Fusion Connect (FSNN) 10-Q 13 Nov 17 2017 Q3 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 12, 2017
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, 2017
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		22,367,631
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2,017

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Current assets:
Cash and cash equivalents	$ 2,341,634	$ 7,221,910
Accounts receivable, net of allowance for doubtful accounts of approximately $779,000 and $427,000, respectively	14,359,639	9,359,876
Prepaid expenses and other current assets	1,776,072	1,084,209
Total current assets	18,477,345	17,665,995
Property and equipment, net	13,769,882	14,248,915
Security deposits	615,585	630,373
Restricted cash	27,153	27,153
Goodwill	34,773,629	35,689,215
Intangible assets, net	58,760,920	63,617,471
Other assets	52,231	77,117
TOTAL ASSETS	126,476,745	131,956,239
Current liabilities:
Term loan - current portion	5,687,500	2,979,167
Obligations under asset purchase agreements - current portion	603,192	546,488
Equipment financing obligations	1,186,115	1,002,578
Accounts payable and accrued expenses	25,674,946	19,722,838
Total current liabilities	33,151,753	24,251,071
Long-term liabilities:
Notes payable - non-related parties, net of discount	31,822,773	31,431,602
Notes payable - related parties	918,135	875,750
Term Loan	55,782,094	60,731,204
Indebtedness under revolving credit facility	1,500,000	3,000,000
Obligations under asset purchase agreements	1,265,811	890,811
Equipment financing obligations	716,005	1,237,083
Derivative liabilities	760,965	348,650
Total liabilities	125,917,536	122,766,171
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value, 10,000,000 shares authorized, 14,341 and 17,299 shares issued and outstanding	143	174
Common stock, $0.01 par value, 90,000,000 shares authorized, 22,296,683 and 20,642,028 shares issued and outstanding	222,967	206,422
Capital in excess of par value	193,642,257	192,233,032
Accumulated deficit	(193,312,093)	(183,249,560)
Total Fusion Telecommunications International, Inc. stockholders' equity	553,274	9,190,068
Noncontrolling interest	5,935	0
Total stockholders' equity	559,209	9,190,068
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 126,476,745	$ 131,956,239

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Current assets:
Allowance for doubtful accounts	$ 779,000	$ 427,000
Stockholders' equity:
Preferred Stock, Par Value	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	10,000,000	10,000,000
Preferred Stock, Shares Issued	14,341	17,299
Preferred Stock, Shares Outstanding	14,341	17,299
Common Stock, Par Value	$ 0.01	$ 0.01
Common Stock, Shares Authorized	90,000,000	90,000,000
Common Stock, Shares Issued	22,296,683	20,642,028
Common Stock, Shares Outstanding	22,296,683	20,642,028

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Statement [Abstract]
Revenues	$ 36,355,187	$ 30,159,019	$ 110,256,069	$ 95,041,024
Cost of revenues, exclusive of depreciation and amortization, shown separately below	19,749,188	17,431,477	59,921,649	55,875,267
Gross profit	16,605,999	12,727,542	50,334,420	39,165,757
Depreciation and amortization	3,711,253	2,998,628	11,149,010	8,946,781
Selling, general and administrative expenses	13,649,349	11,408,048	42,115,158	34,102,847
Total operating expenses	17,360,602	14,406,676	53,264,168	43,049,628
Operating loss	(754,603)	(1,679,134)	(2,929,748)	(3,883,871)
Other (expenses) income:
Interest expense	2,204,520	1,625,195	6,468,916	4,877,828
(Loss) gain on change in fair value of derivative liabilities	(617,820)	152,057	(544,486)	380,099
Loss on disposal of property and equipment	(161,037)	(13,959)	(253,087)	(86,777)
Other income, net	47,694	32,028	177,539	120,291
Total other expenses	(2,935,683)	(1,455,069)	(7,088,950)	(4,464,215)
Loss before income taxes	(3,690,286)	(3,134,203)	(10,018,698)	(8,348,086)
Provision for income taxes	10,200	10,951	41,111	10,951
Net loss	(3,700,486)	(3,145,154)	(10,059,809)	(8,359,037)
Less: Net income attributable to non-controlling interest	(2,724)	0	(2,724)	0
Net loss attributable to Fusion Telecommunications International, Inc.	(3,703,210)	(3,145,154)	(10,062,533)	(8,359,037)
Preferred stock dividends	241,191	285,646	1,735,798	2,102,467
Net loss attributable to common stockholders	$ (3,944,401)	$ (3,430,800)	$ (11,798,331)	$ (10,461,504)
Basic and diluted loss per common share	$ (0.18)	$ (0.23)	$ (0.54)	$ (0.72)
Weighted average common shares outstanding:
Basic and diluted	22,352,341	14,990,816	21,828,816	14,536,893

Condensed Consolidated Stateme5

Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - 9 months ended Sep. 30, 2017 - USD ($)	Preferred Stock	Common Stock	Capital in Excess of Par Value	Accumulated Deficit	Fusion Telecommunications International, Inc.	Noncontrolling Interest	Total
Beginning Balance, Shares at Dec. 31, 2016	17,299	20,642,028
Beginning Balance, Amount at Dec. 31, 2016	$ 174	$ 206,422	$ 192,233,032	$ (183,249,560)	$ 9,190,068	$ 0	$ 9,190,068
Conversion of preferred stock into common stock, Shares	(2,958)	986,665
Conversion of preferred stock into common stock, Amount	$ (31)	$ 9,866	(9,835)
Non-controlling interest (40%) in FGS						3,211	$ 3,211
Dividends on preferred stock, Shares		257,238
Dividends on preferred stock, Amount		$ 2,572	(2,572)
Proceeds from the exercise of common stock purchase warrants, Shares		561,834					0
Proceeds from the exercise of common stock purchase warrants, Amount		$ 5,617	775,334		780,951		$ 780,951
Issuance of common stock for services rendered, Shares		125,870
Issuance of common stock for services rendered, Amount		$ 1,259	183,301		184,560		184,560
Reclassification of derivative liability			132,171		132,171		132,171
Forfeiture of common stock award by employee, Shares		(5,938)
Forfeiture of common stock award by employee, Amount		$ (59)	(8,552)		(8,611)		(8,611)
Cancellation of common stock issued in 2016 acquisition, Shares		(300,000)
Cancellation of common stock issued in 2016 acquisition, Amount		$ (3,000)	(360,000)		(363,000)		(363,000)
Cashless exercise of warrants, Shares		28,986
Cashless exercise of warrants, Amount		$ 290	(290)
Stock based compensation associated with stock incentive plans			699,668		699,668		699,668
Net (loss) income				(10,062,533)	(10,062,533)	2,724	(10,059,809)
Ending Balance, Shares at Sep. 30, 2017	14,341	22,296,683
Ending Balance, Amount at Sep. 30, 2017	$ 143	$ 222,967	$ 193,642,257	$ (193,312,093)	$ 553,274	$ 5,935	$ 559,209

Condensed Consolidated Stateme6

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Cash flows from operating activities:
Net loss	$ (10,059,809)	$ (8,359,037)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	11,149,010	8,946,781
Loss on disposal of property and equipment	253,087	86,777
Stock-based compensation	699,668	572,996
Stock issued for services rendered or in settlement of liabilities	184,560	105,256
Amortization of debt discount and deferred financing fees	630,279	477,751
Loss (gain) on the change in fair value of derivative liability	544,487	(380,099)
Changes in operating assets and liabilities:
Accounts receivable	(4,446,433)	(410,771)
Prepaid expenses and other current assets	(876,267)	(1,373,378)
Other assets	24,885	(317,927)
Accounts payable and accrued expenses	5,786,081	(1,258,968)
Net cash provided by (used in) operating activities	3,889,548	(1,910,619)
Cash flows from investing activities:
Purchase of property and equipment	(3,940,382)	(3,782,232)
Proceeds from the sale of property and equipment	96,344	28,736
Noncontrolling interest	3,211	0
(Payment) for acquisitions, net of cash acquired	(558,329)	16,895
Refunds of purchase price from acquisitions	150,000	392,617
Return of security deposits	14,788	26,750
Net cash used in investing activities	(4,234,368)	(3,317,234)
Cash flows from financing activities:
Proceeds from the exercise of common stock purchase warrants	780,951	0
Repayments of term loan	(2,437,500)	(824,973)
Repayments of revolving debt, net	(1,500,000)	0
Payments for obligations under asset purchase agreements	(583,892)	0
Payments on equipment financing obligations	(795,015)	(743,647)
Net cash used in financing activities	(4,535,456)	(1,568,620)
Net change in cash and cash equivalents	(4,880,276)	(6,796,473)
Cash and cash equivalents, including restricted cash, beginning of period	7,249,063	7,705,666
Cash and cash equivalents, including restricted cash, end of period	$ 2,368,787	$ 909,193

