Annual report pursuant to Section 13 and 15(d)

23. Segment Information

v3.6.0.2
23. Segment Information
12 Months Ended
Dec. 31, 2016
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 internationaltelecommunications 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.

 

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 Apptix effective as of November 14, 2016, TFB effective as of March 31, 2016, RootAxcesseffective as of September 30, 2015, and Fidelity effective as of December 8, 2015/February 2016.

 

Operating segment information for the years ended December 31, 2016 and 2015 is summarized as follows:

  Year ended December 31, 2016
  Carrier Services   Business Services   Corporate and Unallocated*   Consolidated
Revenues  $35,484,101    $  86,561,219    $    $122,045,320
Cost of revenues (exclusive of depreciation and amortization) 33,783,130   34,275,302       68,058,432
Gross profit 1,700,971   52,285,917       53,986,888
Depreciation and amortization 153,567   12,033,551   909,469   13,096,587
Selling, general and administrative expenses 2,710,880   40,331,439   5,482,604   48,524,923
Interest expense     (6,442,224)   (299,919)   (6,742,143)
Gain on change in fair value of derivative liability         265,383   265,383
Loss on extinguishment of debt     (214,294)       (214,294)
Other income (expenses)     36,763   (36,895)    (132)
Income tax benefit     2,572,394       2,572,394
Net loss $(1,163,476)   (4,126,434)   (6,463,504)   (11,753,414)
               
Total assets 6,265,402   126,729,721       132,995,123
Capital expenditures     4,766,214       4,766,214

 

 

  Year ended December 31, 2016
  Carrier Services   Business Services   Corporate and Unallocated*   Consolidated
Revenues 35521679   66172837   -   101694516
Cost of revenues (exclusive of depreciation and amortization) 32596   24127737   -   56724121
Gross profit 2925295   42045100   -   44970395
Depreciation and amortization 185397   12359821   430763   12975981
Selling, general and administrative expenses 4412087   32810336   3786685   41009107
Interest expense (99010)       (206304)   (6062923)
Gain on change in fair value of derivative liability -   -   1843997   1843997
Loss on extinguishment of debt (182083)   (2538272)   -   (2720355)
Other income (expenses) 875067   (818544)   7090   63613
Income tax benefit -   7660536   -   7660536
Net loss (1078215)   (4578945)   (2572665)   (8229825)
Total assets 4703799   98547943   2500524   105752266
Capital expenditures 73115   3367335   -   3440450

 

*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.