Quarterly report pursuant to Section 13 or 15(d)

11. Segment Information

v2.4.0.8
11. Segment Information
6 Months Ended
Jun. 30, 2014
Notes to Financial Statements  
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 and six months ended June 30, 2014 and 2013 is summarized as follows:

  

 Three  months ended June 30, 2014 
     Carrier Services     Business Services      Corporate and Unallocated     Consolidated 
 Revenues   $          7,510,875    $         15,630,098    $                  -       $    23,140,973
 Cost of revenues (exclusive of               
   depreciation and amortization)               6,714,319                 6,033,122                        -             12,747,441
 Gross profit                  796,556                 9,596,976                        -             10,393,532
 Depreciation and amortization                    53,503                 2,522,472                22,003            2,597,978
 Selling, general and administrative expenses                  725,383                 5,878,297           1,221,814            7,825,494
 Interest expense                            -                  (1,400,275)               (196,940)          (1,597,215)
 Loss on change in fair value of derivative liability                    (690,878)             (690,878)
 Other (expenses) income                   (52,997)                    (25,556)                79,272                      719
 Provision for income taxes                            -                                 -                 151,583               151,583
 Net loss   $             (35,327)    $            (229,624)    $    (2,203,946)    $    (2,468,897)
                 
                 
 Total assets   $          5,040,316    $         58,293,657    $     6,720,174    $    70,054,147

 

 Six months ended June 30, 2014 
     Carrier Services     Business Services      Corporate and Unallocated     Consolidated 
 Revenues   $        14,673,371    $         31,372,431    $                  -       $    46,045,802
 Cost of revenues (exclusive of               
   depreciation and amortization)             13,033,057               11,943,416                        -             24,976,473
 Gross profit               1,640,314               19,429,015                        -             21,069,329
 Depreciation and amortization                  116,198                 5,005,102                44,169            5,165,469
 Selling, general and administrative expenses               1,441,232               11,840,301           2,363,358          15,644,891
 Interest expense                            -                  (2,754,067)               (237,694)          (2,991,761)
 Gain on change in fair value of derivative liability                  1,919,069            1,919,069
 Other (expenses) income                   (94,037)                    (26,656)                80,338               (40,355)
 Provision for income taxes                            -                                 -                 173,078               173,078
 Net loss   $             (11,153)    $            (197,111)    $       (818,892)    $       (1,027,156)
                 
                 
 Capital expenditures   $               56,995    $           1,760,712    $                  -       $      1,817,707

 

 Three Months Ending June 30, 2013 
     Carrier Services     Business Services      Corporate and Unallocated     Consolidated 
 Revenues   $          6,738,527    $           7,491,651    $                  -       $    14,230,178
 Cost of revenues (exclusive of               
   depreciation and amortization)               5,938,937                 3,666,597                        -               9,605,534
 Gross profit                  799,590                 3,825,054                        -               4,624,644
 Depreciation and amortization                    48,219                    803,006                21,359               872,584
 Selling, general and administrative expenses                  748,757                 2,600,306           1,084,785            4,433,848
 Interest expense                            -                     (583,344)               (86,387)             (669,731)
 Loss on extinguishment of debt                      (92,376)               (92,376)
 Gain on change in fair value of derivative liability                     238,517               238,517
 Other (expenses) income                  (43,747)                      28,107                 (2,091)               (17,731)
 Gain on extinguishment of accounts payable                                 -              2,908,882            2,908,882
 Provision for income taxes                            -                                    -   
 Net (loss) income   $             (41,133)    $            (133,495)    $     1,860,401    $      1,685,773
                 
 Total assets   $          3,332,067    $         23,091,098    $        897,682    $    27,320,847

 

 Six Months Ended June 30, 2013 
     Carrier Services     Business Services      Corporate and Unallocated     Consolidated 
 Revenues   $        15,431,815    $         14,966,784    $                  -       $    30,398,599
 Cost of revenues (exclusive of               
   depreciation and amortization)             13,920,474                 7,436,656                        -             21,357,130
 Gross profit               1,511,341                 7,530,128                        -               9,041,469
 Depreciation and amortization                    96,432                 1,583,422                42,645            1,722,499
 Selling, general and administrative expenses               1,617,952                 5,051,717           2,031,777            8,701,446
 Interest expense                            -                  (1,148,822)             (180,428)          (1,329,250)
 Loss on extinguishment of debt                    (150,579)             (150,579)
 Gain on change in fair value of derivative liability                     105,267               105,267
 Other (expenses) income                (127,231)                      38,711                26,169               (62,351)
 Gain on extinguishment of accounts payable                                 -              2,908,882            2,908,882
 Net (loss) income   $           (330,274)    $            (215,122)    $        634,889    $           89,493
                 
                 
 Capital expenditures   $               49,768    $              561,342    $          17,497    $         628,607

 

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.