Quarterly report pursuant to Section 13 or 15(d)

15. Segment Information

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15. Segment Information
3 Months Ended
Mar. 31, 2017
Notes to Financial Statements  
15. Segment Information

Operating segments are defined under U.S. GAAP as components of an enterprise for which discrete financial information is available and evaluated regularly by a company's chief operating decision maker in deciding how to allocate resources and assess performance.

 

The Company has two reportable segments – “Business Services” and “Carrier Services.” These segments are organized by the products and services that are sold and the customers that are served. The Company measures and evaluates its reportable segments based on revenues and gross profit margins. The Company’s measurement of segment profit exclude the Company’s executive, administrative and support costs. The accounting policies of the segments are the same as those described in Note 2, Summary of Significant Accounting Policies, of the audited consolidated financial statements included in the 2016 Form 10-K. The Company’s segments and their principal activities consist of the following:

 

Business Services

 

Through this operating segment, the Company provides a comprehensive suite of cloud communications, cloud connectivity, cloud computing and managed cloud-based applications to small, medium and large businesses. These services are sold through both the Company’s direct sales force and its partner sales channel, which utilizes the efforts of independent third-party distributors to sell the Company’s products and services. 

 

Carrier Services

 

Carrier Services includes the termination of domestic and international carrier traffic utilizing primarily VoIP technology.  VoIP permits a less costly and more rapid interconnection between the Company and international telecommunications carriers, and generally provides better profit margins for the Company than other technologies.  The Company currently interconnects with approximately 370 carrier customers and vendors, and is working to expand its interconnection relationships, particularly with carriers in emerging markets.

 

Operating segment information for the three months ended March 31, 2017 and 2016 is summarized in the following tables:

 

    Three Months Ended March 31, 2017  
    Carrier Services     Business Services     Corporate and Unallocated     Consolidated  
Revenues   $ 7,330,836     $ 28,481,040     $ -     $ 35,811,876  
Cost of revenues (exclusive of depreciation and amortization)     7,130,207       12,140,706       -       19,270,913  
Gross profit     200,629       16,340,334       -       16,540,963  
Depreciation and amortization     39,253       3,586,979       210,916       3,837,148  
Selling, general and administrative expenses     521,213       12,191,174       1,422,488       14,134,875  
Interest expense     -       (2,023,552 )     (68,760 )     (2,092,312 )
Loss on change in fair value of derivative liability     -       -       (40,445 )     (40,445 )
Other (expenses) income     (39 )     170,322       (80,603 )     89,680  
Income tax provision     -       (7,811 )     -       (7,811 )
Net loss   $ (359,876 )   $ (1,298,860 )   $ (1,823,212 )   $ (3,481,948 )
Total assets   $ 6,367,811     $ 125,088,903     $ 1,817,144     $ 133,273,858  
Capital expenditures   $ 21,443     $ 963,199     $ -     $ 984,642  

 

    Three Months Ended March 31, 2016  
    Carrier Services     Business Services     Corporate and Unallocated     Consolidated  
Revenues   $ 12,231,665     $ 21,562,584     $ -     $ 33,794,249  
Cost of revenues (exclusive of depreciation and amortization)     11,699,547       8,831,964       -       20,531,511  
Gross profit     532,118       12,730,620       -       13,262,738  
Depreciation and amortization     31,310       2,675,521       209,432       2,916,263  
Selling, general and administrative expenses     1,381,688       9,011,989       1,031,109       11,424,786  
Interest expense     (1,566 )     (1,551,141 )     (75,257 )     (1,627,964 )
Gain on change in fair value of derivative liability     -       -       182,400       182,400  
Other income (expenses)     13       (289,018 )     279,335       (9,670 )
Net loss   $ (882,433 )   $ (797,049 )   $ (854,063 )   $ (2,533,545 )
Total assets   $ 7,740,286     $ 93,789,887     $ 2,179,070     $ 103,709,243  
Capital expenditures   $ 16,244     $ 972,524     $ -     $ 988,768