Crexendo (CXDO) 10-Q 7 Aug 17 2017 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Jul. 31, 2017
Document And Entity Information
Entity Registrant Name	Crexendo, Inc.
Entity Central Index Key	1,075,736
Document Type	10-Q
Document Period End Date	Jun. 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		13,830,556
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2,017

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Current Assets:
Cash and cash equivalents	$ 929	$ 619
Restricted cash	100	100
Trade receivables, net of allowance for doubtful accounts of $42 as of June 30, 2017 and $34 as of December 31, 2016	404	346
Inventories	254	170
Equipment financing receivables	128	121
Prepaid expenses	629	686
Other current assets	8	8
Total Current Assets	2,452	2,050
Certificate of deposit	0	252
Long-term trade receivables, net of allowance for doubtful accounts of $11 as of June 30, 2017 and $13 as of December 31, 2016	36	43
Long term equipment financing receivables	104	176
Property and equipment, net	12	18
Intangible assets, net	286	335
Goodwill	272	272
Long-term prepaid expenses	169	251
Other long-term assets	122	136
Total Assets	3,453	3,533
Current Liabilities:
Accounts payable	162	116
Accrued expenses	853	997
Notes payable, current portion	127	66
Income taxes payable	5	5
Deferred revenue, current portion	960	809
Total Current Liabilities	2,107	1,993
Deferred revenue, net of current portion	36	43
Notes payable, net of current portion	952	966
Other long-term liabilities	0	16
Total Liabilities	3,095	3,018
Stockholders Equity
Preferred stock, par value $0.001 per share - authorized 5,000,000 shares; none issued	0	0
Common stock, par value $0.001 per share - authorized 25,000,000 shares, 13,830,556 shares issued and outstanding as of June 30, 2017 and 13,578,556 shares issued and outstanding as of December 31, 2016	14	14
Additional paid-in capital	59,383	58,716
Accumulated deficit	(59,039)	(58,215)
Total Stockholders' Equity	358	515
Total Liabilities and Stockholders' Equity	$ 3,453	$ 3,533

Condensed Consolidated Balance3

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Assets
Allowance for Doubtful Accounts - Trade Receivables	$ 42	$ 34
Allowance for Doubtful accounts - Long Term Trade Receivables	$ 11	$ 13
Stockholders Equity
Preferred Stock par value	$ 0.001	$ 0.001
Preferred Stock Shares Authorized	5,000,000	5,000,000
Preferred Stock Issued	0	0
Common Stock par value	$ 0.001	$ 0.001
Common Stock Shares Authorized	25,000,000	25,000,000
Common Stock Issued	13,830,556	13,578,556
Common Stock Outstanding	13,830,556	13,578,556

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income Statement [Abstract]
Service revenue	$ 2,182	$ 1,837	$ 4,247	$ 3,660
Product revenue	303	430	582	781
Total Revenue	2,485	2,267	4,829	4,441
Operating expenses:
Cost of service revenue	703	741	1,397	1,503
Cost of product revenue	124	176	232	327
Selling and marketing	709	636	1,399	1,246
General and administrative	1,009	1,274	2,180	2,565
Research and development	185	216	375	445
Total operating expenses	2,730	3,043	5,583	6,086
Loss from operations	(245)	(776)	(754)	(1,645)
Other income (expense):
Interest income	2	4	5	8
Interest expense	(36)	(31)	(71)	(66)
Other income, net	2	29	4	64
Total other income/(expense), net	(32)	2	(62)	6
Loss before income tax	(277)	(774)	(816)	(1,639)
Income tax provision	(4)	(4)	(8)	(7)
Net loss	$ (281)	$ (778)	$ (824)	$ (1,646)
Net loss per common share:
Basic	$ (0.02)	$ (0.06)	$ (0.06)	$ (0.12)
Diluted	$ (0.02)	$ (0.06)	$ (0.06)	$ (0.12)
Weighted-average common shares outstanding:
Basic	13,819,281	13,292,334	13,759,666	13,268,107
Diluted	13,819,281	13,292,334	13,759,666	13,268,107

Condensed Consolidated Stateme5

Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - 6 months ended Jun. 30, 2017 - USD ($) $ in Thousands	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total
Beginning Balance, Amount at Dec. 31, 2016	$ 14	$ 58,716	$ (58,215)	$ 515
Beginning Balance, Shares at Dec. 31, 2016	13,578,556
Share-based compensation, Amount		392		392
Share-based compensation, Shares	27,000
Issuance of common stock for exercise of stock option, Amount		166		166
Issuance of common stock for exercise of stock option, Shares	150,000
Issuance of common stock for interest on related party note payable, Amount		109		109
Issuance of common stock for interest on related party note payable, Shares	75,000
Net loss			(824)	(824)
Ending Balance, Amount at Jun. 30, 2017	$ 14	$ 59,383	$ (59,039)	$ 358
Ending Balance, Shares at Jun. 30, 2017	13,830,556

Condensed Consolidated Stateme6

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (824)	$ (1,646)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of prepaid rent	54	161
Depreciation and amortization	55	74
Non-cash interest expesnse	66	57
Share-based compensation	392	351
Amortization of deferred gain	(16)	(47)
Changes in assets and liabilities:
Trade receivables	(51)	(30)
Equipment financing receivables	65	77
Inventories	(84)	5
Prepaid expenses	140	(85)
Other assets	14	34
Accounts payable and accrued expenses	(98)	323
Deferred revenue	144	16
Net cash used in operating activities	(143)	(710)
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of long-term investment	252	0
Purchase of long term investment	0	(1)
Release of restricted cash	0	12
Net cash provided by investing activities	252	11
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable	111	150
Repayments made on notes payable	(76)	(68)
Proceeds from exercise of options	166	102
Payments of contingent consideration	0	(59)
Net cash provided by financing activities	201	125
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS	310	(574)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	619	1,497
CASH AND CASH EQUIVALENTS, END OF PERIOD	929	923
Supplemental disclosure of cash flow information:
Cash used during the period for: Income taxes, net	(9)	(2)
Supplemental disclosure of non-cash investing and financing information:
Issuance of common stock for prepayment of interest on related-party note payable	109	90
Issuance of common stock from contingent consideration related to business acquisition	0	40
Prepaid assets financed through notes payable	$ 111	$ 116

