Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Mar. 27, 2015 | Jun. 30, 2014 | |
Proceeds from the sale of common stock and warrants, net of expenses, Amount | |||
Entity Registrant Name | FUSION TELECOMMUNICATIONS INTERNATIONAL INC | ||
Entity Central Index Key | 1071411 | ||
Document Type | 10-K | ||
Document Period End Date | 31-Dec-14 | ||
Amendment Flag | FALSE | ||
Current Fiscal Year End Date | -19 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Common Stock, Shares Outstanding | 7,435,028 | ||
Entity Public Float | $25,518,710 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2014 |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Current assets: | ||
Cash and cash equivalents | $6,444,683 | $6,176,575 |
Accounts receivable, net of allowance for doubtful accounts of approximately $254,000 and $514,000, respectively | 7,087,599 | 5,828,389 |
Prepaid expenses and other current assets | 927,772 | 2,704,787 |
Total current assets | 14,460,054 | 14,709,751 |
Property and equipment, net | 13,478,912 | 11,193,355 |
Other assets: | ||
Security deposits | 648,998 | 585,083 |
Restricted cash | 1,164,381 | 1,163,872 |
Goodwill | 10,397,460 | 5,124,130 |
Intangible assets, net | 32,432,416 | 35,048,818 |
Other assets | 1,165,273 | 1,125,652 |
Total other assets | 45,808,528 | 43,047,555 |
TOTAL ASSETS | 73,747,494 | 68,950,661 |
Current liabilities: | ||
Notes payable - non-related parties | 1,225,000 | 625,000 |
Notes payable - related parties | 0 | 310,714 |
Equipment financing obligations | 662,131 | 245,138 |
Escrow payable | 0 | 295,000 |
Accounts payable and accrued expenses | 10,471,514 | 11,161,550 |
Related party payable | 0 | 226,148 |
Current liabilities from discontinued operations | 0 | 55,000 |
Total current liabilities | 12,358,645 | 12,918,550 |
Long-term liabilities: | ||
Notes payable - non-related parties, net of discount | 41,263,934 | 36,788,987 |
Notes payable - related parties, net of discount | 1,292,878 | 1,478,081 |
Equipment financing obligations | 1,702,704 | 167,614 |
Derivative liabilities | 3,839,569 | 10,515,472 |
Other long-term liabilities | 0 | 131,627 |
Total liabilities | 60,457,730 | 62,000,331 |
Commitments and contingencies | 0 | 0 |
Stockholders' equity (deficit): | ||
Preferred stock, $0.01 par value, 10,000,000 shares authorized, 26,793 and 23,525 shares issued and outstanding | 268 | 235 |
Common stock, $0.01 par value, 50,000,000 shares authorized, 7,345,028 and 6,077,071 shares issued and outstanding | 73,449 | 60,770 |
Capital in excess of par value | 175,519,459 | 166,625,595 |
Accumulated deficit | -162,303,412 | -159,736,270 |
Total stockholders' equity | 13,289,764 | 6,950,330 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $73,747,494 | $68,950,661 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Current assets: | ||
Allowance for doubtful accounts | $254,000 | $514,000 |
Stockholders' deficit: | ||
Preferred Stock, Par Value | $0.01 | $0.01 |
Preferred Stock, Shares Authorized | 10,000,000 | 10,000,000 |
Preferred Stock, Shares Issued | 26,793 | 23,525 |
Preferred Stock, Shares Outstanding | 26,793 | 23,525 |
Common Stock, Par Value | $0.01 | $0.01 |
Common Stock, Shares Authorized | 50,000,000 | 50,000,000 |
Common Stock, Shares Issued | 7,345,028 | 6,077,071 |
Common Stock, Shares Outstanding | 7,345,028 | 6,077,071 |
Consolidated_Statements_Of_Ope
Consolidated Statements Of Operations (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Consolidated Statements Of Operations | ||
Revenues | $92,052,600 | $61,496,620 |
Cost of revenues, exclusive of depreciation and amortization, shown separately below | 49,598,373 | 42,717,176 |
Gross profit | 42,454,227 | 18,779,444 |
Depreciation and amortization | 11,004,884 | 3,571,974 |
Selling general and administrative expenses (including stock-based compensation of approximately $372,000 and $189,000 for the years ended December 31, 2014 and 2013, respectively) | 33,224,374 | 18,756,325 |
Total operating expenses | 44,229,258 | 22,328,299 |
Operating loss | -1,775,031 | -3,548,855 |
Other (expenses) income: | ||
Interest expense | -5,988,411 | -2,638,249 |
Loss on extinguishment of debt | 0 | -1,105,283 |
Gain (loss) on change in fair value of derivative liabilities | 5,161,901 | -598,292 |
Other income expenses, net | 60,450 | -22,997 |
Total other expenses | -766,060 | -4,364,821 |
Gain on extinguishment of accounts payable | 0 | 2,883,660 |
Loss before taxes | -2,541,091 | -5,030,016 |
Provision for income taxes | 26,051 | 51,887 |
Net Loss | -2,567,142 | -5,081,903 |
Preferred stock dividends in arears | -1,746,203 | -402,497 |
Net loss applicable to common stockholders: | ($4,313,345) | ($5,484,400) |
Basic and diluted loss per common share | ($0.92) | ($1.22) |
Weighted average common shares outstanding: | ||
Basic and diluted | 7,132,427 | 4,500,548 |
Consolidated_Statements_Of_Ope1
Consolidated Statements Of Operations (Parenthetical) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Consolidated Statements Of Operations Parenthetical | ||
Share Based Compensation | $372,000 | $189,000 |
Consolidated_Statements_of_Cha
Consolidated Statements of Changes in Stockholders' Deficit (USD $) (USD $) | Preferred Stock | Common Stock | Capital in Excess of Par | Accumulated Deficit | Total |
Begining Balance, Amount at Dec. 31, 2012 | $119 | $35,650 | $148,506,859 | ($154,654,367) | ($6,111,739) |
Begining Balance, Shares at Dec. 31, 2012 | 11,907 | 3,565,011 | |||
Proceeds from the sale of preferred stock and warrants, net of expenses, Shares | 16,428 | 0 | |||
Proceeds from the sale of preferred stock and warrants, net of expenses, Amount | 164 | 0 | 15,559,939 | 0 | 15,560,103 |
Warrants issued in conjunction with the issuance of preferred stock deemed not indexed to the Company's common stock | 0 | 0 | -5,967,051 | 0 | -5,967,051 |
Issuance of common stock for services rendered, Shares | 0 | 19,112 | |||
Issuance of common stock for services rendered, Amount | 0 | 191 | 98,060 | 0 | 98,251 |
Proceeds from the sale of common stock and warrants, Shares | 0 | 1,005,144 | |||
Proceeds from the sale of common stock and warrants, Amount | 0 | 10,051 | 4,092,618 | 0 | 4,102,669 |
Issuance of warrants associated with conversion of indebtedness, Shares | 0 | 0 | |||
Issuance of warrants associated with conversion of indebtedness, Amount | 0 | 0 | 1,105,283 | 0 | 1,105,283 |
Conversion of notes payable and accrued expenses into preferred stock and warrants, Shares | 2,052 | 0 | |||
Conversion of notes payable and accrued expenses into preferred stock and warrants, Amount | 21 | 0 | 2,051,979 | 0 | 2,052,000 |
Conversion of notes payable and accrued interest into common stock and warrants, Shares | 0 | 233,960 | |||
Conversion of notes payable and accrued interest into common stock and warrants, Amount | 0 | 2,340 | 1,000,893 | 0 | 1,003,233 |
Net loss | 0 | 0 | 0 | -5,081,903 | -5,081,903 |
Stock based compensation associated with stock incentive plans | 0 | 0 | 189,484 | 0 | 189,484 |
Conversion of Series B Preferred Stock into comon stock, Shares | -6,862 | 1,253,441 | |||
Conversion of Series B Preferred Stock into comon stock, Amount | -69 | 12,534 | -12,465 | 0 | 0 |
Ajustment for fractional shares issued in reverse stock split, Shares | 0 | 403 | |||
Ajustment for fractional shares issued in reverse stock split, Amount | 0 | 4 | -4 | 0 | 0 |
Ending Balance, Amount at Dec. 31, 2013 | 235 | 60,770 | 166,625,595 | -159,736,270 | 6,950,330 |
Ending Balance, Shares at Dec. 31, 2013 | 23,525 | 6,077,071 | |||
Proceeds from the sale of preferred stock and warrants, net of expenses, Shares | 4,358 | 0 | |||
Proceeds from the sale of preferred stock and warrants, net of expenses, Amount | 44 | 0 | 3,984,382 | 0 | 3,984,426 |
Discount on related party note payable, net of exchanges | 0 | 0 | 372,551 | 0 | 372,551 |
Warrants issued in conjunction with the issuance of preferred stock deemed not indexed to the Company's common stock | -1,301,607 | 0 | -1,301,607 | ||
Issuance of common stock for services rendered, Shares | 0 | 38,491 | |||
Issuance of common stock for services rendered, Amount | 0 | 385 | 163,457 | 0 | 163,842 |
Modification of previously issued warrants and reclassification to stockholders' equity | 0 | 0 | 2,815,609 | 0 | 2,815,609 |
Net loss | 0 | -2,567,142 | -2,567,142 | ||
Conversion of preferred stock into common stock, Shares | -1,090 | 218,000 | |||
Conversion of preferred stock into common stock, Amount | -11 | 2,180 | -2,169 | 0 | |
Dividends on preferred stock, Shares | 0 | 299,216 | |||
Dividends on preferred stock, Amount | 0 | 2,992 | -2,992 | 0 | 0 |
Shares issued as partial purchase price of acquired business, Shares | 0 | 712,250 | |||
Shares issued as partial purchase price of acquired business, Amount | 0 | 7,122 | 2,492,875 | 0 | 2,499,997 |
Stock based compensation associated with stock incentive plans | 0 | 371,758 | 371,758 | ||
Ending Balance, Amount at Dec. 31, 2014 | $268 | $73,449 | $175,519,459 | ($162,303,412) | $13,289,764 |
Ending Balance, Shares at Dec. 31, 2014 | 26,793 | 7,345,028 |
Condensed_Consolidated_Interim
Condensed Consolidated Interim Statements of Cash Flows (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Cash flows from operating activities: | ||
Net loss | ($2,567,142) | ($5,081,903) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 11,004,884 | 3,571,974 |
Loss on disposal of property and equipment | 116,638 | 2,374 |
Loss on financing of accounts receivable | 97,486 | 226,261 |
Bad debt expense | 559,832 | 85,405 |
Stock-based compensation | 371,758 | 189,484 |
Stock and warrants issued for services rendered or in settlement of liabilities | 179,717 | 106,585 |
Amortization of debt discount and deferred financing fees | 1,064,346 | 431,132 |
Change in fair value of derivative liability | -5,161,901 | 598,292 |
Loss on extinguishment of debt | 0 | 1,105,283 |
Gain on extinguishment of accounts payable | 0 | -2,883,660 |
Increase (decrease) in cash attributable to changes in operating assets and liabilities: | ||
Accounts receivable | -1,406,348 | -1,514,261 |
Prepaid expenses and other current assets | -521,002 | 11,627 |
Other assets | -42,511 | 18,133 |
Accounts payable and accrued expenses | -1,403,213 | 1,467,523 |
Other long-term liabilities | -131,628 | -134,505 |
Net cash provided by (used in) operating activities | 2,160,915 | -1,800,256 |
Cash flows from investing activities: | ||
Purchase of property and equipment | -3,819,413 | -1,307,349 |
Returns (payments) of security deposits | 1,983,114 | -2,282,370 |
Payment of obligations related to purchase price of acquisitions | -226,148 | -933,425 |
Cash paid for acquisitions, net of cash acquired of $826,035 in 2014 | -7,318,790 | -32,108,450 |
Proceeds from the sale of property and equipment | 53,846 | 0 |
Change in restricted cash | -509 | -519 |
Net cash used in investing activities | -9,327,900 | -36,632,113 |
Cash flows from financing activities: | ||
Proceeds from the sale of common stock and warrants, net | 0 | 4,102,669 |
Proceeds from the sale of equity securities not yet issued | 0 | 295,000 |
Proceeds from notes payable - related parties | 0 | 100,000 |
Proceeds from the transfer of accounts receivable | 3,787,260 | 0 |
Repayments of borrowings related to the transfer of accounts receivable | -3,787,260 | 0 |
Proceeds from notes payable - non-related parties | 5,000,000 | 25,712,500 |
Payments on equipment financing obligations | -453,369 | -99,823 |
Proceeds from the sale of preferred stock and warrants, net of expenses | 3,984,426 | 15,560,103 |
Payment of deferred financing fees | -160,250 | -669,600 |
Repayments of notes payable - related parties | -310,714 | -514,286 |
Repayments of notes payable - non-related parties | -625,000 | -420,833 |
Net cash provided by financing activities | 7,435,093 | 44,065,730 |
Net increase in cash and cash equivalents | 268,108 | 5,633,361 |
Cash flows from discontinued operations: | ||
Net cash used in operating activities of discontinued operations | 0 | 0 |
Net change in cash and cash equivalents: | 268,108 | 5,633,361 |
Cash and cash equivalents, beginning of year | 6,176,575 | 543,214 |
Cash and cash equivalents, end of year | $6,444,683 | $6,176,575 |
Condensed_Consolidated_Interim1
Condensed Consolidated Interim Statements of Cash Flows (Parenthetical) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Condensed Consolidated Interim Statements Of Cash Flows | |
Cash acquired | $826,035 |
1_Nature_Of_Operations
1. Nature Of Operations | 12 Months Ended |
Dec. 31, 2014 | |
Pro forma financial information | |
1. Nature Of Operations | Fusion Telecommunications International, Inc. is a Delaware corporation incorporated in September 1997 (“Fusion” and together with its subsidiaries, the “Company”). The Company is a provider of integrated cloud solutions, including cloud voice, cloud connectivity, cloud storage and security to businesses of all sizes, and IP-based voice services to other carriers. The Company currently operates in two business segments, Business Services and Carrier Services. |
2_Summary_Of_Significant_Accou
2. Summary Of Significant Accounting Policies | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Pro forma financial information | ||||||||||||||
2. Summary Of Significant Accounting Policies | Basis of Presentation and Consolidation | |||||||||||||
The consolidated financial statements include the accounts of Fusion and its wholly owned subsidiaries (see note 3). The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with Regulation S-X of the Securities and Exchange Commission (the “SEC”). All inter-company accounts and transactions have been eliminated in consolidation, and certain prior year balances have been reclassified to conform to the current presentation. | ||||||||||||||
Revenue Recognition | ||||||||||||||
The Company recognizes revenue when persuasive evidence of a sale arrangement exists, delivery has occurred or services have been rendered, the sales price is fixed and determinable, and collectability is reasonably assured. The Company records provisions against revenue for billing adjustments, which are based upon estimates derived from factors that include, but are not limited to, historical results, analysis of credits issued and current economic trends. The provisions for revenue adjustments are recorded as a reduction of revenue when the revenue is recognized. | ||||||||||||||
The Company’s Carrier Services revenue is primarily derived from usage fees charged to other telecommunications carriers that terminate voice traffic over the Company’s network, and from the monthly recurring and usage fees charged to customers that purchase the Company’s business products and services.Variable revenue is earned based on the length of a call, as measured by the number of minutes of duration. It is recognized upon completion of the call, and is adjusted to reflect the Company’s allowance for billing adjustments. Revenue for each customer is calculated from information received through the Company’s network switches. The Company’s customized software tracks the information from the switches and analyzes the call detail records against stored detailed information about revenue rates. This software provides the Company with the ability to complete a timely and accurate analysis of revenue earned in a period. The Company believes that the nature of this process is such that recorded revenues are unlikely to be revised in future periods. | ||||||||||||||
Business Services revenue includes fixed revenue earned from monthly recurring services provided to customers, for which charges are contracted for over a specified period of time, and from variable usage fees charged to customers that purchase the Company’s Business Services products and services. Revenue recognition commences after the provisioning, testing and acceptance of the service by the customer. The recurring customer charges continue until the expiration of the contract, or until cancellation of the service by the customer. To the extent that payments received from a customer are related to a future period, the payment is recorded as deferred revenue until the service is provided or the usage occurs. | ||||||||||||||
Cost of Revenues | ||||||||||||||
Cost of revenues for the Company’s Carrier Services business segment is comprised primarily of costs incurred from other domestic and international communications carriers to originate, transport, and terminate voice calls for the Company’s carrier customers. Thus the majority of the Company’s cost of revenues for this business segment is variable, based upon the number of minutes actually used by the Company’s customers and the destinations they are calling. Call activity is tracked and analyzed with customized software that analyzes the traffic flowing through the Company’s network switch. During each period, the call activity is analyzed and an accrual is recorded for the costs associated with minutes not yet invoiced. This cost accrual is calculated using minutes from the system and the variable cost of revenue based upon predetermined contractual rates.Fixed expenses reflect the costs associated with connectivity between the Company’s network infrastructure, including its New York switching facility, and certain large carrier customers and vendors. | ||||||||||||||
For the Company’s Business Services business segment, fixed expenses include the monthly recurring charges associated with certain platform services purchased from other service providers, the monthly recurring costs associated with private line services and the cost of broadband Internet access used to provide service to business customers. | ||||||||||||||
Accounts Receivable and Allowance for Doubtful Accounts | ||||||||||||||
Accounts receivable are recorded net of an allowance for doubtful accounts. On a periodic basis, the Company evaluates accounts receivable and records an allowance for doubtful accounts based on the Company’s history of past write-offs, collections experience and current credit conditions. Specific customer accounts are written off as uncollectible when collection efforts have been exhausted and payments are not expected to be received. | ||||||||||||||
The Company has an agreement to sell certain of its accounts receivable under an arrangement with a third party. The Company records a loss on sale of accounts receivable at the time the receivables are sold for the difference between the book value of the receivables transferred and their respective purchase price. During the year ended December 31, 2013, the Company accounted for the sales of its accounts receivable as sales of financial assets and derecognized them from its consolidated balance sheet as of the date of sale. During the year ended December 31, 2014, the Company determined that although legal ownership to the transferred receivables belong to the transferee, these transfers do not meet all of the criteria outlined in Accounting Standards Codification Topic (“ASC”) 860, Transfers and Servicing. The Company had derecognized $0.9 million of such receivables as of December 31, 2013, and the Company believes that retaining this amount on its consolidated balance sheet and recording a corresponding note payable would not have been material to the Company’s consolidated balance sheet as of that date. During the year ended December 31, 2014 the Company transferred receivables aggregating approximately $3.8 million resulting in a corresponding note payable for the amount of uncollected receivables transferred. As of December 31, 2014, all of the related receivables had been collected, the notes had been repaid and the Company did not have any outstanding accounts receivable that had been sold under this arrangement. | ||||||||||||||
The Company recognized losses on the transfers of accounts receivable for the years ended December 31, 2014 and 2013 of approximately $97,000 and $226,000, respectively. These amounts are recorded in other income (expenses) in the accompanying consolidated statements of operations. The Company’s obligations to the purchaser of the receivables are secured by a first priority lien on the accounts receivable of the Company’s Carrier Services business segment, and by a subordinated security interest on the other assets of the Company’s Carrier Services business segment. | ||||||||||||||
Fair Value of Financial Instruments | ||||||||||||||
