Fusion Connect (FSNN) 10-Q 16 Nov 15 2015 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2015	Nov. 12, 2015
Document And Entity Information
Entity Registrant Name	FUSION TELECOMMUNICATIONS INTERNATIONAL INC
Entity Central Index Key	1,071,411
Document Type	10-Q
Document Period End Date	Sep. 30, 2015
Amendment Flag	false
Current Fiscal Year End Date	--12-31
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		9,091,299
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2,015

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 3,955,845	$ 6,444,683
Accounts receivable, net of allowance for doubtful accounts of approximately $395,410 and $245,000, respectively	7,063,754	7,087,599
Prepaid expenses and other current assets	1,509,722	927,772
Total current assets	12,529,321	14,460,054
Property and equipment, net	14,018,560	13,478,912
Other assets:
Security deposits	573,998	648,998
Restricted cash	164,381	1,164,381
Goodwill	10,496,650	10,397,460
Intangible assets, net	27,917,106	32,432,416
Other assets	1,197,454	1,165,273
Total other assets	40,349,589	45,808,528
TOTAL ASSETS	66,897,470	73,747,494
Current liabilities:
Notes payable - non-related parties	685,780	$ 1,225,000
Due to Root Axcess Seller	366,667
Equipment financing obligations	1,050,765	$ 662,131
Accounts payable and accrued expenses	11,139,248	10,471,514
Total current liabilities	13,242,460	12,358,645
Long-term liabilities:
Notes payable - non-related parties, net of discount	31,866,658	$ 41,263,934
Due to RootAxcess Seller	333,333
Notes payable - related parties	1,334,479	$ 1,292,878
Indebtedness under revolving credit facility	12,500,000
Equipment financing obligations	2,262,418	$ 1,702,704
Derivative liabilities	931,524	3,839,569
Total liabilities	$ 62,470,872	$ 60,457,730
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $0.01 par value, 10,000,000 shares authorized, 24,166 and 26,793 shares issued and outstanding	$ 242	$ 268
Common stock, $0.01 par value, 50,000,000 shares authorized, 9,090,614 and 7,345,028 shares issued and outstanding	90,906	73,449
Capital in excess of par value	176,474,482	175,519,459
Accumulated deficit	(172,139,032)	(162,303,412)
Total stockholders' equity	4,426,598	13,289,764
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 66,897,470	$ 73,747,494

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Current assets:
Allowance for doubtful accounts	$ 395,410	$ 245,000
Stockholders' equity:
Preferred Stock, Par Value	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	10,000,000	10,000,000
Preferred Stock, Shares Issued	24,166	26,793
Preferred Stock, Shares Outstanding	24,166	26,793
Common Stock, Par Value	$ 0.01	$ 0.01
Common Stock, Shares Authorized	50,000,000	50,000,000
Common Stock, Shares Issued	9,090,614	7,345,028
Common Stock, Shares Outstanding	9,090,614	7,345,028

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Income Statement [Abstract]
Revenues	$ 24,530,824	$ 22,486,531	$ 74,857,557	$ 68,532,333
Cost of revenues (exclusive of depreciation and amortization, shown separately below)	13,533,647	12,312,188	41,359,955	37,288,661
Gross profit	10,997,177	10,174,343	33,497,602	31,243,672
Depreciation and amortization	3,140,427	2,830,727	9,183,632	7,996,196
Selling, general and administrative expenses (including stock-based compensation of approximately $154,000 and $111,000 for the three months ended September 30, 2015 and 2014, respectively, and approximately $393,000 and $253,000 for the nine months ended September 30, 2015 and 2014, respectively)	9,796,483	8,137,368	29,379,196	23,782,259
Total operating expenses	12,936,911	10,968,095	38,562,828	31,778,455
Operating loss	(1,939,734)	(793,752)	(5,065,226)	(534,783)
Other (expenses) income:
Interest expense	(1,434,734)	(1,442,508)	(4,650,286)	(4,434,269)
Gain on change in fair value of derivative liability	1,237,730	$ 2,389,203	2,543,878	$ 4,308,272
Loss on extinguishment of debt	(2,720,355)		(2,720,355)
Other (expense) income, net	(2,398)	$ 9,639	56,369	$ (30,716)
Total other (expenses) income	(2,919,757)	956,334	(4,770,394)	(156,713)
(Loss) income before income taxes	$ (4,859,491)	162,582	$ (9,835,620)	(691,496)
(Benefit) provision for income taxes		(147,341)		25,737
Net (loss) income	$ (4,859,491)	309,923	$ (9,835,620)	(717,233)
Preferred stock dividends in arrears	(379,740)	(432,972)	(1,186,826)	(1,318,254)
Net loss attributable to common stockholders	$ (5,239,231)	$ (123,049)	$ (11,022,446)	$ (2,035,487)
Basic and diluted loss per common share	$ (0.72)	$ (0.19)	$ (1.52)	$ (0.57)
Weighted average common shares outstanding:
Basic and diluted	8,958,815	7,093,215	8,529,642	6,927,011

Condensed Consolidated Stateme5

Condensed Consolidated Statements of Operations (Unaudited) (Parenthetical) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Income Statement [Abstract]
Share Based Compensation	$ 154,000	$ 111,000	$ 393,000	$ 253,000

Condensed Consolidated Stateme6

Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - 9 months ended Sep. 30, 2015 - USD ($)	Preferred Stock	Common Stock	Capital in Excess of Par	Accumulated Deficit	Total
Begining Balance, Shares at Dec. 31, 2014	26,793	7,345,028
Begining Balance, Amount at Dec. 31, 2014	$ 268	$ 73,449	$ 175,519,459	$ (162,303,412)	$ 13,289,764
Net loss				(9,835,620)	$ (9,835,620)
Conversion of preferred stock into common stock, shares	(2,627)	614,150
Conversion of preferred stock into common stock, amount	$ (26)	$ 6,142	(6,116)
Dividends on preferred stock, Shares		344,936
Dividends on preferred stock, Amount		$ 3,451	(3,451)
Cashless exercise of lenders warrants, shares		728,333
Cashless exercise of lenders warrants, Amount		$ 7,282	356,885		$ 364,167
Issuance of common stock for services rendered, Shares		58,167
Issuance of common stock for services rendered, Amount		$ 582	215,029		215,611
Stock based compensation associated with stock incentive plans			392,676		392,676
Ending Balance, Shares at Sep. 30, 2015	24,166	9,090,614
Ending Balance, Amount at Sep. 30, 2015	$ 242	$ 90,906	$ 176,474,482	$ (172,139,032)	$ 4,426,598

Condensed Consolidated Stateme7

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Cash flows from operating activities:
Net loss	$ (9,835,620)	$ (717,233)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	9,183,632	$ 7,996,196
Loss on extinguishment on debt	2,720,355
Loss on accounts receivable settlement	$ 111,659
Loss on disposal of property		$ 122,261
Bad debt expense	$ 373,034	399,995
Stock-based compensation	392,676	253,492
Stock and warrants issued for services rendered or in settlement of liabilities	215,611	81,667
Amortization of debt discount and deferred financing fees	667,191	820,355
Gain in the change in fair value of derivative liability	(2,543,878)	(4,308,272)
Changes in operating assets and liabilities:
Accounts receivable	(565,227)	(590,444)
Prepaid expenses and other current assets	(83,205)	(670,888)
Other assets	(203,414)	(46,616)
Accounts payable and accrued expenses	(297,079)	(2,270,786)
Net cash provided by operating activities	135,735	1,069,727
Cash flows from investing activities:
Purchase of property and equipment	$ (2,479,335)	(2,954,791)
Proceeds from the sale of property and equipment		46,586
Payment for acquisitions	$ (500,000)	(226,148)
Returns of security deposits		2,000,000
Payment of security deposits		(16,886)
Change in restricted cash	$ 1,000,000	(440)
Net cash used in investing activities	$ (1,979,335)	(1,151,679)
Cash flows from financing activities:
Proceeds from the sale of preferred stock and warrants, net		$ 3,984,426
Proceeds from notes payable - non-related parties	$ 9,000,000
Proceeds from revolving debt	12,500,000
Proceeds from accounts receivable factoring arrangement	1,630,045	$ 1,200,210
Repayments of borrowings to accounts receivable factoring arrangement	(1,666,919)	(1,102,723)
Payments on equipment financing obligations	(592,514)	$ (260,814)
Payment of financing fees	$ (680,828)
Repayments of notes payable - related parties		$ (185,714)
Repayments of notes payable - non-related parties	$ (20,835,022)	(468,750)
Net cash (used in) provided by financing activities	(645,238)	3,166,635
Net change in cash and cash equivalents	(2,488,838)	3,084,683
Cash and cash equivalents, beginning of period	6,444,683	6,176,575
Cash and cash equivalents, end of period	$ 3,955,845	$ 9,261,258

1. Organization and Business

1. Organization and Business	9 Months Ended
	Sep. 30, 2015
Organization And Business
1. Organization and Business	Fusion Telecommunications International, Inc. (“Fusion” and together with its subsidiaries, the “Company”) is a Delaware corporation. 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 domestic and international voice services. The Company currently operates in two business segments, ‘Business Services’ and ‘Carrier Services’.