1. Significant Accounting Polic

1. Significant Accounting Policies	6 Months Ended
	Jun. 30, 2017
Significant Accounting Policies
1. Summary of Significant Accounting Policies	Description of Business - The Company continues to generate losses and negative cash flows from operations. However, revenue for the six month period ended June 30, 2017 increased compared to the six month period ended June 30, 2016 and management continues to focus on managing expenses and reducing cash used for operations. Our net losses for the three and six month periods ended June 30, 2017 showed improvement over the comparable three and six month periods ended June 30, 2016. Management evaluated the significance of the negative cash flows and believes that the operational improvements are probable of occurring and the borrowing availability under the existing Loan Agreement mitigate the substantial doubt raised by our historical operating results and satisfying our estimated liquidity needs 12 months from the issuance of the financial statements. However, management cannot predict, with certainty, the outcome of our actions to generate liquidity or whether such actions would generate the expected liquidity as currently planned. Basis of Presentation – Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations. Cash and Cash Equivalents Restricted Cash Trade Receivables Allowance for Doubtful Accounts Inventory Certificate of Deposit Property and Equipment 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 period. Goodwill Intangible Assets Use of Estimates - Service and Product Revenue Recognition - 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 unit’s 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 Cloud Telecommunications and Web Service Revenue - Equipment Sales and Financing Revenue - Fees generated from renting our cloud telecommunication equipment (IP or cloud telephone desktop 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 Service Revenue Cost of Product Revenue Prepaid Sales Commissions Research and Development Fair Value Measurements 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 Income Taxes - Interest and penalties associated with income taxes are classified as income tax expense in the condensed consolidated statements of operations. Stock-Based Compensation - Comprehensive Loss Operating Segments Significant Customers Recently Adopted Accounting Pronouncements - Compensation - Stock Compensation (Topic 718 In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes In September 2015, the FASB issued ASU 2015-16, Business Combinations, In July 2015, the FASB issued ASU 2015-11, Inventory In April 2015, the FASB issued ASU 2015-05, Intangibles—Goodwill and Other—Internal-Use Software, In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern, In June 2014, the FASB issued ASU 2014-12, Compensation – Stock Compensation, Recently Issued Accounting Pronouncements In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, In May 2016, the FASB issued ASU 2016-12, Narrow-Scope Improvements and Practical Expedients Revenue from Contracts with Customers ● Assessing collectibility ● Presenting sales taxes and other similar taxes collected from customers ● Noncash consideration ● Contract modifications at transition ● Completed contracts at transition ● Disclosing the accounting change in the period of adoption Accounting Changes and Error Corrections The effective date and transition requirements for ASU 2016-12 are the same as the effective date and transition requirements of ASU 2014-09 (Topic 606). The Company is currently in the process of evaluating the impact of adoption of the ASU on its consolidated financial statements. In April 2016, the FASB issued ASU 2016-10, Identifying Performance Obligations and Licensing The ASU also clarifies whether a license of intellectual property (IP) represents a right to use the IP (which is satisfied at a point in time) or a right to access the IP (which is satisfied over time) by categorizing the underlying IP as either functional or symbolic. A promise to grant a license that is not a separate performance obligation must be considered in the context above (i.e., functional or symbolic), in order to determine whether the combined performance obligation is satisfied at a point in time or over time, and how to best measure progress toward completion if recognized over time. Regardless of a license’s nature (i.e., functional or symbolic), an entity may not recognize revenue from a license of IP before 1) it provides or otherwise makes available a copy of the IP to the customer, and 2) the period during which the customer is able to use and benefit from the license has begun (i.e., the beginning of the license period). Additionally, the ASU clarifies that 1) an entity should not split a sales-based or usage-based royalty into a portion subject to the guidance on sales-based and usage-based royalties and a portion that is not subject to that guidance; and 2) the guidance on sales-based and usage-based royalties applies whenever the predominant item to which the royalty relates is a license of IP. Lastly, the amendments distinguish contractual provisions requiring the transfer of additional rights to use or access IP that the customer does not already control from provisions that are attributes of a license (e.g., restrictions of time, geography, or use). License attributes define the scope of the rights conveyed to the customer; they do not determine when the entity satisfies a performance obligation. The effective date and transition requirements for ASU 2016-10 are the same as the effective date and transition requirements of ASU 2014-09 (Topic 606). The Company is currently in the process of evaluating the impact of adoption of the ASU on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases, In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, 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.

