Crexendo (CXDO) 10-Q 9 Nov 21 2021 Q3 Quarterly report Financial data

Cover

Cover - shares	9 Months Ended
	Sep. 30, 2021	Oct. 31, 2021
Cover [Abstract]
Entity Registrant Name	Crexendo, Inc.
Entity Central Index Key	0001075736
Document Type	10-Q
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Document Period End Date	Sep. 30, 2021
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2021
Entity Common Stock Shares Outstanding		21,685,214
Document Quarterly Report	true
Document Transition Report	false
Entity Interactive Data Current	Yes
Entity File Number	001-32277
Entity Incorporation State Country Code	NV
Entity Tax Identification Number	87-0591719
Entity Address Address Line 1	1615 South 52nd Street
Entity Address City Or Town	Tempe
Entity Address State Or Province	AZ
Entity Address Postal Zip Code	85281
City Area Code	602
Local Phone Number	714-8500

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($)	Sep. 30, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 7,701,000	$ 17,579,000
Restricted cash	0	100,000
Trade receivables, net of allowance for doubtful accounts of $40 as of September 30, 2021 and $21 as of December 31, 2020	1,280,000	538,000
Contract assets	209,000	159,000
Inventories	479,000	504,000
Equipment financing receivables	324,000	286,000
Contract costs	519,000	421,000
Prepaid expenses	650,000	190,000
Income tax receivable	11,000	4,000
Total current assets	11,173,000	19,781,000
Long-term trade receivables, net of allowance for doubtful accounts of $0 as of June 30, 2021 and $0 as of December 31, 2020	27,000	0
Long-term equipment financing receivables, net	837,000	906,000
Property and equipment, net	3,059,000	2,734,000
Deferred income tax assets, net	8,883,000	6,054,000
Operating lease right-of-use assets	732,000	1,000
Intangible assets, net	23,237,000	252,000
Goodwill	28,129,000	272,000
Contract costs, net of current portion	696,000	549,000
Income tax receivable, net of current portion	256,000	0
Other long-term assets	287,000	156,000
Total Assets	77,316,000	30,705,000
Current liabilities:
Accounts payable	624,000	56,000
Accrued expenses	4,351,000	1,628,000
Finance leases	130,000	29,000
Notes payable	73,000	71,000
Operating lease liabilities	490,000	1,000
Contigent consideration	746,000	0
Contract liabilities	1,831,000	778,000
Total current liabilities	8,245,000	2,563,000
Contract liabilities, net of current portion	1,053,000	450,000
Finance leases, net of current portion	237,000	55,000
Notes payable, net of current portion	1,818,000	1,873,000
Operating lease liabilities, net of current portion	269,000	0
Total liabilities	11,622,000	4,941,000
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 50,000,000 shares, 21,667,628 shares issued and outstanding as of September 30, 2021 and 17,983,177 shares issued and outstanding as of December 31, 2020	22,000	18,000
Additional paid-in capital	117,593,000	75,834,000
Accumulated deficit	(51,931,000)	(50,088,000)
Accumulated other comprehensive income	10,000	0
Total stockholders' equity	66,694,000	25,764,000
Total Liabilities and Stockholders' Equity	$ 77,316,000	$ 30,705,000

Condensed Consolidated Balanc_2

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Assets
Allowance for doubtful accounts - trade receivables	$ 40	$ 21
Allowance for doubtful accounts - long-term trade receivables	$ 0	$ 0
Stockholders equity
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, authorized	5,000,000	5,000,000
Preferred stock, issued	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, authorized	50,000,000	50,000,000
Common stock, issued	21,667,628	17,983,177
Common stock, outstanding	21,667,628	17,983,177