2. Basis of Presentation and Su

2. Basis of Presentation and Summary of Significant Accounting Policies	9 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
2. Basis of Presentation and Summary of Significant Accounting Policies	Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in all material respects in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying unaudited condensed consolidated interim financial statements have been prepared on the same basis as the financial statements for the fiscal year ended December 31, 2014. Because certain information and footnote disclosures have been condensed or omitted, these unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 as filed with the SEC. In management’s opinion, all normal and recurring adjustments considered necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been included. Management believes that the disclosures made in these unaudited condensed consolidated interim financial statements are adequate to make the information not misleading. The results for the three and nine months ended September 30, 2015 are not necessarily indicative of the results to be expected for the full year. Significant Accounting Policies For a detailed discussion of significant accounting policies, please refer to our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2014. There have been no material changes in our accounting policies during the quarter ended September 30, 2015. Principles of Consolidation The condensed consolidated interim financial statements include the accounts of Fusion and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of condensed consolidated interim financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported. Key estimates include: the recognition of revenue, allowance for doubtful accounts; asset lives used in computing depreciation and amortization; valuation of intangible assets; accounting for stock options and other equity awards, particularly related to fair value estimates, accounting for income taxes, contingencies, and litigation. While management believes that such estimates are reasonable when considered in conjunction with the financial position and results of operations taken as a whole, actual results could differ from those estimates, and such differences may be material. Reclassifications Certain reclassifications have been made to the prior year’s financial statements in order to conform to the current year’s presentation. The reclassifications had no impact on net earnings previously reported. Cash and Cash Equivalents Cash and cash equivalents include cash on deposit and short-term, highly-liquid investments with maturities of three months or less at the date of purchase. As of September 30, 2015 and December 31, 2014, the carrying value of cash and cash equivalents approximates fair value due to the short period of time to maturity. Restricted Cash Restricted cash consists primarily of cash held in reserve pursuant to the terms of financing arrangements and certificates of deposit that serve to collateralize outstanding letters of credit. Restricted cash is recorded as current or non-current assets in the consolidated balance sheets depending on the duration of the restriction and the purpose for which the restriction exists. Under the Company’s Senior Secured Credit Facility, dated as of August 28, 2015, with Opus Bank (the “Credit Agreement”), and the Third Amended and Restated Securities Purchase Agreement and Security Agreement, dated August 28, 2015, with Praesidian Capital Opportunity Find III, LP (the “Restated Purchase Agreement”), the Company is not required to maintain restricted cash until and after December 31, 2015, at which time it must maintain a minimum cash balance of $1.0 million. At September 30, 2015, the Company had certificates of deposit collateralizing a letter of credit in the aggregate amount of approximately $164,000. The letter of credit is required as security for one of the Company’s non-cancelable operating leases for office facilities. At December 31, 2014, the Company had $1.0 million in restricted cash in accordance with the terms of the Second Amended and Restated Securities Purchase Agreement (the “SPA”), and certificates of deposit collateralizing a letter of credit in the aggregate amount of approximately $164,000. Fair value of Financial Instruments At September 30, 2015 and December 31, 2014, the carrying value of the Company’s accounts receivable, accounts payable and accrued expenses approximates its fair value due to the short term nature of these financial instruments. Long-Lived Asset Impairment The Company periodically reviews long-lived assets, including intangible assets subject to amortization, for possible impairment when events or changes in circumstances indicate, in management’s judgment, that the carrying amount of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount of an asset or asset group to the estimated undiscounted future cash flows expected to be generated by such asset or asset group. If the undiscounted cash flows are less than the carrying amount of the asset or asset group, an impairment loss is recognized for the amount by which the carrying amount of the asset or asset group exceeds its fair value. The Company did not record any impairment charges during the nine months ended September 30, 2015 or 2014, as there were no indicators of impairment. Goodwill Goodwill represents the excess of consideration paid over the fair value of net assets acquired in business combinations. Goodwill is not amortized and is tested for impairment on an annual basis in the fourth quarter of each fiscal year and whenever events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators include, but are not limited to, deterioration in general economic conditions, adverse changes in the markets in which a company operates, increases in input costs that have negative effects on earnings and cash flows, or a trend of negative or declining cash flows over multiple periods. In testing goodwill for impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (more than 50%) that the estimated fair value of a reporting unit is less than its carrying amount. If the Company elects to perform a qualitative assessment and determines that an impairment is more likely than not, it is then required to perform a quantitative impairment test, otherwise no further analysis is required. The Company also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test. Under the goodwill two-step quantitative impairment test, the Company reviews for impairment the fair value of each reporting unit to its carrying value. The Company has determined that its reporting units are its operating segments (See Note 18). The first step compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying value of the reporting unit exceeds its fair value, then the second step would be conducted; otherwise, no further steps are necessary as no potential impairment exists. The second step compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. Any excess of the reporting unit goodwill carrying value over the respective implied fair value is recognized as an impairment loss. Goodwill at September 30, 2015 and December 31, 2014 was approximately $10.5 million and $10.4 million, respectively. All of the Company’s goodwill is attributable to its ‘Business Services’ segment. There was no change in goodwill as a result of adjustments to purchase price allocations of previous acquisitions during the quarter ended September 30, 2015. For the quarter ended September 30, 2015, the Company recognized estimated goodwill of approximately $0.09 million as a result of its acquisition of RootAxcess, LLC (“RootAxcess”). There was no impairment charge recorded for goodwill during the nine months ended September 30, 2015 or 2014, as there were no indicators of impairment. Advertising and Marketing Costs Costs related to advertising and marketing are expensed as incurred and included in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations. The Company’s advertising and marketing expense was approximately $145,000 and $52,000 for the three months ended September 30, 2015 and 2014, respectively, and approximately $379,000 and $130,000 for the nine months ended September 30, 2015 and 2014, respectively. Income Taxes The Company complies with accounting and reporting requirements with respect to accounting for income taxes, which require an asset and liability approach to financial accounting and reporting for income taxes. 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 September 30, 2015 and December 31, 2014. The Company is subject to income tax examinations by major taxing authorities for all tax years since 2010 and its tax returns may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of, and changes to, tax laws, regulations and interpretations thereof. No interest expense or penalties have been recognized as of September 30, 2015 and December 31, 2014. During the three and nine months ended September 30, 2015 and 2014, the Company recognized no adjustments for uncertain tax positions. Stock-Based Compensation The Company recognizes expense for its employee stock-based compensation based on the fair value of the awards that are granted. The fair values of stock options are estimated at the date of grant using the Black-Scholes option valuation model. The use of the Black-Scholes option valuation model requires the input of subjective assumptions. Measured compensation cost, net of estimated forfeitures, is recognized ratably over the vesting period of the related stock-based compensation award. In addition, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is a more reliable measurement. New and Recently Adopted Accounting Pronouncements In September 2015, the Financial Accounting Standard Board (“FASB”) issued guidance that eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Instead, acquirers must recognize measurement-period adjustments during the period in which they determine the amounts, including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date. This guidance is effective for interim and annual reporting periods beginning after December 15, 2015. The Company does not expect this guidance to have a material impact on its consolidated financial statements. In April 2015, the FASB issued guidance clarifying the circumstances under which an entity would account for fees paid in a cloud computing arrangement as a license of internal-use software. This guidance is effective for interim and annual reporting periods beginning after December 15, 2015. The Company does not expect this guidance to have a material impact on its consolidated financial statements. In addition, in April 2015, the FASB issued guidance requiring an entity to present debt issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This guidance is effective for interim and annual reporting periods beginning after December 15, 2015. The Company does not expect this guidance to have a material impact on its consolidated financial statements. In May 2014, the FASB issued guidance that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most recent current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the accounting for certain incremental costs of obtaining a contract and costs to fulfill a contract with a customer. Entities have the option of applying either a full retrospective approach to all periods presented or a modified approach that reflects differences prior to the date of adoption as an adjustment to equity. In April 2015, the FASB deferred the effective date of this guidance until January 1, 2018 and the Company is currently assessing the impact of this guidance on its consolidated financial statements.

3. Earnings per share

3. Earnings per share	9 Months Ended
	Sep. 30, 2015
Earnings Per Share [Abstract]
3. Earnings per share	Basic and diluted loss per share is computed by dividing (i) (loss) income available to common stockholders, adjusted by approximately $1.2 million gain on the fair value of the Company’s derivative liability for the three months ended September 30, 2015 and 2014, and $1.9 million gain for the nine months ended September 30, 2015 and 2014, that was attributable to 728,333 outstanding warrants with a nominal exercise price and dividends on preferred stock, 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 table sets forth the computation for basic and diluted net income per share for the three and nine months ended September 30, 2015 and 2014: Three Months Ended Nine Months Ended September 30, September 30, 2015 2014 2015 2014 Numerator (Loss) income available to common stockholders $ (4,859,491 ) $ 309,923 $ (9,835,620 ) $ (717,233 ) Dividends on Series A-1, A-2 and A-4 Convertible Preferred Stock (101,730 ) (101,730 ) (301,871 ) (301,871 ) Dividends declared on Series B-2 Convertible Preferred Stock (278,010 ) (331,242 ) (884,955 ) (1,016,383 ) Gain on nominal warrants (1,187,183 ) (1,201,749 ) (1,930,083 ) (1,890,005 ) Loss attributable to common stockholders $ (6,426,414 ) $ (1,324,798 ) $ (12,952,529 ) $ (3,925,492 ) Denominator Basic and diluted weighted average common shares outstanding 8,958,815 7,093,215 8,529,642 6,927,011 Loss per share Basic and diluted $ (0.72 ) $ (0.19 ) $ (1.52 ) $ (0.57 ) For the nine months ended September 30, 2015 and 2014, the following were excluded from the calculation of diluted earnings per common share because of their anti-dilutive effects: Nine Months Ended September 30, 2015 2014 Warrants 3,011,760 3,509,205 Convertible preferred stock 3,992,471 4,525,443 Stock options 677,126 376,863 7,681,357 8,411,511 The net loss per common share calculation includes a provision for preferred stock dividends on Fusion’s outstanding Series A-1, A-2 and A-4 Preferred Stock (the “Series A Preferred Stock”) of approximately $102,000 for the three months ended September 30, 2015 and 2014, and approximately $302,000 for the nine months ended September 30, 2015 and 2014. As of September 30, 2015, Fusion’s Board of Directors had not declared any dividends on any series of Series A Preferred Stock, and the Company had accumulated approximately $4.2 million of preferred stock dividends. Fusion’s Board of Directors has declared a dividend of $278,010 and $884,955 for the three and nine months ended September 30, 2015, related to the Company’s Series B-2 Preferred Stock, which, in accordance with the terms of the Series B-2 Preferred Stock, was paid in the form of 128,999 and 344,936 shares of Fusion common stock.

