| 1. Significant Accounting Policies (Policies) | 9 Months Ended |
| Sep. 30, 2018 |
| Significant Accounting Policies Policies Abstract | |
| Description of Business | Crexendo, Inc. is
incorporated in the state of Nevada. As used hereafter in the notes to condensed consolidated financial statements, we refer to
Crexendo, Inc. and its wholly owned subsidiaries, as “we,” “us,” or “our Company.” 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 business
at affordable monthly rates. The Company has two operating segments, which consist of Cloud Telecommunications and Web Services. |
| Basis of Presentation | The condensed consolidated
financial statements include the accounts and operations of Crexendo, Inc. and its wholly owned subsidiaries, which include Crexendo
Business Solutions, Inc. and Crexendo International, Inc. All intercompany account balances and transactions have been eliminated
in consolidation. The condensed 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 condensed 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 September
30, 2018 and December 31, 2017, we had cash and cash equivalents in financial institutions in excess of federally insured limits
in the amount of $1,546,000 and $1,032,000, respectively. |
| Restricted Cash | We classified $100,000
and $100,000 as restricted cash as of September 30, 2018 and December 31, 2017, respectively. Cash is restricted for compensating
balance requirements on purchasing card agreements. As of September 30, 2018 and December 31, 2017, we had restricted cash in financial
institutions in excess of federally insured limits in the amount of $100,000 and $100,000, respectively. The following table
provides a reconciliation of cash and cash equivalents and restricted cash reported on the balance sheet to the cash, cash equivalents,
and restricted cash shown in the condensed consolidated statement of cash flows (in thousands):
September 30, December 31,
2018 2017
Cash and cash equivalents $ 1,796,000 $ 1,282,000
Restricted cash 100,000 100,000
Total cash, cash equivalents, and restricted cash shown in the condensed
consolidated statement of cash flows $ 1,896,000 $ 1,382,000 |
| 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 twenty-four and thirty-six 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. |
| Contract Assets | Contract assets primarily
relate to the Company’s rights to consideration for work completed but not billed as of the reporting date. The contract
assets are transferred to receivables when the rights become unconditional. |
| Contract Costs | Contract costs primarily
relate to incremental commission costs paid to sales representatives and sales leadership as a result of obtaining telecommunications
contracts which are recoverable. The Company capitalized contract costs in the amount of $725,000 and $743,000 at September 30,
2018 and December 31, 2017, respectively. Capitalized commission costs are amortized based on the transfer of goods or services
to which the assets relate which typically range from thirty-six to sixty months, and are included in selling and marketing expenses.
During the three months ended September 30, 2018 and 2017, the Company amortized $125,000 and $105,000, respectively, and there
was no impairment loss in relation to the costs capitalized. During the nine months ended September 30, 2018 and 2017, the Company
amortized $352,000 and $303,000, respectively, and there was no impairment loss in relation to the costs capitalized. |
| 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. |
| 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 $8,000 and $2,000 for the three months ended September 30, 2018 and 2017, respectively
and $12,000 and $8,000 for the nine months ended September 30, 2018 and 2017, 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. |
| Contract Liabilities | Our contract liabilities
consist primarily of advance consideration received from customers for telecommunications contracts. The product and monthly service
revenue is recognized on completion of the implementation and the remaining activation fees are reclassified as deferred revenue. |
| Use of Estimates | In preparing the
condensed 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 condensed 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. |
| Product and Service Revenue Recognition | Revenue is recognized
upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to
receive in exchange for those products or services and excludes any amounts collected on behalf of third parties. We enter into
contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted
for as separate performance obligations. 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. Revenue is recognized net of
any taxes collected from customers, which are subsequently remitted to governmental authorities. For more detailed information
about revenue, see Note 3. |
| Cost of Service Revenue | Cost of service includes
Cloud Telecommunications and Web Services cost of service revenue. Cloud Telecommunications cost of service revenue primarily consists
of fees we pay to third-party telecommunications and broadband Internet providers, costs of other third party services we resell,
personnel and travel expenses related to system implementation, and customer service. Web Services cost of service revenue consists
primarily of customer service costs and outsourcing fees related to fulfillment of our professional web management services. |
| Cost of Product Revenue | Cost of product revenue
primarily consists of the costs associated with the purchase of desktop devices and other third party equipment we purchase for
resale. |
| 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 |
| Lease Obligations | At the
inception of each lease, we evaluate the lease terms to determine whether the lease will be accounted for as an operating or
capital lease. A lease that transfers substantially all of the benefits and risks incidental to ownership of property
accounted for as a capital lease. At the inception of a capital lease, an asset and payment obligation is recorded at an
amount equal to the lesser of the present value of the minimum lease payments and the property’s fair market value.
