| 1. Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
| Mar. 31, 2016 |
| Summary Of Significant Accounting Policies Policies | |
| Description of Business | Crexendo, Inc. is incorporated in the
state of Delaware. As used hereafter in the notes to condensed consolidated financial statements, we refer to Crexendo, Inc. and
its wholly owned subsidiaries, as we, us, or our Company. We are a hosted services company
that provides hosted telecommunications services, broadband internet services, website hosting, and e-commerce website development
software for businesses. Our services are designed to make enterprise-class hosting services available to any size businesses at
affordable monthly rates. The Company has two operating segments, which consist of Hosted Telecommunications Services
and Web Services. The Company has transformed into a start-up
company with the inherent risks and uncertainties of funding operations until profitability is achieved. We currently
plan to fund our operations during the next twelve months using our cash and cash equivalents of $1,151,000. However,
after considering the Companys historical negative cash flow from operating activities as well as internal forecasts, such
amount does not appear adequate to fund our anticipated cash needs for the next twelve months. Accordingly, the Company will be
required to obtain additional debt or equity financing such as that available from its CEO to sustain operations. The
Company received a commitment from the CEO, and majority shareholder, in April 2016 that he would exercise all warrants received
in connection with the note payable agreement dated December 30, 2015 (Note 8) if additional capital is necessary to fund operations
through May 31, 2017. Based on such commitment, along with its cash resources and loan borrowing availability, the Company
believes it will have sufficient funds to sustain its operations during the next twelve months as a result of the sources of funding
detailed above. |
| Basis of Presentation | The condensed consolidated financial statements
include the accounts and operations of Crexendo, Inc. and its wholly owned subsidiaries, which include Crexendo Business Solutions,
Inc., StoresOnline Inc., StoresOnline International Canada ULC, Avail 24/7 Inc., and Crexendo International, Inc. All
intercompany account balances and transactions have been eliminated in consolidation. The accompanying unaudited interim
consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (US
GAAP), consistent in all material respects with those applied in our consolidated financial statements included in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2015. Because these financial statements address interim periods,
they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete
financial statements. Such interim financial information is unaudited but reflects all adjustments that in the opinion of management
are necessary for the fair presentation of the interim periods presented. The results of operations presented in this Quarterly
Report on Form 10-Q are not necessarily indicative of the results that may be expected for the year ending December 31, 2016
or for any future periods. This Quarterly Report on Form 10-Q should be read in conjunction with the Companys audited consolidated
financial statements and footnotes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015. |
| Cash and Cash Equivalents | We consider all highly liquid, short-term
investments with maturities of three months or less at the time of purchase to be cash equivalents. As of March 31, 2016 and December
31, 2015, we had cash and cash equivalents in financial institutions in excess of federally insured limits in the amount of $928,000
and $1,384,000, respectively. |
| Restricted Cash | We classified $100,000 and $112,000 as
restricted cash as of March 31, 2016 and December 31, 2015, respectively. Cash is restricted for compensating balance
requirements on purchasing card agreements. As of March 31, 2016, we had restricted cash in financial institutions in excess of
federally insured limits in the amount of $100,000. |
| Trade Receivables | We have historically offered to our web
site development software customers the option to finance, typically through 24 and 36-month extended payment term arrangements
(EPTAs), purchases made at our suspended Internet Training Workshops through our Web Services segment. EPTAs are
reflected as short-term and long-term trade receivables, as applicable, as we have the intent and ability to hold the receivables
for the foreseeable future, until maturity or payoff. EPTAs are recorded on a nonaccrual cash basis beginning on the
contract date. Trade receivables from our hosted telecommunications and web services segments are recorded at invoiced amounts. |
| Allowance for Doubtful Accounts | The allowance represents estimated losses
resulting from customers failure to make required payments. The allowance estimate is based on historical collection experience,
specific identification of probable bad debts based on collection efforts, aging of trade receivables, customer payment history,
and other known factors, including current economic conditions. We believe that the allowance for doubtful accounts is adequate
based on our assessment to date, however, actual collection results may differ materially from our expectations. |
| Interest Income | Interest income is primarily earned from
customer financing arrangements. We recognized $4,000 and $6,000 in interest income for the three months ended March 31, 2016 and
2015, respectively. |
| Inventory | Finished goods telecommunications equipment
inventory is stated at the lower of cost (first-in, first-out method) or market. In accordance with applicable