The carrying value of certain financial instruments such as accounts receivable, accounts payable and accrued expenses approximates their fair valuesdue to the short term nature of their underlying terms. | ||||||||||||||
Intangible Assets | ||||||||||||||
Intangible assets at December 31, 2014 and 2013consist of trade names and trademarks, non-compete agreements, proprietary technology, customer relationships and a below-market lease, all of which were acquired in purchase business combinations. In determining fair value, the Company uses standard analytical approaches to business enterprise valuation (“BEV”), such as the income approach and the market comparable approach. The income approach involves estimating the present value of the subject asset’s future cash flows by using projections of the cash flows that the asset is expected to generate, and discounting these cash flows at a given rate of return. The market comparable approach is based on comparisons of the subject company to similar companies engaged in an actual merger or acquisition or to public companies whose stocks are actively traded. Each of these BEV methodologies requires the use of management estimates and assumptions. Amortization is recognized on a straight-line basis over the estimated useful lives of the respective assets, which ranges from two to fifteen years. | ||||||||||||||
Goodwill | ||||||||||||||
Goodwill is the excess of the acquisition cost of businesses over the fair value of the identifiable net assets acquired (see note 3). Goodwill at December 31, 2014 and 2013 was approximately $10.4 million and $5.1 million, respectively.Goodwill is not amortized but is instead tested annually for impairment. All of the Company’s goodwill is attributable to its Business Services business segment. The following table presents the change in goodwill during the years ended December 31, 2014 and 2013: | ||||||||||||||
Balance at | Additions (a) | Other (b) | Balance at | Balance at | Additions (a) | Other (c) | Balance at | |||||||
January 1, | December 31, | January 1, | December 31, | |||||||||||
2014 | 2014 | 2013 | 2013 | |||||||||||
$ 5,124,130 | 5,175,372 | 97,958 | $ 10,397,460 | $ 2,406,269 | 2,520,605 | 197,256 | $ 5,124,130 | |||||||
(a) - Amount relates to acquisitions. See note 3. | ||||||||||||||
(b) - Amount relates to adjustments to the preliminary purchase price for 2013 acquisitions. | ||||||||||||||
(c) - Amount relates to adjustments to the preliminary purchase price for 2012 acquisitions. | ||||||||||||||
Impairment of Long-Lived Assets | ||||||||||||||
The Company reviews long-lived assets, including intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If an impairment indicator is present, the Company evaluates recoverability by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If the carrying value of the asset exceeds the projected undiscounted cash flows, the Company is required to estimate the fair value of the asset and recognize an impairment charge to the extent that the carrying value of the asset exceeds its estimated fair value. The Company did not record any impairment charges for the years ended December 31, 2014 and 2013. | ||||||||||||||
Impairment testing for goodwill is performed annually in the Company’s fourth fiscal quarter. The impairment test for goodwill uses a two-step approach, which is performed at the reporting unit level. The Company has determined that its reporting units are its operating segments since that is the lowest level at which discrete, reliable financial and cash flow information is available. Step one compares the fair value of the reporting unit (calculated using a market approach and/or a discounted cash flow method) to its carrying value. If the carrying value exceeds the fair value, there is a potential impairment and step two must be performed. Step two compares the carrying value of the reporting unit’s goodwill to its implied fair value, which is the fair value of the reporting unit less the fair value of the unit’s assets and liabilities, including identifiable intangible assets. If the implied fair value of goodwill is less than its carrying amount, an impairment is recognized. | ||||||||||||||
The authoritative guidance provides entities with an option to perform a qualitative assessment to determine whether a quantitative analysis is necessary. The Company performed qualitative impairment evaluations on its goodwill as of December 31, 2014 and 2013and determined that there were no indications that goodwill was impaired. | ||||||||||||||
Property and Equipment | ||||||||||||||
Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets as follows: | ||||||||||||||
Asset | Estimated Useful Lives | |||||||||||||
Network equipment | 5 – 7 Years | |||||||||||||
Furniture and fixtures | 3 – 7 Years | |||||||||||||
Computer equipment and software | 3 – 5 Years | |||||||||||||
Customer premise equipment | 2 – 3 Years | |||||||||||||
Leasehold improvements are depreciated over the shorter of the estimated useful lives of the assets or the term of the associated lease. Maintenance and repairs are recorded as a period expense, while betterments and improvements are capitalized. | ||||||||||||||
The Company capitalizes a portion of its payroll and related costs for the development of software for internal use and amortizes these costs over three years. During the years ended December 31, 2014 and 2013, the Company capitalized costs pertaining to the development of internally used software in the approximate amount of $783,000 and$794,000, respectively. | ||||||||||||||
Derivative Financial Instruments | ||||||||||||||
The Company accounts for warrants issued in conjunction with the issuance of debt and equity in accordance with the guidance contained in ASC Topic 815, Derivatives and Hedging (“ASC 815”). For warrant instruments that are not deemed to be indexed to the Company’s own stock, the Company classifies the warrant instrument as a liability at its fair value and adjusts the instrument to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statements of operations (see notes11, 13 and 21). Thefair values of the warrants have been estimated using Black-Scholes and other valuation models, and the Company’s quoted market price (see notes 11 and 13). | ||||||||||||||
Advertising and Marketing | ||||||||||||||
Advertising and marketing expense includes cost for promotional materials and trade show expenses for the marketing of the Company’s business products and services. Advertising and marketing expenses were approximately $211,000 and $28,000 for the years ended December 31, 2014 and 2013, respectively. | ||||||||||||||
Income Taxes | ||||||||||||||
The accounting and reporting requirements with respect to income taxes require an asset and liability approach. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amount expected to be realized. | ||||||||||||||
In accordance with U.S. GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Derecognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce net assets. Based on its analysis, the Company has determined that it has not incurred any liability for unrecognized tax benefits as of December 31, 2014 and 2013. The Company is subject to income tax examinations by major taxing authorities for all tax years since 2010 and for previous periods as it relates to the Company’s net operating loss carryforward. No interest expense or penalties have been recognized as of December 31, 2014 and 2013. During the years ended December 31, 2014 and 2013, the Company recognized no adjustments for uncertain tax positions. | ||||||||||||||
Reverse split of common stock | ||||||||||||||
On April 9, 2014, Fusion’s Board of Directors approved amendments to Fusion’s Certificate of Incorporation to (a) effect a reverse stock split of all of the outstanding shares of Fusion’s common stock at a ratio (the “Reverse Split Ratio”) of one for fifty (the “Reverse Stock Split”) and (b) a corresponding reduction in the number of shares of common stock that Fusion is authorized to issue from 900,000,000 to 18,000,000. The Certificate of Amendment, which was approved by Fusion’s stockholders on March 28, 2014, became effective on May 13, 2014, and at that time the Reverse Stock Split took place and each 50 shares of outstanding common stock was combined and automatically converted into one share of common stock, with a par value of $0.01 per share. In addition, the conversion and exercise prices of all of Fusion’s outstanding preferred stock, common stock purchase warrants and options to purchase common stock were proportionately adjusted at the Reverse Split Ratio consistent with the terms of such instruments. No fractional shares were issued as a result of the Reverse Stock Split, and any fractional share to which a stockholder may have been entitled as a result of the Reverse Stock Split was rounded up to the nearest whole share. | ||||||||||||||
As a result of the Reverse Stock Split, all share and per share amounts as of and for the year ended December 31, 2013 have been restated at the Reverse Split Ratio to give effect to the Reverse Stock Split. | ||||||||||||||
Earnings (Loss) per Share | ||||||||||||||
Basic and diluted loss per share for 2014 is computed by dividing (i) loss available to common stockholders, adjusted by approximately $2.2 million for the gain on fair value of the Company’s derivative liability that was attributable to outstanding warrants with a nominal exercise price (see note 11), by (ii) the weighted-average number of common shares outstanding during the period, increased by the number of common shares underlying such warrants with a nominal exercise price as if such exercise had occurred at the beginning of the year. The following securities were excluded in the calculation of diluted loss per share because their inclusion would be antidilutive: | ||||||||||||||
2014 | 2013 | |||||||||||||
Warrants, excluding 728,333 nominal warrants in 2014 issued to senior lenders (see note 11) | 3,436,775 | 4,015,824 | ||||||||||||
Stock options | 607,877 | 351,439 | ||||||||||||
Convertible preferred stock | 4,512,316 | 3,851,264 | ||||||||||||
8,556,968 | 8,218,527 | |||||||||||||
The net loss per common share calculation includes a provision for preferred stock dividends on the Company’s outstanding Series A-1, A-2 and A-4 Preferred Stock (the “Series A Preferred Stock”) in the approximate amount of $404,000 and $402,000 for the years ended December 31, 2014 and 2013, respectively.As of December 31, 2014, the Company’s Board of Directors had not declared any dividends on the Company’s Series A Preferred Stock, and the Company had accumulated approximately $3.9 million of preferred stock dividends. The Company’s Board of Directors has declared dividends for the year ended December 31, 2014 aggregating $1.3 million related to the Company’s Series B-2 Preferred Stock (see note 13) which, as permitted by the terms of the Series B-2 Preferred Stock, was paid in the form of 299,216 shares of the Company’s common stock. | ||||||||||||||
Stock-Based Compensation | ||||||||||||||
The Company accounts for stock-based compensation by recognizing the fair value of compensation cost for all stock and stock-based awards over the service period (generally equal to the vesting period). Compensation cost is determined using the Black-Scholes option pricing model to estimate the fair value of the awards at the grant date. An offsetting increase to stockholders’ equity is recorded equal to the amount of the compensation expense charge. | ||||||||||||||
Stock-based compensation is included in selling, general, and administrative expenses in the consolidated statements of operations and, with respect to stock option expense, has been reduced for estimated forfeitures. When estimating forfeitures, the Company considers historical forfeiture rates as well as ongoing trends for actual option forfeiture. | ||||||||||||||
The Company calculated the fair value of each common stock option grant on the date of grant using the Black-Scholes option pricing model method with the following assumptions: | ||||||||||||||
2014 | 2013 | |||||||||||||
Dividend yield | 0 | % | 0 | % | ||||||||||
Stock volatility | 102 | % | 137 | % | ||||||||||
Average Risk-free interest rate | 1.97 | % | 0.68 | % | ||||||||||
Average option term (years) | 8 | 3 | ||||||||||||
Recently Adopted and Issued Accounting Pronouncements | ||||||||||||||
During the years ended December 31, 2014 and 2013, there were no new accounting pronouncements adopted by the Company that had a material impact on the Company’s consolidated financial statements. In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers,” (“ASU 2014-09”). ASU 2014-09 outlines a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. ASU 2014-09 is effective for annual and interim reporting periods beginning after December 15, 2016 and early adoption is not permitted. Companies may either use a full retrospective or modified retrospective approach to adopt this new standard. The Company is currently evaluating both adoption options and the impact that adoption of ASU 2014-09 will have on its consolidated financial statements. | ||||||||||||||
Use of Estimates | ||||||||||||||
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the year. Actual results could be affected by those estimates. |
3_Acquisition
3. Acquisition | 12 Months Ended | ||||||
Dec. 31, 2014 | |||||||
Pro forma financial information | |||||||
3. Acquisition | On October 31, 2014, Fusion, through its wholly owned subsidiary, Fusion PTC Acquisition, Inc., (“PTC”), completed the acquisition of all of the outstanding equity securities of PingTone Communications, Inc., a provider of integrated cloud-based communications services (“PingTone”). The acquisition of PingTone was accomplished through a merger of PTC with and into PingTone, with PingTone surviving the merger. As a result of this transaction, PingTone became a wholly owned subsidiary of Fusion’s wholly owned subsidiary, Fusion NBS Acquisition Corp. (“FNAC”), and an indirect subsidiary of Fusion. | ||||||
The purchase price paid to PingTone shareholders was $10.6 million, consisting of $8.1 million in cash 712,250 shares of Fusion’s common stock valued at $2.5 million. A portion of the purchase price ($1,150,000, comprised of $862,500 in cash and 81,908 shares of common stock) has been placed into escrow to secure the representations, warranties and covenants made by the PingTone shareholders under the merger agreement. | |||||||
The allocation of the purchase price of PingTone is as follows: | |||||||
Purchase Price | $ 10,644,822 | ||||||
Cash | 826,035 | ||||||
Accounts receivable, net | 273,948 | ||||||
Other current assets | 141,256 | ||||||
Property and equipment | 481,111 | ||||||
Other assets | 60,941 | ||||||
Deferred tax asset | 1,688,011 | ||||||
Intangible assets subject to amortization | 4,211,300 | ||||||
Goodwill | 5,175,372 | ||||||
Current liabilities | (496,417) | ||||||
Deferred tax liability | (1,688,011) | ||||||
Other liabilities | (28,724) | ||||||
$ 10,644,822 | |||||||
The results of operations of PingTone are reflected in the Company’s consolidated Statement of Operations effective November 1, 2014. The following table provides certain pro forma financial information for the Company as if the acquisition of PingTone had been consummated effective as of January 1, 2013: | |||||||
($000's) | Year ended December 31, | ||||||
2014 | 2013 | ||||||
Revenues | $ 98,988 | $ 69,375 | |||||
Net loss | $ (3,063) | $ (6,026) | |||||
On December 31, 2013, Fusion, through its wholly-owned subsidiary, Fusion BVX LLC (“FBVX”), completed the acquisition of substantially all of the cloud services assets used by BroadvoxGO!, LLC and its affiliate Cypress Communications, LLC (collectively, “Sellers”) in the operation of their cloud services business. A definitive agreement to purchase these assets, including the assumption of substantially all of the related on-going liabilities incurred in the ordinary course of business (collectively, the “Broadvox Assets”) was entered into on August 30, 2013, and amended on November 15, 2013 and December 16, 2013 (the “BVX Purchase Agreement”). | |||||||
The purchase price of the Broadvox Assets of $32.1 million was paid in cash, and a working capital adjustment of $0.2 million was paid to the Sellers in April of 2014 in accordance with the BVX Purchase Agreement. In addition, the Company and the Sellers entered into a Transitional Services Agreement governing the provision and receipt of certain services between the Company and the Sellers covering a range of topics including the Company’s ongoing purchase of VoIP and wholesale services from the Sellers; the Company’s utilization of the Sellers’ network infrastructure; temporary use of financial and administrative systems owned by the Sellers; the marketing of services offered by the Company by sales representatives of the Sellers; and the Company’s use of certain of Sellers’ office facilities and employees. The aggregate purchase price was allocated to the fair value of the net assets acquired as follows: | |||||||
Accounts receivable | $ 1,486,552 | ||||||
Other current assets | 26,656 | ||||||
Property and equipment | 8,101,360 | ||||||
Intangible assets subject to amortization | 21,866,000 | ||||||
Goodwill | 2,618,563 | ||||||
Current liabilities | (1,817,186) | ||||||
$ 32,281,945 | |||||||
The Company’s consolidated balance sheet as of December 31, 2013 includes the Broadvox Assets, and the results of operations generated by the Broadvox Assets are reflected in the Company’s consolidated statement of operations effective January 1, 2014. | |||||||
The following table provides certain pro forma financial information for the Company as if the acquisition of the Broadvox Assets had been consummated effective as of January 1, 2013: | |||||||
($000’s) | |||||||
Revenues | $ | 94,148 | |||||
Net loss | $ | (12,490 | ) |
4_Intangible_Assets
4. Intangible Assets | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Pro forma financial information | |||||||||||||
4. Intangible Assets | All of the Company’s identifiable intangible assets are associated with its Business Services business segment and as of December 31, 2014 and 2013 are comprised of: | ||||||||||||
31-Dec-14 | 31-Dec-13 | ||||||||||||
Gross Carrying Amount | Accumulated | Total | Gross Carrying | Accumulated | Total | ||||||||
Amortization | Amount | Amortization | |||||||||||
Trademarks and tradename | $ 1,093,400 | $ (161,319) | $ 932,081 | $ 563,000 | $ (65,683) | $ 497,317 | |||||||
Proprietary technology | 5,781,000 | (1,600,233) | 4,180,767 | 5,781,000 | (444,033) | 5,336,967 | |||||||
Non-compete agreements | 9,852,100 | (5,150,228) | 4,701,872 | 8,728,000 | (1,266,611) | 7,461,389 | |||||||
Customer relationships | 24,897,800 | (2,403,637) | 22,494,163 | 22,341,000 | (754,988) | 21,586,012 | |||||||
Favorable lease intangible | 218,000 | (94,467) | 123,533 | 218,000 | (50,867) | 167,133 | |||||||
Total acquired intangibles | $ 41,842,300 | $ (9,409,884) | $ 32,432,416 | $ 37,631,000 | $ (2,582,182) | $ 35,048,818 | |||||||
Aggregate amortization expense for each of the five years subsequent to December 31, 2014 is expected to be as follows: | |||||||||||||
For the year ended December 31, | |||||||||||||
2015 | $ | 7,227,469 | |||||||||||
2016 | 3,587,246 | ||||||||||||
2017 | 3,454,097 | ||||||||||||
2018 | 2,729,701 | ||||||||||||
2019 | 1,895,455 |
5_Prepaid_Expenses_and_Other_C
5. Prepaid Expenses and Other Current Assets | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Pro forma financial information | ||||||||
5. Prepaid Expenses and Other Current Assets | Prepaid expenses and other current assets consist of the following at December 31, 2014 and 2013: | |||||||
2014 | 2013 | |||||||
Prepaid insurance | $ | 52,498 | $ | 63,737 | ||||
Other prepaid expenses | 645,133 | 404,818 | ||||||
Escrowed funds – senior lenders | - | 2,000,000 | ||||||
Other current assets | 230,141 | 236,232 | ||||||
Total | $ | 927,772 | $ | 2,704,787 | ||||
The $2.0 million of escrowed funds pertain to a portion of the funds the Company deposited into an account controlled by the Company’s senior lenders, as more fully described in note 11, pendingreceipt of certain regulatory approvals for the pledging of assets related to the debt incurred to finance the acquisition of the Broadvox Assets (see note 3).The necessary regulatory approvals were obtained in April of 2014, at which time the funds were returned to the Company. |