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Condensed Consolidated Statements of Operations (Unaudited)
Service revenue	$ 4,325,000	$ 3,654,000	$ 12,791,000	$ 10,747,000
Software solutions revenue	3,784,000	0	4,796,000	0
Product revenue	701,000	489,000	1,509,000	1,317,000
Total revenue	8,810,000	4,143,000	19,096,000	12,064,000
Operating expenses:
Cost of service revenue	1,210,000	946,000	3,816,000	2,824,000
Cost of software solutions revenue	1,675,000	0	2,201,000	0
Cost of product revenue	461,000	314,000	972,000	797,000
Selling and marketing	2,070,000	1,051,000	5,106,000	3,151,000
General and administrative	2,983,000	1,351,000	7,918,000	3,585,000
Research and development	358,000	326,000	1,096,000	840,000
Total operating expenses	8,757,000	3,988,000	21,109,000	11,197,000
Income/(loss) from operations	53,000	155,000	(2,013,000)	867,000
Other income/(expense):
Interest income	0	1,000	1,000	3,000
Interest expense	(24,000)	(23,000)	(64,000)	(54,000)
Other income/(expense), net	(17,000)	1,000	(14,000)	(28,000)
Total other income/(expense), net	(41,000)	(21,000)	(77,000)	(79,000)
Income/(loss) before income tax	12,000	134,000	(2,090,000)	788,000
Income tax benefit/(provision)	(137,000)	(3,000)	247,000	(9,000)
Net income/(loss)	$ (125,000)	$ 131,000	$ (1,843,000)	$ 779,000
Earnings per common share:
Basic	$ (0.01)	$ 0.01	$ (0.09)	$ 0.05
Diluted	$ (0.01)	$ 0.01	$ (0.09)	$ 0.05
Weighted-average common shares outstanding:
Basic, shares	21,596,415	15,244,804	19,757,658	15,058,192
Diluted, shares	21,596,415	17,249,035	19,757,658	16,793,896

Condensed Consolidated Statem_2

Condensed Consolidated Statements of Comprehensive Income (Unaaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Condensed Consolidated Statements of Comprehensive Income (Unaaudited)
Net income/(loss)	$ (125,000)	$ 131,000	$ (1,843,000)	$ 779,000
Other comprehensive income/(loss), net of tax
Foreign currency translation gain	9,000	0	10,000	0
Total other comprehensive income	9,000	0	10,000	0
Comprehensive income/(loss)	$ (116,000)	$ 131,000	$ (1,833,000)	$ 779,000

