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Note 10 - Segment Reporting | 9 Months Ended
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Sep. 30, 2017
Notes to Financial Statements |
Segment Reporting Disclosure [Text Block] | 1 0 . Segment reporting: (a) We are organized and managed based on two operating segments which are differentiated primarily by their services, the markets they serve and the regulatory environments in which they operate and are described as follows: 1. Network Access Services - This segment derives revenue from the sale of mobile phones, telephony services, high speed Internet access, Internet hosting and consulting services to individuals and small businesses primarily through the Ting website. 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 and 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 profit 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, amortization of intangibles assets, impairment of indefinite life intangible assets, loss 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. The Company follows the same significant accounting policies and estimates for the segments as described in our Annual Report on Form 10 -K for the fiscal year ended December 31, 2016. Information by operating segments, which is regularly reported to the chief operating decision maker is as follows:
|  | Network Access |  |  | Domain Name Services |  |  | Consolidated Totals |
Three months ended September 30, 2017 |  |  |  |  |  |  |  |  |  |  |  |
Net Revenues |  | $ | 22,993,034 |  |  | $ | 62,015,450 |  |  | $ | 85,008,484 |
Cost of revenues |  |  |  |  |  |  |  |  |  |  |  |
Cost of revenues |  |  | 13,310,922 |  |  |  | 47,755,839 |  |  |  | 61,066,761 |
Network expenses |  |  | 446,126 |  |  |  | 2,014,570 |  |  |  | 2,460,696 |
Depreciation of property and equipment |  |  | 578,257 |  |  |  | 245,184 |  |  |  | 823,441 |
Amortization of intangible assets |  |  | 11,532 |  |  |  | 487,500 |  |  |  | 499,032 |
Total cost of revenues |  |  | 14,346,837 |  |  |  | 50,503,093 |  |  |  | 64,849,930 |
Gross Profit |  |  | 8,646,197 |  |  |  | 11,512,357 |  |  |  | 20,158,554 |
Expenses: |  |  |  |  |  |  |  |  |  |  |  |
Sales and marketing |  |  |  |  |  |  |  |  |  |  | 7,578,414 |
Technical operations and development |  |  |  |  |  |  |  |  |  |  | 1,910,147 |
General and administrative |  |  |  |  |  |  |  |  |  |  | 2,852,345 |
Depreciation of property and equipment |  |  |  |  |  |  |  |  |  |  | 154,638 |
Amortization of intangible assets |  |  |  |  |  |  |  |  |  |  | 1,745,923 |
Impairment of indefinite life intangible assets |  |  |  |  |  |  |  |  |  |  | 1,500 |
Loss (gain) on currency forward contracts |  |  |  |  |  |  |  |  |  |  | (54,075 | )
Income from operations |  |  |  |  |  |  |  |  |  |  | 5,969,662 |
Other income (expenses), net |  |  |  |  |  |  |  |  |  |  | (707,029 | )
Income before provision for income taxes |  |  |  |  |  |  |  |  |  | $ | 5,262,633 |
|  | Network Access |  |  | Domain Name Services |  |  | Consolidated Totals |
Three months ended September 30, 2016 |  |  |  |  |  |  |  |  |  |  |  |
Net Revenues |  | $ | 19,253,063 |  |  | $ | 29,811,264 |  |  | $ | 49,064,327 |
Cost of revenues |  |  |  |  |  |  |  |  |  |  |  |
Cost of revenues |  |  | 9,589,183 |  |  |  | 21,257,485 |  |  |  | 30,846,668 |
Network expenses |  |  | 507,128 |  |  |  | 780,492 |  |  |  | 1,287,620 |
Depreciation of property and equipment |  |  | 258,042 |  |  |  | 20,704 |  |  |  | 278,746 |
Amortization of intangible assets |  |  | 13,421 |  |  |  | - |  |  |  | 13,421 |
Total cost of revenues |  |  | 10,367,774 |  |  |  | 22,058,681 |  |  |  | 32,426,455 |
Gross Profit |  |  | 8,885,289 |  |  |  | 7,752,583 |  |  |  | 16,637,872 |
Expenses: |  |  |  |  |  |  |  |  |  |  |  |
Sales and marketing |  |  |  |  |  |  |  |  |  |  | 5,479,445 |
Technical operations and development |  |  |  |  |  |  |  |  |  |  | 1,270,107 |
General and administrative |  |  |  |  |  |  |  |  |  |  | 2,166,217 |
Depreciation of property and equipment |  |  |  |  |  |  |  |  |  |  | 178,687 |
Amortization of intangible assets |  |  |  |  |  |  |  |  |  |  | 279,126 |