6_Property_And_Equipment
6. Property And Equipment | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Pro forma financial information | |||||
6. Property And Equipment | At December 31, 2014 and 2013, property and equipment is comprised of the following: | ||||
2014 | 2013 | ||||
Network equipment | $ 8,374,479 | $ 7,675,786 | |||
Furniture and fixtures | 299,571 | 299,571 | |||
Computer equipment and software | 5,962,838 | 2,654,428 | |||
Customer premise equipment | 7,191,008 | 5,169,629 | |||
Vehicles | 55,884 | 55,884 | |||
Leasehold improvements | 1,140,605 | 993,799 | |||
Assets in progress | 118,831 | - | |||
Total | 23,143,216 | 16,849,097 | |||
Less: accumulated depreciation | (9,664,304) | (5,655,742) | |||
Total | $ 13,478,912 | $ 11,193,355 | |||
Depreciation expense was approximately $4.2 million and $1.4 millionfor the years ended December 31, 2014 and 2013, respectively. |
7_Restricted_Cash
7. Restricted Cash | 12 Months Ended |
Dec. 31, 2014 | |
Pro forma financial information | |
7. Restricted Cash | Restricted cash at December 31, 2014 and 2013includes $1,000,000 of cash held in reserve as required by the terms of the Company’s senior lending agreement (see note 11).Restricted cash also includes certificates of deposit collateralizing letters of credit of approximately $164,000at December 31, 2014 and 2013. These letters of credit are required as security for one of the Company’s non-cancelable operating leases for switching and transmission equipment. |
8_Fair_Value_Disclosures
8. Fair Value Disclosures | 12 Months Ended | |||||||||||
Dec. 31, 2014 | ||||||||||||
Pro forma financial information | ||||||||||||
8. Fair Value Disclosures | Fair value of financial and non-financial assets and liabilities is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The three-tier hierarchy for inputs used in measuring fair value, which prioritizes the inputs used in the methodologies of measuring fair value for assets and liabilities, is as follows: | |||||||||||
Level 1—Quoted prices in active markets for identical assets or liabilities | ||||||||||||
Level 2—Observable inputs other than quoted prices in active markets for identical assets and liabilities | ||||||||||||
Level 3—No observable pricing inputs in the market | ||||||||||||
The following table represents the fair value of the liability measured at fair value on a recurring basis: | ||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||
Non-current liabilities: | ||||||||||||
As of December 31, 2014: | ||||||||||||
Derivative liability | $ | 3,839,569 | $ | 3,839,569 | ||||||||
As of December 31, 2013: | ||||||||||||
Derivative liabilities | $ | 10,515,472 | $ | 10,515,472 | ||||||||
The following table reconciles the changes in the derivative liability categorized within Level 3 of the fair value hierarchy. | ||||||||||||
Balance at December 31, 2013 | $ - | |||||||||||
Transfer of Level 2 balance (a) | 10,515,472 | |||||||||||
Issuance of additional warrants | 1,301,607 | |||||||||||
Gains for the period: | ||||||||||||
Included in earnings | (5,161,901) | |||||||||||
Included in other comprehensive income (loss) | - | |||||||||||
Modification of warrant contracts (see note 8) | (2,815,609) | |||||||||||
Balance at September 30, 2014 | $ 3,839,569 | |||||||||||
(a) - In the course of preparing its financial statements for the year ended December 31, 2014, the Company determined that all of its derivative liabilities contained unobsoverable inputs and should therefore be reported in the Level 3 fair value hierarchy |
9_Accounts_Payable_and_Accrued
9. Accounts Payable and Accrued Expenses | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Pro forma financial information | ||||||
9. Accounts Payable and Accrued Expenses | Accounts payable and accrued expenses consist of the following at December 31, 2014 and 2013: | |||||
31-Dec-14 | 31-Dec-13 | |||||
Trade accounts payable | $ 3,028,902 | $ 5,713,706 | ||||
Other accrued expenses | 3,268,886 | 3,321,133 | ||||
Accrued payroll and vacation | 250,574 | 102,898 | ||||
Accrued state and local taxes | 1,462,097 | 471,320 | ||||
Accrued sales commissions | 864,928 | 72,291 | ||||
Interest payable | 33,341 | 421,632 | ||||
Deferred revenue | 729,618 | 407,426 | ||||
Other | 833,168 | 651,144 | ||||
Total accounts payable and accrued expenses | $ 10,471,514 | $ 11,161,550 |
10_Equipment_Financing_Obligat
10. Equipment Financing Obligations | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Pro forma financial information | |||||
10. Equipment Financing Obligations | From time to time during the years ended December 31, 2014 and 2013, the Company entered into several equipment financing or capital lease arrangements to finance the purchase of network hardware and software utilized in the Company’s operations. These arrangements require monthly payments over a period of 24 to 48 months with interest rates ranging between 4% and 11%. The balance on the Company’s equipment financing obligations aggregated to $2.4 million and $0.4 million at December 31, 2014 and 2013, respectively. | ||||
Approximate principal payments under capital lease agreements for the years ending subsequent to December 31, 2014 are as follows: | |||||
Year Ending December 31: | |||||
2015 | 722,000 | ||||
2016 | 603,000 | ||||
2017 | 580,000 | ||||
2018 | 460,000 | ||||
$ | 2,365,000 |
11_Notes_PayableNonRelated_Par
11. Notes Payable-Non-Related Parties | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Pro forma financial information | ||||||
11. Notes Payable-Non-Related Parties | At December 31, 2014 and 2013, notes payable – non-related parties are comprised of the following: | |||||
31-Dec-14 | 31-Dec-13 | |||||
Senior Notes | $ 46,166,667 | $ 41,791,667 | ||||
Discount on Senior Notes | (3,677,733) | (4,377,680) | ||||
Total notes payable - non-related parties | 42,488,934 | 37,413,987 | ||||
Less: | ||||||
Current portion of Senior Notes | (1,225,000) | (625,000) | ||||
Non-current portion notes payable - non-related parties | $ 41,263,934 | $ 36,788,987 | ||||
Senior Notes | ||||||
On October 29, 2012, FNAC, entered into a Securities Purchase Agreement and Security Agreement (the “Purchase Agreement”) with Praesidian Capital Opportunity Fund III, LP, Praesidian Capital Opportunity Fund III-A, LP and Plexus Fund II, LP (the “Lenders”). Under the Purchase Agreement, FNAC sold the Lenders (a) five-year Series A senior notes (the “Series A Notes”) in the aggregate principal amount of $6.5 million, bearing interest at the rate of 10.0% annually, and (b) five-year Series B senior notes (the “Series B Notes”) in the aggregate principal amount of $10.0 million bearing interest at the rate of 11.5% annually. The proceeds from the sale of the Series A Notes and Series B Notes were used to finance the acquisition of Network Billing Systems, LLC and the assets of its affiliate, Interconnect Services Group II LLC (collectively, “NBS”).During the year ended December 31, 2013, the Company made principal payments on the Series A Notes in the amount of $208,333. | ||||||
In conjunction with the execution of the Series A Notes and Series B notes, the Company and the Lenders also entered into a series of ancillary agreements, amended from time to time, relating to, among other things, securing the Lenders’ right to repayment of the Series A Notes and Series B Notes and establishing priority as to payments and to security among the Lenders and other creditors of the Company (the “Ancillary Agreements”). The Ancillary Agreements consist of: | ||||||
· | An IP Security Agreement under which the Company has pledged intellectual property to the Lenders to secure payment of the Notes; | |||||
· | Intercreditor and Subordination Agreements under which creditors of the Company (including affiliates of the Company) and the Lenders have established priorities among them and reached certain agreements as to enforcing their respective rights against the Company (see note 12); | |||||
· | A Pledge Agreement under which Fusion and its Subsidiaries have each pledged their equity interests in certain subsidiaries to the Lenders; | |||||
· | A Right of First Refusal Agreement granting Fusion certain rights to purchase the shares issued or issuable upon exercise of the Lenders’ Warrants; and | |||||
· | A Management Rights Agreement and SBA Side Letters relating to the Lenders’ status and rights as small business lenders. | |||||
On December 15, 2013, FNAC sold to the Lenders Series C senior notes (the “Series C Notes”) in the aggregate principal amount of $0.5 million. The proceeds were used to pay a deposit on the purchase price to the sellers in connection with the Broadvox Transaction (see note 2). On December 31, 2013, the Purchase Agreement was amended and restated (the “SPA”) whereby FNAC sold to Praesidian Capital Opportunity Fund III, LP, Praesidian Capital Opportunity Fund III-A, LP, Plexus Fund II, L.P., Plexus Fund III, L.P., Plexus Fund QP III, L.P. and United Insurance Company of America (collectively with Plexus Fund II, L.P., the “Senior Lenders”) Series D Senior Notes (the “Series D Notes”) in the aggregate principal amount of $25.0 million (collectively with the Series A Notes, the Series B Notes and the Series C Notes, the “Senior Notes”). The proceeds from the sale of the Series D Notes were used to finance the Broadvox Transaction. Under the terms of the SPA: | ||||||
● | Plexus Fund III, L.P., Plexus Fund QP III, L.P. and United Insurance Company of America became parties to the SPA and to certain ancillary agreements that were entered into with the Lenders at the time of the Purchase Agreement. | |||||
● | The interest rate on all of the Senior Notes was adjusted to 11.15% per annum. | |||||
● | The maturity date on all of the Senior Notes was reset to December 31, 2018. | |||||
● | Interest on all of the Senior Notes is payable monthly, and monthly principal payments aggregating $52,083 are required from January 2014 through December 2014. | |||||
● | Monthly principal payments aggregating $102,083 are required from January 2015 through December 2018, with the outstanding principal balance on all of the Senior Notes payable at maturity. | |||||
Contemporaneously with the completion of the acquisition of PingTone, Fusion, FNAC, FBVX, NBS and PTC executed a Second Amended and Restated Securities Purchase Agreement and Security Agreement (the “Restated Purchase Agreement”) with the Senior Lenders. The Restated Purchase Agreement amends and restates the terms of the SPA, and reflects the sale by FNAC to the Senior Lenders of five-year Series E senior notes (the “Series E Notes” and together with the Senior Notes, the "Notes") in an aggregate principal amount of $5.0 million. The Series E Notes bear interest annually at 11.15%. The Restated Purchase Agreement extended the maturity date of all of the Notes to October 31, 2019. Each of the Series E Notes provides for the payment of interest on a monthly basis commencing November 30, 2014. Principal on the Series E Notes is due and payable at maturity. During the year ended December 31, 2014, the Company made principal payments on the Notes aggregating $625,000. | ||||||
The obligations to the Senior Lenders under the Restated Purchase Agreement are secured by a first priority security interest on all of the assets of FNAC, FBVX, PingTone and NBS, as well as the capital stock of each of Fusion’s subsidiaries, and by a second lien on the accounts receivable and other assets of the Company’s Carrier Services business segment. Further, subject to certain limitations, Fusion, FBVX, NBS and PingTone have guaranteed FNAC’s obligations under the Restated Purchase Agreement, including FNAC’s obligations to repay the Notes. | ||||||
The Restated Purchase Agreement contains a number of affirmative and negative covenants, including but not limited to, restrictions on paying indebtedness subordinate to the Notes, incurring additional indebtedness, making capital expenditures, dividend payments and cash distributions by subsidiaries. In addition, at all times while the Notes are outstanding, the Company is required to maintain a minimum cash bank balance of no less than $1.0 million in excess of (i) any amounts outstanding under a permitted working capital line of credit, and (ii) any and all cash balances held by the Company’s Business Services business segment. The Restated Purchase Agreement also requires on-going compliance with various financial covenants, including leverage ratio, fixed charge coverage ratio and minimum levels of earnings before interest, taxes, depreciation and amortization. Failure to comply with any of the restrictive or financial covenants could result in an event of default and accelerated demand for repayment of the Senior Notes. | ||||||
At various times between May 15, 2013 and December 31, 2013, the Company was not in compliance with the $1.0 million minimum cash balance requirement under the SPA. On August 14, 2013 and November 12, 2013, the Company and the Lenders entered into Waiver and Amendment Agreements to the SPA whereby the Lenders agreed to waive compliance with the $1.0 million minimum cash balance requirement and reduced the minimum cash balance requirement from $1.0 million to $0.5 million for certain periods. Under the Waiver and Amendment Agreements and the Restated Purchase Agreement, the Company is required to maintain a minimum cash bank balance of no less than $1.0 million, in excess of any and all cash balances held by NBS and FBVX, at all times subsequent to December 31, 2013. The Company has been in compliance with the minimum cash bank balance requirement since December 31, 2013. | ||||||
For the year ended December 31, 2014, the Company exceeded the limit on capital expenditures set forth in the Amended SPA, which constitutes an event of default under terms of the Senior Notes and the Amended SPA. On March 27, 2015, the holders of the Senior Notes waived the event of default for 2014 and amended the terms of the agreement by adjusting the threshold for 2015. As a result of the amendment, the Company was in compliance with the capital expenditure limit for the year ended December 31, 2014. The Company anticipates that it will remain in full compliance with all covenant provisions. | ||||||
In connection with the sale of the Notes to the Senior Lenders, Fusion issued nominal warrants to the Senior Lenders to purchase an aggregate of 728,333 shares of its common stock (the “Lenders’ Warrants”). The Lenders’ Warrants are exercisable from the date of issuance at an exercise price of $0.50 per share, with 266,501 warrants expiring on October 29, 2022, and the remainder expiring on December 31, 2023. Fusion is required to pay the exercise price on behalf of the Senior Lenders at the time of exercise. The Company has recorded a discount on the Senior Notes based on the fair value of the Lenders’ Warrants as of the date of issuance. The discount is being accreted over the life of the Senior Notes, and was $3.7 million and $4.4 million as of December 31, 2014 and 2013, respectively. | ||||||
Commencing upon the earlier of a change in control, the repayment of the Senior Notes in full or the five year anniversary of the issuance of the Lenders’ Warrants, in the event that Fusion’s common stock does not meet certain liquidity thresholds with respect to trading volume and market price, then the Senior Lenders have the right to require Fusion to repurchase the shares issued or issuable upon exercise of the Lenders’ Warrants at a repurchase price based upon the formulas set forth therein. As a result, the Lenders’ Warrants do not meet the criteria for equity classification under ASC Topic 480, Distinguishing Liabilities From Equity (“ASC 480”), and are not considered to be indexed to Fusion’s own stock under the guidance provided in ASC 815, and, as a result, the Company recognized derivative liabilities aggregating $4.7 million upon the issuance of the Lenders' Warrants. At December 31, 2014 and 2013, the fair value of these derivative liabilities was $2.3 million and $4.5 million, respectively. The Company recognized a gain on the change in fair value of this derivative for the year ended December 31, 2014 in the amount of $2.2 million, and recognized a loss on the change in fair value of $0.6 million for the year ended December 31, 2013. | ||||||
Expenses incurred in connection with the Restated Purchase Agreement and its predecessor agreements and the sale of the Notes, which include Lenders’ fees of $0.1 million and 0.3 million for the years ended December 31, 2014 and 2013, respectively, are reflected in Other assets on the Company’s consolidated balance sheet in the amount of $1.1 million at December 31, 2014 and 2013, and are being amortized as interest expense over the life of the Notes. | ||||||
Other notes payable | ||||||
During the year ended December 31, 2013, the Company received advances from the purchaser of its accounts receivable (see note 1) totaling $212,500. This amount is in addition to the proceeds received by the Company for the sale of accounts receivable. The Company repaid the entire amount of this advance during the year, along with advance fees of approximately $9,000. These fees are reflected in other expenses, net in the Company’s consolidated statement of operations for the year ended December 31, 2013. |
12_Notes_PayableRelated_Partie
12. Notes Payable-Related Parties | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Pro forma financial information | ||||||
12. Notes Payable-Related Parties | At December 31, 2014 and 2013, components of notes payable – related parties are comprised of the following: | |||||
31-Dec-14 | 31-Dec-13 | |||||
NBS Sellers Notes | $ - | $ 85,714 | ||||
Notes payable to Marvin Rosen | 1,478,081 | 1,578,081 | ||||
Discount on notes payable to Marvin Rosen | (185,203) | - | ||||
Other notes payable - related parties | - | 125,000 | ||||
Total notes payable - related parties | 1,292,878 | 1,788,795 | ||||
Less: | ||||||
Current portion of NBS Sellers Notes | - | (85,714) | ||||
Current portion of notes payable to Marvin Rosen | - | (100,000) | ||||
Current portion of other notes payable | - | (125,000) | ||||
Non-current portion notes payable - related parties | $ 1,292,878 | $ 1,478,081 | ||||
Sellers Notes | ||||||
As part of the purchase price of NBS, FNAC issued the Sellers Notes in the principal amount of $600,000. The Sellers Notes paid interest at 3% per annum, and were payable in fourteen equal monthly installments commencing January 31, 2013. During the year ended December 31, 2013, the Company made principal payments on the Sellers Notes aggregating to $514,286, and the remaining balance on these notes was paid in early 2014. | ||||||
Notes Payable to Marvin Rosen | ||||||
In conjunction with the sale of the Series A Notes and Series B Notes to the Lenders, Marvin Rosen, the Company’s Chairman of the Board of Directors, entered into an Intercreditor and Subordination Agreement with the Company and the Lenders, as amended, whereby Mr. Rosen agreed, among other things, that the amounts owed to him by the Company would be subordinate to the Senior Notes and the Company’s other obligations to the Senior Lenders. In connection with this agreement, on October 25, 2012 Mr. Rosen agreed to consolidate the principal amount of all his then outstanding promissory notes aggregating $3.9 million (the “Old Rosen Notes”) into a new single note (the “New Rosen Note”). The New Rosen Note is unsecured, pays interest monthly at a rate of 7% per annum, and matures 60 days after the Senior Notes are paid in full. Accrued interest on the Old Rosen Notes as of October 24, 2012 amounted to approximately $0.5 million, and the Company also agreed to pay Mr. Rosen 7% annual interest on this amount (collectively, with the New Rosen Note, the “Subordinated Obligations”). | ||||||
During the year ended December 31, 2013, Mr. Rosen converted $0.9 million of the New Rosen Note into 208,876 shares of common stock and warrants to purchase 104,438 shares of the Company’s common stock. The warrants are exercisable at 125% of the volume-weighted average price of the Company’s common stock for the 10 trading days prior to the date of conversion. On December 31, 2013, Mr. Rosen converted $2.0 million of the New Rosen Note into 2,000 shares of the Company’s newly designated Series B-2 Cumulative Convertible Preferred Stock (see note 13) and warrants to purchase 128,000 shares of the Company’s common stock with an exercise price of $6.25 per share. | ||||||