accounting guidance, we regularly evaluate whether inventory is stated at the lower of cost or market. |
| Certificate of Deposit | We hold a $251,000 certificate of deposit
as collateral for merchant accounts, which automatically renews every 12 months. The certificate of deposit is classified as long-term
in the consolidated balance sheets. |
| Property and Equipment | Depreciation and amortization expense
is computed using the straight-line method in amounts sufficient to allocate the cost of depreciable assets over their estimated
useful lives ranging from two to five years. The cost of leasehold improvements is amortized using the straight-line method over
the shorter of the estimated useful life of the asset or the term of the related lease. Depreciation expense is included in general
and administrative expenses and totaled $6,000 and $21,000 for the three months ended March 31, 2016 and 2015, respectively. Depreciable
lives by asset group are as follows:
Computer and office equipment 2 to 5 years
Computer software 3 years
Furniture and fixtures 4 years
Leasehold improvements 2 to 5 years Maintenance and repairs are expensed as
incurred. The cost and accumulated depreciation of property and equipment sold or otherwise retired are removed from the accounts
and any related gain or loss on disposition is reflected in net income or loss for the year. |
| Goodwill | Goodwill is tested for impairment using
a fair-value-based approach on an annual basis (December 31) and between annual tests if indicators of potential impairment exist. |
| Intangible Assets | Our intangible assets consist primarily
of assets acquired in the acquisition of PBX Central and OSV, which include customer relationships and developed technology. The
fair value of identifiable intangible assets is based upon the lower of discounted future cash flow projections or the amount paid
in an arms length transaction. The intangible assets are amortized following the patterns in which the economic
benefits are consumed. We periodically review the estimated useful lives of our intangible assets and review these assets for impairment
whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The determination
of impairment is based on estimates of future undiscounted cash flows. If an intangible asset is considered to be impaired, the
amount of the impairment will be equal to the excess of the carrying value over the fair value of the asset. |
| Use of Estimates | In preparing the consolidated financial
statements, management makes assumptions, estimates and judgments that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts
of net sales and expenses during the reported periods. Specific estimates and judgments include valuation of goodwill
and intangible assets in connection with business acquisitions, allowances for doubtful accounts, uncertainties related to certain
income tax benefits, valuation of deferred income tax assets, valuations of share-based payments and recoverability of long-lived
assets. Managements estimates are based on historical experience and on our expectations that are believed to
be reasonable. The combination of these factors forms the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results may differ from our current estimates
and those differences may be material. |
| Revenue Recognition | In general, we recognize revenue when
all of the following conditions are satisfied: (1) there is persuasive evidence of an arrangement; (2) the product or service has
been provided to the customer; (3) the amount of fees to be paid by the customer is fixed or determinable; and (4) the collection
of our fees is probable. We recognize revenue from our Hosted Telecommunications Services and Web Services segments
on an accrual basis, with the exception of our extended payment term agreement cash receipts which are recognized on a cash basis. Specifics
to revenue category are as follows: We enter into agreements where revenue
is derived from multiple deliverables including any mix of products and/or services. For these arrangements, we determine
whether the delivered item(s) has value to the customer on a stand-alone basis, and in the event the arrangement includes a general
right of return relative to the delivered item(s), whether the delivery or performance of the undelivered item(s) is considered
probable and substantially in our control. If these criteria are met, the arrangement consideration is allocated to
the separate units of accounting based on each units relative selling price. If these criteria are not met, the
arrangement is accounted for as a single unit of accounting which would result in revenue being recognized ratably over the contract
term or deferred until the earlier of when such criteria are met or when the last undelivered element is delivered. The amount
of product and services revenue recognized for arrangements with multiple deliverables is impacted by the allocation of arrangement
consideration to the deliverables in the arrangement based on the relative selling prices. In determining our selling prices, we
apply the selling price hierarchy using vendor specific objective evidence (VSOE) when available, third-party evidence
of selling price (TPE) if VSOE does not exist, and best estimated selling price (BESP) if neither VSOE
nor TPE is available. VSOE of fair value for elements of an
arrangement is based upon the normal pricing and discounting practices for a deliverable when sold separately. In determining
VSOE, we require that a substantial majority of the selling prices fall within a reasonably narrow pricing range, generally evidenced
by a substantial majority of such historical stand-alone transactions falling within a reasonably narrow range of the median rate.
