| 1. Description of Business and Significant Accounting Policies (Policies) | 12 Months Ended |
| Dec. 31, 2017 |
| Description Of Business And Significant Accounting Policies Policies | |
| Description of Business | Crexendo, Inc. is incorporated in the
state of Nevada. As used hereafter in the notes to consolidated financial statements, we refer to Crexendo, Inc. and its wholly
owned subsidiaries, as “we,” “us,” or “our Company.” Crexendo is a next-generation CLEC and
an award-winning leader and provider of unified communications cloud telecom services, broadband internet services, and other cloud
business services that are designed to provide enterprise-class cloud services to any size businesses at affordable monthly rates.
The Company has two operating segments, which consist of Cloud Telecommunications and Web Services. |
| Basis of Presentation | The consolidated financial statements
include the accounts and operations of Crexendo, Inc. and its wholly owned subsidiaries, which include Crexendo Business Solutions,
Inc. and Crexendo International, Inc. All intercompany account balances and transactions have been eliminated in consolidation.
The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“US
GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). These consolidated
financial statements reflect the results of operations, financial position, changes in stockholders’ equity, and cash flows
of our Company. 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 | 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 December 31, 2017 and
2016, we had cash and cash equivalents in financial institutions in excess of federally insured limits in the amount of $1,038,000
and $413,000, respectively. |
| Restricted Cash | We classified $100,000 and $100,000 as
restricted cash as of December 31, 2017 and 2016, respectively. Cash is restricted for compensating balance requirements on purchasing
card agreements. As of December 31, 2017 and 2016, we had restricted cash in financial institutions in excess of federally insured
limits in the amount of $100,000 and $100,000, respectively. |
| Trade Receivables | Trade receivables
from our cloud telecommunications and web services segments are recorded at invoiced amounts. 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. |
| 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 net realizable value (first-in, first-out method). In accordance with applicable accounting
guidance, we regularly evaluate whether inventory is stated at the lower of cost or net realizable value. If net realizable value
is less than cost, the write-down is recognized as a loss in earnings in the period in which the excess occurs. |
| Certificate of Deposit | Certificate of Deposit (“CD”)
is collateral for merchant accounts. The CD was classified as long-term in the condensed consolidated balance sheet at December
31, 2016. In March 2017, the bank removed the collateral requirement; therefore we sold the CD and transferred the proceeds to
our cash and cash equivalents. |
| 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 $10,000 and $15,000 for the years ended December 31, 2017 and 2016, 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 the statement of operations. |
| 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 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. Management’s 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 Cloud Telecommunications 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. 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 | Fees collected for professional services
such as 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. |
| Cloud Services Hosting and Web Hosting Revenue | Fees collected for cloud telecommunications
and website hosting services are recognized as revenue ratably as services are provided. Customers are billed for these services
on a monthly or annual basis at the customer’s 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 cloud telecommunications services begin. 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 | We have affiliate agreements with third-party
entities that are resellers of satellite television services and Internet service providers. We receive commissions when the services
are bundled with our offerings and we recognize commission revenue when received. |
| Cost of Revenue | Cost of Service Revenue Cost of Product Revenue |
| 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 —
Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment.