2. Net Loss Per Common Share

2. Net Loss Per Common Share	6 Months Ended
	Jun. 30, 2017
Net Loss Per Common Share
2. Net Loss Per Common Share	Basic net loss per common share is computed by dividing the net loss for the period by the weighted-average number of common shares outstanding during the period. Diluted net loss per common share is computed giving effect to all dilutive common stock equivalents, consisting of common stock options and warrants. Diluted net loss per common share for the three and six months ended June 30, 2017 and 2016 is the same as basic net loss per common share because the common share equivalents were anti-dilutive due to the net loss. The following table sets forth the computation of basic and diluted net loss per common share: Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Net loss (in thousands) $ (281 ) $ (778 ) $ (824 ) $ (1,646 ) Weighted-average share reconciliation: Weighted-average basic shares outstanding 13,819,281 13,292,334 13,759,666 13,268,107 Diluted shares outstanding 13,819,281 13,292,334 13,759,666 13,268,107 Net loss per common share: Basic $ (0.02 ) $ (0.06 ) $ (0.06 ) $ (0.12 ) Diluted $ (0.02 ) $ (0.06 ) $ (0.06 ) $ (0.12 ) Common stock equivalent shares are not included in the computation of diluted loss per share, as the Company has a net loss and the inclusion of such shares would be anti-dilutive due to the net loss. At June 30, 2017 and 2016, the common stock equivalent shares were, as follows: June 30, June 30, 2017 2016 Shares of common stock issuable under equity incentive plans outstanding 4,067,956 4,034,288 Shares of common stock issuable upon conversion of warrants — 165,000 Common stock equivalent shares excluded from diluted net loss per share 4,067,956 4,199,288

3. Trade Receivables net

3. Trade Receivables net	6 Months Ended
	Jun. 30, 2017
Trade Receivables Net
3. Trade Receivables net	Our trade receivables balance consists of traditional trade receivables and residual Extended Payment Term Agreements (“EPTAs”) sold prior to July 2011. Below is an analysis of the days outstanding of our trade receivables as shown on our balance sheet (in thousands): June 30, December 31, 2017 2016 Trade receivables $ 436 $ 366 Conforming EPTAs 53 66 Non-Conforming EPTAs: 1 - 30 days 4 4 31 - 60 days — — 61 - 90 days — — Gross trade receivables 493 436 Less: allowance for doubtful accounts (53 ) (47 ) Trade receivables, net $ 440 $ 389 Current trade receivables, net $ 404 $ 346 Long-term trade receivables, net 36 43 Trade receivables, net $ 440 $ 389 All current and long-term EPTAs in the table above had original contract terms of greater than one year. The Company wrote off $10,000 of EPTAs during the six months ended June 30, 2017 and $37,000 during the year ended December 31, 2016, of which, all had original contract terms of greater than one year.

4. Equipment Financing Receivab

4. Equipment Financing Receivables	6 Months Ended
	Jun. 30, 2017
Equipment Financing Receivables
4. Equipment Financing Receivables	We rent certain cloud telecommunication equipment (IP telephone devices) through leasing contracts that we classify as either operating leases or sale-type leases. Equipment finance receivables are expected to be collected over the next thirty-six to sixty months. Equipment finance receivables arising from the rental of our cloud telecommunication equipment through sales-type leases, were as follows (in thousands): June 30, December 31, 2017 2016 Gross financing receivables $ 403 $ 573 Less unearned income (171 ) (276 ) Financing receivables, net 232 297 Less: Current portion of finance receivables, net (128 ) (121 ) Finance receivables due after one year $ 104 $ 176

5. Prepaid Expenses

5. Prepaid Expenses	6 Months Ended
	Jun. 30, 2017
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
5. Prepaid Expenses	Prepaid expenses consisted of the following (in thousands): June 30, December 31, 2017 2016 Prepaid commissions $ 438 $ 503 Prepaid corporate insurance 95 45 Prepaid interest on related-party note payable 54 — Prepaid inventory deposits — 156 Other prepaid expenses 211 233 Total prepaid assets $ 798 $ 937 Included in the totals above is $169,000 and $251,000 of long-term prepaid commissions as of June 30, 2017 and December 31, 2016, respectively.

6. Intangible Assets

6. Intangible Assets	6 Months Ended
	Jun. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
6. Intangible Assets	The net carrying amount of intangible assets are as follows (in thousands): June 30, December 31, 2017 2016 Customer relationships $ 941 $ 941 Developed technology 198 198 Less accumulated amortization: Customer relationships (655 ) (607 ) Developed technology (198 ) (197 ) Total $ 286 $ 335 Amortization expense is included in general and administrative expenses and totaled $24,000 and $33,000 for the three months ended June 30, 2017 and 2016, respectively, and $49,000 and $65,000 for the six months ended June 30, 2017 and 2016, respectively.

7. Accrued Expenses

7. Accrued Expenses	6 Months Ended
	Jun. 30, 2017
Payables and Accruals [Abstract]
7. Accrued Expenses	Accrued expenses consisted of the following (in thousands): June 30, December 31, 2017 2016 Accrued wages and benefits $ 269 $ 369 Accrued accounts payable 193 230 Accrued sales and telecommunications taxes 305 310 Other 86 88 Total accrued expenses $ 853 $ 997

