Quarterly report pursuant to Section 13 or 15(d)

15. Segment Information

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15. Segment Information
9 Months Ended
Sep. 30, 2016
Notes to Financial Statements  
15. 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 ("CODM") in deciding how to allocate resources and assess performance.

 

The Company has two reportable segments – “Business Services” and “Carrier 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 accounting policies of the segments are the same as those described in Note 2, Summary of Significant Accounting Policies, of the audited consolidated financial statements included in the 2015 Form 10-K. The Company’s segments and their principal activities consist of the following:

 

Business Services

 

Through this operating segment, the Company provides cloud voice, cloud connectivity, cloud infrastructure, cloud computing and managed cloud-based applications to businesses of all sizes. These services are sold through the Company’s direct sales force and its partner sales channel, which utilizes the efforts of independent third-party agents to sell the Company’s products and services. The Business Services segment includes the business acquired from RootAxcess in September 2015, its acquisition of the stock of various Fidelity companies in December, 2015, and its acquisition of assets from TFB completed in March 2016.

 

Carrier Services

 

Carrier Services includes the termination of domestic and international carrier traffic utilizing primarily VoIP technology. The Company currently interconnects with approximately 370 carriers and vendors, and is working to expand its interconnection relationships, particularly with carriers in emerging markets.

 

Operating segment information for the three and nine months ended September 30, 2016 and 2015 is summarized in the following tables:

 

    Three months ended September 30, 2016      
    Carrier Services     Business Services     Corporate     Consolidated  
Revenues   $ 8,864,791     $ 20,632,338     $ -     $ 29,497,129  
Cost of revenues (exclusive of depreciation and amortization)     8,487,912       8,281,675       -       16,769,587  
Gross profit     376,879       12,350,663       -       12,727,542  
Depreciation and amortization     38,094       2,747,822       212,712       2,998,628  
Selling, general and administrative expenses     653,462       9,547,547       1,207,039       11,408,048  
Interest expense     -       1,551,534       73,661       1,625,195  
Gain on change in fair value of derivative liability     -       -       (152,057 )     (152,057 )
Other expenses (income)     -       247,070       (265,139 )     (18,069 )
Provision for income taxes     -       10,951       -       10,951  
Net loss   $ (314,677 )   $ (1,754,261 )   $ (1,076,216 )   $ (3,145,154 )
Total assets   $ 3,783,321     $ 90,027,291     $ 2,312,655     $ 96,123,267  
                                 

 

    Nine months ended September 30, 2016             
    Carrier Services     Business Services     Corporate     Consolidated  
Revenues   $ 30,711,086       62,390,749     $ -     $ 93,101,835  
Cost of revenues (exclusive of depreciation and amortization)     29,341,982       24,594,096       -       53,936,078  
Gross profit     1,369,104       37,796,653       -       39,165,757  
Depreciation and amortization     116,102       8,128,378       702,301       8,946,781  
Selling, general and administrative expenses     2,119,119       28,052,965       3,930,763       34,102,847  
Interest expense     -       4,647,847       229,981       4,877,828  
Gain on change in fair value of derivative liability     -       -       (380,099 )     (380,099 )
Other expenses (income)     -       764,308       (797,822 )     (33,514 )
Provision for income taxes             10,951               10,951  
Net loss   $ (866,117 )   $ (3,807,796 )   $ (3,685,124 )   $ (8,359,037 )
Capital expenditures   $ 41,584     $ 3,740,648     $ -     $ 3,782,232  

 

 

    Three months ended September 30, 2015        
    Carrier Services     Business Services     Corporate     Consolidated  
Revenues   $ 8,269,529     $ 16,261,295     $ -     $ 24,530,824  
Cost of revenues (exclusive of depreciation and amortization)     7,642,008       5,891,639       -       13,533,647  
Gross profit     627,521       10,369,656       -       10,997,177  
Depreciation and amortization     48,022       2,898,068       194,337       3,140,427  
Selling, general and administrative expenses     885,769       7,953,958       956,756       9,796,483  
Interest expense     -       1,332,719       102,015       1,434,734  
Gain on change in fair value of derivative liability     -       -       (1,237,730 )     (1,237,730 )
Loss on extinguishment of debt     -       2,538,272       182,083       2,720,355  
Other expenses (income)     -       243,420       (241,021 )     2,399  
Net (loss) income   $ (306,270 )   $ (4,596,781 )   $ 43,560     $ (4,859,491 )
Total assets   $ 4,639,835     $ 59,128,769     $ 3,128,866     $ 66,897,470  
                                 

 

 

    Nine months ended September 30, 2015           
    Carrier Services     Business Services     Corporate     Consolidated  
Revenues   $ 25,767,099     $ 49,090,458     $ -     $ 74,857,557  
Cost of revenues (exclusive of depreciation and amortization)     23,540,573       17,819,382       -       41,359,955  
Gross profit     2,226,526       31,271,076       -       33,497,602  
Depreciation and amortization     138,944       8,809,670       235,018       9,183,632  
Selling, general and administrative expenses     2,619,818       23,684,671       3,074,707       29,379,196  
Interest expense     -       4,457,080       193,206       4,650,286  
Gain on change in fair value of derivative liability     -       -       (2,543,878 )     (2,543,878 )
Loss on extinguishment of debt     -       2,538,272       182,083       2,720,355  
Other expenses (income)     -       591,691       (648,060 )     (56,369 )
Net loss   $ (532,236 )   $ (8,810,308 )   $ (493,076 )   $ (9,835,620 )
Capital expenditures   $ 69,905     $ 2,409,430     $ -     $ 2,479,335