4. Intangible Assets

4. Intangible Assets	9 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
4. Intangible Assets	Intangible assets as of September 30, 2015 and December 31, 2014 are as follows: September 30, December 31, 2015 2014 Trademarks and tradename $ 1,093,400 $ 1,093,400 Proprietary technology 5,781,000 5,781,000 Non-compete agreements 10,227,100 9,852,100 Customer relationships 25,563,800 24,897,800 Favorable lease intangible 218,000 218,000 42,883,300 41,842,300 Less: accumulated amortization (14,966,194 ) (9,409,884 ) Intangible assets, net $ 27,917,106 $ 32,432,416 Amortization expense was $1.9 million and $1.7 million for the three months ended September 30, 2015 and 2014, respectively, and for the nine months ended September 30, 2015 and 2014 was $5.6 million and $5.0 million, respectively. Estimated future aggregate amortization expense is expected to be as follows: Year Estimated Annual Amortization Expense 2015 (remainder of the year) $ 1,671,159 2016 $ 3,587,246 2017 $ 3,454,097 2018 $ 2,729,701 2019 $ 1,895,455

5. Stock-based compensation

5. Stock-based compensation	9 Months Ended
	Sep. 30, 2015
Stock-based Compensation
5. Stock-based compensation	The Company's stock-based compensation plan provides for the issuance of stock options to the Company’s employees, officers, and directors. The Compensation Committee of Fusion’s Board of Directors (the "Compensation Committee") approves all awards that are granted under the Fusion's stock-based compensation plan. The following weighted average assumptions were used to determine the fair value of the stock options granted under the Company’s stock-based compensation plan using the Black-Scholes option-pricing model: Nine months ended September 30, 2015 2014 Dividend yield (%) 0.0 0.0 Expected volatility (%) 125.4 129.0 Average Risk-free interest rate (%) 1.70 2.31 Expected life of stock option term (years) 7.60 7.80 The Company recognized compensation expense of approximately $154,000 and $393,000 for the three and nine months ended September 30, 2015, respectively, and $111,000 and $253,000 for the three and nine months ended September 30, 2014, respectively. These amounts are included in selling, general, and administrative expenses in the condensed consolidated interim statements of operations. The following table summarizes the stock option activity for the nine months ended September 30, 2015: Number of Options Weighted Average Exercise Price Outstanding at December 31, 2014 607,877 $ 8.00 Granted 112,080 $ 3.67 Exercised - $ - Forfeited (33,264 ) $ 4.53 Expired (9,567 ) $ 28.29 Outstanding at September 30, 2015 677,126 $ 7.09 Exercisable at September 30, 2015 257,400 $ 12.44 As of September 30, 2015, the Company had approximately $1.0 million of unrecognized compensation expense, net of estimated forfeitures, related to stock options granted under the Company’s stock-based compensation plan, which is expected to be recognized over a weighted-average period of 2.0 years.

6. Supplemental Disclosure of C

6. Supplemental Disclosure of Cash Flow Information	9 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
6. Supplemental Disclosure of Cash Flow Information	The following table summarizes the Company’s supplemental cash flows information: Nine Months Ended September 30, Supplemental Cash Flow Information 2015 2014 Cash paid for interest $ 3,961,498 $ 3,948,533 Cash paid for income taxes $ - $ 71,495 Supplemental Non-Cash Investing and Financing Activities Property and equipment acquired under capital leases $ 1,440,816 $ 1,423,257 Dividend on Series B-2 preferred stock paid with the issuance of common stock $ 884,955 $ 1,016,383 Due to seller of RootAxcess $ 700,000 $ - Equipment received in exchange for settlement of accounts receivable $ 105,570 $ - Exercise of lenders warrants $ 364,167 $ -

7. Acquisition

7. Acquisition	9 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
7. Acquisition	On September 30, 2015, the Company acquired the customer base, technology platform, infrastructure and other assets of RootAxcess, for an aggregate purchase price of $1.2 million, payable in either total cash or in a mix of cash and, at our election, in up to $300,000 in shares of Fusion’s common stock. The purchase price was funded through borrowings of $0.5 million under the Credit Agreement. Of the $1.2 million purchase price, $0.7 million is being held by the Company against potential claims arising from breaches of representation and warranties. RootAxcess is included as part of Fusion ‘Business Services’ segment. The aggregate purchase price has initially been allocated to the fair value of the assets acquired as follows: Covenant not to compete $ 375,000 Customer contracts/relationships 666,000 Fixed assets acquired 59,810 Goodwill 99,190 Purchase Price $ 1,200,000

8. Due to RootAxcess Seller

8. Due to RootAxcess Seller	9 Months Ended
	Sep. 30, 2015
Due To Rootaxcess Seller
8. Due to RootAxcess Seller	In connection with the purchase of RootAxcess, the Company held back $.7 million against potential claims arising from breaches of representation and warranties. Of such amount, $0.4 million is to be paid to the Seller in six equal monthly installments of $66,667 each on the third, six, nine, twelve, fifteen and eighteen month anniversary of the closing date. In addition, the Company held back $0.3 million to be paid in three equal installments of $100,000 on each of the twelve, fifteen, and eighteen month anniversary of the closing date. To the extent there is a unresolved Claim Notice pending (as defined in the asset purchase agreement), the monthly installment payable to Seller immediately following the delivery of such Claim Notice may at the Company’s reasonable discretion be reduced by the amount in dispute under the Claim Notice and such amount will continue to be held by us until resolved, at which point, the Company will disburse the withheld amount to Seller in accordance with such resolution.

9. Prepaid Expenses and Other C

9. Prepaid Expenses and Other Current Assets	9 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
9. Prepaid Expenses and Other Current Assets	The following table sets forth the items in prepaid expenses and other current assets: September 30, December 31, 2015 2014 Insurance $ 82,119 $ 61,004 Rent 152,434 54,209 Marketing 83,923 34,482 Sofware subscriptions 615,416 502,696 Real estate taxes and other taxes 24,574 - Due from factoring party 157,859 - Commissions 14,271 23,015 Other 379,126 252,366 $ 1,509,722 $ 927,772

10. Accounts Payable and Accrue

10. Accounts Payable and Accrued Expenses	9 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
10. Accounts Payable and Accrued Expenses	The following table sets forth the items in accounts payable and accrued expenses: September 30, December 31, 2015 2014 Trade accounts payable $ 2,473,302 $ 3,028,902 Accrued bonus 625,625 575,000 Professional and consulting fees 156,690 132,521 Property and other taxes 460,392 235,600 Accrued network costs 1,615,925 1,384,159 Rent 92,614 131,627 Accrued universal service fund fees 818,113 538,302 Customer deposits 395,612 398,111 Due to factoring party 122,176 - Accrued payroll and vacation 444,813 266,595 Accrued sales and federal excise taxes 1,995,783 1,722,554 Accrued sales commissions 749,981 864,928 Interest payable 24,680 33,341 Deferred revenue 597,553 729,618 Other 565,989 430,256 $ 11,139,248 $ 10,471,514

11. Equipment Financing Obligat

11. Equipment Financing Obligations	9 Months Ended
	Sep. 30, 2015
Equipment Financing Obligations
11. Equipment Financing Obligations	From time to time, the Company enters into equipment financing or capital lease arrangements to finance the purchase of network hardware and software utilized in its operations. These arrangements require monthly payments over a period of 24 to 48 months with interest rates ranging between 4% and 11%. The Company’s equipment financing obligations are as follows: September 30, December 31, 2015 2014 Equipment financing obligations $ 3,313,183 $ 2,364,835 Less: current portion (1,050,765 ) (662,131 ) Long-term portion $ 2,262,418 $ 1,702,704

12. Notes Payable - Non-Related

12. Notes Payable - Non-Related Parties	9 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
12. Notes Payable - Non-Related Parties	Notes payable – non-related at September 30, 2015 and December 31, 2014 is as follows: September 30, December 31, 2015 2014 Subordinated Notes $ 34,331,646 $ 46,166,667 Discount on Subordinated Notes (1,779,208 ) (3,677,733 ) Total notes payable - non-related parties 32,552,438 42,488,934 Less: current portion (685,780 ) (1,225,000 ) Long-term portion $ 31,866,658 $ 41,263,934 On August 28, 2015, simultaneously with the execution of the Credit Agreement (see Note 13), the Company executed the Restated Purchase Agreement and repaid approximately $20.0 million of notes previously issued (the "Original Notes") under that facility held by Plexus Fund II, L.P., Plexus Funds III, L.P. and Plexus Fund QP III, L.P. (“Plexus”). Under the Restated Purchase Agreement, approximately $11.0 million of the original notes held by Plexus were paid in full with borrowings under the Credit Agreement (see Note 13), and $9.0 million of the Original Notes held by Plexus were paid using the proceeds from the sale of Series F senior notes in the aggregate principal amount of $9.0 million, bearing interest at 10.8% annually and having a maturity date of February 28, 2021. Additionally, the maturity date of the all remaining Original Notes was extended to February 28, 2021, and the continuing lenders agreed to subordinate their notes to borrowings extended under the Credit Agreement. As a result of the retirement of the Original Notes held by Plexus, the Company recorded a loss on extinguishment of debt of approximately $2.7 million.

13. Senior Secured Credit Facil

13. Senior Secured Credit Facility	9 Months Ended
	Sep. 30, 2015
Line of Credit Facility [Abstract]
13. Senior Secured Credit Facility	On August 28, 2015, a wholly-owned subsidiary of Fusion executed the $40.0 million senior secured credit facility with Opus Bank, which facility consists of a $15.0 million, four-year revolver, and a $25.0 million, five-year term loan. The maturity date of amounts borrowed under the revolving facility is August 28, 2019, and the maturity date of any amounts borrowed under the term loan is August 28, 2020. As of September 30, 2015, the Company had borrowed $12.5 million under the revolver and no amounts have been borrowed under the term loan. The Company pays interest monthly at an initial rate of 4.5%, and recognized interest expense of approximately $51,000. We used the proceeds from the revolver to retire approximately $12.0 million of the Original Notes and $0.5 million to fund our purchase of the assets of RootAxcess (See Note 7).