8. Notes Payable

8. Notes Payable	6 Months Ended
	Jun. 30, 2017
Debt Disclosure [Abstract]
8. Notes Payable	Related-Party Note Payable On December 30, 2015, the Company entered into a Term Loan Agreement (the "Loan Agreement"), with Steven G. Mihaylo, as Trustee of The Steven G. Mihaylo Trust dated August 19, 1999 (the "Lender"). Mr. Mihaylo is the principal shareholder and Chief Executive Officer of the Company. Pursuant to the Loan Agreement, the Lender has agreed to make an unsecured loan to the Company in the initial principal amount of $1,000,000 (the “Loan”). The Loan Agreement contains a provision which requires the Lender to increase the amount of the Loan by up to an additional $1,000,000 on the same terms and conditions as the initial advance if the independent directors of the Company, in their reasonable discretion, determine such an increase is necessary for the funding needs of the Company and that the terms of the Loan are in the best interests of the Company and its stockholders. The term of the Loan is five years, with simple interest paid at 9% per annum until a balloon payment is due December 30, 2020. The Loan Agreement provides for interest to be paid in shares of common stock of the Company (the “Common Stock”) at a stock price of $1.20 (which is the average of the high and low adjust close price of the Common Stock of the Company for each business day for the period starting December 23, 2015 and ending December 29, 2015.). For the first two years of the Loan term, interest will be paid in advance at the beginning of each year; for the last three years of the Loan term, interest will be paid at the end of each year. After the second year of the Loan term, there is no pre-payment penalty for early repayment of the outstanding principal amount of the Loan. If the Loan is repaid within the first two years of the Loan term, the Company will forfeit prepaid interest as a pre-payment penalty. Contemporaneously with the execution of the Loan Agreement, the Company granted to the Lender a warrant to purchase 250,000 shares of Common Stock (the “Warrant”). The Warrant has a five-year term from the date of the Loan Agreement. The Warrant is exercisable by the Lender, at any time, and from time to time, during its term at a price of $1.20 per share of Common Stock. The initial 250,000 warrants were exercised during 2016 generating proceeds of $300,000. In the event the principal amount of the Loan is increased by an additional $1,000,000, as determined by the independent directors of the Company, the Company has agreed to issue to the Lender a warrant to purchase an additional 250,000 shares of Common Stock on the same terms and subject to the same conditions set forth in the Warrant. During the six months ended June 30, 2017, the Company entered into an amendment to our Loan Agreement with Steven G. Mihaylo. The amendment extends the ability of the Board of Directors to request the remaining $1.0 million available under the Loan Agreement if necessary to fund operations through May 30, 2018. All other terms remain the same as initial loan agreement. Other Notes Payable Other notes payable consists of short and long-term financing arrangements for software licenses, subscriptions, support and corporate insurance. The Company’s outstanding balances under its note payable agreements were as follows (in thousands): June 30, December 31, 2017 2016 Related-party note payable $ 1,000 $ 1,000 Other notes payable 160 124 1,160 1,124 Less: notes payable discount (81 ) (92 ) Net carrying value of notes payable 1,079 1,032 Less: current portion of long-term notes payable (127 ) (66 ) Long-term notes payable $ 952 $ 966 As of June 30, 2017, future principal payments are scheduled as follows (in thousands): Year ending December 31, 2017 $ 65 2018 89 2019 6 2020 1,000 Total $ 1,160

9. Fair Value Measurements

9. Fair Value Measurements	6 Months Ended
	Jun. 30, 2017
Fair Value Measurements
9. Fair Value Measurements	We have financial instruments as of June 30, 2017 and December 31, 2016 for which the fair value is summarized below (in thousands): June 30, 2017 December 31, 2016 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Assets: Trade receivables, net $ 440 $ 440 $ 389 $ 389 Equipment financing receivables 232 232 297 297 Certificate of deposit — — 252 252 Liabilities: Notes payable including discount from warrant grant 1,079 1,169 1,032 1,133 Assets for which fair value is recognized in the balance sheet on a recurring basis are summarized below as of June 30, 2017 and December 31, 2016 (in thousands): Fair value measurement at reporting date Description June 30, 2017 Level 1 Level 2 Level 3 Assets: Certificate of deposit $ - $ - $ - $ - Description December 31, 2016 Level 1 Level 2 Level 3 Assets: Certificate of deposit $ 252 $ - $ 252 $ - The carrying amount of certificates of deposit approximates fair value, as determined by certificates of deposit with similar terms and conditions.

10. Income Taxes

10. Income Taxes	6 Months Ended
	Jun. 30, 2017
Income Taxes
10. Income Taxes	Our effective tax rate for the three and six months ended June 30, 2017 was (1.4)% and (1.0)%, respectively, which resulted in an income tax provision of $(4,000) and $(8,000), respectively. The tax provision is due to state tax payments made with extensions filed. Our effective tax rate for the three and six months ended June 30, 2016 was (0.5)% and (0.4)%, respectively, which resulted in an income tax provision of $(4,000) and $(7,000), respectively. The tax provision is due to state tax payments made with extensions filed. Significant management judgment is required in determining our provision for income taxes and in determining whether deferred tax assets will be realized in full or in part. In assessing the recovery of the deferred tax assets, we considered whether it is more likely than not that some portion or all of our deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. We considered the scheduled reversals of future deferred tax assets, projected future taxable income, the suspension of the sale of product and services through the seminar sales channel, and tax planning strategies in making this assessment. As a result, we determined it was more likely than not that the deferred tax assets would not be realized; accordingly, we recorded a full valuation allowance. Subsequent to placing a full valuation allowance on our net deferred tax assets, adjustments impacting our tax rate have been and are expected to continue to be insignificant.

11. Commitments and Contingenci

11. Commitments and Contingencies	6 Months Ended
	Jun. 30, 2017
Less: Current portion of finance receivables not billed, net
11. Commitments and Contingencies	Operating Leases We lease certain of our corporate offices under a non-cancelable operating lease agreement expiring in 2018. The operating lease for our Reno, NV office contains customary escalation clauses. Rent expense incurred on operating leases for the three months ended June 30, 2017 and 2016 was approximately $5,000 and $30,000, respectively. Rent expense incurred on operating leases for the six months ended June 30, 2017 and 2016 was approximately $10,000 and $60,000, respectively. Sale-Leaseback On February 28, 2014, the Company sold and leased back the land, building and furniture associated with the corporate headquarters in Tempe, Arizona to a Company that is owned by the major shareholder and CEO of the Company for $2.0 million in cash. The Company recognized a deferred gain of $281,000 on sale-leaseback, which was amortized over the initial lease term of 36 months to offset rent expense. Deferred gain amortization for the three months ended June 30, 2017 and 2016 was $0 and $24,000, respectively. Deferred gain amortization for the six months ended June 30, 2017 and 2016 was $16,000 and $47,000, respectively. Effective March 1, 2017 the rent agreement was renewed for a three year term with rent payable in cash. Rent expense incurred on the sale-leaseback during the three months ended June 30, 2017 and 2016 was $75,000 and $57,000, respectively. Rent expense incurred on the sale-leaseback during the six months ended June 30, 2017 and 2016 was $138,000 and $114,000, respectively. Future aggregate minimum lease obligations under the operating lease and sale-leaseback as of June 30, 2017, exclusive of taxes and insurance, are as follows (in thousands): Year ending December 31, 2017 160 2018 315 2019 300 2020 50 Total $ 825

