| 1. Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
| Jun. 30, 2016 |
| Summary Of Significant Accounting Policies Policies | |
| Description of Business | Crexendo, Inc. (CXDO) 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, the Company, or our
Company. We are a hosted services company that provides hosted telecommunications services, broadband internet services
and website hosting 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 $923,000. 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 July 2016 that in addition to the $1,000,000 available under the note payable agreement, 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 August 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 June 30, 2016
and December 31, 2015, we had cash and cash equivalents in financial institutions in excess of federally insured limits in the
amount of $666,000 and $1,384,000, respectively. |
| Restricted Cash | We classified $100,000 and $112,000
as restricted cash as of June 30, 2016 and December 31, 2015, respectively. Cash is restricted for compensating balance requirements
on purchasing card agreements. As of June 30, 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 agreements
(EPTAs). 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. |
| Inventory | Finished goods telecommunications
equipment inventory is stated at the lower of cost or market (first-in, first-out method). 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 $252,000 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 are 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 $3,000 and $15,000 for the three months ended June 30, 2016 and 2015, respectively
and $9,000 and $36,000 for the six months ended June 30, 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 | ur intangible assets consist primarily
of customer relationships and developed technology. 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 | Revenue generated from the
sale of telecommunications equipment is 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 | |
| Cost of Revenue | Cost of Hosted Telecommunications Service revenue
primarily consists of fees we pay to third-party telecommunications and business internet providers, personnel and travel expenses
related to system implementation, customer service, and the costs associated with the purchase of desktop devices and other third
party equipment. Cost of Web Services revenue consists primarily of customer service costs and outsourcing fees related to fulfillment
of our professional web management services. |
| 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 and six months ended June 30, 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 and six months ended June 30, 2016 and 2015. One telecom customer accounted for 12% of
total trade accounts receivable as of June 30, 2016 and no customer accounted for 10% or more of our total trade accounts receivable
as of December 31, 2015. |
| Recently Issued Accounting Pronouncements | Compensation Stock Compensation In February 2016, the FASB issued
ASU 2016-02, Leases, In November 2015, the FASB issued
ASU 2015-17, Balance Sheet Classification of Deferred Taxes, In September 2015, the FASB issued
ASU No. 2015-16, Business Combinations, In April 2015, the FASB issued ASU
2015-05, IntangiblesGoodwill and OtherInternal-Use Software, In August 2014, the FASB issued
ASU 2014-15, Presentation of Financial Statements Going Concern, In June 2014, the FASB issued ASU
No. 2014-12, Compensation Stock Compensation, In May 2014, the FASB issued ASU 2014-09, Revenue
from Contracts with Customers, |