14. Derivative Liability

14. Derivative Liability	9 Months Ended
	Sep. 30, 2015
Derivative Liability
13. Derivative Liability	As part of various debt and equity financing transactions and other agreements, the Company has issued warrants to purchase shares of Fusion’s common stock. These warrants are accounted for in accordance with the guidance contained in ASC Topic 815 Derivatives and Hedging’ The following assumptions were used to determine the fair value of the warrants for the nine months ended September 30, 2015 and 2014: Nine months ended September 30, 2015 2014 Stock price ($) 1.88 3.65 Exercise price ($) 0 - 6.25 0 - 6.25 Risk-free interest rate (%) 1.75 - 2.06 1.78 - 2.52 Expected volatility (%) 125.4 129.0 Time to maturity (years) 7.08 - 8.25 4.25 - 9.25 On August 28, 2015 as part of the debt refinancing, the lenders under Original Credit Facility exercised warrants to purchase 728,333 shares of common stock. As a result of the exercise of these nominal warrants, the Company recognized a reduction in the derivative liability of approximately $364,000 with a reclass to equity. At September 30, 2015 and December 31, 2014, the fair value of the derivative was approximately $0.9 million and $3.8 million, respectively. For the three months ended September 30, 2015 and 2014, the Company recognized a gain on the change in the fair value of this derivative of approximately $1.2 million and $2.4 million, respectively, and a gain of approximately $2.5 million and $4.3 million for the nine months ended September 30, 2015 and 2014, respectively.

15. Notes Payable-Related Parti

15. Notes Payable-Related Parties	9 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
15. Notes Payable-Related Parties	Notes payable – related parties at September 30, 2015 and December 31, 2014 is as follows: September 30, December 31, 2015 2014 Notes payable to Marvin Rosen $ 1,478,081 $ 1,478,081 Discount on note (143,602 ) (185,203 ) Total notes payable - related parties $ 1,334,479 $ 1,292,878 The note payable to Marvin Rosen, the Company’s Chairman of the Board, is subordinated to borrowings under the Credit Agreement and the Restated Purchase Agreement. This note is unsecured, pays interest monthly at an annual rate of 7%, and matures 120 days after the Company’s obligations under the Credit Agreement are paid in full. For the nine months ended September 30, 2015, the Company recognized interest expense on the Rosen note of approximately $80,000, and amortization on the discount of approximately $42,000.

16. Equity Transactions

16. Equity Transactions	9 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
16. Equity Transactions	Common Stock Fusion is authorized to issue 50,000,000 shares of its common stock. As of September 30, 2015 and December 31, 2014, 9,090,614 and 7,345,028 shares of Fusion’s common stock, respectively, were issued and outstanding. On August 28, 2015, as part of the debt refinancing Fusion issued 728,333 shares of its common stock to the original lenders under the Original Credit Agreement upon their cashless exercise of lenders’ warrants. For the quarter ended September 30, 2015, Fusion did not issue any shares of its common stock to third party consultants, and through the nine months ended September 30, 2015, Fusion has issued an aggregate of 58,167 shares of common stock to third party consultants for services rendered valued at $215,611. During the nine months ended September 30, 2015, the Fusion Board of Directors declared aggregate dividends of $884,955 related to Fusion’s Series B-2 preferred stock, which, as permitted by the terms of the Series B-2 preferred stock, was paid in the form of 344,936 shares of Fusion’s common stock. Also, certain holders of Series B-2 preferred stock elected to convert 2,627 shares of their Series B-2 preferred stock into an aggregate of 614,150 shares of Fusion’s common stock. Preferred Stock Fusion is authorized to issue up to 10,000,000 shares of preferred stock. As of September 30, 2015 and December 31, 2014, there were 5,045 shares of Fusion’s Series A-1, A-2 and A-4 cumulative convertible preferred stock issued and outstanding. In addition, as of September 30, 2015 and December 31, 2014, there were 19,121 and 21,748 shares of Series B-2 preferred stock issued and outstanding, respectively. The holders of the Series A preferred stock are entitled to receive cumulative dividends of 8% per annum payable in arrears, when and if declared by Fusion’s Board of Directors, on January 1 of each year. As of September 30, 2015, no dividend had been declared by the Fusion Board of Directors with respect to the Series A preferred stock, and the Company had accumulated approximately $4.2 million of preferred stock dividends. In addition, shares of Series B-2 preferred stock bear a cumulative 6% annual dividend payable quarterly in arrears, in cash or shares of common stock, at the option of the Company. Commencing January 1, 2016, Fusion has the right to force the conversion of the Series B-2 preferred stock into common stock at the specified preferred conversion price; provided that the volume weighted average price for its common stock is at least $12.50 for ten consecutive trading days.

17. Commitments and Contingenci

17. Commitments and Contingencies	9 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
17. Commitments and Contingencies	Legal matters From time to time, the Company is involved in a variety of claims, lawsuits, investigations and proceedings relating to contractual disputes, employment matters, regulatory and compliance matters, intellectual property rights and other litigation arising in the ordinary course of business. Defending such proceedings can be costly and can impose a significant burden on the Company’s management and its other employees. The Company does not expect that the outcome of any such claims or actions will have a material adverse effect on the Company’s liquidity, results of operations or financial condition. As of September 30, 2015, the Company did not have any significant ongoing legal matters.

18. Segment Information

18. Segment Information	9 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
18. Segment Information	Operating segments are defined under U.S. GAAP as components of an enterprise for which separate financial information is available and evaluated regularly by a company's chief operating decision maker in deciding how to allocate resources and assess performance. The Company has two reportable segments – “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 gross profit exclude the Company’s executive, administrative and support costs. The accounting policies of the segments are the same as those described in Note 2, Summary of Significant Accounting Policies, of the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014. The Company’s segments and their principal activities consist of the following: Carrier Services Carrier Services includes the termination of domestic and international 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 Through this operating segment, the Company provides 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 channel, which utilizes the efforts of independent third-party distributors to sell the Company’s products and services. Operating segment information for the three and nine months ended September 30, 2015 and 2014 is summarized in the following table: Three months ended September 30, 2015 Carrier Services Business Services Corporate and Unallocated* Consolidated Revenues $ 8,269,529 $ 16,261,295 $ - $ 24,530,824 Cost of revenues (exclusive of depreciation and amortization) 7,642,008 5,891,639 - 13,533,647 Gross profit 627,521 10,369,656 - 10,997,177 Depreciation and amortization 48,022 2,898,066 194,339 3,140,427 Selling, general and administrative expenses 1,095,851 7,954,321 746,311 9,796,483 Interest expense (6,002) (1,813,060) 384,328 (1,434,734) Gain on change in fair value of derivative liability - - 1,237,730 1,237,730 Loss on extinguishment of debt (182,083) (2,538,272) - (2,720,355) Other income (expenses) 58,939 (243,049) 181,711 (2,399) Net (loss) income $ (645,498) $ (5,077,112) $ 863,119 $ (4,859,491) Total assets $ 4,639,835 $ 59,128,769 $ 3,128,866 $ 66,897,470 Nine months ended September 30, 2015 Carrier Services Business Services Corporate and Unallocated* Consolidated Revenues $ 25,767,099 49,090,458 $ - $ 74,857,557 Cost of revenues (exclusive of depreciation and amortization) 23,540,573 17,819,382 - 41,359,955 Gross profit 2,226,527 31,271,076 - 33,497,602 Depreciation and amortization 138,944 8,809,670 235,018 9,183,632 Selling, general and administrative expenses 3,165,276 23,685,034 2,528,886 29,379,196 Interest expense (97,193) (4,457,080) (96,014) (4,650,286) Gain on change in fair value of derivative liability - - 2,543,878 2,543,878 Loss on extinguishment of debt (182,083) (2,538,272) - (2,720,355) Other income (expenses) 465,614 (590,956) 181,711 56,369 Net loss $ (891,355) $ (8,809,936) $ (134,329) $ (9,835,620) Capital expenditures $ 69,905 $ 2,409,430 $ - $ 2,479,335 Three months ended September 30, 2014 Carrier Services Business Services Corporate and Unallocated* Consolidated Revenues $ 7,253,220 $ 15,233,311 $ - $ 22,486,531 Cost of revenues (exclusive of depreciation and amortization) 6,525,201 5,786,987 - 12,312,188 Gross profit 728,019 9,446,324 - 10,174,343 Depreciation and amortization 164,153 2,642,797 23,777 2,830,727 Selling, general and administrative expenses 752,911 6,051,105 1,333,352 8,137,368 Interest expense - (1,396,038 ) (46,470 ) (1,442,508 ) Loss on change in fair value of derivative liability - - 2,389,203 2,389,203 Other (expenses) income (3,449 ) 12,784 304 9,639 Benefit for income taxes - - (147,341 ) (147,341 ) Net (loss) income $ (192,494 ) $ (630,832 ) $ 1,133,249 $ 309,923 Total assets $ 3,599,981 $ 58,126,589 $ 5,250,339 $ 66,976,909 Nine months ended September 30, 2014 Carrier Services Business Services Corporate and Unallocated* Consolidated Revenues $ 21,926,591 $ 46,605,742 $ - $ 68,532,333 Cost of revenues (exclusive of depreciation and amortization) 19,558,258 17,730,403 - 37,288,661 Gross profit 2,368,333 28,875,339 - 31,243,672 Depreciation and amortization 280,351 7,647,899 67,946 7,996,196 Selling, general and administrative expenses 2,194,143 17,891,406 3,696,710 23,782,259 Interest expense - (4,150,106 ) (284,163 ) (4,434,269 ) Gain on change in fair value of derivative liability 4,308,272 4,308,272 Other (expenses) income (97,486 ) (13,871 ) 80,641 (30,716 ) Provision for income taxes - - 25,737 25,737 Net (loss) income $ (203,647 ) $ (827,943 ) $ 314,357 $ (717,233 ) Capital expenditures $ 100,403 $ 2,854,388 $ - $ 2,954,791 *The Company employs executive, administrative, human resources, and finance resources that service both the Carrier Services and Business Services segments. The amounts reflected as Corporate and Unallocated represent those operating expenses, assets and capital expenditures that were not allocated to a business segment or product line.