12. Segments

12. Segments	6 Months Ended
	Jun. 30, 2017
Segments
12. Segments	Management has chosen to organize the Company around differences based on its products and services. Cloud Telecommunications segment generates revenue from selling cloud telecommunication products and services and broadband internet services. Web Services segment generates revenue from website hosting and other professional services. The Company has two operating segments, which consist of Cloud Telecommunications and Web Services. Segment revenue and income (loss) before income tax provision was as follows (in thousands): Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Revenue: Cloud telecommunications $ 2,216 $ 1,920 $ 4,277 $ 3,698 Web services 269 347 552 743 Consolidated revenue 2,485 2,267 4,829 4,441 Income/(loss) from operations: Cloud telecommunications (373 ) (872 ) (989 ) (1,835 ) Web services 128 96 235 190 Total operating loss (245 ) (776 ) (754 ) (1,645 ) Other income/(expense), net: Cloud telecommunications (32 ) (3 ) (62 ) (10 ) Web services — 5 — 16 Total other income/(expense), net (32 ) 2 (62 ) 6 Income/(loss) before income tax provision Cloud telecommunications (405 ) (875 ) (1,051 ) (1,845 ) Web services 128 101 235 206 Loss before income tax provision $ (277 ) $ (774 ) $ (816 ) $ (1,639 ) Depreciation and amortization was $25,000 and $31,000 for the Cloud Telecommunications segment for the three months ended June 30, 2017 and 2016, respectively. Depreciation and amortization was $49,000 and $63,000 for the Cloud Telecommunications segment for the six months ended June 30, 2017 and 2016, respectively. Depreciation and amortization was $3,000 and $5,000 for the Web Services segment for the three months ended June 30, 2017 and 2016, respectively. Depreciation and amortization was $6,000 and $11,000 for the Web Services segment for the six months ended June 30, 2017 and 2016, respectively. Interest income was $2,000 and $4,000 for the Web Services segment for the three months ended June 30, 2017 and 2016, respectively. Interest income was $5,000 and $8,000 for the Web Services segment for the six months ended June 30, 2017 and 2016, respectively. Interest expense was $32,000 and $27,000 for the Cloud Telecommunications segment for the three months ended June 30, 2017 and 2016, respectively. Interest expense was $63,000 and $56,000 for the Cloud Telecommunications segment for the six months ended June 30, 2017 and 2016, respectively. Interest expense was $4,000 and $4,000 for the Web Services segment for the three months ended June 30, 2017 and 2016, respectively. Interest expense was $8,000 and $10,000 for the Web Services segment for the six months ended June 30, 2017 and 2016, respectively.