1. Organization and Business

1. Organization and Business	9 Months Ended
	Sep. 30, 2017
Organization And Business
1. Organization and Business	Fusion Telecommunications International, Inc. is a Delaware corporation incorporated in September 1997 (“Fusion” and together with its subsidiaries, the “Company,” “we,” “us” and “our”). The Company is a provider of integrated cloud solutions, including cloud voice, cloud connectivity, cloud infrastructure, cloud computing, and managed cloud-based applications to businesses of all sizes, and voice over IP (“VoIP”) - based voice services to carriers. 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, 2017
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 accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Pursuant to the rules and regulations of the U.S. 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. 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, 2016, as amended (the “2016 Form 10-K”) 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 of operations for the interim periods presented are not necessarily indicative of the results for the entire year. Effective January 1, 2017, the Company changed the manner in which it accounts for federal and state universal service fees and surcharges in its consolidated statement of operations. The Company now includes the amounts collected for these fees and surcharges in revenues, and reports the associated costs in cost of revenues, and this change has been applied retrospectively in the Company’s consolidated financial statements for all periods presented. As a result, both the Company’s revenues and cost of revenues for the three and nine months ended September 30, 2017 include $0.9 million and $2.3 million, respectively, of federal and state universal service fees and surcharges. Revenues and cost of revenues for the three and nine months ended September 30, 2016 include $0.7 million and $1.9 million, respectively, of federal and state universal service fees and surcharges. During the three and nine months ended September 30, 2017 and 2016, comprehensive loss was equal to the net loss amounts presented for the respective periods in the accompanying condensed consolidated interim statements of operations. We discussed further below, effective January 1, 2017 the Company early adopted Accounting Standards Update (“ASU”) 2016-18, Restricted Cash. Liquidity Since inception, the Company has incurred significant net losses. At September 30, 2017, the Company had a working capital deficit of $14.7 million and stockholders’ equity of $0.6 million. At December 31, 2016, the Company had a working capital deficit of $6.6 million and stockholders’ equity of $9.2 million. The Company’s consolidated cash balance at September 30, 2017 was $2.3 million. While the Company projects that it has sufficient cash to fund its operations and meet its operating and debt obligations through November 2018, it may be required to either raise additional capital, limit its discretionary capital expenditures or borrow amounts available under its revolving credit facility to support its business plan. There is currently no commitment for any additional funding and there can be no assurances that funds will be available on terms that are acceptable to the Company, or at all. Principles of Consolidation The condensed consolidated interim financial statements include the accounts of Fusion and each of its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Effective September 1, 2017, Fusion transferred 40% of its membership interests in Fusion Global Services LLC (“FGS”) to XcomIP, LLC (“XcomIP”), in exchange for which XcomIP contributed assets of its carrier business to FGS. Under the terms of various agreements entered into by Fusion and XcomIP, Fusion and XcomIP also executed a shareholder agreement under which Fusion has agreed to provide up to $750,000 in working capital to FGS. The Company has determined that, based on the terms of the foregoing agreements, it has a controlling financial interest in FGS under the guidance set forth in Accounting Standards Codification (“ASC”) 810, 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated interim financial statements and the reported amounts of revenues and expenses during the reporting periods. On an on-going basis, the Company evaluates its estimates, including, but not limited to, those related to recognition of revenue; allowance for doubtful accounts; fair value measurements of its financial instruments; useful lives of its long-lived assets used in computing depreciation and amortization; impairment assessment of goodwill and intangible assets; accounting for stock options and other equity awards, particularly related to fair value estimates; and accounting for income taxes, contingencies and litigation. Changes in the facts or circumstances underlying these estimates could result in material changes and actual results could differ from those estimates. Cash Equivalents Cash and cash equivalents include cash on deposit and short-term, highly-liquid investments with maturities of three months or less on the date of purchase. As of September 30, 2017 and December 31, 2016, the carrying value of cash and cash equivalents approximates fair value due to the short period to maturity. Fair Value of Financial Instruments At September 30, 2017 and December 31, 2016, 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. Impairment of Long-Lived Assets The Company periodically reviews long-lived assets, including intangible assets, for possible impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an impairment indicator is present, the Company evaluates recoverability by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If the carrying value of the asset exceeds the projected undiscounted cash flows, the Company is required to estimate the fair value of the asset and recognize an impairment charge to the extent that the carrying value of the asset exceeds its estimated fair value. The Company did not record any impairment charges during the three and nine months ended September 30, 2017 and 2016, as there were no indicators of impairment. Goodwill Goodwill is the excess of the acquisition cost of a business combination over the fair value of the identifiable net assets acquired. Goodwill at September 30, 2017 and December 31, 2016 was $34.8 million and $35.7 million, respectively. All of the Company’s goodwill is attributable to its Business Services segment. The following table presents the changes in the carrying amounts of goodwill during the nine months ended September 30, 2017: Balance at December 31, 2016 $ 35,689,215 Increase in goodwill associated with a 2016 acquisition 7,414 Settlement of litigation with Apptix sellers (513,000 ) Adjustment to goodwill associated with acquisition of customer bases (see note 3) (410,000 ) Balance at September 30, 2017 $ 34,773,629 The reduction in goodwill related to the settlement of litigation consists of $150,000 in cash and the return to the Company of 300,000 shares of common stock valued at $0.4 million (see note 14). The litigation settlement pertains to a matter that existed at the closing date of the acquisition. Therefore, the Company has determined that the litigation matter has a clear and direct link to the original consideration transferred as part of the acquisition. Since the measurement period for purchase accounting was open at the time of settlement, the value of the consideration received by the Company in settlement of the litigation was recorded against the value of the original consideration paid by the Company in the acquisition transaction. 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. The impairment test for goodwill uses a two-step approach, which is performed at the reporting unit level. The Company has determined that its reporting units are its operating segments (see note 15) since that is the lowest level at which discrete, reliable financial and cash flow information is available. Step one compares the fair value of the reporting unit (calculated using a market approach and/or a discounted cash flow method) to its carrying value. If the carrying value exceeds the fair value, there is a potential impairment and step two must be performed. Step two compares the carrying value of the reporting unit’s goodwill to its implied fair value, which is the fair value of the reporting unit less the fair value of the unit’s assets and liabilities, including identifiable intangible assets. If the implied fair value of goodwill is less than its carrying amount, an impairment is recognized. 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. The Company also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test. The Company did not record any impairment charges related to goodwill during the three and nine months ended September 30, 2017 and 2016. Advertising and Marketing Costs Advertising and marketing expenses includes cost for promotional materials and trade show expenses for the marketing of the Company’s products and services. Advertising and marketing expenses were $27,000 and $0.2 million for the three months ended September 30, 2017 and 2016, respectively, and $0.5 million for the nine months ended September 30, 2017 and 2016. Advertising and marketing expenses are reflected in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations. Income Taxes The accounting and reporting requirements with respect to accounting for income taxes require an asset and liability approach. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amount expected to be realized. In accordance with U.S. GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Derecognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce net assets. Based on its analysis, the Company has determined that it has not incurred any liability for unrecognized tax benefits as of September 30, 2017 and December 31, 2016. The Company is subject to income tax examinations by major taxing authorities for all tax years since 2013 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, 2017 and December 31, 2016. During the three and nine months ended September 30, 2017 and 2016, 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 at the date of grant. 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. Compensation cost, net of estimated forfeitures, is recognized ratably over the vesting period of the related stock-based compensation award. For transactions in which goods or services are received from non-employees in return for the issuance of equity instruments, the expense is recognized in the period when the goods and services are received at the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more readily determinable. New and Recently Adopted Accounting Pronouncements In July 2017, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash In February 2016, the FASB issued ASU No. 2016-02, Leases In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation In May 2014, the FASB issued new guidance related to revenue recognition, ASU 2014-09, Revenue from Contracts with Customers (“ASC 606”), which outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance. The new guidance requires a company to recognize revenue upon transfer of goods or services to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services. ASC 606 defines a five-step approach for recognizing revenue: (i) identification of the contract, (ii) identification of the performance obligations, (iii) determination of the transaction price, (iv) allocation of the transaction price to the performance obligations, and (v) recognition of revenue as the entity satisfies the performance obligations. The new criteria for revenue recognition may require a company to use more judgment and make more estimates than under the current guidance. The new guidance becomes effective in calendar year 2018 and early adoption in calendar year 2017 is permitted. Two methods of adoption are permitted: (a) full retrospective adoption, meaning the standard is applied to all periods presented; or (b) modified retrospective adoption, meaning the cumulative effect of applying the new guidance is recognized at the date of initial application as an adjustment to the opening retained earnings balance. In March 2016, April 2016 and December 2016, the FASB issued ASU No. 2016-08, Revenue From Contracts with Customers (ASC 606): Principal Versus Agent Considerations, ASU No. 2016-10, Revenue From Contracts with Customers (ASC 606): Identifying Performance Obligations and Licensing, and ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue From Contracts with Customers, respectively, which further clarify the implementation guidance on principal versus agent considerations contained in ASU No. 2014-09. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers, narrow-scope improvements and practical expedients which provides clarification on assessing the collectability criterion, presentation of sales taxes, measurement date for non-cash consideration and completed contracts at transition. These standards will be effective for the Company beginning in the first quarter of 2018. Early adoption is permitted. The Company will adopt the new standard and related updates effective January 1, 2018, and intends to use the modified retrospective method of adoption. The Company has undertaken an initial impact analysis of these items, which includes reviewing the terms and conditions of its existing customer contracts with respect to the five discrete criteria required for recognizing revenue set forth in ASC 606. The Company believes that the most significant aspects of the new guidance that could impact the Company’s financial statements are the requirements surrounding contract acquisition costs and activation and installation revenues, and that implementation of these requirements could be material to the Company’s financial statements. The Company expects to conclude its analysis of the impact of the new revenue recognition guidance on its consolidated financial statements around December 31, 2017.

3. Acquisitions

3. Acquisitions	9 Months Ended
	Sep. 30, 2017
Acquisitions
3. Acquisitions	On November 18, 2016, the Company entered into a purchase agreement pursuant to which the Company assumed obligations to provide services to the seller’s customer base. In connection with that transaction, the Company recognized goodwill and a corresponding obligation to the seller in the amount of $0.4 million. The Company also agreed to pay additional consideration to the seller if it was able to facilitate the assignment of certain additional customers to the Company. On March 1, 2017, the Company entered into an additional asset purchase agreement with another party . The aggregate amount payable by the Company under the November 2016 and March 2017 agreements totals $2.3 million, comprised of the $0.6 million paid for the accounts receivable and the $1.7 million of contingent consideration related to the customer base which, as provided for in the November 2016 agreement, was valued at a multiple of monthly revenue and will be paid over a period of 18 months. The March 2017 agreement resulted in a reduction to the goodwill in the amount of $0.4 million. These agreements did not have a material effect on the Company’s results of operations or financial condition.

4. Loss per share

4. Loss per share	9 Months Ended
	Sep. 30, 2017
Earnings Per Share [Abstract]
4. Loss per share	Basic and diluted loss per share is computed by dividing the loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period. The following table sets forth the computation of basic and diluted net loss per share for the three and nine months ended September 30, 2017 and 2016: Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Numerator Net loss $ (3,700,486 ) $ (3,145,154 ) $ (10,059,809 ) $ (8,359,037 ) Undeclared dividends on Series A-1, A-2 and A-4 Convertible Preferred Stock (101,729 ) (101,729 ) (301,871 ) (302,976 ) Conversion price reduction on Series B-2 Preferred Stock (see note 13) — — (623,574 ) — Series B-2 warrant exchange (see note 13) — — (347,191 ) — Dividends declared on Series B-2 Convertible Preferred Stock (139,462 ) (183,917 ) (463,162 ) (1,799,491 ) Net income attributable to non-controlling interest (2,724 ) — (2,724 ) — Net loss attributable to common stockholders $ (3,944,401 ) $ (3,430,800 ) $ (11,798,331 ) $ (10,461,504 ) Denominator Basic and diluted weighted average common shares outstanding 22,352,341 14,990,816 21,828,816 14,536,893 Loss per share Basic and diluted $ (0.18 ) $ (0.23 ) $ (0.54 ) $ (0.72 ) For the nine months ended September 30, 2017 and 2016, the following dilutive securities were excluded from the calculation of diluted earnings per common share because of their anti-dilutive effects: For the Nine Months Ended September 30, 2017 2016 Warrants 2,658,900 2,946,948 Convertible preferred stock 2,067,358 2,626,518 Stock options 2,222,288 1,157,512 6,948,546 6,730,978 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 (collectively, the “Series A Preferred Stock”) for the three and nine months ended September 30, 2017 of $0.1 million and $0.3 million, respectively. The provision for dividends on the Series A Preferred Stock for the three and nine months ended September 30, 2016 was $0.1 million and $0.3 million, respectively. Through September 30, 2017, the Board of Directors of Fusion has never declared a dividend on any series of the Series A Preferred Stock, resulting in approximately $5.0 million of accumulated preferred stock dividends. The Fusion Board declared dividends on the Company’s Series B-2 Cumulative Convertible Preferred Stock (the “Series B-2 Preferred Stock”) of $0.1 million and $0.2 million for the three months ended September 30, 2017 and 2016, respectively, and $1.4 million and $1.8 million for the nine months ended September 30, 2017 and 2016, respectively. As permitted by the terms of the Series B-2 Preferred Stock, dividends were paid in the form of 257,238 and 1,010,177 shares of Fusion’s common stock for the nine months ended September 30, 2017 and 2016, respectively.