Condensed Consolidated Statem_3

Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - USD ($)	Total	Common Stock	Additional Paid-In Capital	Accumulated other comprehensive loss	Accumulated Deficit
Balance, shares at Dec. 31, 2019		14,884,755
Balance, amount at Dec. 31, 2019	$ 4,387,000	$ 15,000	$ 62,400,000	$ 0	$ (58,028,000)
Share-based compensation	105,000		105,000	0	0
Vesting of restricted stock units, shares		7,498
Vesting of restricted stock units, amount	0	$ 0	0	0	0
Issuance of common stock for exercise of stock options, shares		49,200
Issuance of common stock for exercise of stock options, amount	84,000	$ 0	84,000	0	0
Net income	140,000	$ 0	0	0	140,000
Balance, shares at Mar. 31, 2020		14,941,453
Balance, amount at Mar. 31, 2020	4,716,000	$ 15,000	62,589,000	0	(57,888,000)
Balance, shares at Dec. 31, 2019		14,884,755
Balance, amount at Dec. 31, 2019	4,387,000	$ 15,000	62,400,000	0	(58,028,000)
Net income	779,000
Balance, shares at Sep. 30, 2020		17,536,891
Balance, amount at Sep. 30, 2020	16,184,000	$ 18,000	73,415,000	0	(57,249,000)
Balance, shares at Mar. 31, 2020		14,941,453
Balance, amount at Mar. 31, 2020	4,716,000	$ 15,000	62,589,000	0	(57,888,000)
Share-based compensation	136,000	$ 0	136,000	0	0
Vesting of restricted stock units, shares		15,363
Vesting of restricted stock units, amount	0	$ 0	0	0	0
Issuance of common stock for exercise of stock options, shares		143,448
Issuance of common stock for exercise of stock options, amount	414,000	$ 0	414,000	0	0
Net income	508,000	$ 0	0	0	508,000
Balance, shares at Jun. 30, 2020		15,100,264
Balance, amount at Jun. 30, 2020	5,774,000	$ 15,000	63,139,000	0	(57,380,000)
Share-based compensation	136,000	$ 0	136,000	0	0
Vesting of restricted stock units, shares		14,372
Vesting of restricted stock units, amount	0	$ 0	0	0	0
Issuance of common stock for exercise of stock options, shares		672,255
Issuance of common stock for exercise of stock options, amount	1,510,000	$ 1,000	1,509,000	0	0
Net income	131,000	$ 0	0	0	131,000
Issuance of common stock in connection with an offering, shares		1,750,000
Issuance of common stock in connection with an offering, amount	8,633,000	$ 0	8,631,000	0	0
Balance, shares at Sep. 30, 2020		17,536,891
Balance, amount at Sep. 30, 2020	16,184,000	$ 18,000	73,415,000	0	(57,249,000)
Balance, shares at Dec. 31, 2020		17,983,177
Balance, amount at Dec. 31, 2020	25,764,000	$ 18,000	75,834,000	0	(50,088,000)
Share-based compensation	282,000	$ 0	282,000	0	0
Vesting of restricted stock units, shares		14,367
Vesting of restricted stock units, amount	0	$ 0	0	0	0
Issuance of common stock for exercise of stock options, shares		380,396
Issuance of common stock for exercise of stock options, amount	1,146,000	$ 0	1,146,000	0	0
Net income	(715,000)	0	0	0	(715,000)
Taxes paid on the net settlement of stock options	(152,000)	$ 0	(152,000)	0	0
Issuance of common stock in connection with a business acquisition, shares		46,662
Issuance of common stock in connection with a business acquisition, amount	346,000	$ 0	346,000	0	0
Balance, shares at Mar. 31, 2021		18,424,602
Balance, amount at Mar. 31, 2021	26,671,000	$ 18,000	77,456,000	0	(50,803,000)
Balance, shares at Dec. 31, 2020		17,983,177
Balance, amount at Dec. 31, 2020	25,764,000	$ 18,000	75,834,000	0	(50,088,000)
Net income	(1,843,000)
Balance, shares at Sep. 30, 2021		21,667,628
Balance, amount at Sep. 30, 2021	65,694,000	$ 22,000	117,593,000	10,000	(51,931,000)
Balance, shares at Mar. 31, 2021		18,424,602
Balance, amount at Mar. 31, 2021	26,671,000	$ 18,000	77,456,000	0	(50,803,000)
Share-based compensation	453,000	$ 0	453,000	0	0
Vesting of restricted stock units, shares		13,622
Vesting of restricted stock units, amount	0	$ 0	0	0	0
Issuance of common stock for exercise of stock options, shares		18,520
Issuance of common stock for exercise of stock options, amount	31,000	$ 1,000	30,000	0	0
Net income	(1,003,000)	0	0	0	(1,003,000)
Taxes paid on the net settlement of stock options	(3,000)	$ 0	(3,000)	0	0
Issuance of common stock in connection with a business acquisition, shares		3,097,309
Issuance of common stock in connection with a business acquisition, amount	39,062,000	$ 3,000	39,059,000	0	0
Foreign currency translation adjustment, net of tax	1,000	$ 0	0	1,000	0
Balance, shares at Jun. 30, 2021		21,554,053
Balance, amount at Jun. 30, 2021	65,212,000	$ 22,000	116,995,000	1,000	(51,806,000)
Share-based compensation	415,000	$ 0	415,000	0	0
Vesting of restricted stock units, shares		13,772
Vesting of restricted stock units, amount	0	$ 0	0	0	0
Issuance of common stock for exercise of stock options, shares		99,803
Issuance of common stock for exercise of stock options, amount	188,000	$ 0	188,000	0	0
Net income	(125,000)	0	0	0	(125,000)
Taxes paid on the net settlement of stock options	(5,000)	0	(5,000)	0	0
Foreign currency translation adjustment, net of tax	9,000	$ 0	0	9,000	0
Balance, shares at Sep. 30, 2021		21,667,628
Balance, amount at Sep. 30, 2021	$ 65,694,000	$ 22,000	$ 117,593,000	$ 10,000	$ (51,931,000)

Condensed Consolidated Statem_4

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss)	$ (1,843,000)	$ 779,000
Adjustments to reconcile net income/(loss) to net cash provided by operating activities:
Depreciation and amortization	931,000	197,000
Share-based compensation	1,150,000	377,000
Non-cash operating lease amortization	(4,000)	0
Changes in assets and liabilities:
Trade receivables	199,000	(248,000)
Contract assets	(50,000)	(72,000)
Equipment financing receivables	31,000	(395,000)
Inventories	37,000	119,000
Contract costs	(245,000)	(100,000)
Prepaid expenses	(384,000)	(191,000)
Income tax receivable	(263,000)	4,000
Other assets	335,000	(46,000)
Accounts payable and accrued expenses	228,000	(25,000)
Income tax payable	0	5,000
Contract liabilities	(595,000)	19,000
Net cash provided by/(used for) operating activities	(473,000)	423,000
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment	91,000	745,000
Acquisitions of assets and businesses, net of cash received	(10,505,000)	(176,000)
Net cash used for investing activities	(10,596,000)	(921,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of contingent consideration	0	(54,000)
Repayments made on finance leases	(71,000)	(22,000)
Proceeds from notes payable	0	1,001,000
Repayments made on notes payable	(53,000)	(39,000)
Proceeds from exercise of options	1,365,000	2,007,000
Taxes paid on the net settlement of stock options and RSUs	(160,000)	0
Proceeds from issuance of common stock in connection with an offering	0	8,778,000
Net cash provided by financing activities	1,081,000	11,671,000
Effect of exchange rate changes on cash	10,000	0
NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	(9,978,000)	11,173,000
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT THE BEGINNING OF THE PERIOD	17,679,000	4,280,000
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT THE END OF THE PERIOD	7,701,000	15,453,000
Income taxes, net	(15,000)	0
Interest expense	(64,000)	(54,000)
Supplemental disclosure of non-cash investing and financing information:
Stock issued for the acquisition of Centric Telecom	346,000	0
Contingent consideration related to the acquisition of Centric Telecom	746,000	0
Stock issued in connection with the merger with NetSapiens	16,942,000	0
Stock options issued in connection with the merger with NetSapiens	22,120,000	0
Property and equipment financed through finance leases	273,000	0
Prepaid assets financed through finance leases	14,000	0
Purchase of property and equipment with a note payable	0	2,000,000
Adjustment to intangible assets and contingent consideration of customer relationship asset acquisition	$ 0	$ (121,000)