1. Summary of Significant Accou

1. Summary of Significant Accounting Policies (Policies)	6 Months Ended
	Jun. 30, 2017
Summary Of Significant Accounting Policies Policies
Description of Business	Description of Business - The Company continues to generate losses and negative cash flows from operations. However, revenue for the six month period ended June 30, 2017 increased compared to the six month period ended June 30, 2016 and management continues to focus on managing expenses and reducing cash used for operations. Our net losses for the three and six month periods ended June 30, 2017 showed improvement over the comparable three and six month periods ended June 30, 2016. Management evaluated the significance of the negative cash flows and believes that the operational improvements are probable of occurring and the borrowing availability under the existing Loan Agreement mitigate the substantial doubt raised by our historical operating results and satisfying our estimated liquidity needs 12 months from the issuance of the financial statements. However, management cannot predict, with certainty, the outcome of our actions to generate liquidity or whether such actions would generate the expected liquidity as currently planned.
Basis of Presentation	Basis of Presentation – Certain prior year amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reported results of operations.
Cash and Cash Equivalents	Cash and Cash Equivalents
Restricted Cash	Restricted Cash
Trade Receivables	Trade Receivables
Allowance for Doubtful Accounts	Allowance for Doubtful Accounts
Inventory	Inventory
Certificate of Deposit	Certificate of Deposit
Property and Equipment	Property and Equipment 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 period.
Goodwill	Goodwill
Intangible Assets	Intangible Assets
Use of Estimates	Use of Estimates -
Service and Product Revenue Recognition	Service and Product Revenue Recognition - 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 unit’s 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 Cloud Telecommunications and Web Service Revenue - Equipment Sales and Financing Revenue - Fees generated from renting our cloud telecommunication equipment (IP or cloud telephone desktop 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 Service Revenue	Cost of Service Revenue
Cost of Product Revenue	Cost of Product Revenue
Prepaid Sales Commissions	Prepaid Sales Commissions
Research and Development	Research and Development
Fair Value Measurements	Fair Value Measurements 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	Notes Payable
Income Taxes	Income Taxes - Interest and penalties associated with income taxes are classified as income tax expense in the condensed consolidated statements of operations.
Stock-Based Compensation	Stock-Based Compensation -
Comprehensive Loss	Comprehensive Loss
Operating Segments	Operating Segments
Significant Customers	Significant Customers
Recently Adopted Accounting Pronouncements	Recently Adopted Accounting Pronouncements - Compensation - Stock Compensation (Topic 718 In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes In September 2015, the FASB issued ASU 2015-16, Business Combinations, In July 2015, the FASB issued ASU 2015-11, Inventory In April 2015, the FASB issued ASU 2015-05, Intangibles—Goodwill and Other—Internal-Use Software, In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements – Going Concern, In June 2014, the FASB issued ASU 2014-12, Compensation – Stock Compensation,
Recently Issued Accounting Pronouncements	Recently Issued Accounting Pronouncements In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, In May 2016, the FASB issued ASU 2016-12, Narrow-Scope Improvements and Practical Expedients Revenue from Contracts with Customers ● Assessing collectibility ● Presenting sales taxes and other similar taxes collected from customers ● Noncash consideration ● Contract modifications at transition ● Completed contracts at transition ● Disclosing the accounting change in the period of adoption Accounting Changes and Error Corrections The effective date and transition requirements for ASU 2016-12 are the same as the effective date and transition requirements of ASU 2014-09 (Topic 606). The Company is currently in the process of evaluating the impact of adoption of the ASU on its consolidated financial statements. In April 2016, the FASB issued ASU 2016-10, Identifying Performance Obligations and Licensing The ASU also clarifies whether a license of intellectual property (IP) represents a right to use the IP (which is satisfied at a point in time) or a right to access the IP (which is satisfied over time) by categorizing the underlying IP as either functional or symbolic. A promise to grant a license that is not a separate performance obligation must be considered in the context above (i.e., functional or symbolic), in order to determine whether the combined performance obligation is satisfied at a point in time or over time, and how to best measure progress toward completion if recognized over time. Regardless of a license’s nature (i.e., functional or symbolic), an entity may not recognize revenue from a license of IP before 1) it provides or otherwise makes available a copy of the IP to the customer, and 2) the period during which the customer is able to use and benefit from the license has begun (i.e., the beginning of the license period). Additionally, the ASU clarifies that 1) an entity should not split a sales-based or usage-based royalty into a portion subject to the guidance on sales-based and usage-based royalties and a portion that is not subject to that guidance; and 2) the guidance on sales-based and usage-based royalties applies whenever the predominant item to which the royalty relates is a license of IP. Lastly, the amendments distinguish contractual provisions requiring the transfer of additional rights to use or access IP that the customer does not already control from provisions that are attributes of a license (e.g., restrictions of time, geography, or use). License attributes define the scope of the rights conveyed to the customer; they do not determine when the entity satisfies a performance obligation. The effective date and transition requirements for ASU 2016-10 are the same as the effective date and transition requirements of ASU 2014-09 (Topic 606). The Company is currently in the process of evaluating the impact of adoption of the ASU on its consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases, In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, 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.

1. Significant Accounting Pol20

1. Significant Accounting Policies (Tables)	6 Months Ended
	Jun. 30, 2017
Significant Accounting Policies Tables
Property and Equipment	Computer and office equipment 2 to 5 years Computer software 3 years Furniture and fixtures 4 years Leasehold improvements 2 to 5 years

2. Net Loss Per Common Share (T

2. Net Loss Per Common Share (Tables)	6 Months Ended
	Jun. 30, 2017
Net Loss Per Common Share
Basic and diluted net income (loss) per common share	Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Net loss (in thousands) $ (281 ) $ (778 ) $ (824 ) $ (1,646 ) Weighted-average share reconciliation: Weighted-average basic shares outstanding 13,819,281 13,292,334 13,759,666 13,268,107 Diluted shares outstanding 13,819,281 13,292,334 13,759,666 13,268,107 Net loss per common share: Basic $ (0.02 ) $ (0.06 ) $ (0.06 ) $ (0.12 ) Diluted $ (0.02 ) $ (0.06 ) $ (0.06 ) $ (0.12 )
Antidilutive securities excluded from earnings	June 30, June 30, 2017 2016 Shares of common stock issuable under equity incentive plans outstanding 4,067,956 4,034,288 Shares of common stock issuable upon conversion of warrants — 165,000 Common stock equivalent shares excluded from diluted net loss per share 4,067,956 4,199,288

3. Trade Receivables, net (Tabl

3. Trade Receivables, net (Tables)	6 Months Ended
	Jun. 30, 2017
Trade Receivables Net Tables
Trade Receivables, net	June 30, December 31, 2017 2016 Trade receivables $ 436 $ 366 Conforming EPTAs 53 66 Non-Conforming EPTAs: 1 - 30 days 4 4 31 - 60 days — — 61 - 90 days — — Gross trade receivables 493 436 Less: allowance for doubtful accounts (53 ) (47 ) Trade receivables, net $ 440 $ 389 Current trade receivables, net $ 404 $ 346 Long-term trade receivables, net 36 43 Trade receivables, net $ 440 $ 389

4. Equipment Financing Receiv23

4. Equipment Financing Receivables (Tables)	6 Months Ended
	Jun. 30, 2017
Equipment Financing Receivables Tables
Equipment Financing Receivables	June 30, December 31, 2017 2016 Gross financing receivables $ 403 $ 573 Less unearned income (171 ) (276 ) Financing receivables, net 232 297 Less: Current portion of finance receivables, net (128 ) (121 ) Finance receivables due after one year $ 104 $ 176

5. Prepaid Expenses (Tables)

5. Prepaid Expenses (Tables)	6 Months Ended
	Jun. 30, 2017
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Prepaid Expenses	June 30, December 31, 2017 2016 Prepaid commissions $ 438 $ 503 Prepaid corporate insurance 95 45 Prepaid interest on related-party note payable 54 — Prepaid inventory deposits — 156 Other prepaid expenses 211 233 Total prepaid assets $ 798 $ 937