5. Intangible Assets

5. Intangible Assets	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
5. Intangible Assets	Intangible assets as of September 30, 2017 and December 31, 2016 are as follows: September 30, 2017 December 31, 2016 Gross Carrying Amount Accumulated Amortization Total Gross Carrying Amount Accumulated Amortization Total Trademarks and tradename $ 1,093,400 $ (629,731 ) $ 463,669 $ 1,093,400 $ (501,982 ) $ 591,418 Proprietary technology 6,670,000 (5,028,346 ) 1,641,654 6,670,000 (4,036,915 ) 2,633,085 Non-compete agreement 12,128,043 (11,389,604 ) 738,439 12,128,043 (9,891,892 ) 2,236,151 Customer relationships 67,713,181 (11,799,657 ) 55,913,524 65,948,181 (7,827,697 ) 58,120,484 Favorable lease intangible 218,000 (214,366 ) 3,634 218,000 (181,667 ) 36,333 Total acquired intangibles $ 87,822,624 $ (29,061,704 ) $ 58,760,920 $ 86,057,624 (22,440,153 ) $ 63,617,471 Amortization expense was $2.2 million and $1.4 million for the three months ended September 30, 2017 and 2016, respectively, and $6.6 million and $4.1 million for the nine months ended September 30, 2017 and 2016, respectively. Estimated future aggregate amortization expense is expected to be as follows: Year Amortization Expense remainder of 2017 $ 1,962,993 2018 6,561,232 2019 5,577,500 2020 5,537,117 2021 5,362,750

6. Supplemental Disclosure of C

6. Supplemental Disclosure of Cash Flow Information	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
6. Supplemental Disclosure of Cash Flow Information	Supplemental cash flow information for the nine months ended September 30, 2017 and 2016 is as follows: Nine Months Ended September 30, Supplemental Cash Flow Information 2017 2016 Cash paid for interest $ 6,166,497 $ 4,233,527 Cash paid for income taxes $ - $ - Supplemental Non-Cash Investing and Financing Activities Property and equipment acquired under capital leases or equipment financing obligations $ 457,475 $ 188,497 Conversion of preferred stock into common stock $ 2,958,000 $ - Dividends on Series B-2 Preferred Stock paid with the issuance of Fusion common stock $ 463,163 $ 599,491 Obligations under purchase agreements $ 1,350,000 $ 961,606

7. Prepaid Expenses and Other C

7. Prepaid Expenses and Other Current Assets	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
7. Prepaid Expenses and Other Current Assets	Prepaid expenses and other current assets at September 30, 2017 and December 31, 2016 are as follows: September 30, 2017 December 31, 2016 Insurance $ 5,327 $ 160,262 Rent 16,326 5,389 Marketing 39,333 74,665 Software subscriptions 697,261 419,431 Comisssions 109,688 159,146 Other 908,137 265,316 Total $ 1,776,072 $ 1,084,209

8. Accounts Payable and Accrued

8. Accounts Payable and Accrued Expenses	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
8. Accounts Payable and Accrued Expenses	Accounts payable and accrued expenses at September 30, 2017 and December 31, 2016 are as follows: September 30, 2017 December 31, 2016 Trade accounts payable $ 7,275,546 $ 6,358,548 Accrued license fees 3,140,568 2,881,331 Accrued sales and federal excise taxes 3,214,289 2,863,363 Deferred revenue 1,523,045 1,874,641 Accrued network costs 5,047,912 1,416,000 Accrued sales commissions 798,835 819,106 Property and other taxes 927,002 581,956 Accrued payroll and vacation 408,570 421,733 Customer deposits 378,783 365,249 Interest payable 7,849 304,409 Credit card payable 117,214 265,985 Accrued USF fees 498,441 249,825 Accrued bonus 376,890 249,361 Professional and consulting fees 151,948 164,878 Rent 129,428 127,781 Other 1,678,626 778,672 Total $ 25,674,946 $ 19,722,838

9. Equipment Financing Obligati

9. Equipment Financing Obligations	9 Months Ended
	Sep. 30, 2017
Equipment Financing Obligations
9. 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 5.3% and 6.6%. The Company’s equipment financing obligations are as follows: September 30, December 31, 2017 2016 Equipment financing obligations $ 1,902,120 $ 2,239,661 Less: current portion (1,186,115 ) (1,002,578 ) Long-term portion $ 716,005 $ 1,237,083 The Company’s payment obligations under its capital leases are as follows: Year ending December 31: Principal remainder of 2017 $ 321,854 2018 1,140,586 2019 429,486 2020 10,194 $ 1,902,120

10. Long-Term Debt

10. Long-Term Debt	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
10. Long-Term Debt	Secured Credit Facilities As of September 30, 2017 and December 31, 2016, secured credit facilities consists of the following: September 30, December 31, 2017 2016 Term loan $ 62,562,500 $ 65,000,000 Less: Deferred financing fees (1,092,906 ) (1,289,629 ) Current portion (5,687,500 ) (2,979,167 ) Term loan - long-term portion $ 55,782,094 $ 60,731,204 Indebtedness under revolving credit facility $ 1,500,000 $ 3,000,000 On November 14, 2016, Fusion NBS Acquisition Corp. (“FNAC”), a wholly-owned subsidiary of Fusion, entered into a new credit agreement (the “East West Credit Agreement”) with East West Bank, as administrative agent and the lenders identified therein (collectively with East West Bank, the “East West Lenders”). Under the East West Credit Agreement, the East West Lenders extended FNAC (i) a $65.0 million term loan and (ii) a $5.0 million revolving credit facility (which includes up to $4 million in “swingline” loans that may be accessed on a short-term basis). The proceeds of the term loan were used to retire $40 million that was outstanding under a previously existing credit facility, and to fund the cash portion of the purchase price of FNAC’s acquisition of all of the issued and outstanding capital stock (the “Apptix Acquisition”) of Apptix, Inc., a wholly-owned subsidiary of Apptix, ASA (“Apptix”). Borrowings under the East West Credit Agreement are evidenced by notes bearing interest at rates computed based upon either the then current “prime” rate of interest or “LIBOR” rate of interest, as selected by FNAC. Interest on borrowings that FNAC designates as “base rate” loans bear interest at the greater of the prime rate published by the Wall Street Journal or 3.25% per annum, in each case plus 2% per annum. Interest on borrowings that FNAC designates as “LIBOR rate” loans bear interest at the LIBOR rate of interest published by the Wall Street Journal, plus 5% per annum. The current interest rate is 6.25% per annum. The Company is required to repay the term loan in equal monthly payments of $270,833 from January 1, 2017 through January 1, 2018, when monthly payments increase to $541,667, until the November 12, 2021 maturity date of the term loan, when the remaining $36.8 million of principal is due. Borrowings under the revolving credit facility are also payable on the November 12, 2021 maturity date of the facility. At September 30, 2017 and December 31, 2016, $1.5 million and $3.0 million, respectively, was outstanding under the revolving credit facility. In conjunction with the execution of the East West Credit Agreement, the Company and the East West Lenders also entered into (i) an IP security agreement under which the Company pledged intellectual property to the East West Lenders to secure payment of the East West Credit Agreement, (ii) subordination agreements under which certain creditors of the Company and the East West Lenders have established priorities among them and reached certain agreements as to enforcing their respective rights against the Company, and (iii) a pledge and security agreement under which Fusion and FNAC have each pledged its equity interest in its subsidiaries to the East West Lenders. Under the East West Credit Agreement: · The Company is subject to a number of affirmative and negative covenants, including but not limited to, restrictions on paying indebtedness subordinate to its obligations to the East West Lenders, incurring additional indebtedness, making capital expenditures, dividend payments and cash distributions by subsidiaries. · The Company is required to comply with various financial covenants, including leverage ratio, fixed charge coverage ratio and minimum levels of earnings before interest, taxes, depreciation and amortization; and its failure to comply with any of the restrictive or financial covenants could result in an event of default and accelerated demand for repayment of amounts outstanding. · The Company granted the lenders security interests on all of its assets, as well as its 60% membership interest in FGS and the capital stock of FNAC and each of its subsidiaries. · Fusion and its subsidiaries (and future subsidiaries of both) other than FNAC and FGS have guaranteed FNAC’s obligations, including FNAC’s repayment obligations thereunder. At September 30, 2017 and December 31, 2016, the Company was in compliance with all of the financial covenants contained in the East West Credit Agreement. Notes Payable – Non-Related Parties At September 30, 2017 and December 31, 2016, notes payable – non-related parties consists of the following: September 30, December 31, 2017 2016 Subordinated notes $ 33,588,717 $ 33,588,717 Discount on subordinated notes (1,122,282 ) (1,368,629 ) Deferred financing fees (643,662 ) (788,486 ) Total notes payable - non-related parties 31,822,773 31,431,602 Less: current portion — — Long-term portion $ 31,822,773 $ 31,431,602 On November 14, 2016, FNAC, Fusion and Fusion’s other subsidiaries entered into the Fifth Amended and Restated Securities Purchase Agreement (the “Praesidian Facility”) with Praesidian Capital Opportunity Fund III, L.P., Praesidian Capital Opportunity Fund III-A, LP and United Insurance Company of America (collectively, the “Praesidian Lenders”). The Praesidian Facility amends and restates a prior facility, pursuant to which FNAC previously sold its Series A, Series B, Series C, Series D, Series E and Series F senior notes in an aggregate principal amount of $33.6 million (the “SPA Notes”). These notes require interest payments in the amount of $0.3 million per month. The current interest rate is 10.8% per annum. Under the terms of the Praesidian Facility, the maturity date of the SPA Notes is May 12, 2022, no payments of principal are due until the maturity date, and the financial covenants contained in the Praesidian Facility are substantially similar to those contained in the East West Credit Agreement. In connection with the execution of the Praesidian Facility, the Praesidian Lenders entered into a subordination agreement with the East West Lenders pursuant to which the Praesidian Lenders have subordinated their right to payment under the Praesidian Facility and the SPA Notes to repayment of the Company’s obligations under the East West Credit Agreement. At September 30, 2017 and December 31, 2016, the Company was in compliance with all of the financial covenants contained in the Praesidian Facility. Notes Payable – Related Parties At September 30, 2017 and December 31, 2016, notes payable – related parties consists of the following: September 30, December 31, 2017 2016 Notes payable to Marvin Rosen $ 928,081 $ 928,081 Discount on notes (9,946 ) (52,331 ) Total notes payable - related parties $ 918,135 $ 875,750 The notes payable to Marvin Rosen, the Chairman of Fusion’s Board of Directors, are subordinated to borrowings under the East West Credit Agreement and the Praesidian Facility. These notes are unsecured, pay interest monthly at an annual rate of 7%, and mature 120 days after the Company’s obligations under the East West Credit Agreement and the Praesidian Facility are paid in full.

11. Obligations Under Asset Pur

11. Obligations Under Asset Purchase Agreements	9 Months Ended
	Sep. 30, 2017
Obligations Under Asset Purchase Agreements
11. Obligations Under Asset Purchase Agreements	In connection with certain acquisitions and asset purchases completed by the Company during 2015, 2016 and 2017, the Company has various obligations to the sellers, mainly for payments of portions of the purchase price that have been deferred under the terms of the respective asset purchase agreements. Such obligations to sellers or other parties associated with these transactions as of September 30, 2017 and December 31, 2016 are as follows: September 30, 2017 December 31, 2017 2016 Root Axcess $ — $ 166,668 Customer base acquisitions 1,007,397 334,025 Technology For Business, Inc. 861,606 936,606 1,869,003 1,437,299 Less: current portion (603,192 ) (546,488 ) Long-term portion $ 1,265,811 $ 890,811

12. Derivative Liability

12. Derivative Liability	9 Months Ended
	Sep. 30, 2017
Derivative Liability
12. Derivative Liability	Fusion has issued warrants to purchase shares of its common stock in connection with certain debt and equity financing transactions. These warrants are accounted for in accordance with the guidance contained in ASC Topic 815 Derivatives and Hedging The fair values of these warrants have been estimated using option pricing and other valuation models, and the quoted market price of Fusion’s common stock. Nine months ended September 30, 2017 2016 Stock price ($) 1.45-2.72 1.65-1.84 Adjusted Exercise price ($) 1.54-1.55 6.25 Risk-free interest rate (%) 2.23 1.56-1.78 Expected volatility (%) 64.3-84.3 92.4-96.7 Time to maturity (years) 1.5-1.75 2.25-3.00 At September 30, 2017 and December 31, 2016, the fair value of the derivative was $0.8 million and $0.3 million, respectively. For the three months ended September 30, 2017 and 2016, the Company recognized a (loss) gain on the change in fair value of the derivative of ($0.6) million and $0.2 million, respectively, and for the nine months ended September 30, 2017 and 2016, the Company recognized a (loss) gain on the change in the fair value of this derivative of ($0.5) million and $0.4 million, respectively.