On March 1, 2013, the Company received a short-term unsecured advance from Mr. Rosen in the amount of $100,000. The Lenders had approved the repayment of this advance from the proceeds from certain future sales of Fusion’s equity securities. The advance was repaid during the year ended December 31, 2014. | ||||||
During the year ended December 31, 2014 and subsequent to the issuance of the Company’s financial statements for the year ended December 31, 2013, the Company determined that the 7% interest rate on the Subordinated Obligations is less than market and requires the Company to impute additional interest expense. As a result, effective January 1, 2014, the Company recognized a discount on the Subordinated Obligations in the approximate amount of $0.4 million as a capital contribution (net of exchanges). This adjustment reflects a 12% effective interest rate, and gives effect to the pro rata reductions to the discount resulting from Mr. Rosen’s partial exchanges of the New Rosen Note into shares of Fusion’s common and preferred stock during the year ended December 31, 2013. During the year ended December 31, 2014, the Company recognized interest expense of approximately $0.2 million to amortize the discount on the Subordinated Obligations, and the net unamortized discount as of December 31, 2014 is $0.2 million. The Company has determined that the amounts associated with the foregoing items, including amortization of discount not previously recognized, were not material to the Company’s consolidated financial statements as of and for the years ended December 31, 2013 and 2012. | ||||||
Other Notes Payable – Related Parties | ||||||
On May 21, 2009, the Company borrowed $125,000 from Marose, LLC, of which Mr. Rosen is a member. This loan was evidenced by a promissory note, which initially matured on July 20, 2009, and bears an interest rate of 8% per annum. On the July 20, 2009 initial maturity date of the note, the note became a demand note pursuant to its terms, and the entire amount of this note remained outstanding at December 31, 2013. The note was repaid during the year ended December 31, 2014. |
13_Equity_Transactions
13. Equity Transactions | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||
Pro forma financial information | |||||||||||||||||||||||||
13. Equity Transactions | Preferred Stock | ||||||||||||||||||||||||
The following table summarizes the activity in the Company’s various classes of preferred stock for the years ended December 31, 2014 and 2013: | |||||||||||||||||||||||||
Series A-1 Preferred Stock | Series A-2 Preferred Stock | Series A-4 Preferred Stock | Series B-1 Preferred Stock | Series B-2 Preferred Stock | Total | ||||||||||||||||||||
Shares | $ | Shares | $ | Shares | $ | Shares | $ | Shares | $ | Shares | $ | ||||||||||||||
Balance at December 31, 2012 | 2,375 | $ 24 | 2,625 | $ 26 | 45 | $ - | 6,862 | $ 69 | - | $ - | 11,907 | $ 119 | |||||||||||||
Conversion of notes payable | 2,052 | 21 | 2,052 | 21 | |||||||||||||||||||||
Conversion of preferred stock into common stock | -6,862 | -69 | -6,862 | -69 | |||||||||||||||||||||
Issuance of shares for cash | 16,428 | 164 | 16,428 | 164 | |||||||||||||||||||||
Balance at December 31, 2013 | 2,375 | 24 | 2,625 | 26 | 45 | - | - | - | 18,480 | 185 | 23,525 | 235 | |||||||||||||
Issuance of shares for cash | 4,358 | 44 | 4,358 | 44 | |||||||||||||||||||||
Conversion of preferred stock into common stock | -1,090 | -11 | -1,090 | -11 | |||||||||||||||||||||
Balance at December 31, 2014 | 2,375 | $ 24 | 2,625 | $ 26 | 45 | $ - | - | $ - | 21,748 | $ 217 | 26,793 | $ 268 | |||||||||||||
On December 31, 2013, the Company issued to a total of 82 accredited investors (the “Investors”), an aggregate of 18,480 shares of its newly designated Series B-2 Cumulative Convertible Preferred Stock, par value $0.01 per share (the “Series B-2 Preferred Stock”) and (b) warrants (the “Investor Warrants”) to purchase 1,182,720 shares of the Company’s common stock (the “Warrant Shares” and together with the Series B-2 Preferred Stock, the “Series B-2 Offering”). The Series B-2 Offering included the issuance of 2,052 shares of Series B-2 Preferred Stock and Investor Warrants to purchase 131,328 Warrant Shares, upon the conversion of $2,052,000 in indebtedness of the Company, including the conversion of $2,000,000 evidenced by the New Rosen Note, $50,000 of other Company indebtedness payable to Matthew Rosen, Fusion’s Chief Executive Officer, and $2,000 payable to another director of the Company. Gross cash proceeds received from the Series B-2 Offering in 2013 were $16,428,000, and were used to partially finance the acquisition of the Broadvox Assets and for general corporate purposes. | |||||||||||||||||||||||||
On January 24, 2014, Fusion held a second and final closing of the Series B-2 Offering and issued to a total of 40 accredited Investors an aggregate of 4,358 shares of Series B-2 Preferred Stock and Investor Warrants to purchase 278,912 Warrant Shares and received gross cash proceeds of $4,358,000. The proceeds, net of transaction expenses of $374,000, were used for general corporate purposes. | |||||||||||||||||||||||||
Each share of Series B-2 Preferred Stock has a Stated Value of $1,000, and is convertible into shares of Fusion’s common stock at the option of the holder at a conversion price of $5.00 per share (the “Preferred Conversion Price”), subject to adjustment. During the year ended December 31, 2014, a total of 1,090 shares of Series B-2 Preferred Stock were converted into 218,000 shares of Fusion’s common stock. Subject to the other terms of the Series B-2 Preferred Stock, the Series B-2 Preferred Stock outstanding at December 31, 2014, including the Series B-2 Preferred Stock issued on December 31, 2013, is convertible into an aggregate of 4,349,600 shares of Fusion’s common stock (the “Conversion Shares”). | |||||||||||||||||||||||||
The Investor Warrants became exercisable on March 28, 2014 for a number of Warrant Shares that is equal to 40% of the Stated Value divided by one hundred and twenty 125% of the Preferred Conversion Price, as adjusted for stock splits, combinations and reclassifications (the “Investor Warrant Exercise Price”). Each Investor Warrant will be exercisable at the Investor Warrant Exercise Price, currently $6.25 per share, for a five-year term commencing on the date of issuance. | |||||||||||||||||||||||||
The Series B-2 Preferred Stock could not be converted, and the Investor Warrants could not be exercised, until the effective date of an amendment to the Company’s Certificate of Incorporation increasing the number of authorized shares of the Company’s common stock sufficient to permit all of the outstanding Series B-2 Preferred Stock and Investor Warrants to be converted or exercised, as the case may be, into the Company’s common stock. On March 28, 2014, the Company filedthe necessary amendment. | |||||||||||||||||||||||||
Fusion also agreed to register the resale of the Conversion Shares and the Investor Warrant Shares, and to use its reasonable commercial efforts to cause the registration statement to remain effective until the date that all of the Conversion Shares and Warrant Shares have been sold or may be sold pursuant to Rule 144 under the Securities Act of 1933, as determined by the Company. The Company filed the registration statement on May 2, 2014, and the registration statement became effective on July 21, 2014. The Company may be required to pay the Investors, as liquidated damages and not as a penalty, an amount equal to one percent (1%) of the aggregate amount invested by such Investor for each 30-day period or pro rata portion thereof during which the registration statement is not available to permit re-sales by the Investors; provided, that the maximum payment to each Investor shall not exceed six percent (6%) of the aggregate amount invested by such Investor. | |||||||||||||||||||||||||
Commencing January 1, 2016, the Company has the right to force the conversion of the Series B-2 Preferred Stock into common stock at the Preferred Conversion Price; provided that the volume weighted average price for Fusion’s Common stock is at least $12.50 for ten consecutive trading days. In addition, shares of Series B-2 Preferred Stock bear a cumulative 6% annual dividend payable quarterly in arrearscommencing March 31, 2014, in cash or shares of common stock, at the option of the Company. | |||||||||||||||||||||||||
The Investor Warrants provide for a downward adjustment of the exercise price if the Company were to issue common stock at an issuance price or issue convertible debt or equity securities with an exercise price that is less than the Investor Warrant Exercise Price. As a result, the Investor Warrants are deemed not indexed to the Company’s common stock under the guidance provided by ASC Topic 815. Accordingly, the Company recognized a derivative liability related to the Investor Warrants of approximately $6.0 million at December 31, 2013 based on their fair value. The Company recognized an additional derivative liability in the amount of $1.3 million related to the Investor Warrants issued in January of 2014. During the year ended December 31, 2014, a portion of the holders of the Investor Warrants executed agreements to modify the terms of their Investor Warrants to remove the provisions related to the downward adjustment of the exercise price. The Company concluded that the amended terms for these Investor Warrants were such that they qualified for equity treatment under ASC Topic 815. As a result, the Company reclassified $2.8 million (the fair value of the derivative liability relative to the modified warrant at the date of the amendment) from the derivative liability related to the Investor Warrants into equity. The Company recognized a gain on the change in fair value related to the remaining Investor Warrants in the amount of $3.0 million during the year ended December 31, 2014, and the fair value of this derivative liability was $1.5 million at December 31, 2014. | |||||||||||||||||||||||||
Holders of Series B-2 Preferred Stock have liquidation rights that are senior to those afforded to holders of the Company’s other equity securities, and holders of Series B-2 Preferred Stock are entitled to vote as one group with holders of common stock on all matters brought to a vote of holders of common stock (with each share of Series B-2 Preferred Stock being entitled to that number of votes into which the registered holder could have converted the Series B-2 Preferred Stock on the record date for the meeting at which the vote will be cast). Holders of common stock are also entitled to vote as a separate class on all matters adversely affecting (within the meaning of Delaware law) such class. | |||||||||||||||||||||||||
The Company sold the Series B-2 Preferred Stock and Investor Warrants through its officers and directors, in conjunction with the assistance of certain select broker-dealers. The Company paid aggregate cash compensation to the broker-dealers of approximately $1.0 million, and issued or is obligated to issue warrants to the broker-dealers or their respective designees to purchase 182,722 shares of the Company’s common stock.Such warrants are exercisable for a period of 5 years at an exercise price of $6.25 per share and the shares of common stock issuable upon exercise of such warrants are afforded the same registration rights as are provided to purchasers of Series B-2 Preferred Stock | |||||||||||||||||||||||||
On September 30, 2013, the Company caused all of the then outstanding shares of its previously issued Series B-1 Convertible Preferred Stock to be converted into 1,253,441 shares of common stock, in accordance with the terms of the Series B-1 Preferred Stock. | |||||||||||||||||||||||||
As of December 31, 2014 and 2013, Fusion had an aggregate of 5,045 shares of Series A-1, A-2 and A-4 Cumulative Convertible Preferred Stock outstanding. Holders of the Series A Preferred Stock are entitled to receive cumulative dividends at the rate of 8% per annum payable in arrears, when, as and if declared by the Company’s Board of Directors, on January 1 of each year. | |||||||||||||||||||||||||
Common Stock | |||||||||||||||||||||||||
During the year ended December 31, 2014, the Company issued an aggregate of 38,491 shares of common stock to third parties for services valued at $163,842. | |||||||||||||||||||||||||
During the year ended December 31, 2013, the Company entered into subscription agreements with 60 accredited investors, under which the Company issued an aggregate of 1,005,144 shares of common stock and five-year warrants to purchase 502,572 shares of the Company’s common stock for aggregate consideration of $4.1 million. The warrants are exercisable at 125% of the volume weighted-average price of the Company’s common stock for the 10 trading days prior to the date of closing. | |||||||||||||||||||||||||
Also during the year ended December 31, 2013, an executive officer of the Company converted $102,500 due to him into 23,559 shares of common stock and warrants to purchase 11,780 shares of the Company’s common stock, and another director of the Company converted $5,733 due to him into 1,525 shares of common stock and warrants to purchase 762 shares of common stock. The warrants are exercisable at 125% of the volume weighted-average price of the Company’s common stock for the 10 trading days prior to the date of conversion. | |||||||||||||||||||||||||
During the year ended December 31, 2013, the Company issued an aggregate of 19,112 shares of common stock to third parties for services valued at $98,251. | |||||||||||||||||||||||||
As of December 31, 2014 and 2013, the number of shares of common stock that the Company is authorized to issue was 50,000,000 and 11,000,000,respectively,and the number of shares of common stock issued and outstanding was 7,345,028 and 6,077,071, respectively. | |||||||||||||||||||||||||
Stock Options and Warrants | |||||||||||||||||||||||||
In accordance with the Company's 2009 Stock Option Plan, the Company reserved 140,000 shares of common stock for issuance to employees at exercise prices determined by the Board of Directors. On February 15, 2013, the Company’s stockholders ratified an increase in the number of shares available for issuance under the 2009 Stock Option Plan to 330,000. On March 28, 2014, the Company’s ratified another increase in the number of shares available under the 2009 Stock Option Plan to 1,260,000.Options under the plan typically vest in annual increments over a three or four year period, expire ten years from the date of grant and are issued at exercise prices no less than 100% of the fair market value at the time of grant. The Company has also reserved 42,620 shares for issuance in the event of exercise of outstanding options granted under the now expired 1998 Stock Option Plan | |||||||||||||||||||||||||
The following summary presents information regarding outstanding options as of December 31, 2014 and 2013 and changes during the years then ended with regard to all options: | |||||||||||||||||||||||||
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contract Term | |||||||||||||||||||||||
Outstanding at December 31, 2012 | 177,309 | $ 29.00 | 6.93 years | ||||||||||||||||||||||
Granted in 2013 | 180,873 | 4.00 | |||||||||||||||||||||||
Forfeitures in 2013 | (3,053) | 5.50 | |||||||||||||||||||||||
Expirations in 2013 | (3,690) | 55.00 | |||||||||||||||||||||||
Outstanding at December 31, 2013 | 351,439 | 16.29 | 7.81 years | ||||||||||||||||||||||
Granted in 2014 | 283,440 | 3.92 | |||||||||||||||||||||||
Forfeitures in 2014 | (14,439) | 4.40 | |||||||||||||||||||||||
Expirations in 2014 | (12,563) | 150.73 | |||||||||||||||||||||||
Outstanding at December 31, 2014 | 607,877 | $ 8.02 | 8.08 years | ||||||||||||||||||||||
Exercisable at December 31, 2014 | 203,714 | $ 15.87 | 5.66 years | ||||||||||||||||||||||
The following table summarizes information about stock options outstanding as of December 31, 2014: | |||||||||||||||||||||||||
Range of Exercise Prices | Options Outstanding | Weighted Average Life (Years) | Weighted Average Exercise Price | Options Exercisable | Weighted Average Price | ||||||||||||||||||||
$3.00 - $4.60 | 442,469 | 9.01 | $ | 3.85 | 88,661 | $ | 4.31 | ||||||||||||||||||
$4.70 - $7.50 | 122,698 | 6.8 | 5.98 | 72,343 | 5.71 | ||||||||||||||||||||
$9.00 - $15.50 | 17,540 | 2.91 | 15.44 | 17,540 | 15.44 | ||||||||||||||||||||
$19.50 - $34.50 | 12,730 | 2.25 | 34.38 | 12,730 | 34.38 | ||||||||||||||||||||
$37.50 - $114.00 | 3,500 | 1.46 | 113.78 | 3,500 | 113.78 | ||||||||||||||||||||
$122.97 - $235.00 | 8,239 | 1.15 | 134.27 | 8,239 | 134.27 | ||||||||||||||||||||
$316.55 - $322.50 | 701 | 0.11 | 322.04 | 701 | 322.04 | ||||||||||||||||||||
607,877 | 8.08 | $ | 8.02 | 203,714 | $ | 15.87 | |||||||||||||||||||
The weighted-average estimated fair value of stock options granted was $3.37 and $3.50 during the years ended December 31, 2014 and 2013, respectively. No stock options were exercised during the years ended December 31, 2014 and 2013. As of December 31, 2014, there was approximately $1.0 million of total unrecognized compensation cost related to stock options granted under the Company’s stock incentive plan which is expected to be recognized over a weighted-average period of 2.3 years. | |||||||||||||||||||||||||
The Company, as part of various debt and equity financing transactions and other agreements, has issued warrants to purchase shares of Fusion’s common stock. The following summarizes the information relating to warrants issued and the activity during the years ended December 31, 2014 and 2013: | |||||||||||||||||||||||||
Number of Warrants | Per Share Exercise Price | Weighted | |||||||||||||||||||||||
Average | |||||||||||||||||||||||||
Exercise Price | |||||||||||||||||||||||||
Outstanding at December 31, 2012 | 1,799,741 | 4.00-83.50 | $ 9.00 | ||||||||||||||||||||||
Granted in 2013 | 2,353,840 | 0.50-8.50 | 5.00 | ||||||||||||||||||||||
Expired in 2013 | (137,506) | 7.00-23.00 | 14.00 | ||||||||||||||||||||||
Exercised in 2013 | - | - | - | ||||||||||||||||||||||
Outstanding at December 31, 2013 | 4,016,075 | 0.50-83.50 | 6.25 | ||||||||||||||||||||||
Granted in 2014 | 402,997 | 6.25 | 6.25 | ||||||||||||||||||||||
Expired in 2014 | (253,964) | 5.50-83.50 | 21.18 | ||||||||||||||||||||||
Exercised in 2014 | - | - | - | ||||||||||||||||||||||
Outstanding at December 31, 2014 | 4,165,108 | 0.50-10.50 | 5.48 | ||||||||||||||||||||||
All warrants are fully exercisable as of December 31, 2014. As a result of the warrants issued in connection with conversions of indebtedness and satisfaction of other liabilities of the Company, the Company recognized a loss on the extinguishment of debt in the amount of $1,105,283 in the years ended December 31, 2013. |
14_Income_Taxes
14. Income Taxes | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Pro forma financial information | ||||||
14. Income Taxes | The provision for income taxes for the years ending December 31, 2014 and 2013 consists of the following: | |||||
2014 | 2013 | |||||
Deferred | ||||||
Federal | $ (1,459,000) | $ (1,843,000) | ||||
State | - | - | ||||
(1,459,000) | (1,843,000) | |||||
Current | ||||||
Federal | - | - | ||||
State | 26,051 | 51,887 | ||||
26,051 | 51,887 | |||||
Change in valuation allowance | 1,459,000 | 1,843,000 | ||||
Tax Provision | $ 26,051 | $ 51,887 | ||||
The following reconciles the Federal statutory tax rate to the effective income tax rate for the years ended December 31, 2014 and 2013: | ||||||
2014 | 2013 | |||||
% | % | |||||
Federal statutory rate | (34.0) | (34.0) | ||||
State net of federal tax | (2.5) | (2.9) | ||||
Permanent and other items | 4.5 | 1.6 | ||||
Change in valuation allowance | 33.0 | 36.3 | ||||
1.0 | 1.0 | |||||
The components of the Company's deferred tax assets and liabilities consist of the following at December 31, 2014 and 2013: | ||||||
2014 | 2013 | |||||
Deferred income tax assets: | ||||||
Net operating losses | $ 45,250,000 | $ 44,365,000 | ||||
Allowance for doubtful accounts | 67,000 | 52,000 | ||||
Derivative liability | 1,460,000 | 1,728,000 | ||||
Accrued liabilities and other | 693,000 | 999,000 | ||||