In addition, we consider major service groups, geographies, customer classifications, and other variables in determining VSOE. We are typically not able to determine
TPE for our products or services. TPE is determined based on competitor prices for similar deliverables when sold separately. Generally,
our offerings contain a significant level of differentiation such that the comparable pricing of products with similar functionality
is difficult to obtain. Furthermore, we are unable to reliably determine what similar competitor products selling prices
are on a stand-alone basis. When we are unable to establish the selling
price using VSOE or TPE, we use BESP in our allocation of arrangement consideration. The objective of BESP is to determine the
price at which we would transact a sale if the product or service were sold on a stand-alone basis. We determine BESP for a product
or service by considering multiple factors including, but not limited to, cost of products, gross margin objectives, pricing practices,
geographies, customer classes and distribution channels. We recognize revenue for delivered elements only when we determine there
are no uncertainties regarding customer acceptance. Changes in the allocation of the sales price between delivered and undelivered
elements can impact the timing of revenue recognized but does not change the total revenue recognized on any agreement. |
| Professional Services Revenue | Fees
collected for professional services, including website design and development, search engine optimization services, link-building,
paid search management services, and telecom installation services are recognized as revenue, net of expected customer refunds,
over the period during which the services are performed, based upon the value for such services. |
| Telecommunications Services Hosting and Web Hosting Revenue | Fees collected for hosting revenue are
recognized ratably as services are provided. Customers are billed for these services on a monthly or annual basis at
the customers option. We recognize revenue ratably over the applicable service period. When we provide
a free trial period, we do not begin to recognize recurring revenue until the trial period has ended and the customer has been
billed for the services. |
| Equipment Sales and Financing Revenue | Fees generated from the sale of telecommunications
equipment are recognized when the devices are installed and hosted telecommunications services begin. Fees generated from renting our hosted
telecommunication equipment (IP or cloud telephone devices) through leasing contracts are recognized as revenue based on whether
the lease qualifies as an operating lease or sales-type lease. The two primary accounting provisions which we use to
classify transactions as sales-type or operating leases are: 1) lease term to determine if it is equal to or greater than 75% of
the economic life of the equipment and 2) the present value of the minimum lease payments to determine if they are equal to or
greater than 90% of the fair market value of the equipment at the inception of the lease. The economic life of most of our products
is estimated to be three years, since this represents the most frequent contractual lease term for our products, and there is no
residual value for used equipment. Residual values, if any, are established at the lease inception using estimates of fair value
at the end of the lease term. The vast majority of our leases that qualify as sales-type leases are non-cancelable and include
cancellation penalties approximately equal to the full value of the lease receivables. Leases that do not meet the criteria for
sales-type lease accounting are accounted for as operating leases. Revenue from sales-type leases is recognized upon installation
and the interest portion is deferred and recognized as earned. Revenue from operating leases in recognized ratably over
the applicable service period. |
| Commission Revenue | We have affiliate agreements with third-party
entities that are resellers of satellite television services and internet service provider bandwidth. We receive commissions when
the services are bundled with our offerings. Commission revenue is recognized when received. |
| Cost of Revenue | Cost of Hosted Telecommunications Service
revenue primarily consists of fees we pay to third-party telecommunications and business internet providers, personnel costs related
to system implementation, customer service and travel costs related to system implementation, and the costs associated with the
purchase of phones and other third party equipment. Cost of Web Services revenue consists primarily of salaries and outsourcing
