Quarterly report pursuant to sections 13 or 15(d)

12. Segment Information

v2.4.0.8
12. Segment Information
9 Months Ended
Sep. 30, 2013
Notes to Financial Statements  
12. Segment Information

The Company complies with the accounting and reporting requirements on Disclosures about Segments of an Enterprise and Related Information.  The guidance requires disclosures of segment information on the basis that is used internally for evaluating segment performance and for determining the allocation of resources to the operating segments.

 

The Company has two reportable segments that it operates and manages – Carrier Services and Business 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 executive, administrative and support costs are allocated to the Company’s operating segments and are included in segment income.  The Company’s segments and their principal activities consist of the following:

 

Carrier Services

Carrier Services includes the termination of carrier traffic utilizing primarily Voice over Internet Protocol (“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 over 270 carrier customers and vendors, and is working to expand its interconnection relationships, particularly with carriers in emerging markets.

 

Business Services

The Company provides a full portfolio of cloud communications, cloud connectivity, storage and security solutions to small, medium and large businesses. These services are sold through both the Company’s direct sales force and its partner sales program, which utilizes the efforts of independent third-party distributors to sell the Company’s products and services.  The Business Services segment includes the results of operations of NBS effective as of October 29, 2012.

 

Operating segment information for the three and nine months ended September 30, 2013 and 2012 is summarized as follows:

 

Three Months Ended September 30, 2013

 

    Carrier Services     Business Services     Corporate and Unallocated     Consolidated  
 Revenues   $ 7,026,589     $ 7,785,239     $ -     $ 14,811,828  
 Cost of revenues (exclusive of                                
 depreciation and amortization)     6,167,706       3,786,028       -       9,953,734  
 Gross profit     858,883       3,999,211       -       4,858,094  
 Depreciation and amortization     83,665       827,948       -       911,613  
 Selling, general and administrative expenses     1,667,067       2,645,441       -       4,312,508  
 Interest expense     82,617       581,072               663,689  
 Other (income) expenses     1,153,973       (16,807 )     -       1,137,166  
 (Loss) gain on extinguishment of accounts payable     (25,222 )     -       -       (25,222 )
 Net income (loss)   $ (2,153,661 )   $ (38,443 )   $ -     $ (2,192,104 )
                                 
 Total assets   $ 2,862,749     $ 22,918,730     $ 897,478     $ 26,678,957  

 

Three Months Ended September 30, 2012

 

    Carrier Services     Business Services     Corporate and Unallocated     Consolidated  
 Revenues   $ 9,383,989     $ 575,976     $ -     $ 9,959,965  
 Cost of revenues (exclusive of                                
 depreciation and amortization)     8,821,004       343,243       -       9,164,247  
 Gross profit     562,985       232,733       -       795,718  
 Depreciation and amortization     82,618       11,808       -       94,426  
 Selling, general and administrative expenses     1,265,538       950,213       -       2,215,751  
 Interest expense     28,430       28,431               56,861  
 Other expenses (income)     66,002       (2,426 )     -       63,576  
 Net loss   $ (879,603 )   $ (755,293 )   $ -     $ (1,634,896 )
                                 
 Total assets   $ 1,773,957     $ 1,340,857     $ 4,248,833     $ 7,363,647  

 

Nine Months Ended September 30, 2013

 

    Carrier Services     Business Services     Corporate and Unallocated     Consolidated  
 Revenues   $ 22,458,404     $ 22,752,023     $ -     $ 45,210,427  
 Cost of revenues (exclusive of                                
 depreciation and amortization)     20,088,181       11,222,683       -       31,310,864  
 Gross profit     2,370,223       11,529,340       -       13,899,563  
 Depreciation and amortization     222,742       2,411,370       -       2,634,112  
 Selling, general and administrative expenses     5,330,703       7,683,251       -       13,013,954  
 Interest expense     263,045       1,729,894               1,992,939  
 Other (income) expenses     774,767       470,062       -       1,244,829  
 Gain on extinguishment of accounts payable     2,883,660                       2,883,660  
 Net income (loss)   $ (1,337,374 )   $ (765,237 )   $ -     $ (2,102,611 )
                                 
 Capital expenditures   $ 142,937     $ 683,306     $ 17,497     $ 843,740  

 

Nine Months Ended September 30, 2012

 

    Carrier Services     Business Services     Corporate and Unallocated     Consolidated  
 Revenues   $ 29,965,082     $ 1,749,023     $ -     $ 31,714,105  
 Cost of revenues (exclusive of                                
 depreciation and amortization)     27,083,520       1,089,276       -       28,172,796  
 Gross profit     2,881,562       659,747       -       3,541,309  
 Depreciation and amortization     252,677       33,926       -       286,603  
 Selling, general and administrative expenses     3,747,117       2,778,160       -       6,525,277  
 Interest expense     80,238       80,239               160,477  
 Other expenses (income)     234,715       (10,296 )     -       224,419  
 Net loss   $ (1,433,185 )   $ (2,222,282 )   $ -     $ (3,655,467 )
                                 
 Capital expenditures   $ 75,220     $ 2,073     $ 4,271     $ 81,564