Quarterly report pursuant to sections 13 or 15(d)

11. Segment Information

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11. Segment Information
3 Months Ended
Mar. 31, 2014
Notes to Financial Statements  
11. Segment Information

11.    Segment Information

The accounting and reporting requirements on Disclosures about Segments of an Enterprise and Related Information 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 measurement of segment profit exclude the Company’s executive, administrative and support costs. 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 related to the assets acquired in the Broadvox Transaction effective as of January 1, 2014.

 

Operating segment information for the three months ended March 31, 2014 and 2013 is summarized as follows:

 

    2014            
    Carrier Services   Business Services   Corporate and Unallocated   Consolidated
Revenues   $ 7,162,496     $ 15,742,333     $ -     $ 22,904,829  
Cost of revenues (exclusive of depreciation and amortization)     6,318,738       5,910,294       -       12,229,032  
Gross profit     843,758       9,832,039       -       10,675,797  
Depreciation and amortization     62,695       2,482,630       22,166       2,567,491  
Selling, general and administrative expenses     715,848       5,962,265       1,141,284       7,819,397  
Interest expense     -       (1,353,792 )     (40,754 )     (1,394,546 )
Gain on change in fair value of derivative liability                     2,609,947       2,609,947  
Other (expenses) income     (41,039 )     (101 )     66       (41,074 )
(Benefit) provision for income taxes     -       (25,000 )     46,495       21,495  
Net income   $ 24,176     $ 58,251     $ 1,359,314     $ 1,441,741  
                                 
Total assets   $ 3,117,947     $ 58,560,013     $ 8,019,989     $ 69,697,949  
                                 
Capital expenditures   $ 24,829     $ 724,753     $ -     $ 749,582  

 

    2013            
    Carrier Services   Business Services   Corporate and Unallocated   Consolidated
Revenues   $ 8,693,288     $ 7,475,133     $ -     $ 16,168,421  
                                 
Cost of revenues (exclusive of depreciation and amortization)     7,981,538       3,770,058       -       11,751,596  
Gross profit     711,750       3,705,075       -       4,416,825  
Depreciation and amortization     48,212       780,418       21,285       849,915  
Selling, general and administrative expenses     869,195       2,451,411       946,991       4,267,597  
Interest expense     -       (565,477 )     (94,042 )     (659,519 )
Loss on extinguishment of debt                     (58,203 )     (58,203 )
Loss on change in fair value of derivative liability                     (133,250 )     (133,250 )
Other (expenses) income     (83,484 )     10,603       28,260       (44,621 )
Provision for income taxes     -                       -  
Net loss from continuing operations   $ (289,141 )   $ (81,628 )   $ (1,225,511 )   $ (1,596,280 )
                                 
Total assets   $ 2,421,200     $ 23,285,418     $ 1,832,974     $ 27,539,592  
                                 
Capital expenditures   $ 2,152     $ 403,651     $ -     $ 405,803  

 

The Company employs executive, administrative, human resources, and finance resources that service both the Carrier Services and Business Services business segments. The amounts reflected as Corporate & Unallocated represent those operating expenses, assets and capital expenditures that were not allocated to a business segment or product line.