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Note 9 - Segment Reporting
 9 Months Ended
Sep. 30, 2014
Segment Reporting [Abstract]  
Segment Reporting Disclosure [Text Block]

9. SEGMENT REPORTING:


(a)      We are organized and managed based on two segments, which are differentiated primarily by their services, the markets they serve and the regulatory environments in which they operate. The two segments are Domain Services and Network Access Services and are described as follows:


 

1.

Domain Services – This segment includes wholesale and retail domain name registration services, value added services and portfolio services. The Company primarily earns revenues from the registration fees charged to resellers in connection with new, renewed and transferred domain name registrations; the sale of retail Internet domain name registration and email services to individuals and small businesses; and by making its portfolio of domain names available for sale or lease. Domain Services revenues are attributed to the country in which the contract originates, primarily Canada.


 

2.

Network Access Services - This segment derives revenue from the sale of retail mobile phones and services to individuals and small businesses through the Ting website. Revenues are generated in the United States.


The Chief Executive Officer is the chief operating decision maker and regularly reviews the operations and performance by segment. The chief operating decision maker reviews gross margin as a key measure of performance for each segment and to make decisions about the allocation of resources. Sales and marketing expenses, technical operations and development expenses, general and administrative expenses, depreciation of property and equipment, loss on disposition of property and equipment, amortization of intangibles, loss (gain) on currency forward contracts, other income (expense), and provision for income taxes, are organized along functional lines and are not included in the measurement of segment profitability. Total assets and total liabilities are centrally managed and are not reviewed at the segment level by the chief operating decision maker.


Information by reportable segments, which is regularly reported to the chief operating decision maker is as follows:


Three months ended September 30, 2014

 

Domain Name

Services

   

Network

Access Services

   

Consolidated

Totals

 

Net Revenues

  $ 29,125,494     $ 9,748,689     $ 38,874,183  

Cost of Revenues

    20,191,680       5,794,195       25,985,875  

Gross Profit before network expenses

    8,933,814       3,954,494       12,888,308  
                         

Network expenses

                    1,311,534  

Gross Profit

                    11,576,774  
                         

Expenses:

                       

Sales and marketing

                    3,593,486  

Technical operations and development

                    1,041,136  

General and administrative

                    2,639,868  

Depreciation of property and equipment

                    58,685  

Amortization of intangibles

                    107,230  

Loss on currency forward contracts

                    237,985  

Income from operations

                    3,898,384  

Other expenses, net

                    63,498  

Income before provision for income taxes

                  $ 3,834,886  

Nine months ended September 30, 2014

 

Domain Name

Services

   

Network

Access Services

   

Consolidated

Totals

 

Net Revenues

  $ 84,143,913     $ 24,720,665     $ 108,864,578  

Cost of Revenues

    59,922,918       15,115,600       75,038,518  

Gross Profit before network expenses

    24,220,995       9,605,065       33,826,060  
                         

Network expenses

                    3,956,812  

Gross Profit

                    29,869,248  
                         

Expenses:

                       

Sales and marketing

                    11,377,701  

Technical operations and development

                    3,238,566  

General and administrative

                    6,293,987  

Depreciation of property and equipment

                    167,527  

Amortization of intangibles

                    545,290  

Write-off / impairment of indefinite life intangible assets

                    577,145  

Loss on currency forward contracts

                    885,901  

Income from operations

                    6,783,131  

Other expenses, net

                    206,679  

Income before provision for income taxes

                  $ 6,576,452  

Three months ended September 30, 2013

 

Domain Name Services

   

Network

Access Services

   

Consolidated

Totals

 

Net Revenues

  $ 30,918,611     $ 4,718,474     $ 35,637,085  

Cost of Revenues

    20,671,990       3,596,971       24,268,961  

Gross Profit before network expenses

    10,246,621       1,121,503       11,368,124  
                         

Network expenses

                    1,368,703  

Gross Profit

                    9,999,421  
                         

Expenses:

                       

Sales and marketing

                    2,998,419  

Technical operations and development

                    1,215,327  

General and administrative

                    1,869,668  

Depreciation of property and equipment

                    52,972  

Amortization of intangibles

                    219,030  

Loss on currency forward contracts

                    (28,068

)

Income from operations

                    3,672,073  

Other expenses, net

                    78,966  

Income before provision for income taxes

                  $ 3,593,107  

Nine months ended September 30, 2013

 

