SEGMENT REPORTING

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

SEGMENT REPORTING

NOTE 15 – SEGMENT REPORTING

Operating segments are defined under U.S. GAAP as components of an enterprise for which separate financial information is available and evaluated regularly by a company's chief operating decision makers in deciding how to allocate resources and assess performance.

Historically, the Company has not had separate operating segments. However, with the acquisition of Broadsmart in March 2016 (see Note 14 above) and the founding of the SMB business during the current quarter, management will be evaluating each of these new business lines separately and has determined that the Company now has three reportable segments – “Consumer,” “Enterprise” and “SMB”. 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 segments and their principal activities consist of the following:

Consumer

This operating segment represents a vertically integrated group of companies, a micro-processor chip design company, an appserver and session border controller company, a wholesale provider of VoIP services, a softphone company, the developer and provider of the magicJack device, and a wholesaler of telephone service to VoIP providers and telecommunication carriers. This segment represents the historical magicJack consumer business.

magicJack is a cloud communications leader that is the inventor of the magicJack devices and other magicJack products and services. magicJack’s products and services allow users to make and/or receive free telephone calls to and from anywhere in the world where the customer has broadband access to the Internet, and allow customers to make free calls back to the United States and Canada from anywhere legally permitted in the world.

Enterprise

This operating segment includes Broadsmart. Broadsmart is a leading hosted UCaaS (Unified Communication as a Service) provider for medium-to-large multi-location enterprise customers. Broadsmart has a track record of designing, provisioning and delivering complex UCaaS solutions to blue chip corporate customers on a nationwide basis. Broadsmart has expertise in servicing enterprises with hundreds-to-thousands of locations.

SMB

Through this operating segment, started during the first quarter of 2016, the Company intends to provide easy-to-buy, simple-to-use VOIP services to small businesses at disruptive prices. The company is currently in the final stages of product development for its first SMB product offering and expects to begin sales in Q2 2016.

Operating segment information for the three months ended March 31, 2016 is summarized as follows (in thousands):

	For the Three Months ended March 31, 2016
	Consumer			Enterprise			SMB			Consolidated
Net revenues	$	23,219			480		$	-		$	23,699
Cost of revenues		7,941			268			-			8,209
Gross profit		15,278			212			-			15,490
Marketing		1,219			(3	)		5			1,221
General and administrative		7,195			242			1,498			8,935
Research and development		1,030			-			70			1,100
Interest and dividend income		(7	)		-			-			(7	)
Interest expense		-			-			-			-
Other expenses, net		7			-			-			7
Income tax expense (benefit)		4,059			(10	)		(549	)		3,500
Net income (loss)	$	1,775		$	(17	)	$	(1,024	)	$	734
Total assets	$	128,282		$	43,349		$	2,090		$	173,721
Capital expenditures	$	5		$	-		$	-		$	5
Goodwill	$	32,304		$	15,181		$	-		$	47,485