Impairment of indefinite life intangible assets |  |  |  |  |  |  |  |  |  |  | 2,866 |
Loss (gain) on currency forward contracts |  |  |  |  |  |  |  |  |  |  | 22,475 |
Income from operations |  |  |  |  |  |  |  |  |  |  | 7,238,949 |
Other income (expenses), net |  |  |  |  |  |  |  |  |  |  | (5,021 | )
Income before provision for income taxes |  |  |  |  |  |  |  |  |  | $ | 7,233,928 |
|  | Network Access |  |  | Domain Name Services |  |  | Consolidated Totals |
Nine months ended September 30, 2017 |  |  |  |  |  |  |  |  |  |  |  |
Net Revenues |  | $ | 63,559,792 |  |  | $ | 175,240,055 |  |  | $ | 238,799,847 |
Cost of revenues |  |  |  |  |  |  |  |  |  |  |  |
Cost of revenues |  |  | 35,389,553 |  |  |  | 134,433,264 |  |  |  | 169,822,817 |
Network expenses |  |  | 1,397,832 |  |  |  | 5,666,626 |  |  |  | 7,064,458 |
Depreciation of property and equipment |  |  | 1,494,299 |  |  |  | 634,118 |  |  |  | 2,128,417 |
Amortization of intangible assets |  |  | 34,596 |  |  |  | 1,300,000 |  |  |  | 1,334,596 |
Total cost of revenues |  |  | 38,316,280 |  |  |  | 142,034,008 |  |  |  | 180,350,288 |
Gross Profit |  |  | 25,243,512 |  |  |  | 33,206,047 |  |  |  | 58,449,559 |
Expenses: |  |  |  |  |  |  |  |  |  |  |  |
Sales and marketing |  |  |  |  |  |  |  |  |  |  | 22,244,961 |
Technical operations and development |  |  |  |  |  |  |  |  |  |  | 5,402,385 |
General and administrative |  |  |  |  |  |  |  |  |  |  | 9,596,298 |
Depreciation of property and equipment |  |  |  |  |  |  |  |  |  |  | 485,648 |
Amortization of intangible assets |  |  |  |  |  |  |  |  |  |  | 4,735,221 |
Impairment of indefinite life intangible assets |  |  |  |  |  |  |  |  |  |  | 1,500 |
Loss (gain) on currency forward contracts |  |  |  |  |  |  |  |  |  |  | (115,276 | )
Income from operations |  |  |  |  |  |  |  |  |  |  | 16,098,822 |
Other income (expenses), net |  |  |  |  |  |  |  |  |  |  | (2,190,673 | )
Income before provision for income taxes |  |  |  |  |  |  |  |  |  | $ | 13,908,149 |
|  | Network Access |  |  | Domain Name Services |  |  | Consolidated Totals |
Nine months ended September 30, 2016 |  |  |  |  |  |  |  |  |  |  |  |
Net Revenues |  | $ | 55,020,436 |  |  | $ | 85,993,893 |  |  | $ | 141,014,329 |
Cost of revenues |  |  |  |  |  |  |  |  |  |  |  |
Cost of revenues |  |  | 28,386,395 |  |  |  | 61,059,098 |  |  |  | 89,445,493 |
Network expenses |  |  | 941,451 |  |  |  | 2,983,926 |  |  |  | 3,925,377 |
Depreciation of property and equipment |  |  | 655,104 |  |  |  | 321,315 |  |  |  | 976,419 |
Amortization of intangible assets |  |  | 36,485 |  |  |  | - |  |  |  | 36,485 |
Total cost of revenues |  |  | 30,019,435 |  |  |  | 64,364,339 |  |  |  | 94,383,774 |
Gross Profit |  |  | 25,001,001 |  |  |  | 21,629,554 |  |  |  | 46,630,555 |
Expenses: |  |  |  |  |  |  |  |  |  |  |  |
Sales and marketing |  |  |  |  |  |  |  |  |  |  | 15,174,619 |
Technical operations and development |  |  |  |  |  |  |  |  |  |  | 3,445,118 |
General and administrative |  |  |  |  |  |  |  |  |  |  | 7,497,752 |
Depreciation of property and equipment |  |  |  |  |  |  |  |  |  |  | 328,877 |
Amortization of intangible assets |  |  |  |  |  |  |  |  |  |  | 613,041 |
Impairment of indefinite life intangible assets |  |  |  |  |  |  |  |  |  |  | 27,745 |
Loss (gain) on currency forward contracts |  |  |  |  |  |  |  |  |  |  | (96,993 | )
Income from operations |  |  |  |  |  |  |  |  |  |  | 19,640,396 |
Other income (expenses), net |  |  |  |  |  |  |  |  |  |  | 85,919 |
Income before provision for income taxes |  |  |  |  |  |  |  |  |  | $ | 19,726,315 |
(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, |
|  | 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
Network Access Services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mobile Services |  | $ | 21,748,809 |  |  | $ | 18,374,906 |  |  | $ | 60,090,266 |  |  | $ | 52,287,808 |
Other Services |  |  | 1,244,225 |  |  |  | 878,157 |  |  |  | 3,469,526 |  |  |  | 2,732,628 |
Total Network Access Services |  |  | 22,993,034 |  |  |  | 19,253,063 |  |  |  | 63,559,792 |  |  |  | 55,020,436 |