13. Equity Transactions

13. Equity Transactions	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
13. Equity Transactions	Common Stock Fusion is authorized to issue 90,000,000 shares of common stock. As of September 30, 2017 and December 31, 2016, 22,296,683 and 20,642,028 shares of its common stock, respectively, were issued and outstanding. During the nine months ended September 30, 2017, the Company entered into exchange agreements with certain holders of Fusion’s outstanding warrants whereby the outstanding warrants were exchanged for new warrants (the “2017 Warrants”), which warrants permitted the holders to exercise and purchase, for a limited period of 60 days, unregistered shares of Fusion’s common stock at a discount of up to 10% below the closing bid price of Fusion’s common stock at the time of exercise but in no event at a price of less than $1.30 per share. In connection with these exchange agreements, the warrant holders exercised 2017 Warrants to purchase 561,834 shares of common stock on March 31, 2017 at an exercise price of $1.39 per share. The Company received proceeds from the exercise of the 2017 Warrants in the amount of $0.8 million, which were used for general corporate purposes. In connection with the exchange agreements, all of the 2017 Warrants were immediately exercised. As a result of the exchange, the Company recorded a preferred stock dividend in the amount of $0.3 million for the difference in fair value of the warrants that were exchanged (see note 4). On September 15, 2017, 64,000 warrants were exercised on a cashless basis and, as a result, the Company issued 28,986 shares of common stock to the holder of those warrants. During the nine months ended September 30, 2017, Fusion issued 125,870 shares of its common stock valued at approximately $0.2 million for services rendered. Also during the nine months ended September 30, 2017, (i) Fusion’s Board of Directors declared dividends on the Series B-2 Preferred Stock that were paid in the form of 257,238 shares of Fusion common stock (see note 4), and (ii) an officer of the Company forfeited a portion of his 2016 restricted stock award and 5,938 shares of common stock were returned to the Company. In August 2017, in connection with the settlement of litigation with Apptix, FNAC was paid $150,000 in cash and Apptix surrendered 300,000 shares of Fusion common stock valued at $363,000 to the Company. Preferred Stock Fusion is authorized to issue up to 10,000,000 shares of preferred stock. As of September 30, 2017 and December 31, 2016, there were 5,045 shares of Series A Preferred Stock issued and outstanding. In addition, there were 9,296 and 12,254 shares of Series B-2 Preferred Stock issued and outstanding as of September 30, 2017 and December 31, 2016, respectively. On March 31, 2017, the Company agreed with certain holders of its Series B-2 Preferred Stock to convert their shares of Series B-2 Preferred Stock into shares of Fusion common stock at a conversion price of $3.00 per share (a two dollar reduction from the specified conversion price). As a result, 2,958 shares of Series B-2 Preferred Stock were converted into a total of 986,665 shares of Fusion common stock, and the Company recorded a preferred stock dividend of $0.6 million for the value of the incremental number of shares of Fusion common stock issued in connection with the reduction in the conversion price of the Series B-2 Preferred Stock (see note 4). 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, on January 1 of each year. As of September 30, 2017, no dividends have been declared with respect to the Series A Preferred Stock (see note 4). The holders of the Series B-2 Preferred Stock are entitled to receive a cumulative 6% annual dividend payable quarterly in arrears when and if declared by Fusion’s Board, in cash or shares of Fusion common stock, at the option of the Company (see note 4). As of September 30, 2017, all required quarterly dividends on the Series B-2 Preferred Stock have been declared and paid in shares of common stock. Stock Options Fusion's The following assumptions were used to determine the fair value of the stock options granted under Fusion’s stock-based compensation plans using the Black-Scholes option-pricing model: Nine Months Ended September 30, 2017 2016 Dividend yield 0.0 % 0.0 % Expected volatility 92.40 % 94.6-96.7% Average Risk-free interest rate 2.18 % 1.56 % Expected life of stock option term (years) 8.00 8.00 The Company recognized compensation expense of $0.2 million for the three months ended September 30, 2017 and 2016, and $0.7 million and $0.6 million for the nine months ended September 30, 2017 and 2016, respectively. These amounts are included in selling, general and administrative expenses in the condensed consolidated interim statements of operations. The following table summarizes stock option activity for the nine months ended September 30, 2017: Number of Options Weighted Average Exercise Price Weighted Average Remaining Contract Term Outstanding at December 31, 2016 2,183,723 $ 2.56 8.56 years Granted 126,300 1.49 Exercised — — Forfeited (61,460 ) 1.60 Expired (26,275 ) 18.80 Outstanding at September 30, 2017 2,222,288 2.33 7.95 Exercisable at September 30, 2017 712,542 3.89 6.35 As of September 30, 2017, the Company had approximately $1.2 million of unrecognized compensation expense, net of estimated forfeitures, related to stock options granted under the Company’s stock-based compensation plans, which is expected to be recognized over a weighted-average period of 1.9 years.

14. Commitments and Contingenci

14. Commitments and Contingencies	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
14. Commitments and Contingencies	From time to time, the Company may be 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 management and employees. As of September 30, 2017, 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. In May 2017, FNAC commenced an action in the United States District Court for the Southern District of New York against Apptix and certain of its and Apptix’s former officers and employees, arising from an estimated $2.9 million underpayment of license fees to a software vendor (see note 8). In August 2017, in connection with the settlement of this litigation matter, FNAC was paid $150,000 in cash and Apptix surrendered to Fusion 300,000 shares of Fusion common stock valued at $363,000.

15. Proposed Merger Transaction

15. Proposed Merger Transaction	9 Months Ended
	Sep. 30, 2017
Proposed Merger Transaction
15. Proposed Merger Transaction	On August 26, 2017, Fusion and its wholly owned subsidiary, Fusion BCHI Acquisition LLC, a Delaware limited liability company (“Merger Sub”), entered into an Agreement and Plan of Merger, as amended (the “Merger Agreement”) with Birch Communications Holdings, Inc., a Georgia corporation (“Birch”). The Merger Agreement, provides, among other things, that upon the terms and conditions set forth therein, Birch will merge with and into Merger Sub (the “Merger”), with Merger Sub surviving such Merger. On the effective date of the Merger, the outstanding shares of common stock, par value $0.01 per share, of Birch (other than treasury shares or shares owned of record by any Birch subsidiary) will be cancelled and converted into the right to receive, in the aggregate, that number of shares of Fusion common stock equal to three times the number of shares of (i) Fusion common stock issued and outstanding immediately prior to the Effective Time (as defined in the Merger Agreement) (assuming the conversion of all outstanding preferred shares) plus (ii) Fusion common stock issuable upon the exercise of all in-the-money Fusion warrants (the “Merger Shares”). Pursuant to subscription agreements executed by each of the stockholders of Birch, the Merger Shares will be issued in the name of, and held by BCHI Holdings, LLC (“BCHI”), a limited liability company owned by the stockholders of Birch. On the closing date of the Merger, BCHI and Fusion will enter into a Registration Rights Agreement governing the registration rights of the BCHI in respect of the Merger Shares and pursuant to which Fusion will agree, among other things, to use reasonable best efforts to cause a shelf registration statement covering the resale of the Merger Shares to be declared effective by the SEC within 120 days of the closing of the Merger. At least 45 days before the closing of the Merger, the parties will give a written notice to each holder of Fusion’s existing preferred stock that such holders will have 15 days to convert their preferred stock into Fusion common stock. At the effective time of the Merger, any preferred shares that have not been converted into Fusion common stock will automatically terminate and be deemed cancelled without consideration. Fusion, Birch and Merger Sub each made customary representations, warranties and covenants in the Merger Agreement, including, among others, covenants by each of Fusion and Birch to, subject to certain exceptions, (a) conduct its business in the ordinary course, (b) preserve intact its business organization and significant business relationships, preserve satisfactory relationships with its officers and key employees and maintain its current rights and franchises, (c) maintain insurance on material assets, and (d) maintain all permits, each during the interim period between the execution of the Merger Agreement and the earlier of the consummation of the Merger or termination of the Merger Agreement. Prior to the closing of the Merger, Fusion is obligated to use reasonable best efforts to cause the Merger Shares to be approved for listing on The NASDAQ Stock Market, LLC (“NASDAQ”), including, if necessary to comply with NASDAQ listing requirements, amending Fusion’s certificate of incorporation prior to the effective time of the Merger to effect a reverse stock split of the Fusion common stock to satisfy NASDAQ minimum price requirements. Closing of the Merger is subject to numerous preconditions, including Fusion obtaining financing for the transaction, which will be used to retire existing senior debt facilities at Birch and Fusion (the “Refinancing”). Each of Fusion and Birch has agreed to use reasonable best efforts to cooperate and arrange and obtain the debt financing necessary to effect the required refinancing and to complete the transactions contemplated by the Merger Agreement. Prior to the closing of the Merger, Birch is required to spin-off to the existing Birch stockholders, its consumer business, which consists of (i) the residential customer base, life line and consumer wireless business, and (ii) its single-line business customer base, in each case located in the United States and Canada. In addition, prior to the closing of the Merger, Fusion is required to spin-off or otherwise exit its Carrier Services business conducted through FGS. On the effective date of the Merger, the certificate of incorporation of Fusion will be amended and restated, which amendments will, among other things, (i) increase the number of authorized shares of Fusion common stock to 150,000,000 and (ii) change the name of Fusion to “FusionConnect”. The terms of the Merger Agreement are such that the Merger, if consummated, will result in a change in control. As a result, the transaction will be accounted for as a reverse acquisition and recapitalization, with Birch as the acquirer for accounting purposes, and the historical financial statements of Birch will become the historical financial statements of the Company.