6. Intangible Assets (Tables)

6. Intangible Assets (Tables)	6 Months Ended
	Jun. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]
Intangible Assets	June 30, December 31, 2017 2016 Customer relationships $ 941 $ 941 Developed technology 198 198 Less accumulated amortization: Customer relationships (655 ) (607 ) Developed technology (198 ) (197 ) Total $ 286 $ 335

7. Accrued Expenses (Tables)

7. Accrued Expenses (Tables)	6 Months Ended
	Jun. 30, 2017
Payables and Accruals [Abstract]
Accrued Expenses	June 30, December 31, 2017 2016 Accrued wages and benefits $ 269 $ 369 Accrued accounts payable 193 230 Accrued sales and telecommunications taxes 305 310 Other 86 88 Total accrued expenses $ 853 $ 997

8. Notes Payable (Tables)

8. Notes Payable (Tables)	6 Months Ended
	Jun. 30, 2017
Debt Disclosure [Abstract]
Summary of note payable	June 30, December 31, 2017 2016 Related-party note payable $ 1,000 $ 1,000 Other notes payable 160 124 1,160 1,124 Less: notes payable discount (81 ) (92 ) Net carrying value of notes payable 1,079 1,032 Less: current portion of long-term notes payable (127 ) (66 ) Long-term notes payable $ 952 $ 966
Schedule of future principal payments	Year ending December 31, 2017 $ 65 2018 89 2019 6 2020 1,000 Total $ 1,160

9. Fair Value Measurements (Tab

9. Fair Value Measurements (Tables)	6 Months Ended
	Jun. 30, 2017
Fair Value Measurements Tables
Financial instruments	June 30, 2017 December 31, 2016 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Assets: Trade receivables, net $ 440 $ 440 $ 389 $ 389 Equipment financing receivables 232 232 297 297 Certificate of deposit — — 252 252 Liabilities: Notes payable including discount from warrant grant 1,079 1,169 1,032 1,133
Assets for which fair value is disclosed	Fair value measurement at reporting date Description June 30, 2017 Level 1 Level 2 Level 3 Assets: Certificate of deposit $ - $ - $ - $ - Description December 31, 2016 Level 1 Level 2 Level 3 Assets: Certificate of deposit $ 252 $ - $ 252 $ -

11. Commitments and Contingen29

11. Commitments and Contingencies (Tables)	6 Months Ended
	Jun. 30, 2017
Commitments and Contingencies Disclosure [Abstract]
Future aggregate minimum lease obligations under operating leases	Year ending December 31, 2017 160 2018 315 2019 300 2020 50 Total $ 825

12. Segments (Tables)

12. Segments (Tables)	6 Months Ended
	Jun. 30, 2017
Notes to Financial Statements
Information on reportable segments and reconciliation to condensed consolidated net (loss) income	Three Months Ended June 30, Six Months Ended June 30, 2017 2016 2017 2016 Revenue: Cloud telecommunications $ 2,216 $ 1,920 $ 4,277 $ 3,698 Web services 269 347 552 743 Consolidated revenue 2,485 2,267 4,829 4,441 Income/(loss) from operations: Cloud telecommunications (373 ) (872 ) (989 ) (1,835 ) Web services 128 96 235 190 Total operating loss (245 ) (776 ) (754 ) (1,645 ) Other income/(expense), net: Cloud telecommunications (32 ) (3 ) (62 ) (10 ) Web services — 5 — 16 Total other income/(expense), net (32 ) 2 (62 ) 6 Income/(loss) before income tax provision Cloud telecommunications (405 ) (875 ) (1,051 ) (1,845 ) Web services 128 101 235 206 Loss before income tax provision $ (277 ) $ (774 ) $ (816 ) $ (1,639 )

1. Significant Accounting Pol31

1. Significant Accounting Policies (Details)	6 Months Ended
	Jun. 30, 2017
Computer and office equipment | Minimum
Depreciable lives	2 years
Computer and office equipment | Maximum [Member]
Depreciable lives	5 years
Computer software
Depreciable lives	3 years
Furniture and fixtures
Depreciable lives	4 years
Leasehold improvements | Minimum
Depreciable lives	2 years
Leasehold improvements | Maximum [Member]
Depreciable lives	5 years

1. Significant Accounting Pol32

1. Significant Accounting Policies (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Significant Accounting Policies Details Narrative
Cash equivalents in financial institutions in excess of federally insured limits	$ 791		$ 791		$ 413
Restricted cash	100		100		$ 100
Depreciation expense included in general and administrative expense	3	$ 3	6	$ 9
Interest Income	$ 2	$ 4	$ 5	$ 8

2. Net Loss Per Common Share (D

2. Net Loss Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Net Loss Per Common Share Details
Net loss (in thousands)	$ (281)	$ (778)	$ (824)	$ (1,646)
Weighted-average share reconciliation:
Weighted-average basic shares outstanding	13,819,281	13,292,334	13,759,666	13,268,107
Diluted shares outstanding	13,819,281	13,292,334	13,759,666	13,268,107
Net loss per common share:
Basic	$ (0.02)	$ (0.06)	$ (0.06)	$ (0.12)
Diluted	$ (0.02)	$ (0.06)	$ (0.06)	$ (0.12)

2. Net Loss Per Common Share 34

2. Net Loss Per Common Share (Details 1) - shares	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Securities excluded from earnings	4,067,956	4,199,288
Equity incentive plans
Securities excluded from earnings	4,067,956	4,034,288
Warrants
Securities excluded from earnings	0	165,000