Domain Name Services

   

Network

Access Services

   

Consolidated

Totals

 

Net Revenues

  $ 85,994,751     $ 10,800,713     $ 96,795,464  

Cost of Revenues

    60,707,782       8,646,584       69,354,366  

Gross Profit before network expenses

    25,286,969       2,154,129       27,441,098  
                         

Network expenses

                    4,252,972  

Gross Profit

                    23,188,126  
                         

Expenses:

                       

Sales and marketing

                    8,792,091  

Technical operations and development

                    3,097,294  

General and administrative

                    5,266,997  

Depreciation of property and equipment

                    158,833  

Amortization of intangibles

                    657,090  

Loss on currency forward contracts

                    353,209  

Income from operations

                    4,862,612  

Other expenses, net

                    271,756  

Income before provision for income taxes

                  $ 4,590,856  

(b)           The following is a summary of the Company’s revenue earned from each significant revenue stream: 


    Three months ended September 30,     Nine months ended September 30,  
   

2014

   

2013

   

2014

   

2013

 

Domain Services:

                               

Wholesale

                               

Domain Services

  $ 21,880,181     $ 22,002,858     $ 65,032,221     $ 65,698,859  

Value Added Services

    2,350,195       2,606,151       7,349,527       7,854,268  

Total Wholesale

    24,230,376       24,609,009       72,381,748       73,553,127  
                                 

Retail

    2,687,478       2,142,446       7,612,079       6,062,244  

Portfolio

    2,207,640       4,167,155       4,150,086       6,379,380  

Total Domain Services

    29,125,494       30,918,610       84,143,913       85,994,751  
                                 

Network Access Services:

                               

Ting

    9,748,689       4,718,475       24,720,665       10,800,713  

Total Network Access Services

    9,748,689       4,718,475       24,720,665       10,800,713  
                                 
    $ 38,874,183     $ 35,637,085     $ 108,864,578     $ 96,795,464  

During the three and nine months ended September 30, 2014 and 2013, no customer accounted for more than 10% of total revenue. As at September 30, 2014 and 2013, no customer accounted for more than 10% of accounts receivable.


(c)           The following is a summary of the Company’s cost of revenues from each significant revenue stream:


    Three months ended September 30,     Nine months ended September 30,  
   

2014

   

2013

   

2014

   

2013

 

Domain Services:

                               

Wholesale

                               

Domain Services

  $ 18,229,841     $ 18,580,828     $ 54,274,382     $ 55,519,797  

Value Added Services

    575,813       484,619       1,679,546       1,567,113  

Total Wholesale

    18,805,654       19,065,447       55,953,928       57,086,910  
                                 

Retail

    1,196,875       946,113       3,322,950       2,530,036  

Portfolio

    189,151       660,430       646,040       1,090,836  

Total Domain Services

    20,191,680       20,671,990       59,922,918       60,707,782  
                                 

Network Access Services:

                               

Ting

    5,794,195       3,596,971       15,115,600       8,646,584  

Total Network Access Services

    5,794,195       3,596,971       15,115,600       8,646,584  
                                 

Network Expenses:

                               

Network, other costs

    1,139,515       1,192,450       3,427,856       3,716,471  

Network, depreciation and amortization costs

    172,019       176,253       528,956       536,501  

Total Network Expenses

    1,311,534       1,368,703       3,956,812       4,252,972  
                                 
    $ 27,297,409     $ 25,637,664     $ 78,995,330     $ 73,607,338  

(d)           The following is a summary of the Company’s property and equipment by geographic region:


   

September 30, 2014

   

December 31, 2013

 

Canada

  $ 1,190,337     $ 1,292,425  

United States

    438,511       453,223  

Germany

    113,457       12,188  
    $ 1,742,305     $ 1,757,836  

(e)           The following is a summary of the Company’s amortizable intangible assets by geographic region:


   

September 30, 2014

   

December 31, 2013

 

Canada

  $ −     $ 271,300  

Germany

    787,060       1,061,050  
    $ 787,060     $ 1,332,350  

(f)           The following is a summary of the Company’s deferred tax asset, net of valuation allowance, by geographic region:


   

September 30, 2014

   

December 31, 2013

 

Canada

  $ 7,444,724     $ 6,451,563  
    $ 7,444,724     $ 6,451,563