16. Segment Information

16. Segment Information	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
16. Segment Information	Operating segments are defined under U.S. GAAP as components of an enterprise for which discrete 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 – Business Services and Carrier Services. These segments are organized by the products and services that are sold and the customers that are served. The Company measures and evaluates its reportable segments based on revenues and gross profit margins. The Company’s measurement of segment profit exclude the Company’s executive, administrative and support costs. The 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 2016 Form 10-K. The Company’s segments and their principal activities consist of the following: Business Services Through this operating segment, the Company provides a comprehensive suite of cloud communications, cloud connectivity, cloud computing and managed cloud-based applications 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. Carrier Services Carrier Services includes the termination of domestic and international carrier traffic utilizing primarily 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 approximately 370 carrier customers and vendors, and is working to expand its interconnection relationships, particularly with carriers in emerging markets. Operating segment information for the three and nine months ended September 30, 2017 and 2016 is summarized in the following tables: Three Months Ended September 30, 2017 Carrier Services Business Services Corporate and Unallocated Consolidated Revenues $ 7,058,137 $ 29,297,050 $ - $ 36,355,187 Cost of revenues (exclusive of depreciation and amortization) 6,704,077 13,045,111 - 19,749,188 Gross profit 354,060 16,251,939 - 16,605,999 Depreciation and amortization 45,269 3,470,310 195,674 3,711,253 Selling, general and administrative expenses 547,654 11,790,690 1,311,005 13,649,349 Interest expense - (2,125,158) (79,361) (2,204,519) Loss on change in fair value of derivative liability - - (617,820) (617,820) Other expenses, net 9,371 112,816 8,844 131,032 Income tax provision - (10,200) - (10,200) Net loss $ (248,234) $ (1,257,235) $ (2,195,016) $ (3,700,486) Total assets $ 4,895,761 $ 119,113,665 $ 2,467,319 $ 126,476,745 Nine Months Ended September 30, 2017 Carrier Services Business Services Corporate and Unallocated Consolidated Revenues $ 22,496,958 $ 87,759,111 $ - $ 110,256,069 Cost of revenues (exclusive of depreciation and amortization) 21,746,819 38,174,830 - 59,921,649 Gross profit 750,139 49,584,281 - 50,334,420 Depreciation and amortization 339,633 10,408,551 400,824 11,149,008 Selling, general and administrative expenses 1,639,020 36,517,317 3,958,821 42,115,158 Interest expense - (6,262,106) (206,810) (6,468,916) Loss on change in fair value of derivative liability - - (544,485) (544,485) Other (expenses) income, net (9,454) 50,516 (116,613) (75,551) Income tax provision - (41,111) - (41,111) Net loss $ (1,237,968) $ (3,594,288) $ (5,227,553) $ (10,059,809) Capital expenditures $ 21,443 $ 4,376,414 $ - $ 4,397,857 Three Months Ended September 30, 2016 Carrier Services Business Services Corporate and Unallocated Consolidated Revenues $ 8,864,791 $ 21,294,318 $ - $ 30,159,109 Cost of revenues (exclusive of depreciation and amortization) 8,487,912 8,943,655 - 17,431,567 Gross profit 376,879 12,350,663 - 12,727,542 Depreciation and amortization 38,094 2,747,822 212,712 2,998,628 Selling, general and administrative expenses 653,462 9,547,547 1,207,039 11,408,048 Interest expense - (1,551,534) (73,661) (1,625,195) Gain on change in fair value of derivative liability - - 152,057 152,057 Other (expenses) income, net - (247,070) 265,139 18,069 Provision for income taxes - (10,951) (10,951) Net loss $ (314,677) $ (1,754,261) $ (1,076,216) $ (3,145,154) Total assets $ 3,783,321 $ 90,027,291 $ 2,312,655 $ 96,123,267 Nine Months Ended September 30, 2016 Carrier Services Business Services Corporate and Unallocated Consolidated Revenues $ 30,711,086 $ 64,329,938 $ - $ 95,041,024 Cost of revenues (exclusive of depreciation and amortization) 29,341,982 26,533,285 - 55,875,267 Gross profit 1,369,104 37,796,653 - 39,165,757 Depreciation and amortization 116,102 8,128,378 702,301 8,946,781 Selling, general and administrative expenses 2,119,119 28,052,965 3,930,763 34,102,847 Interest expense - (4,647,847) (229,981) (4,877,828) Gain on change in fair value of derivative liability - - 380,099 380,099 Other (expenses) income, net - (764,308) 797,822 33,514 Provision for income taxes - (10,951) (10,951) Net loss $ (866,117) $ (3,807,796) $ (3,685,124) $ (8,359,037) Capital expenditures $ 41,584 $ 3,929,145 $ - $ 3,970,729

17. Related Party Transactions

17. Related Party Transactions	9 Months Ended
	Sep. 30, 2017
Related Party Transaction, Due from (to) Related Party [Abstract]
17. Related Party Transactions	Since March 6, 2014, the Company has engaged a tax advisor to prepare its tax returns and to provide related tax advisory services. The Company was billed $0.2 million and $0.1 million for the nine months ended September 30, 2017 and 2016, respectively, by this firm. Larry Blum, a member of Fusion’s Board of Directors, is a Senior Advisor to, and a former partner of, this firm. The Company also has notes payable to Marvin Rosen (see note 10).

18. Fair Value Disclosures

18. Fair Value Disclosures	9 Months Ended
	Sep. 30, 2017
Fair Value Disclosures [Abstract]
18. 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 liabilities measured at fair value on a recurring basis: Level 1 Level 2 Level 3 Total As of September 30, 2017 Current liabilities: Contingent purchase price liability - - $ 603,192 $ 603,192 Non-current liabilities: Contingent purchase price liability - - $ 1,265,811 $ 1,265,811 Derivative liability (see note 12) - - $ 760,965 $ 760,965 As of December 31, 2016 Current liabilities: Contingent purchase price liability - - $ 546,488 $ 546,488 Non-current liabilities: Contingent purchase price liability - - $ 890,811 $ 890,811 Derivative liability (see note 12) - - $ 348,650 $ 348,650 Changes in the derivative warrant liability for the nine months ended September 30, 2017 are as follows: Balance at December 31, 2016 $ 348,650 Change for the period: Change in fair value included in net loss 544,486 Warrant exercises (see note 12) (132,171) Balance at September 30, 2017 $ 760,965 Changes in the contingent purchase price liability for the nine months ended September 30, 2017 are as follows: Balance at December 31, 2016 $ 1,437,299 Change for the period: Acquired customer base 1,350,000 Increase in amounts due from Technology Opportunity Group (334,404) Payments made (583,892) Balance at September 30, 2017 $ 1,869,003

2. Basis of Presentation and 25

2. Basis of Presentation and Summary of Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
Basis of Presentation	The accompanying unaudited condensed consolidated financial statements have been prepared in all material respects in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Pursuant to the rules and regulations of the U.S. 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. 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, 2016, as amended (the “2016 Form 10-K”) 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 of operations for the interim periods presented are not necessarily indicative of the results for the entire year. Effective January 1, 2017, the Company changed the manner in which it accounts for federal and state universal service fees and surcharges in its consolidated statement of operations. The Company now includes the amounts collected for these fees and surcharges in revenues, and reports the associated costs in cost of revenues, and this change has been applied retrospectively in the Company’s consolidated financial statements for all periods presented. As a result, both the Company’s revenues and cost of revenues for the three and nine months ended September 30, 2017 include $0.9 million and $2.3 million, respectively, of federal and state universal service fees and surcharges. Revenues and cost of revenues for the three and nine months ended September 30, 2016 include $0.7 million and $1.9 million, respectively, of federal and state universal service fees and surcharges. During the three and nine months ended September 30, 2017 and 2016, comprehensive loss was equal to the net loss amounts presented for the respective periods in the accompanying condensed consolidated interim statements of operations. We discussed further below, effective January 1, 2017 the Company early adopted Accounting Standards Update (“ASU”) 2016-18, Restricted Cash.
Liquidity	Since inception, the Company has incurred significant net losses. At September 30, 2017, the Company had a working capital deficit of $14.7 million and stockholders’ equity of $0.6 million. At December 31, 2016, the Company had a working capital deficit of $6.6 million and stockholders’ equity of $9.2 million. The Company’s consolidated cash balance at September 30, 2017 was $2.3 million. While the Company projects that it has sufficient cash to fund its operations and meet its operating and debt obligations through November 2018, it may be required to either raise additional capital, limit its discretionary capital expenditures or borrow amounts available under its revolving credit facility to support its business plan. There is currently no commitment for any additional funding and there can be no assurances that funds will be available on terms that are acceptable to the Company, or at all.
Principles of Consolidation	The condensed consolidated interim financial statements include the accounts of Fusion and each of its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Effective September 1, 2017, Fusion transferred 40% of its membership interests in Fusion Global Services LLC (“FGS”) to XcomIP, LLC (“XcomIP”), in exchange for which XcomIP contributed assets of its carrier business to FGS. Under the terms of various agreements entered into by Fusion and XcomIP, Fusion and XcomIP also executed a shareholder agreement under which Fusion has agreed to provide up to $750,000 in working capital to FGS. The Company has determined that, based on the terms of the foregoing agreements, it has a controlling financial interest in FGS under the guidance set forth in Accounting Standards Codification (“ASC”) 810, 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated interim financial statements and the reported amounts of revenues and expenses during the reporting periods. On an on-going basis, the Company evaluates its estimates, including, but not limited to, those related to recognition of revenue; allowance for doubtful accounts; fair value measurements of its financial instruments; useful lives of its long-lived assets used in computing depreciation and amortization; impairment assessment of goodwill and intangible assets; accounting for stock options and other equity awards, particularly related to fair value estimates; and accounting for income taxes, contingencies and litigation. Changes in the facts or circumstances underlying these estimates could result in material changes and actual results could differ from those estimates.
Cash Equivalents	Cash and cash equivalents include cash on deposit and short-term, highly-liquid investments with maturities of three months or less on the date of purchase. As of September 30, 2017 and December 31, 2016, the carrying value of cash and cash equivalents approximates fair value due to the short period to maturity.
Fair Value of Financial Instruments	At September 30, 2017 and December 31, 2016, 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.
Impairment of Long-Lived Assets	The Company periodically reviews long-lived assets, including intangible assets, for possible impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an impairment indicator is present, the Company evaluates recoverability by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If the carrying value of the asset exceeds the projected undiscounted cash flows, the Company is required to estimate the fair value of the asset and recognize an impairment charge to the extent that the carrying value of the asset exceeds its estimated fair value. The Company did not record any impairment charges during the three and nine months ended September 30, 2017 and 2016, as there were no indicators of impairment.
Goodwill	Goodwill is the excess of the acquisition cost of a business combination over the fair value of the identifiable net assets acquired. Goodwill at September 30, 2017 and December 31, 2016 was $34.8 million and $35.7 million, respectively. All of the Company’s goodwill is attributable to its Business Services segment. The following table presents the changes in the carrying amounts of goodwill during the nine months ended September 30, 2017: Balance at December 31, 2016 $ 35,689,215 Increase in goodwill associated with a 2016 acquisition 7,414 Settlement of litigation with Apptix sellers (513,000 ) Adjustment to goodwill associated with acquisition of customer bases (see note 3) (410,000 ) Balance at September 30, 2017 $ 34,773,629 The reduction in goodwill related to the settlement of litigation consists of $150,000 in cash and the return to the Company of 300,000 shares of common stock valued at $0.4 million (see note 14). The litigation settlement pertains to a matter that existed at the closing date of the acquisition. Therefore, the Company has determined that the litigation matter has a clear and direct link to the original consideration transferred as part of the acquisition. Since the measurement period for purchase accounting was open at the time of settlement, the value of the consideration received by the Company in settlement of the litigation was recorded against the value of the original consideration paid by the Company in the acquisition transaction. 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. The impairment test for goodwill uses a two-step approach, which is performed at the reporting unit level. The Company has determined that its reporting units are its operating segments (see note 15) since that is the lowest level at which discrete, reliable financial and cash flow information is available. Step one compares the fair value of the reporting unit (calculated using a market approach and/or a discounted cash flow method) to its carrying value. If the carrying value exceeds the fair value, there is a potential impairment and step two must be performed. Step two compares the carrying value of the reporting unit’s goodwill to its implied fair value, which is the fair value of the reporting unit less the fair value of the unit’s assets and liabilities, including identifiable intangible assets. If the implied fair value of goodwill is less than its carrying amount, an impairment is recognized. 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. The Company also may elect not to perform the qualitative assessment and, instead, proceed directly to the quantitative impairment test. The Company did not record any impairment charges related to goodwill during the three and nine months ended September 30, 2017 and 2016.
Advertising and Marketing Costs	Advertising and marketing expenses includes cost for promotional materials and trade show expenses for the marketing of the Company’s products and services. Advertising and marketing expenses were $27,000 and $0.2 million for the three months ended September 30, 2017 and 2016, respectively, and $0.5 million for the nine months ended September 30, 2017 and 2016. Advertising and marketing expenses are reflected in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations.
Income Taxes	The accounting and reporting requirements with respect to accounting for income taxes require an asset and liability approach. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amount expected to be realized. In accordance with U.S. GAAP, the Company is required to determine whether a tax position of the Company is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Derecognition of a tax benefit previously recognized could result in the Company recording a tax liability that would reduce net assets. Based on its analysis, the Company has determined that it has not incurred any liability for unrecognized tax benefits as of September 30, 2017 and December 31, 2016. The Company is subject to income tax examinations by major taxing authorities for all tax years since 2013 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, 2017 and December 31, 2016. During the three and nine months ended September 30, 2017 and 2016, 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 at the date of grant. 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. Compensation cost, net of estimated forfeitures, is recognized ratably over the vesting period of the related stock-based compensation award. For transactions in which goods or services are received from non-employees in return for the issuance of equity instruments, the expense is recognized in the period when the goods and services are received at the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more readily determinable.
New and Recently Adopted Accounting Pronouncements	In July 2017, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash In February 2016, the FASB issued ASU No. 2016-02, Leases In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation In May 2014, the FASB issued new guidance related to revenue recognition, ASU 2014-09, Revenue from Contracts with Customers (“ASC 606”), which outlines a comprehensive revenue recognition model and supersedes most current revenue recognition guidance. The new guidance requires a company to recognize revenue upon transfer of goods or services to a customer at an amount that reflects the expected consideration to be received in exchange for those goods or services. ASC 606 defines a five-step approach for recognizing revenue: (i) identification of the contract, (ii) identification of the performance obligations, (iii) determination of the transaction price, (iv) allocation of the transaction price to the performance obligations, and (v) recognition of revenue as the entity satisfies the performance obligations. The new criteria for revenue recognition may require a company to use more judgment and make more estimates than under the current guidance. The new guidance becomes effective in calendar year 2018 and early adoption in calendar year 2017 is permitted. Two methods of adoption are permitted: (a) full retrospective adoption, meaning the standard is applied to all periods presented; or (b) modified retrospective adoption, meaning the cumulative effect of applying the new guidance is recognized at the date of initial application as an adjustment to the opening retained earnings balance. In March 2016, April 2016 and December 2016, the FASB issued ASU No. 2016-08, Revenue From Contracts with Customers (ASC 606): Principal Versus Agent Considerations, ASU No. 2016-10, Revenue From Contracts with Customers (ASC 606): Identifying Performance Obligations and Licensing, and ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue From Contracts with Customers, respectively, which further clarify the implementation guidance on principal versus agent considerations contained in ASU No. 2014-09. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers, narrow-scope improvements and practical expedients which provides clarification on assessing the collectability criterion, presentation of sales taxes, measurement date for non-cash consideration and completed contracts at transition. These standards will be effective for the Company beginning in the first quarter of 2018. Early adoption is permitted. The Company will adopt the new standard and related updates effective January 1, 2018, and intends to use the modified retrospective method of adoption. The Company has undertaken an initial impact analysis of these items, which includes reviewing the terms and conditions of its existing customer contracts with respect to the five discrete criteria required for recognizing revenue set forth in ASC 606. The Company believes that the most significant aspects of the new guidance that could impact the Company’s financial statements are the requirements surrounding contract acquisition costs and activation and installation revenues, and that implementation of these requirements could be material to the Company’s financial statements. The Company expects to conclude its analysis of the impact of the new revenue recognition guidance on its consolidated financial statements around December 31, 2017.