These values are generally |
| 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. |
| 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 years ended December 31, 2017 and 2016. |
| 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 Cloud Telecommunications and Web Services. Research and development expenses are allocated
to Cloud Telecommunications 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 Cloud Telecommunications 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 years ended December 31, 2017 and 2016. One telecommunications services customer accounted for 11%
and 11% of total trade accounts receivable as of December 31, 2017 and 2016, respectively. |
| Recently Adopted Accounting Pronouncements | In March 2016, the Financial Accounting
Standards Board ("FASB") issued Accounting Standards Update (ASU) 2016-09, 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
No. 2015-16, Business Combinations, In July 2015, the FASB issued ASU 2015-11,
Inventory, which will require an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable
value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal,
and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendments
do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply
to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. We adopted
this guidance effective January 1, 2017. The adoption of this guidance did not have an impact on our consolidated financial statements. In April 2015, the FASB issued ASU 2015-05,
Intangibles—Goodwill and Other—Internal-Use Software, 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 an impact on our consolidated financial statements. 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, which 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 adopted ASU 2014-12 effective January 1, 2017. The adoption of this ASU did not impact
our condensed consolidated financial statements for the three and nine months ended September 30, 2017, as there are no performance
targets associated with outstanding awards. |
| Recently Issued Accounting Pronouncements | In May 2017, the FASB issued ASU 2017-09,
Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, the amendments provide guidance on determining
which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under
Topic 718. Effective for all entities for annual periods, including interim periods within those annual periods, beginning after
December 15, 2017. Early adoption is permitted. The adoption of this new ASU will not have a material impact on our consolidated
financial statements. In January 2017,
the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which
eliminates Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing
the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which
the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount
of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying
amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The amendments also
eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and,
if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform
the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. This guidance is
effective for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption
is permitted. ASU 2017-04 should be adopted on a prospective basis. We are in the process of evaluating the adoption and potential
impact of this new ASU on our consolidated financial statements. In January 2017,
the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business, that provides guidance
to assist entities with evaluating when a set of transferred assets and activities (set) is a business. Under the new guidance,
an entity first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single
identifiable asset or a group of similar identifiable assets. If this threshold is met, the set is not a business. If it’s
not met, the entity then evaluates whether the set meets the requirement that a business include, at a minimum, an input and a
substantive process that together significantly contribute to the ability to create outputs. Under today’s guidance, it doesn’t
matter whether all the value relates primarily to one asset. Under ASU 2017-01, a set is not a business when substantially all
of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable
assets. The ASU includes guidance on which types of assets can and cannot be combined into a single identifiable asset or a group
of similar identifiable assets for the purpose of applying the threshold. The ASU is effective for fiscal years beginning after
December 15 2017, and interim periods within those years. Early adoption is permitted, including for interim or annual periods
in which the financial statements have not been issued or made available for issuance. In November 2016,
the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires that a statement of cash flows
explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash
or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should
be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the
statement of cash flows. The amendments do not provide a definition of restricted cash or restricted cash equivalents. This guidance
is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption
is permitted. The amendments should be applied using a retrospective transition method to each period presented. The adoption of
this new ASU will not have a material impact on our consolidated financial statements. In August 2016, the
FASB issued ASU No. 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). In February 2016,
the FASB issued ASU 2016-02, Leases, In May 2014, the
FASB issued ASU 2014-09, which provides guidance for revenue recognition. The standard’s core principle is that a company
will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to
which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more
judgment and make more estimates than under today’s guidance. 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. We
will use the modified retrospective approach upon adoption of this guidance effective January 1, 2018. We have utilized a comprehensive
approach to assess the impact of the guidance on our contract portfolio. We have reviewed our current accounting policies and practices
to identify potential differences resulting from the application of the new requirements to our revenue contracts, including evaluation
of performance obligations in the contract, allocating the transaction price to each separate performance obligation and accounting
treatment of costs to obtain and fulfill contracts. In addition, we will update certain disclosures, as applicable, included in
our financial statements to meet the requirements of the new guidance. We are substantially
complete with our review of contracts with our customers. We expect to record a cumulative effect adjustment to accumulated deficit
upon adoption of the new revenue standard as of January 1, 2018. The cumulative adjustment is related to incremental upfront contract
acquisition costs (such as sales commissions) for customer contracts. The new standard requires these incremental costs to be capitalized
and amortized over the estimated life of the asset. Currently, our indirect sales commissions for the sales leadership team are
expensed as incurred. We anticipate the resulting contract acquisition asset will be amortized over the average contract life for
the group of contracts that resulted in the achievement of the bonuses and commissions. We will evaluate the contract assets for
impairment on a periodic basis. For the majority of our contracts, we
expect no change from ASU 2014-09. We have some contracts where we recognize revenue from the reselling of third party products
and service. We are currently evaluating these contracts to determine if we meet the requirements for reporting revenue on a gross
basis. We expect there will be no impact on the accumulated deficit as a result of any changes to our current policy. The adjustments
will not have a material impact on revenue or cost of revenue. |