Intangible assets | 1,997,000 | 504,000 | ||||
Property and equipment | - | 337,000 | ||||
49,467,000 | 47,985,000 | |||||
Deferred income tax liabilities: | ||||||
Debt discount | 759,000 | 1,664,000 | ||||
Property and equipment | 933,000 | - | ||||
1,692,000 | 1,664,000 | |||||
Deferred tax asset, net | 47,775,000 | 46,321,000 | ||||
Less: valuation allowance | -47,775,000 | -46,321,000 | ||||
Net deferred tax assets | $ - | $ - | ||||
At December 31, 2014 and 2013, the Company has net operating loss carry forwards of approximately $131.9 million and $129.8 million, respectively, that may be applied against future taxable income, and which expire in various years through 2034. Under the Tax Reform Act of 1986, the amounts of and benefits from net operating loss carry forwards and credits may be impaired or limited in certain circumstances. Events which cause limitations in the amount of net operating losses that the Company may utilize in any one year include, but are not limited to, a cumulative ownership change of more than 50%, as defined, over a three year period. The amount of such limitation, if any has not been determined. | ||||||
The Company maintains a full valuation allowance for its net deferred tax assets, as the Company’s management has determined that it is more likely than not that the Company will not generate sufficient future taxable income to be able to utilize these deferred tax assets. |
15_Supplemental_Disclosure_of_
15. Supplemental Disclosure of Cash Flow Information | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Pro forma financial information | |||||||||
15. Supplemental Disclosure of Cash Flow Information | Supplemental cash flow information for the years ended December 31, 2014 and 2013 is as follows: | ||||||||
2014 | 2013 | ||||||||
Supplemental disclosure of cash flow information: | |||||||||
Cash paid for interest | $ 5,312,356 | $ 1,912,283 | |||||||
Supplemental schedule of non-cash investing and financing activities: | |||||||||
Conversion of notes payable - related parties and accrued expenses | |||||||||
to common stock | $ - | $ 1,003,233 | |||||||
Property and equipment acquired through financing obligations | $ 2,187,754 | $ 359,675 | |||||||
Conversion of notes payable - related parties and accrued expenses | |||||||||
to preferred stock | $ - | $ 2,052,000 | |||||||
The following table represents cash paid, common stock issued and liabilities assumed for the acquisitions of PingTone in 2014 and the Broadvox Assets in 2013 (see note 3): | |||||||||
2014 | 2013 | ||||||||
Fair value of assets acquired | $ 11,169,963 | $ 34,099,131 | |||||||
Cash paid | (3,144,825) | (32,281,945) | |||||||
Debt issued | (5,000,000) | - | |||||||
Common stock issued | (2,499,997) | - | |||||||
Liabilities assumed | $ 525,141 | $ 1,817,186 |
16_Commitments_and_Contingenci
16. Commitments and Contingencies | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Pro forma financial information | |||||
16. Commitments and Contingencies | Operating Leases | ||||
The Company has various non-cancelable operating lease agreements for office facilities. A summary of the approximate lease commitments under non-cancelable leases for years ending subsequent to December 31, 2014 are as follows: | |||||
Year Ending December 31: | |||||
2015 | 2,289,000 | ||||
2016 | 1,887,000 | ||||
2017 | 1,669,000 | ||||
2018 | 772,000 | ||||
2019 and thereafter | 1,479,000 | ||||
$ | 8,096,000 | ||||
Rent expense for all operating leases was $1.7 million and $1.0 million for each of the years ended December 31, 2014 and 2013, respectively. Certain of the Company’s leases include fixed rent escalation schedules or rent escalations based upon a fixed percentage. The Company recognizes rent expense (including escalations) on a straight-line basis over the lease term. | |||||
The Company is from time to time involved in claims and legal actions arising in the ordinary course of business. Management foes not expect that the outcome of any such claims or actions will have a material effect on the Company’s liquidity, results of operations or financial condition. In addition, due to the regulatory nature of the telecommunications industry, the Company periodically receives and responds to various inquiries from state and federal regulatory agencies. Management does not expect the outcome of any such claims, legal actions or regulatory inquiries to have a material impact on the Company’s liquidity, financial condition or results of operations. |
17_Profit_Sharing_Plan
17. Profit Sharing Plan | 12 Months Ended |
Dec. 31, 2014 | |
Pro forma financial information | |
17. Profit Sharing Plan | On June 1, 1997,the Company adopted a defined contribution profit sharing plan, which covers all employees who meet certain eligibility requirements.Contributions to the plan are made at the discretion of the Board of Directors. No contributions to the profit sharing plan were made for the years ended December 31, 2014 and 2013. |
18_Concentrations
18. Concentrations | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Pro forma financial information | |||||||||
18. Concentrations | Major Customers | ||||||||
For the year ended December 31, 2014, no single customer accounted for more than 10% of the Company’s consolidated revenues, however one customer accounted for approximately 16% of the Company’s consolidated accounts receivable at December 31, 2014. For the year ended December 31, 2013, one customer accounted for more than 10% of the Company’s consolidated revenues. The amount owed to the Company by this customer was approximately $543,000, or 9% of the Company’s consolidated accounts receivable, at December 31, 2013. | |||||||||
Geographic Concentrations | |||||||||
The Company’s operations are significantly influenced by economic factors and risks inherent in conducting business in foreign countries, including government regulations, currency restrictions and other factors that may significantly affect management’s estimates and the Company’s performance. | |||||||||
For the years ended December 31, 2014 and 2013, the Company generated approximate revenues from customers in the following countries: | |||||||||
2014 | 2013 | ||||||||
United States | $ | 81,326,000 | $ | 53,912,000 | |||||
Other | 10,727,000 | 7,585,000 | |||||||
$ | 92,053,000 | $ | 61,497,000 | ||||||
Revenues by geographic area are based upon the location of the customers. | |||||||||
Credit Risk | |||||||||
The Company maintains its cash balances in high credit quality financial institutions. The Company’s cash balances may, at times, exceed the deposit insurance limits provided by the Federal Deposit Insurance Corp. |
19_Gain_on_Extinguishment_of_A
19. Gain on Extinguishment of Accounts Payable | 12 Months Ended |
Dec. 31, 2014 | |
Pro forma financial information | |
19. Gain on Extinguishment of Accounts Payable | In June 2013, based on applicable laws and the advice of counsel, the Company determined that it no longer had any liability pertaining to a trade payable associated with the Carrier Services business segment in the amount $2,908,882. As a result, the Company derecognized the payable from its consolidated balance sheet and recorded a corresponding gain on the extinguishment of debt, net of legal fees in the amount of $25,222. |
20_Segment_Information
20. Segment Information | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Pro forma financial information | |||||||||
20. Segment Information | The accounting and reporting requirements on Disclosures about Segments of an Enterprise and Related Information requires disclosures of segment information on the basis that is used internally for evaluating segment performance and for determining the allocation of resources to the operating segments. | ||||||||
The Company has two reportable segments that it operates and manages – 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 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 carrier traffic utilizing primarily Voice over Internet Protocol (“VoIP”) technology. VoIP permits a less costly and more rapid interconnection between the Company and international telecommunications carriers, and generally provides better profit margins for the Company than other technologies. The Company currently interconnects with over 270 carrier customers and vendors, and is working to expand its interconnection relationships, particularly with carriers in emerging markets. | |||||||||
Business Services | |||||||||
The Company provides a full portfolio of cloud communications, cloud connectivity, 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 program, which utilizes the efforts of independent third-party distributors to sell the Company’s products and services. The Business Services segment includes the results of operations of the Broadvox Assets effective as of January 1, 2014 and of PingTone effective as of November 1, 2014. | |||||||||
Operating segment information for the years ended December 31, 2014 and 2013 is summarized as follows: | |||||||||
2014 | |||||||||
Carrier Services | Business Services | Corporate and Unallocated | Consolidated | ||||||
Revenues | $ 29,156,799 | $ 62,895,801 | $ - | $ 92,052,600 | |||||
Cost of revenues (exclusive of | |||||||||
depreciation and amortization) | 25,970,357 | 23,628,016 | - | 49,598,373 | |||||
Gross profit | 3,186,442 | 39,267,785 | - | 42,454,227 | |||||
Depreciation and amortization | 445,273 | 10,467,018 | 92,593 | 11,004,884 | |||||
Selling, general and administrative expenses | 2,922,989 | 25,153,607 | 5,147,778 | 33,224,374 | |||||
Interest expense | - | (5,659,702) | (328,709) | (5,988,411) | |||||
Loss on change in fair value of derivative liability | 5,161,901 | 5,161,901 | |||||||
Other income (expenses) | (97,560) | 23,719 | 134,291 | 60,450 | |||||
Gain on extinguishment of accounts payable | - | - | - | ||||||
Benefit (provision) for income taxes | - | 24,741 | (50,792) | (26,051) | |||||
Net loss | $ (279,380) | $ (1,964,082) | $ (323,680) | $ (2,567,142) | |||||
Total assets | $ 4,553,339 | $ 66,394,132 | $ 2,800,023 | $ 73,747,494 | |||||
Capital expenditures | $ 101,872 | $ 3,717,541 | $ - | $ 3,819,413 | |||||
2013 | |||||||||
Carrier Services | Business Services | Corporate and Unallocated | Consolidated | ||||||
Revenues | $ 31,122,771 | $ 30,373,849 | $ - | $ 61,496,620 | |||||
Cost of revenues (exclusive of | |||||||||
depreciation and amortization) | 27,842,245 | 14,874,931 | - | 42,717,176 | |||||
Gross profit | 3,280,526 | 15,498,918 | - | 18,779,444 | |||||
Depreciation and amortization | 222,943 | 3,261,932 | 87,099 | 3,571,974 | |||||
Selling, general and administrative expenses | 3,070,678 | 10,298,063 | 5,387,584 | 18,756,325 | |||||
Interest expense | - | (2,300,237) | (338,012) | (2,638,249) | |||||
Loss on extinguishment of debt | (1,105,283) | (1,105,283) | |||||||
Loss on change in fair value of derivative liability | (598,292) | (598,292) | |||||||
Other income (expenses) | (180,948) | 104,548 | 53,403 | (22,997) | |||||
Gain on extinguishment of accounts payable | 2,883,660 | - | - | 2,883,660 | |||||
Provision for income taxes | - | (26,887) | (25,000) | (51,887) | |||||
Net income (loss) | $ 2,689,617 | $ (283,653) | $ (7,487,867) | $ (5,081,903) | |||||
Total assets | $ 3,021,463 | $ 58,487,324 | $ 7,441,874 | $ 68,950,661 | |||||
Capital expenditures | $ 180,415 | $ 1,111,386 | $ 15,548 | $ 1,307,349 | |||||
The Company employs executive, administrative, human resources, and finance resources that service both the Carrier Services and Business Services business 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. |
21_Related_Party_Transactions
21. Related Party Transactions | 12 Months Ended |
Dec. 31, 2014 | |
Pro forma financial information | |
21. Related Party Transactions | Upon the closing of the acquisition of NBS on October 29, 2012, the purchase price was adjusted for an additional amount payable to the Sellers of NBS, including certain affiliates of an executive officer of the Company, of approximately $1.1 million following the application of certain working capital adjustments as set forth in the purchase agreements. Approximately $226,000 remained outstanding to the Sellers of NBS as of December 31, 2013 and is reflected in Related party payable in the accompanying consolidated balance sheets. This amount was repaid during the year ended December 31, 2014. |
During the year ended December 31, 2014, the Company paid approximately $45,000 to an accounting firm to prepare the Company’s 2013 tax returns and perform other tax-related services for the Company. One of the Company’s directors is a senior advisor and former partner of this accounting firm. | |
See notes 11, 12 and 13 for additional information regarding related party transactions. |
22_Subsequent_Events
22. Subsequent Events | 12 Months Ended |
Dec. 31, 2014 | |
Pro forma financial information | |
22. Subsequent Events | In February of 2015, 450 shares of the Company’s Series B-2 Preferred Stock were converted into 90,000 shares of the Company’s common stock in accordance with the terms of the Series B-2 Preferred Stock. |
On March 27, 2015, the holders of the Senior Notes waived the event of default for 2014 and amended the terms of the agreement by adjusting the threshold for 2015. (see note 11). |
2_Summary_Of_Significant_Accou1
2. Summary Of Significant Accounting Policies (Policies) | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Summary Of Significant Accounting Policies Policies | ||||||||||||||
Basis of Presentation and Consolidation | The consolidated financial statements include the accounts of Fusion and its wholly owned subsidiaries (see note 3). The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and in accordance with Regulation S-X of the Securities and Exchange Commission (the “SEC”). All inter-company accounts and transactions have been eliminated in consolidation, and certain prior year balances have been reclassified to conform to the current presentation. | |||||||||||||
Revenue Recognition | The Company recognizes revenue when persuasive evidence of a sale arrangement exists, delivery has occurred or services have been rendered, the sales price is fixed and determinable, and collectability is reasonably assured. The Company records provisions against revenue for billing adjustments, which are based upon estimates derived from factors that include, but are not limited to, historical results, analysis of credits issued and current economic trends. The provisions for revenue adjustments are recorded as a reduction of revenue when the revenue is recognized. | |||||||||||||
The Company’s Carrier Services revenue is primarily derived from usage fees charged to other telecommunications carriers that terminate voice traffic over the Company’s network, and from the monthly recurring and usage fees charged to customers that purchase the Company’s business products and services.Variable revenue is earned based on the length of a call, as measured by the number of minutes of duration. It is recognized upon completion of the call, and is adjusted to reflect the Company’s allowance for billing adjustments. Revenue for each customer is calculated from information received through the Company’s network switches. The Company’s customized software tracks the information from the switches and analyzes the call detail records against stored detailed information about revenue rates. This software provides the Company with the ability to complete a timely and accurate analysis of revenue earned in a period. The Company believes that the nature of this process is such that recorded revenues are unlikely to be revised in future periods. | ||||||||||||||
Business Services revenue includes fixed revenue earned from monthly recurring services provided to customers, for which charges are contracted for over a specified period of time, and from variable usage fees charged to customers that purchase the Company’s Business Services products and services. Revenue recognition commences after the provisioning, testing and acceptance of the service by the customer. The recurring customer charges continue until the expiration of the contract, or until cancellation of the service by the customer. To the extent that payments received from a customer are related to a future period, the payment is recorded as deferred revenue until the service is provided or the usage occurs. | ||||||||||||||
Cost of Revenues | Cost of revenues for the Company’s Carrier Services business segment is comprised primarily of costs incurred from other domestic and international communications carriers to originate, transport, and terminate voice calls for the Company’s carrier customers. Thus the majority of the Company’s cost of revenues for this business segment is variable, based upon the number of minutes actually used by the Company’s customers and the destinations they are calling. Call activity is tracked and analyzed with customized software that analyzes the traffic flowing through the Company’s network switch. During each period, the call activity is analyzed and an accrual is recorded for the costs associated with minutes not yet invoiced. This cost accrual is calculated using minutes from the system and the variable cost of revenue based upon predetermined contractual rates.Fixed expenses reflect the costs associated with connectivity between the Company’s network infrastructure, including its New York switching facility, and certain large carrier customers and vendors. | |||||||||||||
For the Company’s Business Services business segment, fixed expenses include the monthly recurring charges associated with certain platform services purchased from other service providers, the monthly recurring costs associated with private line services and the cost of broadband Internet access used to provide service to business customers. | ||||||||||||||
Accounts Receivable and Allowance for Doubtful Accounts | Accounts receivable are recorded net of an allowance for doubtful accounts. On a periodic basis, the Company evaluates accounts receivable and records an allowance for doubtful accounts based on the Company’s history of past write-offs, collections experience and current credit conditions. Specific customer accounts are written off as uncollectible when collection efforts have been exhausted and payments are not expected to be received. | |||||||||||||
The Company has an agreement to sell certain of its accounts receivable under an arrangement with a third party. The Company records a loss on sale of accounts receivable at the time the receivables are sold for the difference between the book value of the receivables transferred and their respective purchase price. During the year ended December 31, 2013, the Company accounted for the sales of its accounts receivable as sales of financial assets and derecognized them from its consolidated balance sheet as of the date of sale. During the year ended December 31, 2014, the Company determined that although legal ownership to the transferred receivables belong to the transferee, these transfers do not meet all of the criteria outlined in Accounting Standards Codification Topic (“ASC”) 860, Transfers and Servicing. The Company had derecognized $0.9 million of such receivables as of December 31, 2013, and the Company believes that retaining this amount on its consolidated balance sheet and recording a corresponding note payable would not have been material to the Company’s consolidated balance sheet as of that date. During the year ended December 31, 2014 the Company transferred receivables aggregating approximately $3.8 million resulting in a corresponding note payable for the amount of uncollected receivables transferred. As of December 31, 2014, all of the related receivables had been collected, the notes had been repaid and the Company did not have any outstanding accounts receivable that had been sold under this arrangement. | ||||||||||||||
The Company recognized losses on the transfers of accounts receivable for the years ended December 31, 2014 and 2013 of approximately $97,000 and $226,000, respectively. These amounts are recorded in other income (expenses) in the accompanying consolidated statements of operations. The Company’s obligations to the purchaser of the receivables are secured by a first priority lien on the accounts receivable of the Company’s Carrier Services business segment, and by a subordinated security interest on the other assets of the Company’s Carrier Services business segment. | ||||||||||||||