2. Basis of Presentation and 26

2. Basis of Presentation and Summary of Significant Accounting Policies (Tables)	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
Goodwill	Balance at December 31, 2016 $ 35,689,215 Increase in goodwill associated with a 2016 acquisition 7,414 Settlement of litigation with Apptix sellers (513,000 ) Adjustment to goodwill associated with acquisition of customer bases (see note 3) (410,000 ) Balance at September 30, 2017 $ 34,773,629

4. Loss per share (Tables)

4. Loss per share (Tables)	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
Computation for basic and diluted net income per share	Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Numerator Net loss $ (3,700,486 ) $ (3,145,154 ) $ (10,059,809 ) $ (8,359,037 ) Undeclared dividends on Series A-1, A-2 and A-4 Convertible Preferred Stock (101,729 ) (101,729 ) (301,871 ) (302,976 ) Conversion price reduction on Series B-2 Preferred Stock (see note 13) — — (623,574 ) — Series B-2 warrant exchange (see note 13) — — (347,191 ) — Dividends declared on Series B-2 Convertible Preferred Stock (139,462 ) (183,917 ) (463,162 ) (1,799,491 ) Net income attributable to non-controlling interest (2,724 ) — (2,724 ) — Net loss attributable to common stockholders $ (3,944,401 ) $ (3,430,800 ) $ (11,798,331 ) $ (10,461,504 ) Denominator Basic and diluted weighted average common shares outstanding 22,352,341 14,990,816 21,828,816 14,536,893 Loss per share Basic and diluted $ (0.18 ) $ (0.23 ) $ (0.54 ) $ (0.72 )
Excluded from calculation of diluted earnings per common share	For the Nine Months Ended September 30, 2017 2016 Warrants 2,658,900 2,946,948 Convertible preferred stock 2,067,358 2,626,518 Stock options 2,222,288 1,157,512 6,948,546 6,730,978

5. Intangible Assets (Tables)

5. Intangible Assets (Tables)	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
Identifiable intangible assets	September 30, 2017 December 31, 2016 Gross Carrying Amount Accumulated Amortization Total Gross Carrying Amount Accumulated Amortization Total Trademarks and tradename $ 1,093,400 $ (629,731 ) $ 463,669 $ 1,093,400 $ (501,982 ) $ 591,418 Proprietary technology 6,670,000 (5,028,346 ) 1,641,654 6,670,000 (4,036,915 ) 2,633,085 Non-compete agreement 12,128,043 (11,389,604 ) 738,439 12,128,043 (9,891,892 ) 2,236,151 Customer relationships 67,713,181 (11,799,657 ) 55,913,524 65,948,181 (7,827,697 ) 58,120,484 Favorable lease intangible 218,000 (214,366 ) 3,634 218,000 (181,667 ) 36,333 Total acquired intangibles $ 87,822,624 $ (29,061,704 ) $ 58,760,920 $ 86,057,624 (22,440,153 ) $ 63,617,471
Estimated future aggregate amortization expense	Year Amortization Expense remainder of 2017 $ 1,962,993 2018 6,561,232 2019 5,577,500 2020 5,537,117 2021 5,362,750

6. Supplemental Disclosure of29

6. Supplemental Disclosure of Cash Flow Information (Tables)	9 Months Ended
	Sep. 30, 2017
Supplemental Disclosure Of Cash Flow Information Tables
Supplemental Disclosure of Cash Flow Information	Nine Months Ended September 30, Supplemental Cash Flow Information 2017 2016 Cash paid for interest $ 6,166,497 $ 4,233,527 Cash paid for income taxes $ - $ - Supplemental Non-Cash Investing and Financing Activities Property and equipment acquired under capital leases or equipment financing obligations $ 457,475 $ 188,497 Conversion of preferred stock into common stock $ 2,958,000 $ - Dividends on Series B-2 Preferred Stock paid with the issuance of Fusion common stock $ 463,163 $ 599,491 Obligations under purchase agreements $ 1,350,000 $ 961,606

7. Prepaid Expenses and Other30

7. Prepaid Expenses and Other Current Assets (Tables)	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
Prepaid expenses and other current assets	September 30, 2017 December 31, 2016 Insurance $ 5,327 $ 160,262 Rent 16,326 5,389 Marketing 39,333 74,665 Software subscriptions 697,261 419,431 Comisssions 109,688 159,146 Other 908,137 265,316 Total $ 1,776,072 $ 1,084,209

8. Accounts Payable and Accru31

8. Accounts Payable and Accrued Expenses (Tables)	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
Accounts payable and accrued expenses	September 30, 2017 December 31, 2016 Trade accounts payable $ 7,275,546 $ 6,358,548 Accrued license fees 3,140,568 2,881,331 Accrued sales and federal excise taxes 3,214,289 2,863,363 Deferred revenue 1,523,045 1,874,641 Accrued network costs 5,047,912 1,416,000 Accrued sales commissions 798,835 819,106 Property and other taxes 927,002 581,956 Accrued payroll and vacation 408,570 421,733 Customer deposits 378,783 365,249 Interest payable 7,849 304,409 Credit card payable 117,214 265,985 Accrued USF fees 498,441 249,825 Accrued bonus 376,890 249,361 Professional and consulting fees 151,948 164,878 Rent 129,428 127,781 Other 1,678,626 778,672 Total $ 25,674,946 $ 19,722,838

9. Equipment Financing Obliga32

9. Equipment Financing Obligations (Tables)	9 Months Ended
	Sep. 30, 2017
Equipment Financing Obligations
Equipment financing obligations	September 30, December 31, 2017 2016 Equipment financing obligations $ 1,902,120 $ 2,239,661 Less: current portion (1,186,115 ) (1,002,578 ) Long-term portion $ 716,005 $ 1,237,083
Principal payment under the capital lease agreements	Year ending December 31: Principal remainder of 2017 $ 321,854 2018 1,140,586 2019 429,486 2020 10,194 $ 1,902,120

10. Long-Term Debt (Tables)

10. Long-Term Debt (Tables)	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
Secured credit facilities	September 30, December 31, 2017 2016 Term loan $ 62,562,500 $ 65,000,000 Less: Deferred financing fees (1,092,906 ) (1,289,629 ) Current portion (5,687,500 ) (2,979,167 ) Term loan - long-term portion $ 55,782,094 $ 60,731,204 Indebtedness under revolving credit facility $ 1,500,000 $ 3,000,000
Components of notes payable non-related parties	September 30, December 31, 2017 2016 Subordinated notes $ 33,588,717 $ 33,588,717 Discount on subordinated notes (1,122,282 ) (1,368,629 ) Deferred financing fees (643,662 ) (788,486 ) Total notes payable - non-related parties 31,822,773 31,431,602 Less: current portion — — Long-term portion $ 31,822,773 $ 31,431,602
Related Party Note Payable	September 30, December 31, 2017 2016 Notes payable to Marvin Rosen $ 928,081 $ 928,081 Discount on notes (9,946 ) (52,331 ) Total notes payable - related parties $ 918,135 $ 875,750

11. Obligations Under Asset P34

11. Obligations Under Asset Purchase Agreements (Tables)	9 Months Ended
	Sep. 30, 2017
Obligations Under Asset Purchase Agreements Tables
Obligations Under Asset Purchase Agreements	September 30, 2017 December 31, 2017 2016 Root Axcess $ — $ 166,668 Customer base acquisitions 1,007,397 334,025 Technology For Business, Inc. 861,606 936,606 1,869,003 1,437,299 Less: current portion (603,192 ) (546,488 ) Long-term portion $ 1,265,811 $ 890,811

12. Derivative Liability (Table

12. Derivative Liability (Tables)	9 Months Ended
	Sep. 30, 2017
Derivative Liability Tables
Assumptions used to determine the fair value of the warrants	Nine months ended September 30, 2017 2016 Stock price ($) 1.45-2.72 1.65-1.84 Adjusted Exercise price ($) 1.54-1.55 6.25 Risk-free interest rate (%) 2.23 1.56-1.78 Expected volatility (%) 64.3-84.3 92.4-96.7 Time to maturity (years) 1.5-1.75 2.25-3.00

13. Equity Transactions (Tables

13. Equity Transactions (Tables)	9 Months Ended
	Sep. 30, 2017
Equity Transactions Tables
Black-Scholes option-pricing model	Nine Months Ended September 30, 2017 2016 Dividend yield 0.0 % 0.0 % Expected volatility 92.40 % 94.6-96.7% Average Risk-free interest rate 2.18 % 1.56 % Expected life of stock option term (years) 8.00 8.00
Stock option activity	Number of Options Weighted Average Exercise Price Weighted Average Remaining Contract Term Outstanding at December 31, 2016 2,183,723 $ 2.56 8.56 years Granted 126,300 1.49 Exercised — — Forfeited (61,460 ) 1.60 Expired (26,275 ) 18.80 Outstanding at September 30, 2017 2,222,288 2.33 7.95 Exercisable at September 30, 2017 712,542 3.89 6.35