fees related to fulfillment of our web services and customer service costs. |
| Prepaid Sales Commissions | For
arrangements where we recognize revenue over the relevant contract period, we defer related commission payments to our direct
sales force and amortize these amounts over the same period that the related revenues are recognized. This is done
to match commissions with the related revenues. Commission payments are nonrefundable unless amounts due from a customer
are determined to be uncollectible or if the customer subsequently changes or terminates the level of service, in which case commissions
which were paid are recoverable by us. |
| Research and Development | Research and development costs are expensed
as incurred. Costs related to internally developed software are expensed as research and development expense until technological
feasibility has been achieved, after which the costs are capitalized. |
| Fair Value Measurements | The fair value of our financial assets
and liabilities was determined based on three levels of inputs, of which the first two are considered observable and the last unobservable,
that may be used to measure fair value which are the following: Level 1 Level 2 ° Quoted prices for
similar assets or liabilities in active markets; ° Quoted prices
for identical or similar assets in non-active markets; ° Inputs other than
quoted prices that are observable for the asset or liability; and ° Inputs that
are derived principally from or corroborated by other observable market data. Level 3 |
| Notes Payable | We record notes payable net of any discounts
or premiums. Discounts and premiums are amortized as interest expense or income over the life of the note in such a way as to result
in a constant rate of interest when applied to the amount outstanding at the beginning of any given period. |
| Income Taxes | We recognize a liability or asset for
the deferred tax consequences of all temporary differences between the tax basis of assets and liabilities and their reported amounts
in the consolidated financial statements that will result in taxable or deductible amounts in future years when the reported amounts
of the assets and liabilities are recovered or settled. Accruals for uncertain tax positions are provided for in accordance with
accounting guidance. Accordingly, we may recognize the tax benefits from an uncertain tax position only if it is more-likely-than-not
that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.
The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that
has a greater than 50% likelihood of being realized upon ultimate settlement. Accounting guidance is also provided on de-recognition
of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for
interest and penalties associated with tax positions, and income tax disclosures. Judgment is required in assessing the future
tax consequences of events that have been recognized in the financial statements or tax returns. Variations in the actual outcome
of these future tax consequences could materially impact our financial position, results of operations, and cash flows. In
assessing the need for a valuation allowance, we evaluate all significant available positive and negative evidence, including historical
operating results, estimates of future taxable income and the existence of prudent and feasible tax planning strategies. We
have placed a full valuation allowance on net deferred tax assets. Interest and penalties associated with
income taxes are classified as income tax expense in the condensed consolidated statements of operations. We do not intend to indefinitely reinvest
the undistributed earnings of our United Kingdom subsidiary, therefore, we have provided for U.S. deferred income taxes on
such undistributed foreign earnings. All other foreign subsidiaries are considered disregarded foreign entities for
US tax purposes. |
| Stock-Based Compensation | For equity-classified awards, compensation
expense is recognized over the requisite service period based on the computed fair value on the grant date of the award. Equity
classified awards include the issuance of stock options. |
| Comprehensive Loss | There were no other components of comprehensive
loss other than net loss for the three months ended March 31, 2016 and 2015. |
| Operating Segments | Accounting
guidance establishes standards for the way public business enterprises are to report information about operating segments in annual
financial statements and requires enterprises to report selected information about operating segments in financial reports issued
to stockholders. The Company has two operating segments, which consist of Hosted Telecommunications Services and Web Services.