Fair value of financial instruments | The carrying value of certain financial instruments such as accounts receivable, accounts payable and accrued expenses approximates their fair valuesdue to the short term nature of their underlying terms. | |||||||||||||
Intangible Assets | Intangible assets at December 31, 2014 and 2013consist of trade names and trademarks, non-compete agreements, proprietary technology, customer relationships and a below-market lease, all of which were acquired in purchase business combinations. In determining fair value, the Company uses standard analytical approaches to business enterprise valuation (“BEV”), such as the income approach and the market comparable approach. The income approach involves estimating the present value of the subject asset’s future cash flows by using projections of the cash flows that the asset is expected to generate, and discounting these cash flows at a given rate of return. The market comparable approach is based on comparisons of the subject company to similar companies engaged in an actual merger or acquisition or to public companies whose stocks are actively traded. Each of these BEV methodologies requires the use of management estimates and assumptions. Amortization is recognized on a straight-line basis over the estimated useful lives of the respective assets, which ranges from two to fifteen years. | |||||||||||||
Goodwill | Goodwill is the excess of the acquisition cost of businesses over the fair value of the identifiable net assets acquired (see note 3). Goodwill at December 31, 2014 and 2013 was approximately $10.4 million and $5.1 million, respectively.Goodwill is not amortized but is instead tested annually for impairment. All of the Company’s goodwill is attributable to its Business Services business segment. The following table presents the change in goodwill during the years ended December 31, 2014 and 2013: | |||||||||||||
Balance at | Additions (a) | Other (b) | Balance at | Balance at | Additions (a) | Other (c) | Balance at | |||||||
January 1, | December 31, | January 1, | December 31, | |||||||||||
2014 | 2014 | 2013 | 2013 | |||||||||||
$ 5,124,130 | 5,175,372 | 97,958 | $ 10,397,460 | $ 2,406,269 | 2,520,605 | 197,256 | $ 5,124,130 | |||||||
(a) - Amount relates to acquisitions. See note 3. | ||||||||||||||
(b) - Amount relates to adjustments to the preliminary purchase price for 2013 acquisitions. | ||||||||||||||
(c) - Amount relates to adjustments to the preliminary purchase price for 2012 acquisitions. | ||||||||||||||
Impairment of Long-Lived Assets | The Company reviews long-lived assets, including intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If an impairment indicator is present, the Company evaluates recoverability by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If the carrying value of the asset exceeds the projected undiscounted cash flows, the Company is required to estimate the fair value of the asset and recognize an impairment charge to the extent that the carrying value of the asset exceeds its estimated fair value. The Company did not record any impairment charges for the years ended December 31, 2014 and 2013. | |||||||||||||
Impairment testing for goodwill is performed annually in the Company’s fourth fiscal quarter. The impairment test for goodwill uses a two-step approach, which is performed at the reporting unit level. The Company has determined that its reporting units are its operating segments since that is the lowest level at which discrete, reliable financial and cash flow information is available. Step one compares the fair value of the reporting unit (calculated using a market approach and/or a discounted cash flow method) to its carrying value. If the carrying value exceeds the fair value, there is a potential impairment and step two must be performed. Step two compares the carrying value of the reporting unit’s goodwill to its implied fair value, which is the fair value of the reporting unit less the fair value of the unit’s assets and liabilities, including identifiable intangible assets. If the implied fair value of goodwill is less than its carrying amount, an impairment is recognized. | ||||||||||||||
The authoritative guidance provides entities with an option to perform a qualitative assessment to determine whether a quantitative analysis is necessary. The Company performed qualitative impairment evaluations on its goodwill as of December 31, 2014 and 2013and determined that there were no indications that goodwill was impaired. | ||||||||||||||
Property and Equipment | Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets as follows: | |||||||||||||
Asset | Estimated Useful Lives | |||||||||||||
Network equipment | 5 – 7 Years | |||||||||||||
Furniture and fixtures | 3 – 7 Years | |||||||||||||
Computer equipment and software | 3 – 5 Years | |||||||||||||
Customer premise equipment | 2 – 3 Years | |||||||||||||
Leasehold improvements are depreciated over the shorter of the estimated useful lives of the assets or the term of the associated lease. Maintenance and repairs are recorded as a period expense, while betterments and improvements are capitalized. | ||||||||||||||
The Company capitalizes a portion of its payroll and related costs for the development of software for internal use and amortizes these costs over three years. During the years ended December 31, 2014 and 2013, the Company capitalized costs pertaining to the development of internally used software in the approximate amount of $783,000 and$794,000, respectively. | ||||||||||||||
Derivative Financial Instruments | The Company accounts for warrants issued in conjunction with the issuance of debt and equity in accordance with the guidance contained in ASC Topic 815, Derivatives and Hedging (“ASC 815”). For warrant instruments that are not deemed to be indexed to the Company’s own stock, the Company classifies the warrant instrument as a liability at its fair value and adjusts the instrument to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statements of operations (see notes11, 13 and 21). Thefair values of the warrants have been estimated using Black-Scholes and other valuation models, and the Company’s quoted market price (see notes 11 and 13). | |||||||||||||
Advertising and Marketing | Advertising and marketing expense includes cost for promotional materials and trade show expenses for the marketing of the Company’s business products and services. Advertising and marketing expenses were approximately $211,000 and $28,000 for the years ended December 31, 2014 and 2013, respectively. | |||||||||||||
Income Taxes | The accounting and reporting requirements with respect to income taxes require an asset and liability approach. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amount expected to be realized. | |||||||||||||
In accordance with U.S. GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Derecognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce net assets. Based on its analysis, the Company has determined that it has not incurred any liability for unrecognized tax benefits as of December 31, 2014 and 2013. The Company is subject to income tax examinations by major taxing authorities for all tax years since 2010 and for previous periods as it relates to the Company’s net operating loss carryforward. No interest expense or penalties have been recognized as of December 31, 2014 and 2013. During the years ended December 31, 2014 and 2013, the Company recognized no adjustments for uncertain tax positions. | ||||||||||||||
Reverse split of common stock | On April 9, 2014, Fusion’s Board of Directors approved amendments to Fusion’s Certificate of Incorporation to (a) effect a reverse stock split of all of the outstanding shares of Fusion’s common stock at a ratio (the “Reverse Split Ratio”) of one for fifty (the “Reverse Stock Split”) and (b) a corresponding reduction in the number of shares of common stock that Fusion is authorized to issue from 900,000,000 to 18,000,000. The Certificate of Amendment, which was approved by Fusion’s stockholders on March 28, 2014, became effective on May 13, 2014, and at that time the Reverse Stock Split took place and each 50 shares of outstanding common stock was combined and automatically converted into one share of common stock, with a par value of $0.01 per share. In addition, the conversion and exercise prices of all of Fusion’s outstanding preferred stock, common stock purchase warrants and options to purchase common stock were proportionately adjusted at the Reverse Split Ratio consistent with the terms of such instruments. No fractional shares were issued as a result of the Reverse Stock Split, and any fractional share to which a stockholder may have been entitled as a result of the Reverse Stock Split was rounded up to the nearest whole share. | |||||||||||||
As a result of the Reverse Stock Split, all share and per share amounts as of and for the year ended December 31, 2013 have been restated at the Reverse Split Ratio to give effect to the Reverse Stock Split. | ||||||||||||||
Earnings (Loss) per Share | Basic and diluted loss per share for 2014 is computed by dividing (i) loss available to common stockholders, adjusted by approximately $2.2 million for the gain on fair value of the Company’s derivative liability that was attributable to outstanding warrants with a nominal exercise price (see note 11), by (ii) the weighted-average number of common shares outstanding during the period, increased by the number of common shares underlying such warrants with a nominal exercise price as if such exercise had occurred at the beginning of the year. The following securities were excluded in the calculation of diluted loss per share because their inclusion would be antidilutive: | |||||||||||||
2014 | 2013 | |||||||||||||
Warrants, excluding 728,333 nominal warrants in 2014 issued to senior lenders (see note 11) | 3,436,775 | 4,015,824 | ||||||||||||
Stock options | 607,877 | 351,439 | ||||||||||||
Convertible preferred stock | 4,512,316 | 3,851,264 | ||||||||||||
8,556,968 | 8,218,527 | |||||||||||||
The net loss per common share calculation includes a provision for preferred stock dividends on the Company’s outstanding Series A-1, A-2 and A-4 Preferred Stock (the “Series A Preferred Stock”) in the approximate amount of $404,000 and $402,000 for the years ended December 31, 2014 and 2013, respectively.As of December 31, 2014, the Company’s Board of Directors had not declared any dividends on the Company’s Series A Preferred Stock, and the Company had accumulated approximately $3.9 million of preferred stock dividends. The Company’s Board of Directors has declared dividends for the year ended December 31, 2014 aggregating $1.3 million related to the Company’s Series B-2 Preferred Stock (see note 13) which, as permitted by the terms of the Series B-2 Preferred Stock, was paid in the form of 299,216 shares of the Company’s common stock. | ||||||||||||||
Stock based compensation | The Company accounts for stock-based compensation by recognizing the fair value of compensation cost for all stock and stock-based awards over the service period (generally equal to the vesting period). Compensation cost is determined using the Black-Scholes option pricing model to estimate the fair value of the awards at the grant date. An offsetting increase to stockholders’ equity is recorded equal to the amount of the compensation expense charge. | |||||||||||||
Stock-based compensation is included in selling, general, and administrative expenses in the consolidated statements of operations and, with respect to stock option expense, has been reduced for estimated forfeitures. When estimating forfeitures, the Company considers historical forfeiture rates as well as ongoing trends for actual option forfeiture. | ||||||||||||||
The Company calculated the fair value of each common stock option grant on the date of grant using the Black-Scholes option pricing model method with the following assumptions: | ||||||||||||||
2014 | 2013 | |||||||||||||
Dividend yield | 0 | % | 0 | % | ||||||||||
Stock volatility | 102 | % | 137 | % | ||||||||||
Average Risk-free interest rate | 1.97 | % | 0.68 | % | ||||||||||
Average option term (years) | 8 | 3 | ||||||||||||
2014 | 2013 | |||||||||||||
Dividend yield | 0 | % | 0 | % | ||||||||||
Stock volatility | 102 | % | 137 | % | ||||||||||
Average Risk-free interest rate | 1.97 | % | 0.68 | % | ||||||||||
Average option term (years) | 8 | 3 | ||||||||||||
Recently Adopted and Issued Accounting Pronouncements | During the years ended December 31, 2014 and 2013, there were no new accounting pronouncements adopted by the Company that had a material impact on the Company’s consolidated financial statements. In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers,” (“ASU 2014-09”). ASU 2014-09 outlines a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. ASU 2014-09 is effective for annual and interim reporting periods beginning after December 15, 2016 and early adoption is not permitted. Companies may either use a full retrospective or modified retrospective approach to adopt this new standard. The Company is currently evaluating both adoption options and the impact that adoption of ASU 2014-09 will have on its consolidated financial statements. | |||||||||||||
Use of estimates | The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the year. Actual results could be affected by those estimates. |
2_Summary_Of_Significant_Accou2
2. Summary Of Significant Accounting Policies (Tables) | 12 Months Ended | |||||||||||||
Dec. 31, 2014 | ||||||||||||||
Summary Of Significant Accounting Policies Tables | ||||||||||||||
Business acquisition cost for goodwill | Balance at January 1, 2014 | Additions (a) | Other (b) | Balance at December 31, 2014 | Balance at January 1, 2013 | Additions (a) | Other (c) | Balance at December 31, 2013 | ||||||
$ 5,124,130 | 5,175,372 | 97,958 | $ 10,397,460 | $ 2,406,269 | 2,520,605 | 197,256 | $ 5,124,130 | |||||||
(a) - Amount relates to acquisitions. See note 3. | ||||||||||||||
(b) - Amount relates to adjustments to the preliminary purchase price for 2013 acquisitions. | ||||||||||||||
(c) - Amount relates to adjustments to the preliminary purchase price for 2012 acquisitions. | ||||||||||||||
Estimated useful lives | Asset | Estimated Useful Lives | ||||||||||||
Network equipment | 5 – 7 Years | |||||||||||||
Furniture and fixtures | 3 – 7 Years | |||||||||||||
Computer equipment and software | 3 – 5 Years | |||||||||||||
Customer premise equipment | 2 – 3 Years | |||||||||||||
Following securities were excluded in the calculation of diluted loss per share | 2014 | 2013 | ||||||||||||
Warrants, excluding 728,333 nominal warrants in 2014 issued to senior lenders (see note 11) | 3,436,775 | 4,015,824 | ||||||||||||
Stock options | 607,877 | 351,439 | ||||||||||||
Convertible preferred stock | 4,512,316 | 3,851,264 | ||||||||||||
8,556,968 | 8,218,527 | |||||||||||||
Stock option pricing model | 2014 | 2013 | ||||||||||||
Dividend yield | 0 | % | 0 | % | ||||||||||
Stock volatility | 102 | % | 137 | % | ||||||||||
Average Risk-free interest rate | 1.97 | % | 0.68 | % | ||||||||||
Average option term (years) | 8 | 3 |
3_Acquisitions_Tables
3. Acquisitions (Tables) | 12 Months Ended | ||||||
Dec. 31, 2014 | |||||||
Acquisitions Tables | |||||||
Purchase price allocated to the fair value of the net assets | Purchase Price | $ 10,644,822 | |||||
Cash | 826,035 | ||||||
Accounts receivable, net | 273,948 | ||||||
Other current assets | 141,256 | ||||||
Property and equipment | 481,111 | ||||||
Other assets | 60,941 | ||||||
Deferred tax asset | 1,688,011 | ||||||
Intangible assets subject to amortization | 4,211,300 | ||||||
Goodwill | 5,175,372 | ||||||
Current liabilities | (496,417) | ||||||
Deferred tax liability | (1,688,011) | ||||||
Other liabilities | (28,724) | ||||||
$ 10,644,822 | |||||||
Schedule of net assets acquired | Accounts receivable | $ 1,486,552 | |||||
Other current assets | 26,656 | ||||||
Property and equipment | 8,101,360 | ||||||
Intangible assets subject to amortization | 21,866,000 | ||||||
Goodwill | 2,618,563 | ||||||
Current liabilities | (1,817,186) | ||||||
$ 32,281,945 | |||||||
Pro forma financial information | The following table provides certain pro forma financial information for the Company as if the acquisition of PingTone had been consummated effective as of January 1, 2013: | ||||||
($000's) | Year ended December 31, | ||||||
2014 | 2013 | ||||||
Revenues | $ 98,988 | $ 69,375 | |||||
Net loss | $ (3,063) | $ (6,026) | |||||
The following table provides certain pro forma financial information for the Company as if the acquisition of the Broadvox Assets had been consummated effective as of January 1, 2013: | |||||||
($000’s) | |||||||
Revenues | $ | 94,148 | |||||
Net loss | $ | (12,490 | ) |
4_Intangible_Assets_Tables
4. Intangible Assets (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2014 | |||||||||||||
Intangible Assets Tables | |||||||||||||
Identifiable intangible assets | 31-Dec-14 | 31-Dec-13 | |||||||||||
Gross Carrying Amount | Accumulated Amortization | Total | Gross Carrying Amount | Accumulated Amortization | Total | ||||||||
Trademarks and tradename | $ 1,093,400 | $ (161,319) | $ 932,081 | $ 563,000 | $ (65,683) | $ 497,317 | |||||||
Proprietary technology | 5,781,000 | (1,600,233) | 4,180,767 | 5,781,000 | (444,033) | 5,336,967 | |||||||
Non-compete agreements | 9,852,100 | (5,150,228) | 4,701,872 | 8,728,000 | (1,266,611) | 7,461,389 | |||||||
Customer relationships | 24,897,800 | (2,403,637) | 22,494,163 | 22,341,000 | (754,988) | 21,586,012 | |||||||
Favorable lease intangible | 218,000 | (94,467) | 123,533 | 218,000 | (50,867) | 167,133 | |||||||
Total acquired intangibles | $ 41,842,300 | $ (9,409,884) | $ 32,432,416 | $ 37,631,000 | $ (2,582,182) | $ 35,048,818 | |||||||
Estimated future aggregate amortization expense | For the year ended December 31, | ||||||||||||
2015 | $ | 7,227,469 | |||||||||||
2016 | 3,587,246 | ||||||||||||
2017 | 3,454,097 | ||||||||||||
2018 | 2,729,701 | ||||||||||||
2019 | 1,895,455 |
5_Prepaid_Expenses_and_Other_C1
5. Prepaid Expenses and Other Current Assets (Tables) | 12 Months Ended | |||||||
Dec. 31, 2014 | ||||||||
Prepaid Expenses And Other Current Assets Tables | ||||||||
Prepaid expenses and other current assets | 2014 | 2013 | ||||||
Prepaid insurance | $ | 52,498 | $ | 63,737 | ||||
Other prepaid expenses | 645,133 | 404,818 | ||||||
Escrowed funds – senior lenders | - | 2,000,000 | ||||||
Other current assets | 230,141 | 236,232 | ||||||
Total | $ | 927,772 | $ | 2,704,787 |
6_Property_and_Equipment_Table
6. Property and Equipment (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Property And Equipment Tables | |||||
Schedule of property and equipment | 2014 | 2013 | |||
Network equipment | $ 8,374,479 | $ 7,675,786 | |||
Furniture and fixtures | 299,571 | 299,571 | |||
Computer equipment and software | 5,962,838 | 2,654,428 | |||
Customer premise equipment | 7,191,008 | 5,169,629 | |||
Vehicles | 55,884 | 55,884 | |||
Leasehold improvements | 1,140,605 | 993,799 | |||
Assets in progress | 118,831 | - | |||
Total | 23,143,216 | 16,849,097 | |||
Less: accumulated depreciation | (9,664,304) | (5,655,742) | |||
Total | $ 13,478,912 | $ 11,193,355 |
8_Fair_Value_Disclosures_Table
8. Fair Value Disclosures (Tables) | 12 Months Ended | |||||||||||
Dec. 31, 2014 | ||||||||||||
Abandonment of common stock, Amount | ||||||||||||
Fair value of the liability measured at fair value on a recurring basis | The following table represents the fair value of the liability measured at fair value on a recurring basis: | |||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||
Non-current liabilities: | ||||||||||||
As of December 31, 2014: | ||||||||||||
Derivative liability | $ | 3,839,569 | $ | 3,839,569 | ||||||||
As of December 31, 2013: | ||||||||||||
Derivative liabilities | $ | 10,515,472 | $ | 10,515,472 | ||||||||
The following table reconciles the changes in the derivative liability categorized within Level 3 of the fair value hierarchy. | ||||||||||||
Balance at December 31, 2013 | $ - | |||||||||||
Transfer of Level 2 balance (a) | 10,515,472 | |||||||||||
Issuance of additional warrants | 1,301,607 | |||||||||||