19. Related Party Transactions

19. Related Party Transactions	9 Months Ended
	Sep. 30, 2015
Related Party Transaction, Due from (to) Related Party [Abstract]
19. Related Party Transactions	Since March 6, 2014, the Company has engaged a third party to prepare its tax returns and to provide related tax advisory services. Larry Blum, a member of Fusion’s Board of Directors, is a Senior Advisor and a former partner of the third party that the Company is using to provide tax advisory services.

120. Fair Value Disclosures

120. Fair Value Disclosures	9 Months Ended
	Sep. 30, 2015
Fair Value Disclosures [Abstract]
20. 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 As of September 30, 2015 Non-current liabilities: Derivative liability (see note 14) $ - $ - $ 931,524 $ 931,524 As of December 31, 2014 Non-current liabilities: Derivative liability (see note 14) $ - $ - $ 3,839,569 $ 3,839,569 Changes in the derivative warrant liability for the nine months ended September 30, 2015 are as follows: Balance at December 31, 2014 $ 3,839,569 Gain for the period: Included in net loss (2,543,878 ) Reduction in derivative liability due to exercise of Lenders' warrants (364,167 ) Included in other comprehensive loss - Balance at September 30, 2015 $ 931,524

1. Basis of Presentation and Su

1. Basis of Presentation and Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
Basis of Presentation	The accompanying unaudited condensed consolidated financial statements have been prepared in all material respects in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information. Pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The accompanying unaudited condensed consolidated interim financial statements have been prepared on the same basis as the financial statements for the fiscal year ended December 31, 2014. Because certain information and footnote disclosures have been condensed or omitted, these unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 as filed with the SEC. In management’s opinion, all normal and recurring adjustments considered necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been included. Management believes that the disclosures made in these unaudited condensed consolidated interim financial statements are adequate to make the information not misleading. The results for the three and nine months ended September 30, 2015 are not necessarily indicative of the results to be expected for the full year.
Principles of Consolidation	The condensed consolidated interim financial statements include the accounts of Fusion and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates	The preparation of condensed consolidated interim financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported. Key estimates include: the recognition of revenue, allowance for doubtful accounts; asset lives used in computing depreciation and amortization; valuation of intangible assets; accounting for stock options and other equity awards, particularly related to fair value estimates, accounting for income taxes, contingencies, and litigation. While management believes that such estimates are reasonable when considered in conjunction with the financial position and results of operations taken as a whole, actual results could differ from those estimates, and such differences may be material.
Reclassifications	Certain reclassifications have been made to the prior year’s financial statements in order to conform to the current year’s presentation. The reclassifications had no impact on net earnings previously reported.
Cash and Cash Equivalents	Cash and cash equivalents include cash on deposit and short-term, highly-liquid investments with maturities of three months or less at the date of purchase. As of September 30, 2015 and December 31, 2014, the carrying value of cash and cash equivalents approximates fair value due to the short period of time to maturity.
Restricted Cash	Restricted cash consists primarily of cash held in reserve pursuant to the terms of financing arrangements and certificates of deposit that serve to collateralize outstanding letters of credit. Restricted cash is recorded as current or non-current assets in the consolidated balance sheets depending on the duration of the restriction and the purpose for which the restriction exists. Under the Company’s Senior Secured Credit Facility, dated as of August 28, 2015, with Opus Bank (the “Credit Agreement”), and the Third Amended and Restated Securities Purchase Agreement and Security Agreement, dated August 28, 2015, with Praesidian Capital Opportunity Find III, LP (the “Restated Purchase Agreement”), the Company is not required to maintain restricted cash until and after December 31, 2015, at which time it must maintain a minimum cash balance of $1.0 million. At September 30, 2015, the Company had certificates of deposit collateralizing a letter of credit in the aggregate amount of approximately $164,000. The letter of credit is required as security for one of the Company’s non-cancelable operating leases for office facilities. At December 31, 2014, the Company had $1.0 million in restricted cash in accordance with the terms of the Second Amended and Restated Securities Purchase Agreement (the “SPA”), and certificates of deposit collateralizing a letter of credit in the aggregate amount of approximately $164,000.
Fair value of Financial Instruments	At September 30, 2015 and December 31, 2014, the carrying value of the Company’s accounts receivable, accounts payable and accrued expenses approximates its fair value due to the short term nature of these financial instruments.
Long-Lived Asset Impairment	The Company periodically reviews long-lived assets, including intangible assets subject to amortization, for possible impairment when events or changes in circumstances indicate, in management’s judgment, that the carrying amount of an asset may not be recoverable. Recoverability is measured by a comparison of the carrying amount of an asset or asset group to the estimated undiscounted future cash flows expected to be generated by such asset or asset group. If the undiscounted cash flows are less than the carrying amount of the asset or asset group, an impairment loss is recognized for the amount by which the carrying amount of the asset or asset group exceeds its fair value. The Company did not record any impairment charges during the nine months ended September 30, 2015 or 2014, as there were no indicators of impairment.
Goodwill	Goodwill represents the excess of consideration paid over the fair value of net assets acquired in business combinations. Goodwill is not amortized and is tested for impairment on an annual basis in the fourth quarter of each fiscal year and whenever events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators include, but are not limited to, deterioration in general economic conditions, adverse changes in the markets in which a company operates, increases in input costs that have negative effects on earnings and cash flows, or a trend of negative or declining cash flows over multiple periods. In testing goodwill for impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (more than 50%) that the estimated fair value of a reporting unit is less than its carrying amount. If the Company elects to perform a qualitative assessment and determines that an impairment is more likely than not, it is then required to perform a quantitative impairment test, otherwise no further analysis is required. The Company also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test. Under the goodwill two-step quantitative impairment test, the Company reviews for impairment the fair value of each reporting unit to its carrying value. The Company has determined that its reporting units are its operating segments (See Note 18). The first step compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying value of the reporting unit exceeds its fair value, then the second step would be conducted; otherwise, no further steps are necessary as no potential impairment exists. The second step compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. Any excess of the reporting unit goodwill carrying value over the respective implied fair value is recognized as an impairment loss. Goodwill at September 30, 2015 and December 31, 2014 was approximately $10.5 million and $10.4 million, respectively. All of the Company’s goodwill is attributable to its ‘Business Services’ segment. There was no change in goodwill as a result of adjustments to purchase price allocations of previous acquisitions during the quarter ended September 30, 2015. For the quarter ended September 30, 2015, the Company recognized estimated goodwill of approximately $0.09 million as a result of its acquisition of RootAxcess, LLC (“RootAxcess”). There was no impairment charge recorded for goodwill during the nine months ended September 30, 2015 or 2014, as there were no indicators of impairment.
Advertising and Marketing Costs	Costs related to advertising and marketing are expensed as incurred and included in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations. The Company’s advertising and marketing expense was approximately $145,000 and $52,000 for the three months ended September 30, 2015 and 2014, respectively, and approximately $379,000 and $130,000 for the nine months ended September 30, 2015 and 2014, respectively.
Income Taxes	The Company complies with accounting and reporting requirements with respect to accounting for income taxes, which require an asset and liability approach to financial accounting and reporting for income taxes. 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 September 30, 2015 and December 31, 2014. The Company is subject to income tax examinations by major taxing authorities for all tax years since 2010 and its tax returns may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of, and changes to, tax laws, regulations and interpretations thereof. No interest expense or penalties have been recognized as of September 30, 2015 and December 31, 2014. During the three and nine months ended September 30, 2015 and 2014, the Company recognized no adjustments for uncertain tax positions.
Stock-Based Compensation	The Company recognizes expense for its employee stock-based compensation based on the fair value of the awards that are granted. The fair values of stock options are estimated at the date of grant using the Black-Scholes option valuation model. The use of the Black-Scholes option valuation model requires the input of subjective assumptions. Measured compensation cost, net of estimated forfeitures, is recognized ratably over the vesting period of the related stock-based compensation award. In addition, all transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is a more reliable measurement.
New and Recently Adopted Accounting Pronouncements	In September 2015, the Financial Accounting Standard Board (“FASB”) issued guidance that eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. Instead, acquirers must recognize measurement-period adjustments during the period in which they determine the amounts, including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date. This guidance is effective for interim and annual reporting periods beginning after December 15, 2015. The Company does not expect this guidance to have a material impact on its consolidated financial statements. In April 2015, the FASB issued guidance clarifying the circumstances under which an entity would account for fees paid in a cloud computing arrangement as a license of internal-use software. This guidance is effective for interim and annual reporting periods beginning after December 15, 2015. The Company does not expect this guidance to have a material impact on its consolidated financial statements. In addition, in April 2015, the FASB issued guidance requiring an entity to present debt issuance costs related to a recognized debt liability as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This guidance is effective for interim and annual reporting periods beginning after December 15, 2015. The Company does not expect this guidance to have a material impact on its consolidated financial statements. In May 2014, the FASB issued guidance that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most recent current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also specifies the accounting for certain incremental costs of obtaining a contract and costs to fulfill a contract with a customer. Entities have the option of applying either a full retrospective approach to all periods presented or a modified approach that reflects differences prior to the date of adoption as an adjustment to equity. In April 2015, the FASB deferred the effective date of this guidance until January 1, 2018 and the Company is currently assessing the impact of this guidance on its consolidated financial statements.