Research and development expenses are allocated to Hosted Telecommunications Services and Web Services segments based on the level
of effort, measured primarily by wages and benefits attributed to our engineering department. Indirect sales and marketing
expenses are allocated to the Hosted Telecommunications Services and Web Services segments based on level of effort, measured
by month-to-date contract bookings. General and administrative |
| Significant Customers | No customer accounted for 10% or more
of our total revenue for the three months ended March 31, 2016 and 2015. One telecom customer accounted for 13% of total
trade accounts receivable as of March 31, 2016 and no customer accounted for 10% or more of our total trade accounts receivable
as of December 31, 2015. |
| Recently Issued Accounting Pronouncements | In
March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09,
which amends Accounting Standards Codification ("ASC") Topic 718, Compensation Stock Compensation In
February 2016, the FASB issued ASU 2016-02, Leases in order to increase transparency and comparability among organizations by
recognizing lease assets and lease liabilities on the balance sheet for those leases classified as operating leases under previous
Generally Accepted Accounting Principles (GAAP). The ASU 2016-02 requires that a lessee should recognize
a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying
asset for the lease term on the balance sheet. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 (including
interim periods within those periods) using a modified retrospective approach and early adoption is permitted. The Company is
currently in the process of evaluating the impact of adoption of the ASU on its consolidated financial statements. In
November 2015, the FASB issued ASU 2015-17, which will require entities to present deferred tax assets (DTAs) and deferred
tax liabilities (DTLs) as noncurrent in a classified balance sheet. The ASU simplifies the current guidance, which requires entities
to separately present DTAs and DTLs as current and noncurrent in a classified balance sheet. ASU 2015-17 is effective
for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual
periods. The adoption of this guidance will eliminate the need to present DTAs as long-term and DTLs as current liabilities. We
will adopt this guidance effective January 1, 2017. In
April 2015, the FASB issued ASU 2015-05, which provides guidance to customers about whether a cloud computing arrangement includes
a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software
license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement
does not include a software license, the customer should account for the arrangement as a service contract. The guidance will
not change U.S. GAAP for a customer's accounting for service contracts. We adopted this guidance effective January 1, 2016. The
adoption of this guidance did not have a material impact on our consolidated financial statements as our hosted telecommunications
is a service contract. In
August 2014, the FASB issued ASU 2014-15. This ASU requires management to assess an entitys ability to continue as a going
concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the
ASU (1) provides a definition of the term substantial doubt, (2) requires an evaluation every reporting period including interim
periods, (3) provides principles for considering the mitigating effect of managements plans, (4) requires certain disclosures
when substantial doubt is alleviated as a result of consideration of managements plans, (5) requires an express statement
and other disclosures when substantial doubt is not alleviated, and (6) requires an assessment for a period of one year after
the date that the financial statements are issued (or available to be issued). This standard is effective for the fiscal years
ending after December 15, 2016, and for annual periods and interim periods thereafter. The adoption of ASU 2014-15 will not have
a material impact on our consolidated financial statements. In
June 2014, the FASB issued ASU No. 2014-12. This ASU requires that a performance target that affects vesting and could be achieved
after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in
ASC 718, Compensation-Stock Compensation, as it relates to such awards. ASU 2014-12 is effective for us in our first quarter of
fiscal 2017 with early adoption permitted using either of two methods: (i) prospective to all awards granted or modified after
the effective date; or (ii) retrospective to all awards with performance targets that are outstanding as of the beginning of the
earliest annual period presented in the financial statements and to all new or modified awards thereafter, with the cumulative
effect of applying ASU 2014-12 as an adjustment to the opening retained earnings balance as of the beginning of the earliest annual
period presented in the financial statements. The Company is currently assessing the impact of this pronouncement to its consolidated
financial statements. In
May 2014, the FASB issued ASU 2014-09 that introduces a new five-step revenue recognition model in which an entity should recognize
revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which
the entity expects to be entitled in exchange for those goods or services. This ASU also requires disclosures sufficient to enable
users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers,
including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments,
and assets recognized from the costs to obtain or fulfill a contract. In August 2015, the FASB issued ASU 2015-14,
which defers the effective date of ASU 2014-09 for all entities by one year. Accordingly, public business entities should apply
the guidance in ASU 2014-09 to annual reporting periods (including interim periods within those periods) beginning after December
15, 2017. Early adoption is permitted but not before annual periods beginning after December 15, 2016. The standard permits the
use of the retrospective or the modified approach method. We have not yet selected a transition method, and are currently in the
process of evaluating the impact of adoption of this ASU on our consolidated financial statements and disclosures. |
