Annual report pursuant to Section 13 and 15(d)

23. Segment Information

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23. Segment Information
12 Months Ended
Dec. 31, 2015
Pro forma financial information  
23. Segment Information

Operating segments are defined under U.S. GAAP as components of an enterprise for which separate 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 – “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 gross 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 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 369 carrier customers and vendors, and is working to expand its interconnection relationships, particularly with carriers in emerging markets.

 

Business Services

 

Through this operating segment, the Company provides cloud communications, cloud connectivity, cloud 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 channel, which utilizes the efforts of independent third-party distributors to sell the Company’s products and services. The Business Services segment includes the Company’s acquisition of RootAxcess effective as of September 30, 2015, and Fidelity effective as of December 8, 2015.

 

Operating segment information for the years ended December 31, 2015 and 2014 is summarized as follows:

 

    Year ended December 31, 2015  
    Carrier Services     Business Services     Corporate and Unallocated*     Consolidated  
Revenues   $ 35,521,679       66,172,837     $ -     $ 101,694,516  
Cost of revenues (exclusive of depreciation and amortization)     32,596,384       24,127,737       -       56,724,121  
Gross profit     2,925,295       42,045,100       -       44,970,395  
Depreciation and amortization     185,397       12,359,821       430,763       12,975,981  
Selling, general and administrative expenses     4,412,087       32,810,336       3,786,685       41,009,107  
Interest expense     (99,010 )     (5,757,609 )     (206,304 )     (6,062,923 )
Gain on change in fair value of derivative liability     -       -       1,843,997       1,843,997  
Loss on extinguishment of debt     (182,083 )     (2,538,272 )     -       (2,720,355 )
Other income (expenses)     875,067       (818,544 )     7,090       63,613  
Benefit for income taxes     -       7,660,536       -       7,660,536  
Net loss   $ (1,078,215 )   $ (4,578,945 )   $ (2,572,665 )   $ (8,229,825 )
                                 
Total assets   $ 4,703,799     $ 98,547,943     $ 2,500,524     $ 105,752,266  
Capital expenditures   $ 73,115     $ 3,367,335     $ -     $ 3,440,450  

 

    Year ended December 31, 2014  
    Carrier Services     Business Services     Corporate and Unallocated*     Consolidated  
Revenues   $ 29,156,799     $ 62,895,801     $ -     $ 92,052,600  
Cost of revenues (exclusive of depreciation and amortization)     25,970,357       23,628,016       -       49,598,373  
Gross profit     3,186,442       39,267,785       -       42,454,227  
Depreciation and amortization     445,273       10,467,018       92,593       11,004,884  
Selling, general and administrative expenses     2,922,989       25,153,607       5,147,778       33,224,374  
Interest expense     -       (5,659,702 )     (328,709 )     (5,988,411 )
Gain on change in fair value of derivative liability                     5,161,901       5,161,901  
Other (expenses) income     (97,560 )     23,719       134,291       60,450  
Benefit (provision) for income taxes     -       24,741       (50,792 )     (26,051 )
                                 
Net loss   $ (279,380 )   $ (1,964,082 )   $ (323,680 )   $ (2,567,142 )
                                 
Total assets   $ 4,553,339     $ 66,394,132     $ 2,800,023     $ 73,747,494  
Capital expenditures   $ 101,872     $ 3,717,541     $ -     $ 3,819,413  

 

*The Company employs executive, administrative, human resources, and finance resources that service both the Carrier Services and Business Services 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.