| 1. Significant Accounting Policies (Policies) | 9 Months Ended |
| Sep. 30, 2019 |
| Accounting 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 an award-winning
premier provider of cloud communications, UCaaS (Unified Communications as a Service), call center, collaboration 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. |
| 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, 2019 and December 31, 2018, we had cash and cash equivalents in financial institutions in excess of federally insured limits
in the amount of $3,254,000 and $1,645,000, respectively. |
| Restricted Cash | We classified $100,000 and
$100,000 as restricted cash as of September 30, 2019 and December 31, 2018, respectively. Cash is restricted for compensating balance
requirements on purchasing card agreements. As of September 30, 2019 and December 31, 2018, 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, September 30,
2019 2018
Cash and cash equivalents $ 3,308 $ 1,796
Restricted cash 100 100
Total cash, cash equivalents, and restricted cash shown in the condensed
consolidated statement of cash flows $ 3,408 $ 1,896 |
| Trade Receivables | Trade receivables from our
cloud telecommunications and web services segments are recorded at invoiced amounts. |
| Allowance for Doubtful Accounts | The allowance represents
estimated losses resulting from customers’ failure to make required payments. The allowance estimate is based on historical
collection experience, specific identification of probable bad debts based on collection efforts, aging of trade receivables, customer
payment history, and other known factors, including current economic conditions. We believe that the allowance for doubtful accounts
is adequate based on our assessment to date, however, actual collection results may differ materially from our expectations. |
| 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 $781,000 and $713,000 at September 30,
2019 and December 31, 2018, 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, 2019 and 2018, the Company amortized $127,000 and $125,000 respectively, and there
was no impairment loss in relation to the costs capitalized. During the nine months ended September 30, 2019 and 2018, the Company
amortized $376,000 and $352,000, 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 $12,000 and $8,000 for the three months ended September 30, 2019 and 2018, respectively
and $29,000 and $12,000 for the nine months ended September 30, 2019 and 2018, 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
of customer relationships. 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, annual incentive
bonuses accrual, recoverability of long-lived assets and product warranty liabilities. 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. |
| Product Warranty | We provide for the estimated
cost of product warranties at the time we recognize revenue. We evaluate our warranty obligations on a product group basis. Our
standard product warranty terms generally include post-sales support and repairs or replacement of a product at no additional charge
for a specified period of time. We base our estimated warranty obligation upon warranty terms, ongoing product failure rates, and
current period product shipments. If actual product failure rates, repair rates or any other post-sales support costs were to differ
from our estimates, we would be required to make revisions to the estimated warranty liability. Warranty terms generally last for
the duration that the customer has service. Estimated cost of product warranties is included in accrued expenses (see Note 8). |
| 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 | We determine if an agreement
is a lease at inception. We evaluate the lease terms to determine whether the lease will be accounted for as an operating or finance
lease. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities, current
portion, and operating lease liabilities, net of current portion in our condensed consolidated balance sheets. ROU assets represent our
right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising
from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease
payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based
on the information available at commencement date in determining the present value of lease payments. We use the implicit rate
when readily determinable. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our
lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.
Lease expense for lease payments is recognized on a straight-line basis over the lease term. A lease that transfers substantially
all of the benefits and risks incidental to ownership of property are accounted for as finance leases. At the inception of a finance
lease, an asset and finance lease 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. Finance lease obligations are classified as either current or long-term based
on the due dates of future minimum lease payments, net of interest. |
| 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 and restricted stock units (“RSUs”). |
| 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, 2019 and 2018. |
| 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, 2019 and 2018. No customer accounted for 10%
or more of our total trade accounts receivable as of September 30, 2019 and 2018, respectively. |
| Recently Adopted Accounting Pronouncements | In February 2016, the Financial
Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases Narrow-Scope Improvements for Lessors Codification
Improvements to Topic 842, Leases Leases (Topic 842) - Targeted Improvements We
adopted Topic 842 as of January 1, 2019, using the alternative transition method that allowed us to recognize a cumulative-effect
adjustment to the opening balance of retained earnings at the beginning of the period of adoption. We used the package of practical
expedients permitted under the transition guidance that allowed us to not reassess: (1) whether any expired or existing contracts
are or contain leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired
or existing leases. We elected the practical expedient that allows lessees to treat the lease and non-lease components of leases
as a single lease component. Additionally, we elected the hindsight practical expedient to determine the reasonably certain lease
terms for existing leases. The adoption of Topic 842 did not have a material adjustment to the opening balance of retained earnings.
The adoption of Topic 842 had a material impact on our condensed consolidated balance sheet due to the recognition of right-of-use
(“ROU”) assets and lease liabilities. As a result of the adoption of the standard, the Company recognized ROU assets
and lease liabilities of $1,088,000 as of January 1, 2019. The adoption of Topic 842 did not have a material impact on our condensed
consolidated statement of operations or our condensed consolidated statement cash flows. In August 2018, the FASB
issued 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 Company adopted ASU 2018-07 effective January 1, 2019.
The adoption of this ASU did not have an impact on our condensed consolidated financial statements. 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): , 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 January 2017, the FASB
issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): |