3. Earnings per share (Tables)

3. Earnings per share (Tables)	9 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
Computation for basic and diluted net income per share	Three Months Ended Nine Months Ended September 30, September 30, 2015 2014 2015 2014 Numerator (Loss) income available to common stockholders $ (4,859,491 ) $ 309,923 $ (9,835,620 ) $ (717,233 ) Dividends on Series A-1, A-2 and A-4 Convertible Preferred Stock (101,730 ) (101,730 ) (301,871 ) (301,871 ) Dividends declared on Series B-2 Convertible Preferred Stock (278,010 ) (331,242 ) (884,955 ) (1,016,383 ) Gain on nominal warrants (1,187,183 ) (1,201,749 ) (1,930,083 ) (1,890,005 ) Loss attributable to common stockholders $ (6,426,414 ) $ (1,324,798 ) $ (12,952,529 ) $ (3,925,492 ) Denominator Basic and diluted weighted average common shares outstanding 8,958,815 7,093,215 8,529,642 6,927,011 Loss per share Basic and diluted $ (0.72 ) $ (0.19 ) $ (1.52 ) $ (0.57 )
Excluded from calculation of diluted earnings per common share	Nine Months Ended September 30, 2015 2014 Warrants 3,011,760 3,509,205 Convertible preferred stock 3,992,471 4,525,443 Stock options 677,126 376,863 7,681,357 8,411,511

4. Intangible Assets (Tables)

4. Intangible Assets (Tables)	9 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
Identifiable intangible assets	September 30, December 31, 2015 2014 Trademarks and tradename $ 1,093,400 $ 1,093,400 Proprietary technology 5,781,000 5,781,000 Non-compete agreements 10,227,100 9,852,100 Customer relationships 25,563,800 24,897,800 Favorable lease intangible 218,000 218,000 42,883,300 41,842,300 Less: accumulated amortization (14,966,194 ) (9,409,884 ) Intangible assets, net $ 27,917,106 $ 32,432,416
Estimated future aggregate amortization expense	Year Estimated Annual Amortization Expense 2015 (remainder of the year) $ 1,671,159 2016 $ 3,587,246 2017 $ 3,454,097 2018 $ 2,729,701 2019 $ 1,895,455

5. Stock-based compensation (Ta

5. Stock-based compensation (Tables)	9 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
Fair value of stock options granted	Nine months ended September 30, 2015 2014 Dividend yield (%) 0.0 0.0 Expected volatility (%) 125.4 129.0 Average Risk-free interest rate (%) 1.70 2.31 Expected life of stock option term (years) 7.60 7.80
Stock option activity	Number of Options Weighted Average Exercise Price Outstanding at December 31, 2014 607,877 $ 8.00 Granted 112,080 $ 3.67 Exercised - $ - Forfeited (33,264 ) $ 4.53 Expired (9,567 ) $ 28.29 Outstanding at September 30, 2015 677,126 $ 7.09 Exercisable at September 30, 2015 257,400 $ 12.44

6. Supplemental Disclosure of32

6. Supplemental Disclosure of Cash Flow Information (Tables)	9 Months Ended
	Sep. 30, 2015
Supplemental Disclosure Of Cash Flow Information Tables
Supplemental Disclosure of Cash Flow Information	Nine Months Ended September 30, Supplemental Cash Flow Information 2015 2014 Cash paid for interest $ 3,961,498 $ 3,948,533 Cash paid for income taxes $ - $ 71,495 Supplemental Non-Cash Investing and Financing Activities Property and equipment acquired under capital leases $ 1,440,816 $ 1,423,257 Dividend on Series B-2 preferred stock paid with the issuance of common stock $ 884,955 $ 1,016,383 Due to seller of RootAxcess $ 700,000 $ - Equipment received in exchange for settlement of accounts receivable $ 105,570 $ - Exercise of lenders warrants $ 364,167 $ -

7. Acquisition (Tables)

7. Acquisition (Tables)	9 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
Purchase price allocated to the fair value of the net assets	Covenant not to compete $ 375,000 Customer contracts/relationships 666,000 Fixed assets acquired 59,810 Goodwill 99,190 Purchase Price $ 1,200,000

9. Prepaid Expenses and Other34

9. Prepaid Expenses and Other Current Assets (Tables)	9 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
Prepaid expenses and other current assets	September 30, December 31, 2015 2014 Insurance $ 82,119 $ 61,004 Rent 152,434 54,209 Marketing 83,923 34,482 Sofware subscriptions 615,416 502,696 Real estate taxes and other taxes 24,574 - Due from factoring party 157,859 - Commissions 14,271 23,015 Other 379,126 252,366 $ 1,509,722 $ 927,772

10. Accounts Payable and Accr35

10. Accounts Payable and Accrued Expenses (Tables)	9 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
Accounts payable and accrued expenses	September 30, December 31, 2015 2014 Trade accounts payable $ 2,473,302 $ 3,028,902 Accrued bonus 625,625 575,000 Professional and consulting fees 156,690 132,521 Property and other taxes 460,392 235,600 Accrued network costs 1,615,925 1,384,159 Rent 92,614 131,627 Accrued universal service fund fees 818,113 538,302 Customer deposits 395,612 398,111 Due to factoring party 122,176 - Accrued payroll and vacation 444,813 266,595 Accrued sales and federal excise taxes 1,995,783 1,722,554 Accrued sales commissions 749,981 864,928 Interest payable 24,680 33,341 Deferred revenue 597,553 729,618 Other 565,989 430,256 $ 11,139,248 $ 10,471,514

11. Equipment Financing Oblig36

11. Equipment Financing Obligations (Tables)	9 Months Ended
	Sep. 30, 2015
Equipment Financing Obligations
Equipment financing obligations	September 30, December 31, 2015 2014 Equipment financing obligations $ 3,313,183 $ 2,364,835 Less: current portion (1,050,765 ) (662,131 ) Long-term portion $ 2,262,418 $ 1,702,704

12. Notes Payable - Non-Relat37

12. Notes Payable - Non-Related Parties (Tables)	9 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
Components of notes payable non-related parties	September 30, December 31, 2015 2014 Subordinated Notes $ 34,331,646 $ 46,166,667 Discount on Subordinated Notes (1,779,208 ) (3,677,733 ) Total notes payable - non-related parties 32,552,438 42,488,934 Less: current portion (685,780 ) (1,225,000 ) Long-term portion $ 31,866,658 $ 41,263,934

14. Derivative Liability (Table

14. Derivative Liability (Tables)	9 Months Ended
	Sep. 30, 2015
Derivative Liability Tables
Assumptions used to determine the fair value of the warrants	Nine months ended September 30, 2015 2014 Stock price ($) 1.88 3.65 Exercise price ($) 0 - 6.25 0 - 6.25 Risk-free interest rate (%) 1.75 - 2.06 1.78 - 2.52 Expected volatility (%) 125.4 129.0 Time to maturity (years) 7.08 - 8.25 4.25 - 9.25

15. Notes Payable-Related Par39

15. Notes Payable-Related Parties (Tables)	9 Months Ended
	Sep. 30, 2015
Notes Payable-related Parties Tables
Component of notes payable related party	September 30, December 31, 2015 2014 Notes payable to Marvin Rosen $ 1,478,081 $ 1,478,081 Discount on note (143,602 ) (185,203 ) Total notes payable - related parties $ 1,334,479 $ 1,292,878

18. Segment Information (Tables

18. Segment Information (Tables)	9 Months Ended
	Sep. 30, 2015
Notes to Financial Statements
Operating segment information	Three months ended September 30, 2015 Carrier Services Business Services Corporate and Unallocated* Consolidated Revenues $ 8,269,529 $ 16,261,295 $ - $ 24,530,824 Cost of revenues (exclusive of depreciation and amortization) 7,642,008 5,891,639 - 13,533,647 Gross profit 627,521 10,369,656 - 10,997,177 Depreciation and amortization 48,022 2,898,066 194,339 3,140,427 Selling, general and administrative expenses 1,095,851 7,954,321 746,311 9,796,483 Interest expense (6,002) (1,813,060) 384,328 (1,434,734) Gain on change in fair value of derivative liability - - 1,237,730 1,237,730 Loss on extinguishment of debt (182,083) (2,538,272) - (2,720,355) Other income (expenses) 58,939 (243,049) 181,711 (2,399) Net (loss) income $ (645,498) $ (5,077,112) $ 863,119 $ (4,859,491) Total assets $ 4,639,835 $ 59,128,769 $ 3,128,866 $ 66,897,470 Nine months ended September 30, 2015 Carrier Services Business Services Corporate and Unallocated* Consolidated Revenues $ 25,767,099 49,090,458 $ - $ 74,857,557 Cost of revenues (exclusive of depreciation and amortization) 23,540,573 17,819,382 - 41,359,955 Gross profit 2,226,527 31,271,076 - 33,497,602 Depreciation and amortization 138,944 8,809,670 235,018 9,183,632 Selling, general and administrative expenses 3,165,276 23,685,034 2,528,886 29,379,196 Interest expense (97,193) (4,457,080) (96,014) (4,650,286) Gain on change in fair value of derivative liability - - 2,543,878 2,543,878 Loss on extinguishment of debt (182,083) (2,538,272) - (2,720,355) Other income (expenses) 465,614 (590,956) 181,711 56,369 Net loss $ (891,355) $ (8,809,936) $ (134,329) $ (9,835,620) Capital expenditures $ 69,905 $ 2,409,430 $ - $ 2,479,335 Three months ended September 30, 2014 Carrier Services Business Services Corporate and Unallocated* Consolidated Revenues $ 7,253,220 $ 15,233,311 $ - $ 22,486,531 Cost of revenues (exclusive of depreciation and amortization) 6,525,201 5,786,987 - 12,312,188 Gross profit 728,019 9,446,324 - 10,174,343 Depreciation and amortization 164,153 2,642,797 23,777 2,830,727 Selling, general and administrative expenses 752,911 6,051,105 1,333,352 8,137,368 Interest expense - (1,396,038 ) (46,470 ) (1,442,508 ) Loss on change in fair value of derivative liability - - 2,389,203 2,389,203 Other (expenses) income (3,449 ) 12,784 304 9,639 Benefit for income taxes - - (147,341 ) (147,341 ) Net (loss) income $ (192,494 ) $ (630,832 ) $ 1,133,249 $ 309,923 Total assets $ 3,599,981 $ 58,126,589 $ 5,250,339 $ 66,976,909 Nine months ended September 30, 2014 Carrier Services Business Services Corporate and Unallocated* Consolidated Revenues $ 21,926,591 $ 46,605,742 $ - $ 68,532,333 Cost of revenues (exclusive of depreciation and amortization) 19,558,258 17,730,403 - 37,288,661 Gross profit 2,368,333 28,875,339 - 31,243,672 Depreciation and amortization 280,351 7,647,899 67,946 7,996,196 Selling, general and administrative expenses 2,194,143 17,891,406 3,696,710 23,782,259 Interest expense - (4,150,106 ) (284,163 ) (4,434,269 ) Gain on change in fair value of derivative liability 4,308,272 4,308,272 Other (expenses) income (97,486 ) (13,871 ) 80,641 (30,716 ) Provision for income taxes - - 25,737 25,737 Net (loss) income $ (203,647 ) $ (827,943 ) $ 314,357 $ (717,233 ) Capital expenditures $ 100,403 $ 2,854,388 $ - $ 2,954,791 *The Company employs executive, administrative, human resources, and finance resources that service both the Carrier Services and Business Services segments. The amounts reflected as Corporate and Unallocated represent those operating expenses, assets and capital expenditures that were not allocated to a business segment or product line.

