5 years		40,000		(12,672	)		27,328
Customer relationships, 7 years		1,480,000		(276,077	)		1,203,923
Marketing & Non-compete, 5 years		800,000		(200,000	)		600,000
Total Define-lived Assets		2,470,000		(638,749	)		1,831,251
Goodwill, Indefinite		810,353		-			810,353
Balance, July 31, 2019	$	3,280,353	$	(638,749	)	$	2,641,604

July 31, 2018	Gross Carrying Value		Accumulated Amortization			Net Carrying Amount
NetSapiens - license, 10 years	$	150,000	$	(150,000	)	$	-
Customer relationships, 5 years		40,000		(4,667	)		35,333
Customer relationships, 7 years		1,480,000		(64,652	)		1,415,348
Marketing & Non-compete, 5 years		800,000		(40,000	)		760,000
Total Define-lived Assets		2,470,000		(259,319	)		2,210,681
Goodwill, Indefinite		834,828		-			834,828
Balance, July 31, 2018	$	3,304,828	$	(259,319	)	$	3,045,509

Total amortization expense for the periods ended July 31, 2019 and 2018 was approximately $379,000 and $123,000, respectively.