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Note 12 - Segment Reporting
 6 Months Ended
Jun. 30, 2015
Segment Reporting [Abstract]  
Segment Reporting Disclosure [Text Block]

12. 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 Network Access Services and Domain Services are described as follows:


1.

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, as well as provides high speed Internet access, Internet hosting and network consulting to customers in Central Virginia through its acquisition of a 70% share in Ting Virginia, LLC. Revenues are generated in the United States.
   

2.

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.

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 June 30, 2015

  

Domain Name

Services

    

Network

Access

Services

    

Consolidated

Totals

  

Net Revenues

   $ 27,471,251     $ 15,417,969     $ 42,889,220  

Cost of Revenues

     19,752,035       8,498,637       28,250,672  

Gross Profit before network expenses

     7,719,216       6,919,332       14,638,548  
                         

Network expenses

                     1,786,299  

Gross Profit

                     12,852,249  
                         

Expenses:

                        

Sales and marketing

                     4,847,963  

Technical operations and development

                     1,189,276  

General and administrative

                     2,173,254  

Depreciation of property and equipment

                     62,022  

Amortization of intangibles

                     56,997  

Impairment of indefinite life intangible assets

                     37,805  

Loss on currency forward contracts

                     602,439  

Income from operations

                     3,882,493  

Other expenses, net

                     57,402  

Income before provision for income taxes

                   $ 3,825,091  

Six months ended June 30, 2015

  

Domain Name

Services

    

Network

Access

Services

    

Consolidated

Totals

  

Net Revenues

   $ 55,012,070     $ 28,344,983     $ 83,357,053  

Cost of Revenues

     39,228,252       15,843,794       55,072,046  

Gross Profit before network expenses

     15,783,818       12,501,189       28,285,007  
                         

Network expenses

                     3,211,961  

Gross Profit

                     25,073,046  
                         

Expenses:

                        

Sales and marketing

                     8,647,138  

Technical operations and development

                     2,303,471  

General and administrative

                     3,988,442  

Depreciation of property and equipment

                     121,284  

Amortization of intangibles

                     110,212  

Impairment of indefinite life intangible assets

                     50,298  

Loss on currency forward contracts

                     1,559,297  

Income from operations

                     8,292,904  

Other expenses, net

                     82,177  

Income before provision for income taxes

                   $ 8,210,727  

Three months ended June 30, 2014

 

Domain Name

Services

 

 

Network

Access

Services

 

 

Consolidated

Totals

 

Net Revenues

 

$

27,328,156

 

 

$

8,259,845

 

 

$

35,588,001

 

Cost of Revenues

 

 

19,696,030

 

 

 

5,039,974

 

 

 

24,736,004

 

Gross Profit before network expenses

 

 

7,632,126

 

 

 

3,219,871

 

 

 

10,851,997

 
 

 

 

 

 

 

 

 

 

 

 

 

 

Network expenses

 

 

 

 

 

 

 

 

 

 

1,318,660

 

Gross Profit

 

 

 

 

 

 

 

 

 

 

9,533,337

 
 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

 

 

 

 

 

 

 

 

3,762,441

 

Technical operations and development

 

 

 

 

 

 

 

 

 

 

1,107,532

 

General and administrative

 

 

 

 

 

 

 

 

 

 

1,886,319

 

Depreciation of property and equipment

 

 

 

 

 

 

 

 

 

 

52,538

 

Amortization of intangibles

 

 

 

 

 

 

 

 

 

 

219,030

 

Write-off / impairment of indefinite life intangible assets

 

 

 

 

 

 

 

 

 

 

326,457

 

Loss on currency forward contracts

 

 

 

 

 

 

 

 

 

 

96,545

 

Income from operations

 

 

 

 

 

 

 

 

 

 

2,082,475

 

Other expenses, net

 

 

 

 

 

 

 

 

 

 

69,348

 

Income before provision for income taxes

 

 

 

 

 

 

 

 

 

$

2,013,127

 

Six months ended June 30, 2014

 

Domain Name

Services

 

 

Network

Access

Services

 

 

Consolidated

Totals

 

Net Revenues

 

$

55,018,418

 

 

$

14,971,977

 

 

$

69,990,395

 

Cost of Revenues

 

 

39,731,238

 

 

 

9,321,405

 

 

 

49,052,643

 

Gross Profit before network expenses

 

 

15,287,180

 

 

 

5,650,572

 

 

 

20,937,752

 
 

 

 

 

 

 

 

 

 

 

 

 

 

Network expenses

 

 

 

 

 

 

 

 

 

 

2,645,278

 