20. Fair Value Disclosures (Tab

20. Fair Value Disclosures (Tables)	9 Months Ended
	Sep. 30, 2015
Fair Value Disclosures [Abstract]
Fair value of the liability measured at fair value on a recurring basis	Level 1 Level 2 Level 3 Total As of September 30, 2015 Non-current liabilities: Derivative liability (see note 14) $ - $ - $ 931,524 $ 931,524 As of December 31, 2014 Non-current liabilities: Derivative liability (see note 14) $ - $ - $ 3,839,569 $ 3,839,569
Changes in the derivative liability	Balance at December 31, 2014 $ 3,839,569 Gain for the period: Included in net loss (2,543,878 ) Reduction in derivative liability due to exercise of Lenders' warrants (364,167 ) Included in other comprehensive loss - Balance at September 30, 2015 $ 931,524

2. Basis of Presentation and 42

2. Basis of Presentation and Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Notes to Financial Statements
Certificate of deposit collateralizing a letter of credit	$ 164,000		$ 164,000		$ 164,000
Restricted cash held in reserve					1,000,000
Goodwill	10,496,650		10,496,650		$ 10,397,460
Goodwill acquired	90,000
Advertising and marketing expenses	$ 145,000	$ 52,000	$ 379,000	$ 130,000

3. Earnings Per Share (Details)

3. Earnings Per Share (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Numerator
(Loss) income available to common stockholders	$ (4,859,491)	$ 309,923	$ (9,835,620)	$ (717,233)
Dividends on Series A-1, A-2 and A-4 Convertible Preferred Stock	(101,730)	(101,730)	(301,871)	(301,871)
Dividends declared on Series B-2 Convertible Preferred Stock	(278,010)	(331,242)	(884,955)	(1,016,383)
Gain on nominal warrants	(1,187,183)	(1,201,749)	(1,930,083)	(1,890,005)
Loss attributable to common stockholders	$ (6,426,414)	$ (1,324,798)	$ (12,952,529)	$ (3,925,492)
Denominator
Basic and diluted weighted average common shares outstanding	8,958,815	7,093,215	8,529,642	6,927,011
Loss per share
Basic and diluted	$ (0.72)	$ (0.19)	$ (1.52)	$ (0.57)

3. Earnings Per Share (Details

3. Earnings Per Share (Details 1) - shares	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Antidilutive securities excluded from the calculation of diluted earnings per common share	7,681,357	8,411,511
Warrant
Antidilutive securities excluded from the calculation of diluted earnings per common share	3,011,760	3,509,205
Convertible Preferred Stock [Member]
Antidilutive securities excluded from the calculation of diluted earnings per common share	3,992,471	4,525,443
Stock Options
Antidilutive securities excluded from the calculation of diluted earnings per common share	677,126	376,863

3. Earnings Per Share (Detail45

3. Earnings Per Share (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Income (loss) available to common stockholders	$ 1,200,000	$ 1,200,000	$ 1,900,000	$ 1,900,000
Outstanding warrants	728,333		728,333
Preferred stock dividends
Preferred stock dividends accumulated	$ 4,200,000		$ 4,200,000
Series A Preferred Stock [Member]
Preferred stock dividends	102,000	$ 102,000	302,000	$ 302,000
Preferred stock dividends accumulated	$ 4,200,000		4,200,000
Series B-2 Preferred Stock [Member]
Preferred stock dividends			$ 884,955
Preferred stock dividends paid	128,999		344,936
Board of Directors [Member]
Preferred stock dividends	$ 278,010		$ 884,955

4. Intangible Assets (Details)

4. Intangible Assets (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Gross intangible assets	$ 42,883,300	$ 41,842,300
Less: accumulated amortization	(14,966,194)	(9,409,884)
Intangible assets, net	27,917,106	32,432,416
Trademarks and tradename [Member]
Gross intangible assets	1,093,400	1,093,400
Proprietary technology [Member]
Gross intangible assets	5,781,000	5,781,000
Non-compete agreement [Member]
Gross intangible assets	10,227,100	9,852,100
Customer relationships [Member]
Gross intangible assets	25,563,800	24,897,800
Favorable lease intangible [Member]
Gross intangible assets	$ 218,000	$ 218,000

4. Intangible Assets (Details 1

4. Intangible Assets (Details 1)	Sep. 30, 2015USD ($)
Notes to Financial Statements
2015 (remainder of the year)	$ 1,671,159
2,016	3,587,246
2,017	3,454,097
2,018	2,729,701
2,019	$ 1,895,455

4. Intangible Assets (Details N

4. Intangible Assets (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Notes to Financial Statements
Amortization expense	$ 1,900,000	$ 1,700,000	$ 5,600,000	$ 5,000,000

5. Stock-based compensation (De

5. Stock-based compensation (Details)	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Dividend yield (%)	0.00%	0.00%
Expected volatility (%)	125.40%	129.00%
Average Risk-free interest rate (%)	1.70%	2.31%
Expected life of stock option term (years)	7 years 7 months 6 days	7 years 9 months 18 days

5. Stock-based compensation (50

5. Stock-based compensation (Details 1)	9 Months Ended
	Sep. 30, 2015$ / sharesshares
Number of Options
Oustanding at December 31, 2014 | shares	607,877
Granted | shares	112,080
Exercised | shares
Forfeited | shares	(33,264)
Expired | shares	(9,567)
Outstanding at Sept 30, 2015 | shares	677,126
Exercisable at Sept 30, 2015 | shares	257,400
Weighted Average Exercise Price
Oustanding at December 31, 2014	$ 8
Granted	$ 3.67
Exercised
Forfeited	$ 4.53
Expired	28.29
Outstanding at Sept 30, 2015	7.09
Exercisable at Sept 30, 2015	$ 12.44

5. Stock-based compensation (51

5. Stock-based compensation (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Compensation expense	$ 154,000	$ 111,000	$ 393,000	$ 253,000
Unrecognized compensation expense, net of estimated forfeitures	$ 1,000,000		$ 1,000,000
Weighted-average period recognized			2 years

6. Supplemental Disclosure of52

6. Supplemental Disclosure of Cash Flow Information (Details) - USD ($)	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Supplemental Cash Flow Information
Cash paid for interest	$ 3,961,498	$ 3,948,533
Cash paid for income taxes		71,495
Supplemental Non-Cash Investing and Financing Activities
Property and equipment acquired under capital leases	$ 1,440,816	1,423,257
Dividend on Series B-2 preferred stock paid with the issuance of common stock	884,955	$ 1,016,383
Due to seller of RootAxcess	700,000
Equipment received in exchange for settlement of accounts receivable	105,570
Exercise of lenders warrants	$ 364,167

7. Acquisition (Details)

7. Acquisition (Details)	Sep. 30, 2015USD ($)
Business Combinations [Abstract]
Covenant not to compete	$ 375,000
Customer contracts/relationships	666,000
Fixed assets acquired	59,810
Goodwill	99,190
Purchase Price	$ 1,200,000

7. Acquisition (Details Narrati

7. Acquisition (Details Narrative)	Sep. 30, 2015USD ($)
Acquisition Details Narrative
Acquisition of assets	$ 1,200,000
Acquisition of assets paid in common shares, amount	300,000
Acquisition funded through borrowings Credit Agreement.	500,000
Held by Company against potential claims	$ 700,000

9. Prepaid Expenses and Other55

9. Prepaid Expenses and Other Current Assets (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Prepaid expenses and other current assets
Insurance	$ 82,119	$ 61,004
Rent	152,434	54,209
Marketing	83,923	34,482
Software subscriptions	615,416	$ 502,696
Real estate taxes and other taxes	24,574
Due from factoring party	157,859
Commissions	14,271	$ 23,015
Other	379,126	252,366
Total	$ 1,509,722	$ 927,772

10. Accounts Payable and Accr56

10. Accounts Payable and Accrued Expenses (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Notes to Financial Statements
Trade accounts payable	$ 2,473,302	$ 3,028,902
Accrued bonus	625,625	575,000
Professional and consulting fees	156,690	132,521
Property and other taxes	460,392	235,600
Accrued network costs	1,615,925	1,384,159
Rent	92,614	131,627
Accrued universal service fund fees	818,113	538,302
Customer deposits	395,612	$ 398,111
Due to factoring party	122,176
Accrued payroll and vacation	444,813	$ 266,595
Accrued sales and federal excise taxes	1,995,783	1,722,554
Accrued sales commissions	749,981	864,928
Interest payable	24,680	33,341
Deferred revenue	597,553	729,618
Other	565,989	430,256
Total accounts payable and accrued expenses	$ 11,139,248	$ 10,471,514