16. Segment Information (Tables

16. Segment Information (Tables)	9 Months Ended
	Sep. 30, 2017
Notes to Financial Statements
Operating segment information	Three Months Ended September 30, 2017 Carrier Services Business Services Corporate and Unallocated Consolidated Revenues $ 7,058,137 $ 29,297,050 $ - $ 36,355,187 Cost of revenues (exclusive of depreciation and amortization) 6,704,077 13,045,111 - 19,749,188 Gross profit 354,060 16,251,939 - 16,605,999 Depreciation and amortization 45,269 3,470,310 195,674 3,711,253 Selling, general and administrative expenses 547,654 11,790,690 1,311,005 13,649,349 Interest expense - (2,125,158) (79,361) (2,204,519) Loss on change in fair value of derivative liability - - (617,820) (617,820) Other expenses, net 9,371 112,816 8,844 131,032 Income tax provision - (10,200) - (10,200) Net loss $ (248,234) $ (1,257,235) $ (2,195,016) $ (3,700,486) Total assets $ 4,895,761 $ 119,113,665 $ 2,467,319 $ 126,476,745 Nine Months Ended September 30, 2017 Carrier Services Business Services Corporate and Unallocated Consolidated Revenues $ 22,496,958 $ 87,759,111 $ - $ 110,256,069 Cost of revenues (exclusive of depreciation and amortization) 21,746,819 38,174,830 - 59,921,649 Gross profit 750,139 49,584,281 - 50,334,420 Depreciation and amortization 339,633 10,408,551 400,824 11,149,008 Selling, general and administrative expenses 1,639,020 36,517,317 3,958,821 42,115,158 Interest expense - (6,262,106) (206,810) (6,468,916) Loss on change in fair value of derivative liability - - (544,485) (544,485) Other (expenses) income, net (9,454) 50,516 (116,613) (75,551) Income tax provision - (41,111) - (41,111) Net loss $ (1,237,968) $ (3,594,288) $ (5,227,553) $ (10,059,809) Capital expenditures $ 21,443 $ 4,376,414 $ - $ 4,397,857 Three Months Ended September 30, 2016 Carrier Services Business Services Corporate and Unallocated Consolidated Revenues $ 8,864,791 $ 21,294,318 $ - $ 30,159,109 Cost of revenues (exclusive of depreciation and amortization) 8,487,912 8,943,655 - 17,431,567 Gross profit 376,879 12,350,663 - 12,727,542 Depreciation and amortization 38,094 2,747,822 212,712 2,998,628 Selling, general and administrative expenses 653,462 9,547,547 1,207,039 11,408,048 Interest expense - (1,551,534) (73,661) (1,625,195) Gain on change in fair value of derivative liability - - 152,057 152,057 Other (expenses) income, net - (247,070) 265,139 18,069 Provision for income taxes - (10,951) (10,951) Net loss $ (314,677) $ (1,754,261) $ (1,076,216) $ (3,145,154) Total assets $ 3,783,321 $ 90,027,291 $ 2,312,655 $ 96,123,267 Nine Months Ended September 30, 2016 Carrier Services Business Services Corporate and Unallocated Consolidated Revenues $ 30,711,086 $ 64,329,938 $ - $ 95,041,024 Cost of revenues (exclusive of depreciation and amortization) 29,341,982 26,533,285 - 55,875,267 Gross profit 1,369,104 37,796,653 - 39,165,757 Depreciation and amortization 116,102 8,128,378 702,301 8,946,781 Selling, general and administrative expenses 2,119,119 28,052,965 3,930,763 34,102,847 Interest expense - (4,647,847) (229,981) (4,877,828) Gain on change in fair value of derivative liability - - 380,099 380,099 Other (expenses) income, net - (764,308) 797,822 33,514 Provision for income taxes - (10,951) (10,951) Net loss $ (866,117) $ (3,807,796) $ (3,685,124) $ (8,359,037) Capital expenditures $ 41,584 $ 3,929,145 $ - $ 3,970,729

18. Fair Value Disclosures (Tab

18. Fair Value Disclosures (Tables)	9 Months Ended
	Sep. 30, 2017
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, 2017 Current liabilities: Contingent purchase price liability - - $ 603,192 $ 603,192 Non-current liabilities: Contingent purchase price liability - - $ 1,265,811 $ 1,265,811 Derivative liability (see note 12) - - $ 760,965 $ 760,965 As of December 31, 2016 Current liabilities: Contingent purchase price liability - - $ 546,488 $ 546,488 Non-current liabilities: Contingent purchase price liability - - $ 890,811 $ 890,811 Derivative liability (see note 12) - - $ 348,650 $ 348,650
Changes in derivative liability and contingent purchase price liability	Changes in the derivative warrant liability for the nine months ended September 30, 2017 are as follows: Balance at December 31, 2016 $ 348,650 Change for the period: Change in fair value included in net loss 544,486 Warrant exercises (see note 12) (132,171) Balance at September 30, 2017 $ 760,965 Changes in the contingent purchase price liability for the nine months ended September 30, 2017 are as follows: Balance at December 31, 2016 $ 1,437,299 Change for the period: Acquired customer base 1,350,000 Increase in amounts due from Technology Opportunity Group (334,404) Payments made (583,892) Balance at September 30, 2017 $ 1,869,003

2. Basis of Presentation and 39

2. Basis of Presentation and Summary of Significant Accounting Policies (Details)	9 Months Ended
	Sep. 30, 2017USD ($)
Basis Of Presentation And Summary Of Significant Accounting Policies Details
Balance at December 31, 2016	$ 35,689,215
Increase in goodwill associated with a 2016 acquisition	7,414
Settlement of litigation with Apptixsellers	(513,000)
Adjustment to goodwill associated with acquisition of customer bases (see note 3)	(410,000)
Balance at September 30, 2017	$ 34,773,629

2. Basis of Presentation and 40

2. Basis of Presentation and Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Notes to Financial Statements
Working capital deficit	$ (14,700,000)		$ (14,700,000)
Stockholders' equity	553,274		553,274		$ 9,190,068
Cash	2,341,634		2,341,634		7,221,910
Goodwill	34,773,629		34,773,629		$ 35,689,215
Advertising and marketing expenses	$ 27,000	$ 27,000	$ 200,000	$ 200,000

4. Loss per share (Details)

4. Loss per share (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Numerator
Net Loss	$ (3,700,486)	$ (3,145,154)	$ (10,059,809)	$ (8,359,037)
Undeclared dividends on Series A-1, A-2 and A-4 Convertible Preferred Stock	(101,729)	(101,729)	(301,871)	(302,976)
Conversion price reduction on Series B-2 Preferred Stock (see note 13)	0	0	(623,574)	0
Series B-2 warrant exchange (see note 13)	0	0	(347,191)	0
Dividends declared on Series B-2 Convertible Preferred Stock	(139,462)	(183,917)	(463,162)	(1,799,491)
Net loss attributable to non-controlling interest	(2,724)	0	(2,724)	0
Net loss attributable to common stockholders	$ (3,944,401)	$ (3,430,800)	$ (11,798,331)	$ (10,461,504)
Denominator
Basic and diluted weighted average common shares outstanding	22,352,341	14,990,816	21,828,816	14,536,893
Loss per share
Basic and diluted	$ (0.18)	$ (0.23)	$ (0.54)	$ (0.72)

4. Loss per share (Details 1)

4. Loss per share (Details 1) - shares	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Antidilutive securities excluded from the calculation of diluted earnings per common share	6,948,546	6,730,978
Warrants [Member]
Antidilutive securities excluded from the calculation of diluted earnings per common share	2,658,900	2,946,948
Convertible preferred stock [Member]
Antidilutive securities excluded from the calculation of diluted earnings per common share	2,067,358	2,626,518
Stock options [Member]
Antidilutive securities excluded from the calculation of diluted earnings per common share	2,222,288	1,157,512

4. Loss Per Share (Details Narr

4. Loss Per Share (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Preferred stock dividends accumulated	$ 5,000,000		$ 5,000,000
Series B-2 Preferred Stock [Member]
Preferred stock dividends declared	$ 100,000	$ 200,000	$ 1,400,000	$ 1,800,000
Preferred stock dividends paid			257,238	1,010,177

5. Intangible Assets (Details)

5. Intangible Assets (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Gross intangible assets	$ 87,822,624	$ 86,057,624
Less: accumulated amortization	(29,061,704)	(22,440,153)
Intangible assets, net	58,760,920	63,617,471
Trademarks and tradename [Member]
Gross intangible assets	1,093,400	1,093,400
Less: accumulated amortization	(629,731)	(501,982)
Intangible assets, net	463,669	591,418
Proprietary technology [Member]
Gross intangible assets	6,670,000	6,670,000
Less: accumulated amortization	(5,028,346)	(4,036,915)
Intangible assets, net	1,641,654	2,633,085
Non-compete agreement [Member]
Gross intangible assets	12,128,043	12,128,043
Less: accumulated amortization	(11,389,604)	(9,891,892)
Intangible assets, net	738,439	2,236,151
Customer relationships [Member]
Gross intangible assets	67,713,181	65,948,181
Less: accumulated amortization	(11,799,657)	(7,827,697)
Intangible assets, net	55,913,524	58,120,484
Favorable lease intangible [Member]
Gross intangible assets	218,000	218,000
Less: accumulated amortization	(214,366)	(181,667)
Intangible assets, net	$ 3,634	$ 36,333

5. Intangible Assets (Details 1

5. Intangible Assets (Details 1)	Sep. 30, 2017USD ($)
Notes to Financial Statements
Remainder of 2017	$ 1,962,993
2,018	6,561,232
2,019	5,577,500
2,020	5,537,117
2,021	$ 5,362,750

5. Intangible Assets (Details N

5. Intangible Assets (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Notes to Financial Statements
Amortization expense	$ 2,200,000	$ 1,400,000	$ 6,600,000	$ 4,100,000

6. Supplemental Disclosure of47

6. Supplemental Disclosure of Cash Flow Information (Details) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Supplemental Cash Flow Information
Cash paid for interest	$ 6,166,497	$ 4,233,527
Cash paid for income taxes	0	0
Supplemental Non-Cash Investing and Financing Activities
Property and equipment acquired under capital leases	457,475	188,497
Conversion of preferred stock into common stock	2,958,000	0
Dividend on Series B-2 preferred stock paid with the issuance of Fusion common stock	463,163	599,491
Obligations under asset purchase agreements	$ 1,350,000	$ 961,606

7. Prepaid Expenses and Other48

7. Prepaid Expenses and Other Current Assets (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Prepaid expenses and other current assets
Insurance	$ 5,327	$ 160,262
Rent	16,326	5,389
Marketing	39,333	74,665
Software subscriptions	697,261	419,431
Commissions	109,688	159,146
Other	908,137	265,316
Total	$ 1,776,072	$ 1,084,209

8. Accounts Payable and Accru49

8. Accounts Payable and Accrued Expenses (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Notes to Financial Statements
Trade accounts payable	$ 7,275,546	$ 6,358,548
Accrued license fees	3,140,568	2,881,331
Accrued sales and federal excise taxes	3,214,289	2,863,363
Deferred revenue	1,523,045	1,874,641
Accrued network costs	5,047,912	1,416,000
Accrued sales commissions	798,835	819,106
Property and other taxes	927,002	581,956
Accrued payroll and vacation	408,570	421,733
Customer deposits	378,783	365,249
Interest payable	7,849	304,409
Credit card payable	117,214	265,985
Accrued USF fees	498,441	249,825
Accrued bonus	376,890	249,361
Professional and consulting fees	151,948	164,878
Rent	129,428	127,781
Other	1,678,626	778,672
Total accounts payable and accrued expenses	$ 25,674,946	$ 19,722,838