Gross Profit

 

 

 

 

 

 

 

 

 

 

18,292,474

 
 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

 

 

 

 

 

 

 

 

7,784,215

 

Technical operations and development

 

 

 

 

 

 

 

 

 

 

2,197,430

 

General and administrative

 

 

 

 

 

 

 

 

 

 

3,654,119

 

Depreciation of property and equipment

 

 

 

 

 

 

 

 

 

 

108,842

 

Amortization of intangibles

 

 

 

 

 

 

 

 

 

 

438,060

 

Write-off / impairment of indefinite life intangible assets

 

 

 

 

 

 

 

 

 

 

577,145

 

Loss on currency forward contracts

 

 

 

 

 

 

 

 

 

 

647,916

 

Income from operations

 

 

 

 

 

 

 

 

 

 

2,884,747

 

Other expenses, net

 

 

 

 

 

 

 

 

 

 

143,181

 

Income before provision for income taxes

 

 

 

 

 

 

 

 

 

$

2,741,566

 

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


    Three months ended June 30,     Six months ended June 30,  
   

2015

    

2014

    

2015

    

2014

  

Domain Services:

                                

Wholesale

                                

Domain Services

   $ 21,286,863     $ 21,503,086     $ 42,461,994     $ 43,152,040  

Value Added Services

     2,355,837       2,395,726       4,597,835       4,999,331  

Total Wholesale

     23,642,700       23,898,812       47,059,829       48,151,371  
                                 

Retail

     3,009,465       2,540,538       5,885,193       4,924,601  

Portfolio

     819,086       888,806       2,067,048       1,942,446  

Total Domain Services

     27,471,251       27,328,156       55,012,070       55,018,418  
                                 

Network Access Services:

                                

Ting

     15,417,969       8,259,845       28,344,983       14,971,977  

Total Network Access Services

     15,417,969       8,259,845       28,344,983       14,971,977  
                                 
    $ 42,889,220     $ 35,588,001     $ 83,357,053     $ 69,990,395  

During the three and six months ended June 30, 2015 and 2014, no customer accounted for more than 10% of total revenue. As at June 30, 2015 two customers accounted for 21% of accounts receivable. At June 30, 2014, one customer accounted for 12% of accounts receivable.


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


    Three months ended June 30,     Six months ended June 30,  
   

2015

    

2014

    

2015

    

2014

  

Domain Services:

                                

Wholesale

                                

Domain Services

   $ 17,749,516     $ 17,809,325     $ 35,297,543     $ 36,044,540  

Value Added Services

     501,518       563,011       1,037,650       1,103,733  

Total Wholesale

     18,251,034       18,372,336       36,335,193       37,148,273  
                                 

Retail

     1,322,620       1,110,659       2,543,120       2,126,075  

Portfolio

     178,381       213,035       349,939       456,890  

Total Domain Services

     19,752,035       19,696,030       39,228,252       39,731,238  
                                 
                                 

Network Access Services:

                                

Ting

     8,498,637       5,039,974       15,843,794       9,321,405  

Total Network Access Services

     8,498,637       5,039,974       15,843,794       9,321,405  
                                 

Network Expenses:

                                

Network, other costs

     1,494,838       1,144,697       2,716,934       2,288,341  

Network, depreciation and amortization costs

     291,461       173,963       495,027       356,937  

Total Network Expenses

     1,786,299       1,318,660       3,211,961       2,645,278  
                                 
    $ 30,036,971     $ 26,054,664     $ 58,284,007     $ 51,697,921  

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


   

June 30,

2015

    

December 31,

2014

  

Canada

   $ 1,245,594     $ 1,131,883  

United States

     4,840,253       379,891  

Germany

     71,071       98,013  
    $ 6,156,918     $ 1,609,787  

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


   

June 30,

2015

    

December 31,

2014

  

United States

   $ 736,992     $ —  

Germany

     633,070       735,730  
    $ 1,370,062     $ 735,730  

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


   

June 30,

2015

    

December 31,

2014

  

Canada

   $ 8,733,496     $ 7,378,619  
    $ 8,733,496     $ 7,378,619  

(g)           Valuation and qualifying accounts:


   

Balance at

beginning

period

    

Charged to

(recovered)

costs and

expenses

    

Write-offs

during

period

    

Balance at

end of

period

  

Allowance for doubtful accounts, excluding provision for credit notes

                                

Six months ended June 30, 2015

   $ 125,766     $ 2,813     $ —     $ 122,953  

Year ended December 31, 2014

   $ 91,226     $ (34,540

)

   $ —     $ 125,766