3. Trade Receivables, net (Deta

3. Trade Receivables, net (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Valuation and Qualifying Accounts Disclosure [Line Items]
Trade receivables	$ 436	$ 366
Conforming EPTAs	53	66
Gross trade receivables	493	436
Less allowance for doubtful accounts	(53)	(47)
Trade receivables, net	440	389
Current trade receivables, net	404	346
Long-term trade receivables, net	36	43
Trade receivables, net	440	389
1 - 30 Days
Valuation and Qualifying Accounts Disclosure [Line Items]
Non-Conforming EPTAs	4	4
31 - 60 Days
Valuation and Qualifying Accounts Disclosure [Line Items]
Non-Conforming EPTAs	0	0
61 To 90 Days
Valuation and Qualifying Accounts Disclosure [Line Items]
Non-Conforming EPTAs	$ 0	$ 0

3. Trade Receivables, net (De36

3. Trade Receivables, net (Details Narrative) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Trade Receivables Net Details Narrative
Write off	$ 10	$ 37

4. Equipment Financing Receiv37

4. Equipment Financing Receivables (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Equipment Financing Receivables Details
Gross financing receivables	$ 403	$ 573
Less unearned income	(171)	(276)
Financing receivables, net	232	297
Less: Current portion of finance receivables, net	(128)	(121)
Finance receivables due after one year	$ 104	$ 176

5. Prepaid Expenses (Details)

5. Prepaid Expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Prepaid commissions	$ 438	$ 503
Prepaid corporate insurance	95	45
Prepaid interest on related-party note payable	54	0
Prepaid inventory deposits	0	156
Other prepaid expenses	211	278
Total prepaid assets	$ 798	$ 937

6. Intangible Assets (Details)

6. Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Carrying amount of intangible, Net	$ 286	$ 335
Customer Relationships [Member]
Carrying amount of intangible, Gross	9,411	941
Less accumulated amortization	(655)	(607)
Developed technology
Carrying amount of intangible, Gross	198	198
Less accumulated amortization	$ (198)	$ (197)

7. Accrued Expenses (Details)

7. Accrued Expenses (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Payables and Accruals [Abstract]
Accrued wages and benefits	$ 269	$ 369
Accrued accounts payable	193	230
Accrued sales and telecommunications taxes	305	310
Other	86	88
Total accrued expenses	$ 853	$ 997

8. Notes Payable (Details)

8. Notes Payable (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Notes Payable Details
Related party note payable	$ 1,000	$ 1,000
Other notes payable	160	124
Total	1,160	1,124
Less: notes payable discount	(81)	(92)
Net carrying value of notes payable	1,079	1,032
Less: current portion of long-term notes payable	(127)	(66)
Long-term notes payable	$ 952	$ 966

8. Notes Payable (Details 1)

8. Notes Payable (Details 1) $ in Thousands	Jun. 30, 2017USD ($)
Notes Payable Details 1
2,017	$ 65
2,018	89
2,019	6
2,020	1,000
Total	$ 1,160

9. Fair Value Measurements (Det

9. Fair Value Measurements (Details) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Assets:
Certificate of deposit	$ 0	$ 252
Carrying Value [Member]
Assets:
Trade receivables, net	440	389
Equipment financing receivable	232	297
Certificate of deposit	0	252
Liabilities:
Notes payable including discount from warrant grant	1,079	1,032
Estimated Fair Value [Member]
Assets:
Trade receivables, net	440	389
Equipment financing receivable	232	297
Certificate of deposit	0	252
Liabilities:
Notes payable including discount from warrant grant	$ 1,169	$ 1,133

9. Fair Value Measurements (D44

9. Fair Value Measurements (Details 1) - USD ($) $ in Thousands	Jun. 30, 2017	Dec. 31, 2016
Assets:
Certificate of deposit	$ 0	$ 252
Level 1 Member
Assets:
Certificate of deposit	0	0
Level 2 Member
Assets:
Certificate of deposit	0	252
Level 3 Member
Assets:
Certificate of deposit	$ 0	$ 0

10. Income Taxes (Details Narra

10. Income Taxes (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income Taxes Details Narrative
Effective tax rate	(1.40%)	(0.50%)	(1.00%)	(0.40%)
Income tax (provision) benefit	$ (4)	$ (4)	$ (8)	$ (7)

11. Commitments and Contingen46

11. Commitments and Contingencies (Details) $ in Thousands	Jun. 30, 2017USD ($)
Commitments And Contingencies Details
2,017	$ 160
2,018	315
2,019	300
2,020	50
Total	$ 825

11. Commitments and Contingen47

11. Commitments and Contingencies (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Liabilities relating to legal proceedings
Rent expense	$ 75	$ 57	$ 138	$ 114

12. Segment Information (Detail

12. Segment Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Segment Information
Revenue	$ 2,485	$ 2,267	$ 4,829	$ 4,441
Income/(loss) from operations	(245)	(776)	(754)	(1,645)
Other income/(loss), net	(32)	2	(62)	6
Income/(loss) before income tax provision	(277)	(774)	(816)	(1,639)
Cloud telecommunications
Segment Information
Revenue	2,216	1,920	4,277	3,698
Income/(loss) from operations	(373)	(872)	(989)	(1,835)
Other income/(loss), net	(32)	(3)	(62)	(10)
Income/(loss) before income tax provision	(405)	(875)	(1,051)	(1,845)
Web Services
Segment Information
Revenue	269	347	552	743
Income/(loss) from operations	128	96	235	190
Other income/(loss), net	0	5	0	16
Income/(loss) before income tax provision	$ 128	$ 101	$ 235	$ 206