Gains for the period: | ||||||||||||
Included in earnings | (5,161,901) | |||||||||||
Included in other comprehensive income (loss) | - | |||||||||||
Modification of warrant contracts (see note 8) | (2,815,609) | |||||||||||
Balance at September 30, 2014 | $ 3,839,569 |
9_Accounts_Payable_and_Accrued1
9. Accounts Payable and Accrued Expenses (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Accounts Payable And Accrued Expenses Tables | ||||||
Accounts payable and accrued expenses | ||||||
31-Dec-14 | 31-Dec-13 | |||||
Trade accounts payable | $ 3,028,902 | $ 5,713,706 | ||||
Other accrued expenses | 3,268,886 | 3,321,133 | ||||
Accrued payroll and vacation | 250,574 | 102,898 | ||||
Accrued state and local taxes | 1,462,097 | 471,320 | ||||
Accrued sales commissions | 864,928 | 72,291 | ||||
Interest payable | 33,341 | 421,632 | ||||
Deferred revenue | 729,618 | 407,426 | ||||
Other | 833,168 | 651,144 | ||||
Total accounts payable and accrued expenses | $ 10,471,514 | $ 11,161,550 |
10_Equipment_Financing_Obligat1
10. Equipment Financing Obligations (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Pro forma financial information | |||||
Principal payments under capital lease agreements | Year Ending December 31: | ||||
2015 | 722,000 | ||||
2016 | 603,000 | ||||
2017 | 580,000 | ||||
2018 | 460,000 | ||||
$ | 2,365,000 |
11_Notes_Payable_NonRelated_Pa
11. Notes Payable Non-Related Parties (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Notes Payable Non-related Parties Tables | ||||||
Components of notes payable non-related parties | 31-Dec-14 | 31-Dec-13 | ||||
Senior Notes | $ 46,166,667 | $ 41,791,667 | ||||
Discount on Senior Notes | (3,677,733) | (4,377,680) | ||||
Total notes payable - non-related parties | 42,488,934 | 37,413,987 | ||||
Less: | ||||||
Current portion of Senior Notes | (1,225,000) | (625,000) | ||||
Non-current portion notes payable - non-related parties | $ 41,263,934 | $ 36,788,987 |
12_Notes_Payable_Related_Parti
12. Notes Payable Related Parties (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Debt discount | ||||||
Component of notes payable related party | 31-Dec-14 | 31-Dec-13 | ||||
NBS Sellers Notes | $ - | $ 85,714 | ||||
Notes payable to Marvin Rosen | 1,478,081 | 1,578,081 | ||||
Discount on notes payable to Marvin Rosen | (185,203) | - | ||||
Other notes payable - related parties | - | 125,000 | ||||
Total notes payable - related parties | 1,292,878 | 1,788,795 | ||||
Less: | ||||||
Current portion of NBS Sellers Notes | - | (85,714) | ||||
Current portion of notes payable to Marvin Rosen | - | (100,000) | ||||
Current portion of other notes payable | - | (125,000) | ||||
Non-current portion notes payable - related parties | $ 1,292,878 | $ 1,478,081 |
13_Equity_Transactions_Tables
13. Equity Transactions (Tables) | 12 Months Ended | ||||||||||||||||||||||||
Dec. 31, 2014 | |||||||||||||||||||||||||
Equity Transactions Tables | |||||||||||||||||||||||||
Schedule of preferred stock | Series A-1 Preferred Stock | Series A-2 Preferred Stock | Series A-4 Preferred Stock | Series B-1 Preferred Stock | Series B-2 Preferred Stock | Total | |||||||||||||||||||
Shares | $ | Shares | $ | Shares | $ | Shares | $ | Shares | $ | Shares | $ | ||||||||||||||
Balance at December 31, 2012 | 2,375 | $ 24 | 2,625 | $ 26 | 45 | $ - | 6,862 | $ 69 | - | $ - | 11,907 | $ 119 | |||||||||||||
Conversion of notes payable | 2,052 | 21 | 2,052 | 21 | |||||||||||||||||||||
Conversion of preferred stock into common stock | -6,862 | -69 | -6,862 | -69 | |||||||||||||||||||||
Issuance of shares for cash | 16,428 | 164 | 16,428 | 164 | |||||||||||||||||||||
Balance at December 31, 2013 | 2,375 | 24 | 2,625 | 26 | 45 | - | - | - | 18,480 | 185 | 23,525 | 235 | |||||||||||||
Issuance of shares for cash | 4,358 | 44 | 4,358 | 44 | |||||||||||||||||||||
Conversion of preferred stock into common stock | -1,090 | -11 | -1,090 | -11 | |||||||||||||||||||||
Balance at December 31, 2014 | 2,375 | $ 24 | 2,625 | $ 26 | 45 | $ - | - | $ - | 21,748 | $ 217 | 26,793 | $ 268 | |||||||||||||
Schedule of stock options and warrants | The following summary presents information regarding outstanding options as of December 31, 2014 and 2013 and changes during the years then ended with regard to all options: | ||||||||||||||||||||||||
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contract Term | |||||||||||||||||||||||
Outstanding at December 31, 2012 | 177,309 | $ 29.00 | 6.93 years | ||||||||||||||||||||||
Granted in 2013 | 180,873 | 4.00 | |||||||||||||||||||||||
Forfeitures in 2013 | (3,053) | 5.50 | |||||||||||||||||||||||
Expirations in 2013 | (3,690) | 55.00 | |||||||||||||||||||||||
Outstanding at December 31, 2013 | 351,439 | 16.29 | 7.81 years | ||||||||||||||||||||||
Granted in 2014 | 283,440 | 3.92 | |||||||||||||||||||||||
Forfeitures in 2014 | (14,439) | 4.40 | |||||||||||||||||||||||
Expirations in 2014 | (12,563) | 150.73 | |||||||||||||||||||||||
Outstanding at December 31, 2014 | 607,877 | $ 8.02 | 8.08 years | ||||||||||||||||||||||
Exercisable at December 31, 2014 | 203,714 | $ 15.87 | 5.66 years | ||||||||||||||||||||||
The following table summarizes information about stock options outstanding as of December 31, 2014: | |||||||||||||||||||||||||
Range of Exercise Prices | Options Outstanding | Weighted Average Life (Years) | Weighted Average Exercise Price | Options Exercisable | Weighted Average Price | ||||||||||||||||||||
$3.00 - $4.60 | 442,469 | 9.01 | $ | 3.85 | 88,661 | $ | 4.31 | ||||||||||||||||||
$4.70 - $7.50 | 122,698 | 6.8 | 5.98 | 72,343 | 5.71 | ||||||||||||||||||||
$9.00 - $15.50 | 17,540 | 2.91 | 15.44 | 17,540 | 15.44 | ||||||||||||||||||||
$19.50 - $34.50 | 12,730 | 2.25 | 34.38 | 12,730 | 34.38 | ||||||||||||||||||||
$37.50 - $114.00 | 3,500 | 1.46 | 113.78 | 3,500 | 113.78 | ||||||||||||||||||||
$122.97 - $235.00 | 8,239 | 1.15 | 134.27 | 8,239 | 134.27 | ||||||||||||||||||||
$316.55 - $322.50 | 701 | 0.11 | 322.04 | 701 | 322.04 | ||||||||||||||||||||
607,877 | 8.08 | $ | 8.02 | 203,714 | $ | 15.87 | |||||||||||||||||||
The following summarizes the information relating to warrants issued and the activity during the years ended December 31, 2014 and 2013: | |||||||||||||||||||||||||
Number of Warrants | Per Share Exercise Price | Weighted | |||||||||||||||||||||||
Average | |||||||||||||||||||||||||
Exercise Price | |||||||||||||||||||||||||
Outstanding at December 31, 2012 | 1,799,741 | 4.00-83.50 | $ 9.00 | ||||||||||||||||||||||
Granted in 2013 | 2,353,840 | 0.50-8.50 | 5.00 | ||||||||||||||||||||||
Expired in 2013 | (137,506) | 7.00-23.00 | 14.00 | ||||||||||||||||||||||
Exercised in 2013 | - | - | - | ||||||||||||||||||||||
Outstanding at December 31, 2013 | 4,016,075 | 0.50-83.50 | 6.25 | ||||||||||||||||||||||
Granted in 2014 | 402,997 | 6.25 | 6.25 | ||||||||||||||||||||||
Expired in 2014 | (253,964) | 5.50-83.50 | 21.18 | ||||||||||||||||||||||
Exercised in 2014 | - | - | - | ||||||||||||||||||||||
Outstanding at December 31, 2014 | 4,165,108 | 0.50-10.50 | 5.48 |
14_Income_Taxes_Tables
14. Income Taxes (Tables) | 12 Months Ended | |||||
Dec. 31, 2014 | ||||||
Income Taxes Tables | ||||||
Schedule of provision for income taxes | 2014 | 2013 | ||||
Deferred | ||||||
Federal | $ (1,459,000) | $ (1,843,000) | ||||
State | - | - | ||||
(1,459,000) | (1,843,000) | |||||
Current | ||||||
Federal | - | - | ||||
State | 26,051 | 51,887 | ||||
26,051 | 51,887 | |||||
Change in valuation allowance | 1,459,000 | 1,843,000 | ||||
Tax Provision | $ 26,051 | $ 51,887 | ||||
Schedule of Federal statutory tax rate | 2014 | 2013 | ||||
% | % | |||||
Federal statutory rate | (34.0) | (34.0) | ||||
State net of federal tax | (2.5) | (2.9) | ||||
Permanent and other items | 4.5 | 1.6 | ||||
Change in valuation allowance | 33.0 | 36.3 | ||||
1.0 | 1.0 | |||||
Schedule of deferred tax assets and liability | 2014 | 2013 | ||||
Deferred income tax assets: | ||||||
Net operating losses | $ 45,250,000 | $ 44,365,000 | ||||
Allowance for doubtful accounts | 67,000 | 52,000 | ||||
Derivative liability | 1,460,000 | 1,728,000 | ||||
Accrued liabilities and other | 693,000 | 999,000 | ||||
Intangible assets | 1,997,000 | 504,000 | ||||
Property and equipment | - | 337,000 | ||||
49,467,000 | 47,985,000 | |||||
Deferred income tax liabilities: | ||||||
Debt discount | 759,000 | 1,664,000 | ||||
Property and equipment | 933,000 | - | ||||
1,692,000 | 1,664,000 | |||||
Deferred tax asset, net | 47,775,000 | 46,321,000 | ||||
Less: valuation allowance | -47,775,000 | -46,321,000 | ||||
Net deferred tax assets | $ - | $ - |
15_Supplemental_Disclosure_of_1
15. Supplemental Disclosure of Cash Flow Information (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Supplemental Disclosure Of Cash Flow Information Tables | |||||||||
Supplemental Disclosure of Cash Flow Information | 2014 | 2013 | |||||||
Supplemental disclosure of cash flow information: | |||||||||
Cash paid for interest | $ 5,312,356 | $ 1,912,283 | |||||||
Supplemental schedule of non-cash investing and financing activities: | |||||||||
Conversion of notes payable - related parties and accrued expenses | |||||||||
to common stock | $ - | $ 1,003,233 | |||||||
Property and equipment acquired through financing obligations | $ 2,187,754 | $ 359,675 | |||||||
Conversion of notes payable - related parties and accrued expenses | |||||||||
to preferred stock | $ - | $ 2,052,000 | |||||||
2014 | 2013 | ||||||||
Fair value of assets acquired | $ 11,169,963 | $ 34,099,131 | |||||||
Cash paid | (3,144,825) | (32,281,945) | |||||||
Debt issued | (5,000,000) | - | |||||||
Common stock issued | (2,499,997) | - | |||||||
Liabilities assumed | $ 525,141 | $ 1,817,186 |
16_Commitments_and_Contingenci1
16. Commitments and Contingencies (Tables) | 12 Months Ended | ||||
Dec. 31, 2014 | |||||
Commitments And Contingencies Tables | |||||
Schedule of Commitments and Contingencies | Year Ending December 31: | ||||
2015 | 2,289,000 | ||||
2016 | 1,887,000 | ||||
2017 | 1,669,000 | ||||
2018 | 772,000 | ||||
2019 and thereafter | 1,479,000 | ||||
$ | 8,096,000 |
18_Concentrations_Tables
18. Concentrations (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Concentrations Tables | |||||||||
Schedule of Geographic Concentrations | 2014 | 2013 | |||||||
United States | $ | 81,326,000 | $ | 53,912,000 | |||||
Other | 10,727,000 | 7,585,000 | |||||||
$ | 92,053,000 | $ | 61,497,000 |
20_Segment_Information_Tables
20. Segment Information (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2014 | |||||||||
Segment Information Tables | |||||||||
Operating segment information | 2014 | ||||||||
Carrier Services | Business Services | Corporate and Unallocated | Consolidated | ||||||
Revenues | $ 29,156,799 | $ 62,895,801 | $ - | $ 92,052,600 | |||||
Cost of revenues (exclusive of | |||||||||
depreciation and amortization) | 25,970,357 | 23,628,016 | - | 49,598,373 | |||||
Gross profit | 3,186,442 | 39,267,785 | - | 42,454,227 | |||||
Depreciation and amortization | 445,273 | 10,467,018 | 92,593 | 11,004,884 | |||||
Selling, general and administrative expenses | 2,922,989 | 25,153,607 | 5,147,778 | 33,224,374 | |||||
Interest expense | - | (5,659,702) | (328,709) | (5,988,411) | |||||
Loss on change in fair value of derivative liability | 5,161,901 | 5,161,901 | |||||||
Other income (expenses) | (97,560) | 23,719 | 134,291 | 60,450 | |||||
Gain on extinguishment of accounts payable | - | - | - | ||||||
Benefit (provision) for income taxes | - | 24,741 | (50,792) | (26,051) | |||||
Net loss | $ (279,380) | $ (1,964,082) | $ (323,680) | $ (2,567,142) | |||||
Total assets | $ 4,553,339 | $ 66,394,132 | $ 2,800,023 | $ 73,747,494 | |||||
Capital expenditures | $ 101,872 | $ 3,717,541 | $ - | $ 3,819,413 | |||||
2013 | |||||||||
Carrier Services | Business Services | Corporate and Unallocated | Consolidated | ||||||
Revenues | $ 31,122,771 | $ 30,373,849 | $ - | $ 61,496,620 | |||||
Cost of revenues (exclusive of | |||||||||
depreciation and amortization) | 27,842,245 | 14,874,931 | - | 42,717,176 | |||||
Gross profit | 3,280,526 | 15,498,918 | - | 18,779,444 | |||||
Depreciation and amortization | 222,943 | 3,261,932 | 87,099 | 3,571,974 | |||||
Selling, general and administrative expenses | 3,070,678 | 10,298,063 | 5,387,584 | 18,756,325 | |||||
Interest expense | - | (2,300,237) | (338,012) | (2,638,249) | |||||
Loss on extinguishment of debt | (1,105,283) | (1,105,283) | |||||||
Loss on change in fair value of derivative liability | (598,292) | (598,292) | |||||||
Other income (expenses) | (180,948) | 104,548 | 53,403 | (22,997) | |||||
Gain on extinguishment of accounts payable | 2,883,660 | - | - | 2,883,660 |
Recovered_Sheet1
2. Summary of Significant Accounting Policies (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Summary Of Significant Accounting Policies Details | ||
Beginning balance, goodwill | $5,124,130 | $2,406,269 |
Additions | 5,175,372 | 2,520,605 |
Other | 97,958 | 197,256 |
Ending balance, goodwill | $10,397,460 | $5,124,130 |
Recovered_Sheet2
2. Summary of Significant Accounting Policies (Details 1 ) | 12 Months Ended |
Dec. 31, 2014 | |
Network equipment [Member] | Minimum [Member] | |
Estimated useful lives of property and equipment | 5 years |
Network equipment [Member] | Maximum [Member] | |
Estimated useful lives of property and equipment | 7 years |
Furniture and fixtures [Member] | Minimum [Member] | |
Estimated useful lives of property and equipment | 3 years |
Furniture and fixtures [Member] | Maximum [Member] | |
Estimated useful lives of property and equipment | 7 years |
Computer equipment and software [Member] | Minimum [Member] | |
Estimated useful lives of property and equipment | 3 years |
Computer equipment and software [Member] | Maximum [Member] | |
Estimated useful lives of property and equipment | 5 years |
Customer premise equipment [Member] | Minimum [Member] | |
Estimated useful lives of property and equipment | 2 years |
Customer premise equipment [Member] | Maximum [Member] | |
Estimated useful lives of property and equipment | 3 years |
Recovered_Sheet3
2. Summary of Significant Accounting Policies (Details 2 ) | Dec. 31, 2014 | Dec. 31, 2013 |
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities | 8,556,968 | 8,218,527 |
Warrant | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities | 3,436,775 | 4,015,824 |
Stock Options | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities | 607,877 | 351,439 |
Convertible Preferred | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities | 4,512,316 | 3,851,264 |
2_Summary_of_Significant_Accou3
2. Summary of Significant Accounting Policies (Details 3 ) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Black-Scholes option-pricing model method with the following assumptions | ||
Dividend yield | 0.00% | 0.00% |
Stock volatility | 102.00% | 137.00% |
Average Risk-free interest rate | 1.97% | 0.68% |
Average option term (years) | 8 years | 3 years |
2_Summary_of_Significant_Accou4
2. Summary of Significant Accounting Policies (Details Narrative ) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Summary Of Significant Accounting Policies Details Narrative | |||
Derecognized accounts receivable | $3,800,000 | $900,000 | |
Recognized losses on transfers of accounts receivable | 97,000 | 226,000 | |
Goodwill | 10,397,460 | 5,124,130 | 2,406,269 |
Capitalized costs pertaining to development of software | 783,000 | 794,000 | |
Advertising and marketing expenses | 211,000 | 28,000 | |
Provision for preferred stock dividends | $404,000 | $402,000 |
3_Acquisition_Details
3. Acquisition (Details) (PingTone [Member], USD $) | Dec. 31, 2014 |
PingTone [Member] | |
Purchase Price | $10,644,822 |
Cash | 826,035 |
Accounts receivable, net | 273,948 |
Other current assets | 141,256 |
Property and equipment | 481,111 |
Other assets | 60,941 |
Deferred tax asset | 1,688,011 |
Intangible assets subject to amortization | 4,211,300 |
Goodwill | 5,175,372 |
Current liabilities | -496,417 |
Deferred tax liability | -1,688,011 |
Other liabilities | -28,724 |
Aggregate purchase price | $10,644,822 |
3_Acquisition_Details_1
3. Acquisition (Details 1) (PingTone [Member], USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
PingTone [Member] | ||
Revenues | $98,988,000 | $69,375,000 |
Net loss | ($3,063,000) | ($6,026,000) |
3_Acquisition_Details_2
3. Acquisition (Details 2) (BVX LLC [Member], USD $) | Dec. 31, 2014 |
BVX LLC [Member] | |
Accounts receivable | $1,486,552 |
Other current assets | 26,656 |
Property and equipment | 8,101,360 |
Intangible assets subject to amortization | 21,866,000 |
Goodwill | 2,618,563 |
Current liabilities | -1,817,186 |
Aggregate purchase price allocated to fair value of net assets | $32,281,945 |
3_Acquisition_Details_3
3. Acquisition (Details 3) (Broadvox [Member], USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Broadvox [Member] | |
Revenues | $94,148,000 |
Net loss | ($12,490,000) |
4_Intangible_Assets_Details
4. Intangible Assets (Details) (NBS [Member], USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Trademarks and tradename [Member] | ||
Gross Carrying Amount | $1,093,400 | $563,000 |
Accumulated Amortization | -161,319 | -65,683 |
Total | 932,081 | 497,317 |
Proprietary technology [Member] | ||
Gross Carrying Amount | 5,781,000 | 5,781,000 |
Accumulated Amortization | -1,600,233 | -444,033 |
Total | 4,180,767 | 5,336,967 |
Non-compete agreement [Member] | ||
Gross Carrying Amount | 9,852,100 | 8,728,000 |
Accumulated Amortization | -5,150,228 | -1,266,611 |
Total | 4,701,872 | 7,461,389 |
Customer relationships [Member] | ||
Gross Carrying Amount | 24,897,800 | 22,341,000 |
Accumulated Amortization | -2,403,637 | -754,988 |
Total | 22,494,163 | 21,586,012 |
Favorable lease intangible [Member] | ||
Gross Carrying Amount | 218,000 | 218,000 |
Accumulated Amortization | -94,467 | -50,867 |
Total | 123,533 | 167,133 |
Total acquired intangibles [Member] | ||
Gross Carrying Amount | 41,842,300 | 37,631,000 |
Accumulated Amortization | -9,409,884 | -2,582,182 |
Total | $32,432,416 | $35,048,818 |
4_Intangible_Assets_Details_1
4. Intangible Assets (Details 1) (USD $) | Dec. 31, 2014 |
Intangible Assets Details 1 | |
2015 | $7,227,469 |
2016 | 3,587,246 |
2017 | 3,454,097 |
2018 | 2,729,701 |
2019 | $1,895,455 |
5_Prepaid_Expenses_and_Other_C2
5. Prepaid Expenses and Other Current Assets (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Prepaid expenses and other current assets | ||
Prepaid insurance | $52,498 | $63,737 |
Other prepaid expenses | 645,133 | 404,818 |
Escrowed funds - senior lenders | 2,000,000 | |
Other current assets | 236,232 | |
Total | $927,772 | $2,704,787 |
6_Property_and_Equipment_Detai
6. Property and Equipment (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Total | $23,143,216 | $16,849,097 |
Less: accumulated depreciation | -9,664,304 | -5,655,742 |
Total | 13,478,912 | 11,193,355 |
Network equipment [Member] | ||
Total | 8,374,479 | 7,675,786 |
Furniture and fixtures [Member] | ||
Total | 299,571 | 299,571 |
Computer equipment and software [Member] | ||
Total | 5,962,838 | 2,654,428 |
Customer premise equipment [Member] | ||
Total | 7,191,008 | 5,169,629 |
Vehicles [Member] | ||
Total | 55,884 | 55,884 |
Leasehold improvements [Member] | ||
Total | 1,140,605 | 993,799 |
Assets in progress [Member] | ||
Total | $118,831 |
6_Property_and_Equipment_Detai1
6. Property and Equipment (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Property And Equipment Details Narrative | ||
Depreciation expense | $4,200,000 | $1,400,000 |
7_Restricted_Cash_Details_Narr
7. Restricted Cash (Details Narrative) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Restricted Cash Details Narrative | ||
Cash held in reserve | $1,000,000 | $1,000,000 |
Certificates of deposit collateralizing letters of credit | $164,000 | $164,000 |
8_Fair_Value_Disclosures_Detai
8. Fair Value Disclosures (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Non-current liabilities: | ||
Derivative liability | $3,839,569 | $10,515,472 |
Level 1 | ||
Non-current liabilities: | ||
Derivative liability | ||
Level 2 | ||
Non-current liabilities: | ||
Derivative liability | 10,515,472 | |
Level 3 | ||
Non-current liabilities: | ||
Derivative liability | $3,839,569 |
8_Fair_Value_Disclosures_Detai1
8. Fair Value Disclosures (Details 1) (USD $) | 12 Months Ended |
Dec. 31, 2014 | |
Pro forma financial information | |
Balance at December 31, 2013 | |
Transfer of Level 2 balance (a) | 10,515,472 |