11. Equipment Financing Oblig57

11. Equipment Financing Obligations (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Equipment Financing Obligations
Equipment financing obligations	$ 3,313,183	$ 2,364,835
Less: current portion	(1,050,765)	(662,131)
Long-term portion	$ 2,262,418	$ 1,702,704

12. Notes Payable - Non-Relat58

12. Notes Payable - Non-Related Parties (Details) - Non Related Party [Member] - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Senior Notes	$ 34,331,646	$ 46,166,667
Discount on Senior Notes	(1,779,208)	(3,677,733)
Total notes payable - non-related parties	32,552,438	42,488,934
Less: current portion	(685,780)	(1,225,000)
Long-term portion	$ 31,866,658	$ 41,263,934

13. Senior Secured Credit Fac59

13. Senior Secured Credit Facility (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2015	Dec. 31, 2014
Senior Secured Credit Facility Details Narrative
Revolver credit facility	$ 12,500,000
Interest rate	4.50%
Interest expense	$ 51,000

14. Derivative Liability (Detai

14. Derivative Liability (Details) - $ / shares	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014
Stock price ($)	$ 1.88	$ 3.65
Expected volatility (%)	125.40%	129.00%
Minimum
Exercise price ($)	$ 0	$ 0
Risk-free interest rate (%)	1.75%	1.78%
Time to maturity (years)	7 years 29 days	4 years 3 months
Maximum
Exercise price ($)	$ 6.25	$ 6.25
Risk-free interest rate (%)	2.06%	2.52%
Time to maturity (years)	8 years 3 months	9 years 3 months

14. Derivative Liability (Det61

14. Derivative Liability (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014	Dec. 31, 2014
Derivative Liability [Abstract]
Fair value derivative liability	$ 900,000		$ 900,000		$ 3,800,000
Gain on fair value of derivative	$ 1,200,000	$ 2,400,000	$ 2,500,000	$ 4,300,000

15. Notes Payable-Related Par62

15. Notes Payable-Related Parties (Details) - RelatedParty - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Notes payable to Marvin Rosen	$ 1,478,081	$ 1,478,081
Discount on notes	(143,602)	(185,203)
Total notes payable - related parties	$ 1,334,479	$ 1,292,878

15. Notes Payable-Related Par63

15. Notes Payable-Related Parties (Details Narrative)	9 Months Ended
	Sep. 30, 2015USD ($)
Notes Payable-related Parties Details Narrative
Interest expense	$ 80,000
Amortization discount	$ 42,000

16. Equity Transactions (Detail

16. Equity Transactions (Details Narrative) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2015	Sep. 30, 2015	Dec. 31, 2014
Common Stock, Shares Authorized	50,000,000	50,000,000	50,000,000
Common Stock, Shares Issued	9,090,614	9,090,614	7,345,028
Common Stock, Shares Outstanding	9,090,614	9,090,614	7,345,028
Preferred Stock, Shares Authorized	10,000,000	10,000,000	10,000,000
Preferred Stock, Shares Issued	24,166	24,166	26,793
Preferred Stock, Shares Outstanding	24,166	24,166	26,793
Series A-1, A-2 and A-4 Preferred Stock outstanding, Shares			5,045
Preferred stock dividends accumulated	$ 4,200,000	$ 4,200,000
Preferred stock dividends
Board of Directors [Member]
Preferred stock dividends	$ 278,010	$ 884,955
Series B-2 Preferred Stock [Member]
Preferred Stock, Shares Issued	19,121	19,121	21,748
Preferred Stock, Shares Outstanding	19,121	19,121	21,748
Preferred stock dividends paid	128,999	344,936
Preferred stock dividends		$ 884,955
Series B-2 Preferred Stock converted into common stock	2,627
Common Stock
Common stock issued for services	58,167
Common stock issued for services value	$ 215,611
Preferred stock dividends		$ 3,451
Series B-2 Preferred Stock converted into common stock	614,150

18. Segment Information (Detail

18. Segment Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2015	Sep. 30, 2014	Sep. 30, 2015	Sep. 30, 2014
Segment Reporting Information [Line Items]
Revenues	$ 24,530,824	$ 22,486,531	$ 74,857,557	$ 68,532,333
Cost of revenues (exclusive of depreciation and amortization)	13,533,647	12,312,188	41,359,955	37,288,661
Gross profit	10,997,177	10,174,343	33,497,602	31,243,672
Selling, general and administrative expenses	9,796,483	8,137,368	29,379,196	23,782,259
Interest expense	(1,434,734)	$ (1,442,508)	(4,650,286)	(4,434,269)
Gain (loss) on change in fair value of derivative liability			2,543,878	$ 4,308,272
Loss on extinguishment of debt	$ (2,720,355)		$ (2,720,355)
Provision for income taxes		$ (147,341)		$ 25,737
Carrier Services
Segment Reporting Information [Line Items]
Revenues	$ 8,269,529	7,253,220	$ 25,767,099	21,926,591
Cost of revenues (exclusive of depreciation and amortization)	7,642,008	6,525,201	23,540,573	19,558,258
Gross profit	627,521	728,019	2,226,527	2,368,333
Depreciation and amortization	48,022	164,153	138,944	280,351
Selling, general and administrative expenses	1,095,851	$ 752,911	3,165,276	$ 2,194,143
Interest expense	$ (6,002)		$ (97,193)
Gain (loss) on change in fair value of derivative liability
Loss on extinguishment of debt	$ (182,083)		$ (182,083)
Other income (expenses)	58,939	$ (3,449)	465,614	$ (97,486)
Provision for income taxes
Net (loss) income	(645,498)	$ (192,494)	(891,355)	$ (203,647)
Total assets	4,639,835	3,599,981
Capital expenditures			69,905	100,403
Business Services
Segment Reporting Information [Line Items]
Revenues	16,261,295	15,233,311	49,090,458	46,605,742
Cost of revenues (exclusive of depreciation and amortization)	5,891,639	5,786,987	17,819,382	17,730,403
Gross profit	10,369,656	9,446,324	31,271,076	28,875,339
Depreciation and amortization	2,898,066	2,642,797	8,809,670	7,647,899
Selling, general and administrative expenses	7,954,321	6,051,105	23,685,034	17,891,406
Interest expense	$ (1,813,060)	$ (1,396,038)	$ (4,457,080)	$ (4,150,106)
Gain (loss) on change in fair value of derivative liability
Loss on extinguishment of debt	$ (2,538,272)		$ (2,538,272)
Other income (expenses)	(243,049)	$ 12,784	(590,956)	$ (13,871)
Provision for income taxes
Net (loss) income	(5,077,112)	$ (630,832)	(8,809,936)	$ (827,943)
Total assets	$ 59,128,769	$ 58,126,589
Capital expenditures			$ 2,409,430	$ 2,854,388
Corporate and Unallocated
Segment Reporting Information [Line Items]
Revenues
Cost of revenues (exclusive of depreciation and amortization)
Gross profit
Depreciation and amortization	$ 194,339	$ 23,777	$ 235,018	$ 67,946
Selling, general and administrative expenses	746,311	1,333,352	2,528,886	3,696,710
Interest expense	384,328	(46,470)	(96,014)	(284,163)
Gain (loss) on change in fair value of derivative liability	$ 1,237,730	2,389,203	$ 2,543,878	4,308,272
Loss on extinguishment of debt
Other income (expenses)	$ 181,711	304	$ 181,711	80,641
Provision for income taxes		(147,341)		25,737
Net (loss) income	863,119	1,133,249	$ (134,329)	$ 314,357
Total assets	3,128,866	5,250,339
Capital expenditures
Consolidated
Segment Reporting Information [Line Items]
Revenues	24,530,824	22,486,531	$ 74,857,557	$ 68,532,333
Cost of revenues (exclusive of depreciation and amortization)	13,533,647	12,312,188	41,359,955	37,288,661
Gross profit	10,997,177	10,174,343	33,497,602	31,243,672
Depreciation and amortization	3,140,427	2,830,727	9,183,632	7,996,196
Selling, general and administrative expenses	9,796,483	8,137,368	29,379,196	23,782,259
Interest expense	(1,434,734)	(1,442,508)	(4,650,286)	(4,434,269)
Gain (loss) on change in fair value of derivative liability	1,237,730	2,389,203	2,543,878	4,308,272
Loss on extinguishment of debt	(2,720,355)		(2,720,355)
Other income (expenses)	(2,399)	9,639	56,369	(30,716)
Provision for income taxes		(147,341)		25,737
Net (loss) income	(4,859,491)	309,923	(9,835,620)	(717,233)
Total assets	$ 66,897,470	$ 66,976,909
Capital expenditures			$ 2,479,335	$ 2,954,791

20. Fair Value Disclosures (Det

20. Fair Value Disclosures (Details) - USD ($)	Sep. 30, 2015	Dec. 31, 2014
Non-current liabilities:
Derivative liability	$ 931,524	$ 3,839,569
Level 1 [Member]
Non-current liabilities:
Derivative liability
Level 2 [Member]
Non-current liabilities:
Derivative liability
Level 3 [Member]
Non-current liabilities:
Derivative liability	$ 931,524	$ 3,839,569

20. Fair Value Disclosures (D67

20. Fair Value Disclosures (Details 1)	9 Months Ended
	Sep. 30, 2015USD ($)
Fair Value Disclosures [Abstract]
Balance at December 31, 2014	$ 3,839,569
Gain for the period:
Included in net loss	(2,543,878)
Reduction in derivative liability due to exercise of Lenders' warrants	$ (364,167)
Included in other comprehensive loss
Balance at September 30, 2015	$ 931,524