Capital lease obligations are classified as either short or long-term based on the due dates of future minimum lease
payments, net of interest. All other leases are accounted for as operating leases and the related lease payments are charged
to expenses as incurred. |
| 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 condensed 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 Income/(Loss) | There were no other
components of comprehensive income/(loss) other than net income/(loss) for the three and nine months ended September 30, 2018 and
2017. |
| 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 three and nine months ended September 30, 2018 and 2017. No customer accounted for
10% or more of our total trade accounts receivable as of September 30, 2018 and one Cloud Telecommunications services customer
accounted for 10% of total trade accounts receivable as of September 30, 2017. |
| Recently Adopted Accounting Pronouncements | In July 2015, the
Financial Accounting Standards Board issued ASU 2015-11, Inventory In January 2017,
the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business In November 2016,
the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): In August 2016, the
FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): , The adoption of these
new ASUs required us to restate the previously reported cash and cash equivalent amounts reported in prior periods to include restricted
cash, see Note 2-Changes in Accounting Principles. In June 2014, the
FASB issued ASU 2014-12, Compensation – Stock Compensation In May 2014, the
FASB issued ASU 2014-09, Revenue from Contracts with Customers In May 2017, the
FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718 |
| Recently Issued Accounting Pronouncements | In August 2018, the
FASB issued ASU 2018-13, which changes the fair value measurement disclosure requirements of ASC 820. The amendments in this
ASU are the result of a broader disclosure project called FASB Concepts Statement, Conceptual Framework for Financial
Reporting — Chapter 8: Notes to Financial Statements, which the Board finalized in August 2018. The Board used the guidance
in the Concepts Statement to improve the effectiveness of ASC 820’s disclosure requirements. The ASU is effective for
all entities for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted.
The Company is in the process of evaluating the impact of this new ASU on our condensed consolidated financial statements. In August 2018, the
FASB issued Accounting Standards Update (ASU) 2018-07, to simplify the accounting for share-based payments to nonemployees by aligning
it with the accounting for share-based payments to employees, with certain exceptions. The new guidance expands the scope of Accounting
Standards Codification (ASC) 718 to include share-based payments granted to nonemployees in exchange for goods or services used
or consumed in an entity’s own operations and supersedes the guidance in ASC 505-50. The guidance also applies to awards
granted by an investor to employees and nonemployees of an equity method investee for goods or services used or consumed in the
investee’s operations. The guidance in ASC 718 does not apply to instruments issued to a lender or an investor in a financing
(e.g., in a capital raising) transaction. It also does not apply to equity instruments granted when selling goods or services to
customers in the scope of ASC 606. However, the guidance states that share-based payments granted to a customer in exchange for
a distinct good or service to be used or consumed in the grantor’s own operations are accounted for under ASC 718. The guidance
is effective for public business entities (PBEs) in annual periods beginning after December 15 2018, and interim periods within
those annual periods. The Company is in the process of evaluating the impact of this new ASU on our condensed consolidated financial
statements. In July 2018, the
FASB issued ASU 2018-11 to provide entities with relief from the costs of implementing certain aspects of the new leasing
standard, ASU 2016-02 (codified as ASC 842). Specifically, under the amendments in ASU 2018-11:
● Entities may elect not to recast the comparative periods presented when transitioning to ASC 842 (Issue 1).
● Lessors may elect not to separate lease and non-lease components when certain conditions are met (Issue 2). These amendments
are consistent with the tentative decisions that the Board made at its November 29, 2017, meeting and further refined at its
March 7, 2018, and March 28, 2018, meetings. In addition, on July 19, 2018, the FASB issued ASU 2018-10, which made 16
separate amendments to ASC 842. The Company is in the process of evaluating the impact of this new ASU on our condensed consolidated
financial statements. In
July 2018, the FASB has issued Accounting Standards Update (ASU) 2018-10, “Codification Improvements to Topic In January 2017,
the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): In February 2016,
the FASB issued ASU 2016-02, Leases |