Domain Services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Wholesale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Domain Services |  |  | 47,769,779 |  |  |  | 22,955,731 |  |  |  | 135,411,688 |  |  |  | 65,879,375 |
Value Added Services |  |  | 4,401,704 |  |  |  | 2,226,977 |  |  |  | 14,034,456 |  |  |  | 6,834,086 |
Total Wholesale |  |  | 52,171,483 |  |  |  | 25,182,708 |  |  |  | 149,446,144 |  |  |  | 72,713,461 |
Retail |  |  | 8,872,984 |  |  |  | 3,721,032 |  |  |  | 22,937,606 |  |  |  | 10,747,456 |
Portfolio |  |  | 970,983 |  |  |  | 907,524 |  |  |  | 2,856,305 |  |  |  | 2,532,976 |
Total Domain Services |  |  | 62,015,450 |  |  |  | 29,811,264 |  |  |  | 175,240,055 |  |  |  | 85,993,893 |
|  | $ | 85,008,484 |  |  | $ | 49,064,327 |  |  | $ | 238,799,847 |  |  | $ | 141,014,329 |
During the three and nine months ended September 30, 2017 and 2016, no customer accounted for more than 10% of total revenue. As at September 30, 2017 and December 31, 2016, 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, |
|  | 2017 |  |  | 2016 |  |  | 2017 |  |  | 2016 |
Network Access Services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Mobile Services |  | $ | 12,365,383 |  |  | $ | 9,087,274 |  |  | $ | 32,634,348 |  |  | $ | 27,026,242 |
Other Services |  |  | 945,539 |  |  |  | 501,909 |  |  |  | 2,755,205 |  |  |  | 1,360,153 |
Total Network Access Services |  |  | 13,310,922 |  |  |  | 9,589,183 |  |  |  | 35,389,553 |  |  |  | 28,386,395 |
Domain Services: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Wholesale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Domain Services |  |  | 42,294,131 |  |  |  | 18,934,555 |  |  |  | 119,206,649 |  |  |  | 54,215,215 |
Value Added Services |  |  | 671,291 |  |  |  | 463,369 |  |  |  | 1,823,711 |  |  |  | 1,401,821 |
Total Wholesale |  |  | 42,965,422 |  |  |  | 19,397,924 |  |  |  | 121,030,360 |  |  |  | 55,617,036 |
Retail |  |  | 4,610,745 |  |  |  | 1,727,867 |  |  |  | 12,775,941 |  |  |  | 4,968,659 |
Portfolio |  |  | 179,672 |  |  |  | 131,694 |  |  |  | 626,963 |  |  |  | 473,403 |
Total Domain Services |  |  | 47,755,839 |  |  |  | 21,257,485 |  |  |  | 134,433,264 |  |  |  | 61,059,098 |
Network Expenses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Network, other costs |  |  | 2,460,696 |  |  |  | 1,287,620 |  |  |  | 7,064,458 |  |  |  | 3,925,377 |
Network, depreciation and amortization costs |  |  | 1,322,473 |  |  |  | 292,167 |  |  |  | 3,463,013 |  |  |  | 1,012,904 |
|  |  | 3,783,169 |  |  |  | 1,579,787 |  |  |  | 10,527,471 |  |  |  | 4,938,281 |
|  | $ | 64,849,930 |  |  | $ | 32,426,455 |  |  | $ | 180,350,288 |  |  | $ | 94,383,774 |
(d) The following is a summary of the Company’s property and equipment by geographic region:
|  | September 30, 2017 |  |  | December 31, 2016 |
Canada |  | $ | 1,169,409 |  |  | $ | 1,010,427 |
United States |  |  | 21,036,074 |  |  |  | 12,398,961 |
Germany |  |  | 27,387 |  |  |  | 41,050 |
|  | $ | 22,232,870 |  |  | $ | 13,450,438 |
(e) The following is a summary of the Company’s amortizable intangible assets by geographic region:
|  | September 30, 2017 |  |  | December 31, 2016 |
Canada |  | $ | 7,522,264 |  |  | $ | 5,850,596 |
United States |  |  | 39,730,601 |  |  |  | 633,798 |
Germany |  |  | 171,100 |  |  |  | 325,090 |
|  | $ | 47,423,965 |  |  | $ | 6,809,484 |
(f) The following is a summary of the Company’s deferred tax asset by geographic region:
|  | September 30, 2017 |  |  | December 31, 2016 |
Canada |  | $ | - |  |  | $ | 5,708,725 |
|  | $ | - |  |  | $ | 5,708,725 |
(g) Valuation and qualifying accounts:
Allowance for doubtful accounts excluding provision for credit notes |  | Balance at beginning of period |  |  | Charged to (recovered) costs and expenses |  |  | Write-offs during period |  |  | Balance at end of period |
Nine months ended September 30, 2017 |  | $ | 164,145 |  |  | $ | 3,741 |  |  | $ | - |  |  | $ | 167,886 |
Year ended December 31, 2016 |  | $ | 122,095 |  |  | $ | 42,050 |  |  | $ | - |  |  | $ | 164,145 |

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI http://asc.fasb.org/topic&trid=2134510 + Details
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