Significant Accounting Policies

Significant Accounting Policies	9 Months Ended
	Sep. 30, 2021
Significant Accounting Policies
1. Significant Accounting Policies	1. Significant Accounting Policies Description of Business – 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. Foreign Currency Translation - Due to changes in exchange rates between reporting periods and changes in certain account balances, the foreign currency translation adjustment will change from period to period. During the three and nine months ended September 30, 2021 and 2020, we recorded foreign currency translation gains/(losses) of $1,000, and $9,000, respectively, in our statements of comprehensive income (loss). Cash and Cash Equivalents – Restricted Cash – 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, 2021 2020 Cash and cash equivalents $ 7,701 $ 15,353 Restricted cash - 100 Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statement of cash flows $ 7,701 $ 15,453 Trade Receivables – Allowance for Doubtful Accounts – Contract Assets – Contract Costs – Inventory – Property and Equipment – Building 39 years Computer and office equipment 2 to 5 years Computer software 3 years Internal-use software 3 years Vehicles 5 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. Asset Acquisitions – Business Acquisitions - Goodwill – Intangible Assets – Contract Liabilities – Use of Estimates – C ontingencies – Service, Software Solutions and Product Revenue Recognition – Cost of Service Revenue – Cost of Software Solutions Revenue – Cost of Product Revenue – Product Warranty – Contingent Consideration – Public Offering On October 21, 2020, the underwriters of the Company’s public offering exercised their option to purchase additional shares of the Company’s common stock to cover sales by the underwriters of a greater number of shares than the total set forth in the filed prospectus for the public offering. The underwriters purchased an additional 420,000 shares of common stock from the Company. The gross proceeds to the Company of the issuance were $2,310,000, and the Company received net proceeds of $2,148,000 after deducting underwriting discounts and 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 Lease Obligations – 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 – Income Taxes – Interest and penalties associated with income taxes are classified as income tax expense in the consolidated statements of operations. Stock-Based Compensation – Operating Segments – Significant Customers – Recently Adopted Accounting Pronouncements – Income Taxes In August 2018, the FASB issued ASU 2018-13, which removes, modifies and adds to the disclosure requirements on fair value measurements in Topic 820. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this updated guidance and delay adoption of the additional disclosures until their effective date. We adopted this guidance effective January 1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Recently Issued Accounting Pronouncements – In August 2020, the FASB issued ASU 2020-06, which simplifies the accounting for convertible instruments. ASU 2020-06 eliminates certain models that require separate accounting for embedded conversion features, in certain cases. Additionally, among other changes, the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own equity. ASU 2020-06 also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. ASU 2020-06 is effective for our fiscal year beginning after December 15, 2021, including interim periods within this fiscal year. This guidance can be applied using either a modified or full retrospective approach. The Company is currently evaluating the impact this ASU will have on the financial statements and related disclosures, as well as the timing of adoption.