Issuance of additional warrants | 1,301,607 |
Gains for the period: | |
Included in earnings | -5,161,901 |
Included in other comprehensive income (loss) | |
Modification of warrant contracts (see note 8) | -2,815,609 |
Balance at September 30, 2014 | $3,839,569 |
8_Related_Party_Transactions_D
8. Related Party Transactions (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Related Party Transactions Details Narrative | ||
Related party payable | $226,000 | |
Payments to accounting firm | $45,000 |
9_Accounts_Payable_and_Accrued2
9. Accounts Payable and Accrued Expenses (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Accounts Payable And Accrued Expenses Details | ||
Trade accounts payable | $3,028,902 | $5,713,706 |
Other accrued expenses | 3,268,886 | 3,321,133 |
Accrued payroll and vacation | 250,574 | 102,898 |
Accrued state and local taxes | 1,462,097 | 471,320 |
Accrued sales commissions | 864,928 | 72,291 |
Interest payable | 33,341 | 421,632 |
Deferred revenue | 729,618 | 407,426 |
Other | 833,168 | 651,144 |
Total accounts payable and accrued expenses | $10,471,514 | $11,161,550 |
10_Equipment_Financing_Obligat2
10. Equipment Financing Obligations (Details) (USD $) | Dec. 31, 2014 |
Equipment Financing Obligations Details | |
2015 | $722,000 |
2016 | 603,000 |
2017 | 580,000 |
2018 | 460,000 |
Total | $2,365,000 |
10_Equipment_Financing_Obligat3
10. Equipment Financing Obligations (Details Narrative) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Equipment Financing Obligations Details Narrative | ||
Company's equipment financing obligations | $2,400,000 | $400,000 |
11_Notes_Payable_NonRelated_Pa1
11. Notes Payable - Non-Related Parties (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Current portion of other notes payable | $0 | $212,500 |
NonRelatedParty | ||
Senior Notes | 46,166,667 | 41,791,667 |
Discount on senior notes | -3,677,733 | -4,377,680 |
Total notes payable - non-related parties | 42,488,934 | 37,413,987 |
Less: Current portion of Senior Notes | -1,225,000 | -625,000 |
Non-current portion notes payable - non-related parties | $41,263,934 | $36,788,987 |
11_Notes_Payable_Non_Related_P
11. Notes Payable - Non Related Parties (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Notes Payable - Non Related Parties Details Narrative | ||
Principal payments on Series A Notes | $208,333 | |
Accreted Discount on senior notes | 3,700,000 | 4,400,000 |
Fair value derivative liability | 1,300,000 | 6,000,000 |
Recognized gain (loss) on change of fair value | 5,161,901 | -598,292 |
Advances from the purchaser of accounts receivable | 0 | 212,500 |
Amount repaid of letter of credit unsecured portion | 9,000 | |
Principal payments Notes | 625,000 | |
Fair value derivative liability | 2,300,000 | 4,500,000 |
Recognized gain (loss) on change of fair value | 2,200,000 | 3,000,000 |
Outstanding Advance accounts receivable | 0 | 1,100,000 |
Lenders' fees | $100,000 | $300,000 |
12_Notes_Payable_Related_Party
12. Notes Payable - Related Party (Details) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Non-current portion notes payable - related parties | $1,292,878 | $1,478,081 |
RelatedParty | ||
NBS Sellers Notes | 0 | 85,714 |
Notes payable to Marvin Rosen | 1,478,081 | 1,578,081 |
Discount on notes payable to Marvin Rosen | -185,203 | 0 |
Other notes payable - related parties | 0 | 125,000 |
Total notes payable - related parties | 1,292,878 | 1,788,795 |
Less: Current portion of NBS Sellers Notes | 0 | -85,714 |
Less: Current portion of notes payable to Marvin Rosen | 0 | -100,000 |
Less: Current portion of other notes payable | 0 | -125,000 |
Non-current portion notes payable - related parties | $1,292,878 | $1,478,081 |
12_Notes_Payable_Related_Party1
12. Notes Payable - Related Party (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Notes Payable - Related Party Details Narrative | ||
Principal payments on Sellers Notes | $514,286 | |
Loans from Marvin Rosen | 100,000 | |
Convertible preferred Shares issued on conversion of New Rosen Notes | 2,000 | |
Convertible Shares issued on conversion of New Rosen Notes, Amount | 900,000 | |
New Rosed notes converted into convertible preferred stock, amount | 2,000,000 | |
New Rosed notes converted into convertible Common stock, amount | 208,876 | |
Warrants to purchase common stock, shares | 128,000 | |
Warrants to purchase shares | 104,438 | |
Warrants exercise price | $6.25 | |
Interest rate | 7.00% | 7.00% |
Interest expense | 200,000 | |
Unamortized discount | $200,000 |
13_Equity_Transactions_Details
13. Equity Transactions (Details) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Balance, shares | 23,525 | 11,907 | |
Balance, amount | $235 | $119 | |
Conversion of notes payable, shares | 2,052 | ||
Conversion of notes payable, amount | 21 | ||
Conversion of preferred stock into common stock, shares | -1,090 | -6,862 | |
Conversion of preferred stock into common stock, amount | -11 | -69 | |
Issuance of shares for cash. Shares | 4,358 | 16,428 | |
Issuance of shares for cash, amount | 44 | 164 | |
Balance, shares | 26,793 | 23,525 | |
Balance, amount | 268 | 235 | |
Series A-1 Preferred Stock | |||
Balance, shares | 2,375 | ||
Balance, amount | 24 | ||
Balance, shares | 2,375 | 2,375 | 2,375 |
Balance, amount | 24 | 24 | 24 |
Series A-2 Preferred Stock | |||
Balance, shares | 2,625 | ||
Balance, amount | 26 | ||
Balance, shares | 2,625 | 2,625 | 2,625 |
Balance, amount | 26 | 26 | 26 |
Series A-4 Preferred Stock | |||
Balance, shares | 45 | ||
Balance, amount | |||
Balance, shares | 45 | 45 | 45 |
Balance, amount | |||
Series B-1 Preferred Stock | |||
Balance, shares | 6,862 | ||
Balance, amount | 69 | ||
Conversion of preferred stock into common stock, shares | -6,862 | ||
Conversion of preferred stock into common stock, amount | -69 | ||
Balance, shares | |||
Balance, amount | |||
Series B-2 Preferred Stock | |||
Balance, shares | 18,480 | ||
Balance, amount | 185 | ||
Conversion of notes payable, shares | 2,052 | ||
Conversion of notes payable, amount | 21 | ||
Conversion of preferred stock into common stock, shares | -1,090 | ||
Conversion of preferred stock into common stock, amount | -11 | ||
Issuance of shares for cash. Shares | 4,358 | 16,428 | |
Issuance of shares for cash, amount | 44 | 164 | |
Balance, shares | 21,748 | 18,480 | |
Balance, amount | $217 | $185 |
13_Equity_Transactions_Details1
13. Equity Transactions (Details 1) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Summarizes the stock option activity | |||
Outstanding Beginning Balance, Number of Options | 351,439 | 177,309 | |
Granted, Number of Options | 283,440 | 180,873 | |
Forfeitures, Number of Options | -14,439 | -3,053 | |
Expirations, Number of Options | -12,563 | -3,690 | |
Outstanding Ending Balance, Number of Options | 607,877 | 351,439 | 177,309 |
Exercisable Ending Balance, Number of Options | 203,714 | ||
Outstanding Beginning Balance, Weighted Average Exercise Price | $16.29 | $29 | |
Granted, Weighted Average Exercise Price | $3.92 | $4 | |
Forfeitures, Weighted Average Exercise Price | $4.40 | $5.50 | |
Cancelled or expired, Weighted Average Exercise Price | $150.73 | $55 | |
Outstanding Ending Balance, Weighted Average Exercise Price | $8.02 | $16.29 | $29 |
Exercisable Ending Balance, Weighted Average Exercise Price | $15.87 | ||
Weighted Average Remaining Contractual Life (in years) Outstanding | 8 years 29 days | 7 years 9 months 22 days | 6 years 11 months 5 days |
Weighted Average Remaining Contractual Life (in years) Exercisable | 5 years 7 months 28 days |
13_Equity_Transactions_Details2
13. Equity Transactions (Details 2) (USD $) | 12 Months Ended | ||
Dec. 31, 2014 | Dec. 31, 2013 | Dec. 31, 2012 | |
Options Outstanding | 607,877 | ||
Weighte Average Life (Years) | 8 years 29 days | 7 years 9 months 22 days | 6 years 11 months 5 days |
Weighted Average Exercise Price | 8.02 | ||
Options Exercisable | 203,714 | ||
Option Exercisable, Weighted Average Price | $15.87 | ||
$0.06-$0.10 [Member] | |||
Options Outstanding | 442,469 | ||
Weighte Average Life (Years) | 9 years 4 days | ||
Weighted Average Exercise Price | 3.85 | ||
Options Exercisable | 88,661 | ||
Option Exercisable, Weighted Average Price | $4.31 | ||
$0.11-$0.17 [Member] | |||
Options Outstanding | 122,698 | ||
Weighte Average Life (Years) | 6 years 9 months 18 days | ||
Weighted Average Exercise Price | 5.98 | ||
Options Exercisable | 72,343 | ||
Option Exercisable, Weighted Average Price | $5.71 | ||
$0.18-$0.31 [Member] | |||
Options Outstanding | 17,540 | ||
Weighte Average Life (Years) | 2 years 10 months 28 days | ||
Weighted Average Exercise Price | 15.44 | ||
Options Exercisable | 17,540 | ||
Option Exercisable, Weighted Average Price | $15.44 | ||
$0.39-$0.69 [Member] | |||
Options Outstanding | 12,730 | ||
Weighte Average Life (Years) | 2 years 3 months | ||
Weighted Average Exercise Price | 34.38 | ||
Options Exercisable | 12,730 | ||
Option Exercisable, Weighted Average Price | $34.38 | ||
$0.75-$2.28 [Member] | |||
Options Outstanding | 3,500 | ||
Weighte Average Life (Years) | 1 year 5 months 16 days | ||
Weighted Average Exercise Price | 113.78 | ||
Options Exercisable | 3,500 | ||
Option Exercisable, Weighted Average Price | $113.78 | ||
$2.46-$4.38 [Member] | |||
Options Outstanding | 8,239 | ||
Weighte Average Life (Years) | 1 year 1 month 24 days | ||
Weighted Average Exercise Price | 134.27 | ||
Options Exercisable | 8,239 | ||
Option Exercisable, Weighted Average Price | $134.27 | ||
$4.70-$6.45 [Member] | |||
Options Outstanding | 701 | ||
Weighte Average Life (Years) | 1 month 10 days | ||
Weighted Average Exercise Price | 322.04 | ||
Options Exercisable | 701 | ||
Option Exercisable, Weighted Average Price | $322.04 |
13_Equity_Transactions_Details3
13. Equity Transactions (Details 3) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Outstanding Beginning Balance, Number of Warrants | 4,016,075 | 1,799,741 |
Granted, Number of Warrants | 402,997 | 2,353,840 |
Expired, Number of Warrants | -253,964 | -137,506 |
Exercised, Number of Warrants | ||
Outstanding Ending Balance, Number of Warrants | 4,165,108 | 4,016,075 |
Outstanding Beginning Balance, Weighted Average Exercise Price | $6.25 | $9 |
Granted, Weighted Average Exercise Price | $6.25 | $5 |
Expired, Weighted Average Exercise Price | $21.18 | $14 |
Exercised, Weighted Average Exercise Price | ||
Outstanding Ending Balance, Weighted Average Exercise Price | $5.48 | $6.25 |
Granted, Warrants Per Share Exercise Price | $6.25 | |
Exercised, Warrants Per Share Exercise Price | ||
Minimum [Member] | ||
Outstanding Beginning Balance, Warrants Per Share Exercise Price | $0.50 | $4 |
Granted, Warrants Per Share Exercise Price | $0.50 | |
Expired, Warrants Per Share Exercise Price | $5.50 | $7 |
Outstanding Ending Balance, Warrants Per Share Exercise Price | $0.50 | $0.50 |
Maximum [Member] | ||
Outstanding Beginning Balance, Warrants Per Share Exercise Price | $83.50 | $83.50 |
Granted, Warrants Per Share Exercise Price | $8.50 | |
Expired, Warrants Per Share Exercise Price | $83.50 | $23 |
Outstanding Ending Balance, Warrants Per Share Exercise Price | $10.50 | $83.50 |
13_Equity_Transactions_Details4
13. Equity Transactions (Details Narrative ) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Cumulative Convertible Preferred Stock issued to investors, shares | 18,480 | |
Cumulative Convertible Preferred Stock, par value | $0.01 | |
Warrants to purchase common stock issued to investors | 1,182,720 | |
Derivative liability related to investor warrants | $6,000,000 | |
Fair value related to the remaining Investor Warrants | 3,000,000 | |
fair value of derivative liability | 1,500,000 | |
Series A-1, A-2 and A-4 Preferred Stock outstanding, Shares | 5,045 | 5,045 |
Common stock issued to accredited investors, shares | 1,005,144 | |
Warrants to purchase common stock under subscription agreement | 502,572 | |
Consideration amount under subscription agreement | 4,100,000 | |
Common stock issued to third parties, shares | 38,491 | 19,112 |
Common stock issued to third parties, amount | 163,842 | 98,251 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 7,345,028 | 6,077,071 |
Common stock, shares outstanding | 7,345,028 | 6,077,071 |
Weighted-average estimated fair value of stock options granted | $3.37 | $3.50 |
Unrecognized compensation cost related to stock options granted | 100,000 | |
Unrecognized compensation recognition weighted-average period | 2 years 3 months 18 days | |
Loss on extinguishment of debt | 1,105,283 | |
Executive Officer [Member] | ||
Officer converted common stock, shares | 23,559 | |
Officer converted common stock, amount | 102,500 | |
Warrants issued to officer to purchase common stock | 11,780 | |
Director [Member] | ||
Officer converted common stock, shares | 1,525 | |
Officer converted common stock, amount | $5,733 | |
Warrants issued to officer to purchase common stock | 762 |
14_Income_Taxes_Details
14. Income Taxes (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Deferred | ||
Federal | ($1,459,000) | ($1,843,000) |
State | ||
Total | -1,459,000 | -1,843,000 |
Current | ||
Federal | ||
State | 26,051 | 51,887 |
Total | 26,051 | 51,887 |
Change in valuation allowance | 1,459,000 | 1,843,000 |
Total deferred benefit | $26,051 | $51,887 |
14_Income_Taxes_Details_1
14. Income Taxes (Details 1) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Taxes Details 1 | ||
Federal statutory rate | -34.00% | -34.00% |
State net of federal tax | -2.50% | -2.90% |
Permanent and other items | 4.50% | 1.60% |
Change in valuation allowance | 33.00% | 36.30% |
Effective income tax rate | 1.00% | 1.00% |
14_Income_Taxes_Details_2
14. Income Taxes (Details 2) (USD $) | Dec. 31, 2014 | Dec. 31, 2013 |
Deferred tax assets | ||
Net operating losses | $45,250,000 | $44,365,000 |
Allowance for doubtful accounts | 67,000 | 52,000 |
Derivative liability | 1,460,000 | 1,728,000 |
Accrued liabilities and other | 693,000 | 999,000 |
Intangible Assets | 1,997,000 | 504,000 |
Property and equipment | 337,000 | |
Deferred Tax Assets, Gross | 49,467,000 | 47,985,000 |
Deferred Income tax Liabilities: | ||
Debt discount | 759,000 | 1,664,000 |
Property and equipment | 933,000 | |
Total | 1,692,000 | 1,664,000 |
Deferred tax asset, net | 47,775,000 | 46,321,000 |
Less: Valuation Allowance | -47,775,000 | -46,321,000 |
Net Deferred Tax Assets |
14_Income_Taxes_Details_Narrat
14. Income Taxes (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Income Taxes Details Narrative | ||
Net operating loss carry forwards | $131,900,000 | $129,800,000 |
Expiry year | 2034 |
15_Supplemental_Disclosure_of_2
15. Supplemental Disclosure of Cash Flow Information (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | $5,312,356 | $1,912,283 |
Supplemental schedule of non-cash investing and financing activities: | ||
Conversion of notes payable-related parties and accrued expenses to common stock | 1,003,233 | |
Property and equipment acquired through financing obligations | 2,187,754 | 359,675 |
Conversion of notes payable-related parties and accrued expenses to preferred stock | $2,052,000 |
15_Supplemental_Disclosure_of_3
15. Supplemental Disclosure of Cash Flow Information (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Supplemental Disclosure Of Cash Flow Information Details 1 | ||
Fair value of assets acquired | $11,169,963 | $34,099,131 |
Cash paid | -3,144,825 | -32,281,945 |
Debt issued | -5,000,000 | |
Common stock issued | -2,499,997 | |
Liabilities assumed | $525,141 | $1,817,186 |
16_Commitments_and_Contingenci2
16. Commitments and Contingencies (Details) (USD $) | Dec. 31, 2014 |
Commitments And Contingencies Details | |
2015 | $2,289,000 |
2016 | 1,887,000 |
2017 | 1,669,000 |
2018 | 772,000 |
2019 and thereafter | 1,479,000 |
Total | $8,096,000 |
16_Commitments_and_Contingenci3
16. Commitments and Contingencies (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Commitments And Contingencies Details Narrative | ||
Rent expense for all operating leases | $1,700,000 | $1,000,000 |
18_Concentrations_Details
18. Concentrations (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Concentrations Details | ||
United States | $81,326,000 | $53,912,000 |
Other | 10,727,000 | 7,585,000 |
Total | $92,053,000 | $61,497,000 |
18_Concentrations_Details_Narr
18. Concentrations (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
No single customer [Member] | Revenues [Member] | ||
Concentration risk percentage | 10.00% | |
Customer One [Member] | Revenues [Member] | ||
Concentration risk percentage | 10.00% | |
Customer One [Member] | Accounts Receivable [Member] | ||
Concentration risk percentage | 16.00% | 9.00% |
Accounts Receivable | $543,000 |
20_Segment_Information_Details
20. Segment Information (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2014 | Dec. 31, 2013 | |
Segment Reporting Information [Line Items] | ||
Revenues | $92,052,600 | $61,496,620 |
Cost of revenues (exclusive of depreciation and amortization) | 49,598,373 | 42,717,176 |
Gross profit | 42,454,227 | 18,779,444 |
Depreciation and amortization | 11,004,884 | 3,571,974 |
Selling, general and administrative expenses | 33,224,374 | 18,756,325 |
Interest expense | -5,988,411 | -2,638,249 |
Loss on extinguishment of debt | 0 | -1,105,283 |
Loss on change in fair value of derivative liability | 5,161,901 | -598,292 |
Gain on extinguishment of accounts payable | 0 | 2,883,660 |
Benefit (provision) for income taxes | 26,051 | 51,887 |
Total assets | 73,747,494 | 68,950,661 |
Carrier Services | ||
Segment Reporting Information [Line Items] | ||
Revenues | 29,156,799 | 31,122,771 |
Cost of revenues (exclusive of depreciation and amortization) | 25,970,357 | 27,842,245 |
Gross profit | 3,186,442 | 3,280,526 |
Depreciation and amortization | 445,273 | 222,943 |
Selling, general and administrative expenses | 2,922,989 | 3,070,678 |
Interest expense | ||
Other income (expenses) | -97,560 | -180,948 |
Gain on extinguishment of accounts payable | 2,883,660 | |
Benefit (provision) for income taxes | ||
Net loss/income | -279,380 | 2,689,617 |
Total assets | 4,553,339 | 3,021,463 |
Capital expenditures | 101,872 | 180,415 |
Business Services And Other | ||
Segment Reporting Information [Line Items] | ||
Revenues | 62,895,801 | 30,373,849 |
Cost of revenues (exclusive of depreciation and amortization) | 23,628,016 | 14,874,931 |
Gross profit | 39,267,785 | 15,498,918 |
Depreciation and amortization | 10,467,018 | 3,261,932 |
Selling, general and administrative expenses | 25,153,607 | 10,298,063 |
Interest expense | -5,659,702 | -2,300,237 |
Other income (expenses) | 23,719 | 104,548 |
Gain on extinguishment of accounts payable | ||
Benefit (provision) for income taxes | 24,741 | -26,887 |
Net loss/income | -1,964,082 | -283,653 |
Total assets | 66,394,132 | 58,487,324 |
Capital expenditures | 3,717,541 | 1,111,386 |
Corporate and Unallocated | ||
Segment Reporting Information [Line Items] | ||
Revenues | ||
Cost of revenues (exclusive of depreciation and amortization) | ||
Gross profit | ||
Depreciation and amortization | 92,593 | 87,099 |
Selling, general and administrative expenses | -5,147,778 | 5,387,584 |
Interest expense | -328,709 | -338,012 |
Loss on extinguishment of debt | -1,105,283 | |
Loss on change in fair value of derivative liability | 5,161,901 | -598,292 |
Other income (expenses) | 134,291 | 53,403 |
Gain on extinguishment of accounts payable | ||
Benefit (provision) for income taxes | -50,792 | -25,000 |
Net loss/income | -323,680 | -7,487,867 |
Total assets | 2,800,023 | 7,441,874 |
Capital expenditures | 15,548 | |
Consolidated | ||
Segment Reporting Information [Line Items] | ||
Revenues | 92,052,600 | 61,496,620 |
Cost of revenues (exclusive of depreciation and amortization) | 49,598,373 | 42,717,176 |
Gross profit | 42,454,227 | 18,779,444 |
Depreciation and amortization | 11,004,884 | 3,571,974 |
Selling, general and administrative expenses | 33,224,374 | 18,756,325 |
Interest expense | -5,988,411 | -2,638,249 |
Loss on extinguishment of debt | -1,105,283 | |
Loss on change in fair value of derivative liability | 5,161,901 | -598,292 |
Other income (expenses) | 60,450 | -22,997 |
Gain on extinguishment of accounts payable | 2,883,660 | |
Benefit (provision) for income taxes | -26,051 | -51,887 |
Net loss/income | -2,567,142 | -5,081,903 |
Total assets | 73,747,494 | 68,950,661 |
Capital expenditures | $3,819,413 | $1,307,349 |