9. Equipment Financing Obliga50

9. Equipment Financing Obligations (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Equipment Financing Obligations
Equipment financing obligations	$ 1,902,120	$ 2,239,661
Less: current portion	(1,186,115)	(1,002,578)
Long-term portion	$ 716,005	$ 1,237,083

9. Equipment Financing Obliga51

9. Equipment Financing Obligations (Details 1)	Sep. 30, 2017USD ($)
Equipment Financing Obligations
Remainder of 2017	$ 321,854
2,018	1,140,586
2,019	429,486
2,020	10,194
Total	$ 1,902,120

10. Long-Term Debt (Details)

10. Long-Term Debt (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Long-term Debt Details
Term loan	$ 62,562,500	$ 65,000,000
Less: Deferred financing fees	(1,092,906)	(1,289,629)
Less: Current Portion	(5,687,500)	(2,979,167)
Term loan - long-term portion	55,782,094	60,731,204
Indebtedness under revolving credit facility	$ 1,500,000	$ 3,000,000

10. Long-Term Debt (Details 1)

10. Long-Term Debt (Details 1) - Non Related Party [Member] - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Subordinated Notes	$ 33,588,717	$ 33,588,717
Discount on subordinated notes	(1,122,282)	(1,368,629)
Deferred financing fees	(643,662)	(788,486)
Total notes payable - non-related parties	31,822,773	31,431,602
Less: current portion	0	0
Long-term portion	$ 31,822,773	$ 31,431,602

10. Long-Term Debt (Details 2)

10. Long-Term Debt (Details 2) - RelatedParty - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Notes payable to Marvin Rosen	$ 928,081	$ 928,081
Discount on note	(9,946)	(52,331)
Total notes payable - related parties	$ 918,135	$ 875,750

10. Long-Term Debt (Details Nar

10. Long-Term Debt (Details Narrative) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Long-term Debt Details Narrative
Revolver credit facility	$ 1,500,000	$ 3,000,000

11. Obligations Under Asset P56

11. Obligations Under Asset Purchase Agreements (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Obligations Under Asset Purchase Agreements Details
Root Axcess	$ 0	$ 166,668
Customer base acquisitions	1,007,397	334,025
Technology For Business, Inc.	861,606	936,606
Total	1,869,003	1,437,299
Less: current portion	603,192	546,488
Long-term portion	$ 1,265,811	$ 890,811

12. Derivative Liability (Detai

12. Derivative Liability (Details) - $ / shares	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Exercise price ($)		$ 6.25
Risk-free interest rate (%)	2.23%
Minimum
Stock price ($)	$ 1.45	$ 1.65
Exercise price ($)	$ 1.54
Risk-free interest rate (%)		1.56%
Expected volatility (%)	64.30%	92.40%
Time to maturity (years)	1 year 6 months	2 years 3 months
Maximum
Stock price ($)	$ 2.72	$ 1.84
Exercise price ($)	$ 1.55
Risk-free interest rate (%)		1.78%
Expected volatility (%)	84.30%	96.70%
Time to maturity (years)	1 year 9 months	3 years

12. Derivative Liability (Det58

12. Derivative Liability (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Derivative Liability [Abstract]
Fair value derivative liability	$ 800,000		$ 800,000		$ 300,000
Gain on fair value of derivative	$ (600,000)	$ 200,000	$ (500,000)	$ 400,000

13. Equity Transactions (Detail

13. Equity Transactions (Details)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Dividend yield (%)	0.00%	0.00%
Expected volatility (%)	92.40%
Average Risk-free interest rate (%)	2.18%	1.56%
Expected life of stock option term (years)	8 years	8 years
Minimum
Expected volatility (%)		94.60%
Maximum
Expected volatility (%)		96.70%

13. Equity Transactions (Deta60

13. Equity Transactions (Details 1)	9 Months Ended
	Sep. 30, 2017$ / sharesshares
Number of Options
Balance at December 31, 2016 | shares	2,183,723
Shares granted during the period | shares	126,300
Shares exercised during the period | shares	0
Shares forfeited during the period | shares	(61,460)
Shares expired during the period | shares	(26,275)
Shares outstanding at September 30, 2017 | shares	2,222,288
Shares exercisable at September 30, 2017 | shares	712,542
Weighted Average Exercise Price
Balance at December 31, 2016 | $ / shares	$ 2.56
Shares granted during the period | $ / shares	1.49
Shares exercised during the period | $ / shares	0
Shares forfeited during the period | $ / shares	1.60
Shares expired during the period | $ / shares	18.80
Shares outstanding at September 30, 2017 | $ / shares	2.33
Shares exercisable at September 30, 2017 | $ / shares	$ 3.89
Weighted Average Remaining Contract Term
Outstanding at December 31, 2016	8 years 6 months 22 days
Outstanding at September 30, 2017	7 years 11 months 12 days
Exercisable at September 30, 2017	6 years 4 months 6 days

13. Equity Transactions (Deta61

13. Equity Transactions (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Common Stock, Shares Authorized	90,000,000		90,000,000		90,000,000
Common Stock, Shares Issued	22,296,683		22,296,683		20,642,028
Common Stock, Shares Outstanding	22,296,683		22,296,683		20,642,028
Preferred Stock, Shares Authorized	10,000,000		10,000,000		10,000,000
Preferred Stock, Shares Issued	14,341		14,341		17,299
Preferred Stock, Shares Outstanding	14,341		14,341		17,299
Stock based compensation	$ 200,000	$ 200,000	$ 700,000	$ 600,000
Unrecognized compensation expense	$ 1,200,000		$ 1,200,000
Series A Preferred Stock [Member]
Preferred Stock, Shares Issued	5,045		5,045		5,045
Preferred Stock, Shares Outstanding	5,045		5,045		5,045
Series B-2 Preferred Stock [Member]
Preferred Stock, Shares Issued	9,296		9,296		12,254
Preferred Stock, Shares Outstanding	9,296		9,296		12,254

16. Segment Information (Detail

16. Segment Information (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Segment Reporting Information [Line Items]
Revenues	$ 36,355,187	$ 30,159,019	$ 110,256,069	$ 95,041,024
Cost of revenues (exclusive of depreciation and amortization)	19,749,188	17,431,477	59,921,649	55,875,267
Gross profit	16,605,999	12,727,542	50,334,420	39,165,757
Selling, general and administrative expenses	13,649,349	11,408,048	42,115,158	34,102,847
Interest expense	(2,204,520)	(1,625,195)	(6,468,916)	(4,877,828)
Gain on change in fair value of derivative liability			(544,487)	380,099
Income tax (provision) benefit	10,200	10,951	41,111	10,951
Carrier Services
Segment Reporting Information [Line Items]
Revenues	7,058,137	8,864,791	22,496,958	30,711,086
Cost of revenues (exclusive of depreciation and amortization)	6,704,077	8,487,912	21,746,819	29,341,982
Gross profit	354,060	376,879	750,139	1,369,104
Depreciation and amortization	(45,269)	(38,094)	(339,633)	(116,102)
Selling, general and administrative expenses	547,654	653,462	1,639,020	2,119,119
Interest expense	0	0	0	0
Gain on change in fair value of derivative liability	0	0	0	0
Other (expenses) income, net	(9,371)	0	9,454	0
Income tax (provision) benefit	0	0	0	0
Net loss	(248,234)	(314,677)	(1,237,968)	(866,117)
Total assets	4,895,761	3,783,321
Capital expenditures			21,443	41,584
Business Services
Segment Reporting Information [Line Items]
Revenues	29,297,050	21,294,318	87,759,111	64,329,938
Cost of revenues (exclusive of depreciation and amortization)	13,045,111	8,943,655	38,174,830	26,533,285
Gross profit	16,251,939	12,350,663	49,584,281	37,796,653
Depreciation and amortization	(3,470,310)	(2,747,822)	(10,408,551)	(8,128,378)
Selling, general and administrative expenses	11,790,690	9,547,547	36,517,317	28,052,965
Interest expense	2,125,158	1,551,534	6,262,106	4,647,847
Gain on change in fair value of derivative liability	0	0	0	0
Other (expenses) income, net	(112,816)	247,070	(50,516)	764,308
Income tax (provision) benefit	(10,200)	(10,951)	(41,111)	(10,951)
Net loss	(1,257,235)	(1,754,261)	(3,594,288)	(3,807,796)
Total assets	119,113,665	90,027,291
Capital expenditures			4,376,414	3,929,145
Corporate and Unallocated
Segment Reporting Information [Line Items]
Revenues	0	0	0	0
Cost of revenues (exclusive of depreciation and amortization)	0	0	0	0
Gross profit	0	0	0	0
Depreciation and amortization	(195,674)	(212,712)	(400,824)	(702,301)
Selling, general and administrative expenses	1,311,005	1,207,039	3,958,821	3,930,763
Interest expense	79,361	73,661	206,810	229,981
Gain on change in fair value of derivative liability	(617,820)	152,057	(544,485)	380,099
Other (expenses) income, net	(8,844)	(265,139)	116,613	(797,822)
Income tax (provision) benefit	0	0	0	0
Net loss	(2,195,016)	(1,076,216)	(5,227,553)	(3,685,124)
Total assets	2,467,319	2,312,655
Capital expenditures			0	0
Consolidated
Segment Reporting Information [Line Items]
Revenues	36,355,187	30,159,109	110,256,069	95,041,024
Cost of revenues (exclusive of depreciation and amortization)	19,749,188	17,431,567	59,921,649	55,875,267
Gross profit	16,605,999	12,727,542	50,334,420	39,165,757
Depreciation and amortization	(3,711,253)	(2,998,628)	(11,149,008)	(8,946,781)
Selling, general and administrative expenses	13,649,349	11,408,048	42,115,158	34,102,847
Interest expense	2,204,519	1,625,195	6,468,916	4,877,828
Gain on change in fair value of derivative liability	(617,820)	152,057	(544,485)	380,099
Other (expenses) income, net	(131,032)	(18,069)	75,551	(33,514)
Income tax (provision) benefit	(10,200)	(10,951)	(41,111)	(10,951)
Net loss	(3,700,486)	(3,145,154)	(10,059,809)	(8,359,037)
Total assets	$ 126,476,745	$ 96,123,267
Capital expenditures			$ 4,397,857	$ 3,970,729

18. Fair Value Disclosures (Det

18. Fair Value Disclosures (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Current liabilities:
Contingent purchase price liability	$ 603,192	$ 546,488
Non-current liabilities:
Contingent purchase price liability	1,265,811	890,811
Derivative liability (see note 12)	760,965	348,650
Level 1
Current liabilities:
Contingent purchase price liability	0	0
Non-current liabilities:
Contingent purchase price liability	0	0
Derivative liability (see note 12)	0	0
Level 2
Current liabilities:
Contingent purchase price liability	0	0
Non-current liabilities:
Contingent purchase price liability	0	0
Derivative liability (see note 12)	0	0
Level 3
Current liabilities:
Contingent purchase price liability	603,192	546,488
Non-current liabilities:
Contingent purchase price liability	1,265,811	890,811
Derivative liability (see note 12)	$ 760,965	$ 348,650

18. Fair Value Disclosures (D64

18. Fair Value Disclosures (Details 1)	9 Months Ended
	Sep. 30, 2017USD ($)
Derivative Warrant Liability
Beginning Balance	$ 348,650
Change in fair value included in net loss	544,486
Warrant exercises (see note 12)	(132,171)
Ending Balance	760,965
Contingent Purchase Price Liability
Beginning Balance	1,437,299
Acquired customer base	1,350,000
Increase in amounts due from Technology Opportunity Group	(334,404)
Payments made	(583,892)
Ending Balance	$ 1,869,003