Revenue

Revenue	9 Months Ended
	Sep. 30, 2021
Revenue
2. Revenue	2. Revenue Revenue is measured based on a consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product, service, or software solution to a customer. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. The following is a description of principal activities – separated by reportable segments – from which the Company generates its revenue. For more detailed information about reportable segments, see Note 15. Cloud Telecommunications Services Segment Products and services may be sold separately or in bundled packages. The typical length of a contract for service is thirty-six to sixty months. Customers are billed for these services on a monthly basis. For bundled packages, the Company accounts for individual products and services separately if they are distinct – i.e. if a product or service is separately identifiable from other items in the bundled package and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The consideration (including any discounts) is allocated between separate products and services in a bundle based on their relative stand-alone selling prices. The stand-alone selling prices are determined based on the prices at which the Company separately sells the desktop devices and telecommunication services. For items that are not sold separately (e.g. additional features) the Company estimates stand-alone selling prices using the adjusted market assessment approach. 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. Desktop Devices – Equipment Financing Revenue – Cloud Telecommunications Services – Fees, Commissions, and Other, Recognized over Time – · Contracted activation and flash fees – The Company generally allocates a portion of the activation fees to the desktop devices, which is recognized at the time of the installation or customer acceptance, and a portion to the service, which is recognized over the contract term using the straight-line method. · Non-contracted carrier cost recovery fee – This fee recovers the various costs and expenses that the Company incurs in connection with complying with legal, regulatory, and other requirements, including without limitation federal, state, and local reporting and filing requirements. This fee is assessed as a set percentage of our monthly billing and is recognized monthly. · Non-contracted administrative fees – Administrative fees are recognized as revenue on a monthly basis. One-Time Fees, Commissions, and Other – · Contracted professional service revenue – Professional service revenue includes professional installation services, custom integration, and other professional services. The Company typically bills and collects professional service revenue upon entering into a contract with a customer. Professional service revenue is recognized as revenue when the performance obligations are completed. · Non-contracted cancellation fees – These cancellation fees relate to remaining contractual term buyout payments in connection with early cancellation and are billed and recognized as revenue upon receipt. · Other non-contracted fees – These fees include disconnect fees, shipping fees, restocking fees, and porting fees. Other non-contracted fees are recognized as revenue upon receipt of payment. Software Solutions Segment The Software Solutions segment derives revenues from three primary sources: software licenses, software maintenance support and professional services. Software and services may be sold separately or in bundled packages. Generally, contracts with customers contain multiple performance obligations, consisting of software and services. For bundled packages, the Company accounts for individual products and services separately if they are distinct – i.e. if a product or service is separately identifiable from other items in the bundled package and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The consideration (including any discounts) is allocated between separate products and services in a bundle based on their relative stand-alone selling prices. The stand-alone selling prices are determined based on the prices at which the Company separately sells the software licenses and professional services. For items that are not sold separately (e.g. additional features) the Company estimates stand-alone selling prices using the adjusted market assessment approach. 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. Software Licenses - · SNAPsolution® · SNAPaccel – a Subscription Maintenance and Support - Professional Services and Other - Disaggregation of Revenue In the following table, revenue is disaggregated by primary major product line, and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the reportable segments. Three Months Ended September 30, 2021 Cloud Software Total (In thousands) Telecommunications Solutions Reportable Segment Segment Segments Major products/services lines Desktop devices $ 701 $ - $ 701 Equipment financing revenue 63 - 63 Telecommunications services 3,718 - 3,718 Fees, commissions, and other, recognized over time 419 - 419 One time fees, commissions and other 125 - 125 Software licenses - 1,473 1,473 Subscription maintenance and support - 2,213 2,213 Professional services and other - 98 98 $ 5,026 $ 3,784 $ 8,810 Timing of revenue recognition Products, services, and fees recognized at a point in time $ 775 $ 1,917 $ 2,692 Products, services, and fees transferred over time 4,251 1,867 6,118 $ 5,026 $ 3,784 $ 8,810 Three Months Ended September 30, 2020 Cloud Software Total (In thousands) Telecommunications Solutions Reportable Segment Segment Segments Major products/services lines Desktop devices $ 489 $ - $ 489 Equipment financing revenue 59 - 59 Telecommunications services 3,182 - 3,182 Fees, commissions, and other, recognized over time 373 - 373 One time fees, commissions and other 40 - 40 $ 4,143 $ - $ 4,143 Timing of revenue recognition Products and fees recognized at a point in time $ 529 $ - $ 529 Services and fees transferred over time 3,614 - 3,614 $ 4,143 $ - $ 4,143 Nine Months Ended September 30, 2021 Cloud Software Total (In thousands) Telecommunications Solutions Reportable Segment Segment Segments Major products/services lines Desktop devices $ 1,509 $ - $ 1,509 Equipment financing revenue 198 - 198 Telecommunications services 10,995 - 10,995 Fees, commissions, and other, recognized over time 1,252 - 1,252 One time fees, commissions and other 346 - 346 Software licenses - 2,210 2,210 Subscription maintenance and support - 2,451 2,451 Professional services and other - 135 135 $ 14,300 $ 4,796 $ 19,096 Timing of revenue recognition Products and fees recognized at a point in time $ 1,804 $ 2,633 $ 4,437 Services and fees transferred over time 12,496 2,163 14,659 $ 14,300 $ 4,796 $ 19,096 Nine Months Ended September 30, 2020 Cloud Software Total (In thousands) Telecommunications Solutions Reportable Segment Segment Segments Major products/services lines Desktop devices $ 1,317 $ - $ 1,317 Equipment financing revenue 156 - 156 Telecommunications services 9,321 - 9,321 Fees, commissions, and other, recognized over time 1,147 - 1,147 One time fees, commissions and other 123 - 123 $ 12,064 $ - $ 12,064 Timing of revenue recognition Products and fees recognized at a point in time $ 1,440 $ - $ 1,440 Services and fees transferred over time 10,624 - 10,624 $ 12,064 $ - $ 12,064 Contract balances The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers. September 30, December 31, (In thousands) 2021 2020 Receivables, which are included in trade receivables, net of allowance for doubtful accounts $ 1,307 $ 538 Contract assets 209 159 Contract liabilities 2,884 1,228 Significant changes in the contract assets and the contract liabilities balances during the period are as follows: Nine Months Ended For the Year Ended (In thousands) September 30, 2021 December 31, 2020 Contract Assets Contract Liabilities Contract Assets Contract Liabilities Revenue recognized that was included in the contract liability balance at the beginning of the period $ - $ (986 ) $ - $ (976 ) Increase due to cash received, excluding amounts recognized as revenue during the period - 2,642 - 990 Transferred to receivables from contract assets recognized at the beginning of the period (47 ) - (21 ) - Increase due to additional unamortized discounts 97 - 158 - Transaction price allocated to the remaining performance obligations The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period from the cloud telecommunications services segment (in thousands): 2021 2022 2023 2024 2025 2026 Total Desktop devices $ 242 - - - - - $ 242 Telecommunications service $ 3,905 11,306 7,699 4,967 2,165 439 $ 30,481 All consideration from contracts with customers is included in the amounts presented above The table above excludes backlog from the software solutions segment acquired in the NetSapiens acquisition, as additional time is required to compile the data.

Earnings Per Common Share

Earnings Per Common Share	9 Months Ended
	Sep. 30, 2021
Earnings Per Common Share
3. Earnings Per Common Share	3. Earnings Per Common Share Basic net income/(loss) per common share is computed by dividing the net income for the period by the weighted-average number of common shares outstanding during the period. Diluted net income per common share is computed giving effect to all dilutive common stock equivalents, consisting of common stock options. Diluted net loss per common share for the three and nine months ended September 30, 2021 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 income per common share: Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net income/(loss) (in thousands) (A) $ (125 ) $ 131 $ (1,843 ) $ 779 Weighted-average share reconciliation: Weighted-average basic shares outstanding (B) 21,596,415 15,244,804 19,757,658 15,058,192 Dilutive effect of stock-based awards - 2,004,231 - 1,735,704 Diluted weighted-average outstanding shares of common stock (C) 21,596,415 17,249,035 19,757,658 16,793,896 Earnings per common share: Basic (A/B) $ (0.01 ) $ 0.01 $ (0.09 ) $ 0.05 Diluted (A/C) $ (0.01 ) $ 0.01 $ (0.09 ) $ 0.05 For the three and nine months ended September 30, 2021 and 2020, the following potentially dilutive common stock, including awards granted under our equity incentive compensation plans, were excluded from the computation of diluted net income per share because including them would be anti-dilutive. Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Stock options 970,631 18,685 840,623 91,845

Acquisitions

Acquisitions	9 Months Ended
	Sep. 30, 2021
Acquisitions
4. Acquisitions	4. Acquisitions NetSapiens, Inc. Merger Agreement On June 1, 2021, the Company acquired 100% of the issued and outstanding shares of NetSapiens, Inc. (“NetSapiens”), a provider of a comprehensive suite of unified communications (UC), video conferencing, collaboration & contact center solutions to service providers, servicing over two million users around the globe. The aggregate purchase price was approximately $49.1 million, consisting of $10 million in cash, and approximately $39 million in common stock and stock options. In connection with the closing of the Merger, the Company issued 3,097,309 shares of the Company’s common stock valued at $5.47 per share for common stock consideration of approximately $16.9 million, and 4,482,328 options under the Crexendo, Inc. 2021 Equity Incentive Plan with an aggregate value of $22.1 million, net of the aggregate exercise price of $5.6 million. Acquisition costs are included in general and administrative expenses and totaled $4,000 for the three months ended September 30, 2021 and $1,015,000 for the nine months ended September 30, 2021. The acquisition was accounted for under the acquisition method of accounting, with the Company identified as the acquirer. The Company’s unaudited condensed consolidated financial statements include the results of operations of NetSapiens from the date of acquisition. The historical results of operations of NetSapiens were not significant to the Company’s unaudited condensed consolidated results of operations for the periods presented. Under the acquisition method of accounting, the aggregate amount of consideration paid by the Company was allocated to NetSapiens’s net tangible assets and intangible assets based on their estimated fair value on the acquisition date. The preliminary purchase price allocation, as set forth in the table below, reflects various preliminary fair value estimates and analysis prepared by the Company. The preliminary purchase price allocation is subject to revision as a more detailed analysis is completed by a third party valuation specialist and additional information on the fair values of NetSapiens’s assets and liabilities becomes available. Any change in the fair value of the net assets of NetSapiens will change the amount of the purchase price allocable to goodwill. Final purchase accounting adjustments may differ materially from preliminary purchase price allocation presented here. The preliminary areas of the purchase price allocation that are not yet finalized relate to the identification and valuation of intangible assets by an independent third party valuation firm and the determination of fair values of certain assets and liabilities; trade receivable, right-of-use assets and associated liabilities, deferred tax assets, and contract costs. We anticipate finalizing our purchase price allocation during 2021. The following table presents the preliminary allocation of the assets acquired and liabilities assumed as of June 1, 2021 (in thousands): Total purchase price $ 49,062 Cash 1,658 Trade receivables 846 Prepaid expenses 57 Other current assets 319 Property and equipment, net 62 Right-of-use assets 551 Deferred tax assets 2,829 Other long-term assets 84 Intangible assets- existing technology 5,047 Intangible assets- customer relationships 16,473 Total identifiable assets 27,926 Accounts payable (438 ) Accrued expenses (2,412 ) Finance leases (17 ) Contract liabilities (1,475 ) Operating lease liabilities (379 ) Contract liabilities, net of current portion (629 ) Finance leases, net of current portion (29 ) Operating lease liabilities, net of current portion (219 ) Total liabilities assumed (5,598 ) Total goodwill $ 26,734 A preliminary estimate of $5.0 million has been allocated to existing technology, an intangible asset with an estimated useful life of approximately 6 years. A preliminary estimate of $16.5 million has been allocated to customer relationships with an estimated life of approximately 9 years. The estimated fair values of existing technology and customer relationships was established based upon the income approach. The income approach relies on an estimation of the present value of the future monetary benefits expected to flow to the owner of an asset during its remaining economic life. This approach requires a projection of the cash flow that the asset is expected to generate in the future. The projected cash flow is discounted to its present value using a rate of return, or discount rate that accounts for the time value of money and the degree of risk inherent in the asset. The income approach may take the form of a “relief from royalty” methodology, a cost savings methodology, a “with and without” methodology, or excess earnings methodology, depending on the specific asset under consideration. The existing technology and customer relationships were valued using the multi-period excess earnings method. Inherent in the multi-period excess earnings method is the recognition that, in most cases, all of the assets of the business, both tangible and intangible, contribute to the generation of the cash flow of the business and the net cash flows attributable to the subject asset must recognize the support of the other assets which contribute to the realization of the cash flows. This future cash flow was then discounted using an estimated required rate of return for the asset to determine the present value of the future cash flows attributable to the asset. The key assumptions used in valuing the existing technology and customer relationships acquired are as follows: weighted average cost of capital of 17.4%, tax rate of 22.5%, and estimated economic life of 6 and 9 years, respectively. A preliminary estimate of $26.7 million has been allocated to goodwill. Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. Goodwill will not be amortized and will be tested for impairment at least annually. The preliminary purchase price allocation for NetSapiens is subject to revision as more detailed analysis is completed and additional information on the fair values of NetSapiens’ assets and liabilities becomes available. Any changes in the fair value of the net assets of NetSapiens will change the amount of the purchase price allocable to goodwill. The final purchase accounting allocation may therefore differ materially from the pro forma adjustments presented herein. The final allocation may include (1) changes in fair values of property and equipment (2) changes in allocations to intangible assets such as technology, customer relationships, and deferred revenue as well as goodwill and (3) other changes to assets and liabilities. The following unaudited pro forma information presents our condensed consolidated results of operations as if NetSapiens, Inc. had been included in our consolidated results since January 1, 2020: For the Nine Months Ended September 30, (Unaudited) (In thousands) 2021 2020 Revenues $ 24,123 $ 20,867 Net income/(loss) (12,671 ) 487 Earnings per share $ (0.64 ) $ 0.03 The unaudited pro forma financial information is presented for informational purposes only, and may not necessarily reflect the Company’s future results of operations or what the results of operations would have been had the Company owned and operated NetSapiens, Inc. as of January 1, 2020. Centric Telecom, Inc. Business Acquisition On January 14, 2021, the Company acquired 100% of the issued and outstanding shares of Centric Telecom, Inc., a provider of telecommunications products, services, and solutions in Northern Virginia. The aggregate purchase price of $3,255,000 consisted of $2,163,000 of cash paid at closing, 46,662 shares of our common stock with an estimated fair value of $346,000 issued at closing, and $746,000 of estimated contingent consideration to be paid out based on annualized revenue recognized during the nine month earn-out period. The fair value of the common stock issued as consideration was determined based on the closing market price of the Company’s common stock on the date of the acquisition of $7.42. The aggregate purchase price is subject to customary upward or downward adjustments for Centric Telecom’s net working capital. Acquisition costs are included in general and administrative expenses and totaled $0 for the three months ended September 30, 2021 and $50,000 for the nine months ended September 30, 2021. The acquisition was accounted for under the acquisition method of accounting, with the Company identified as the acquirer. The Company’s unaudited condensed consolidated financial statements include the results of operations of Centric Telecom from the date of acquisition. The historical results of operations of Centric Telecom were not significant to the Company’s unaudited condensed consolidated results of operations for the periods presented. Under the acquisition method of accounting, the aggregate amount of consideration paid by the Company was allocated to Centric Telecom’s net tangible assets and intangible assets based on their estimated fair value on the acquisition date. The preliminary purchase price allocation, as set forth in the table below, reflects various preliminary fair value estimates and analysis prepared by the Company. The preliminary purchase price allocation is subject to revision as a more detailed analysis is completed by a third party valuation specialist and additional information on the fair values of Centric’s assets and liabilities becomes available. Any change in the fair value of the net assets of Centric Telecom will change the amount of the purchase price allocable to goodwill. Final purchase accounting adjustments may differ materially from preliminary purchase price allocation presented here. The primary areas of the purchase price allocation that are not yet finalized relate to the valuation of the intangible assets acquired, fair value of right to use assets and associated operating lease liabilities assumed, and net working capital adjustments. We anticipate finalizing our purchase price allocation during 2021. The following table presents the preliminary allocation of the assets acquired and liabilities assumed as of January 14, 2021 (in thousands): Consideration (including estimated unpaid contingent consideration) Cash $ 2,163 Common stock 346 Contingent consideration 746 $ 3,255 Assets Cash $ 7 Accounts receivables 122 Prepaid expenses 4 Inventory 12 Other assets 12 Property and equipment 57 Right to use assets 134 Intangible assets acquired 2,238 Other long-term assets 44 Total assets acquired 2,630 Liabilities Accounts Payable 26 Accrued Expenses 187 Contract Liability 147 Operating Lease Liability 118 Direct Financing Liability 20 Total liabilities assumed 498 Net identifiable assets acquired 2,132 Goodwill 1,123 Total purchase price $ 3,255 The intangible assets acquired consist of customer relationships. The fair value of the customer relationships was determined utilizing variations of the income approach where the expected future cash flows resulting from the acquired identifiable intangible assets were reduced by operating costs and charges for contributory assets and then discounted to present value at the weighted average cost of capital. The key assumptions used in valuing the customer relationships acquired is a weighted average cost of capital of 17.4% and a tax rate of 22.5%. The amortizable intangible assets have an average useful life of eight years. The purchase price exceeded the estimated fair value of the tangible and identifiable intangible assets and liabilities acquired and, as a result of the allocation, the Company recorded goodwill of $1,123,000, which is not deductible for tax purposes. The goodwill recognized is primarily attributable to contributions of the entity’s assembled workforce of the acquired business.

Trade Receivables net

Trade Receivables net	9 Months Ended
	Sep. 30, 2021
Trade Receivables net
5. Trade Receivables net	5. Trade Receivables, net Our trade receivables balance consists of traditional trade receivables. Below is an analysis of our trade receivables as shown on our balance sheet (in thousands): September 30, December 31, 2021 2020 Gross trade receivables $ 1,347 $ 559 Less: allowance for doubtful accounts (40 ) (21 ) Trade receivables, net $ 1,307 $ 538 Current trade receivables, net $ 1,280 $ 538 Long-term trade receivables, net 27 - Trade receivables, net $ 1,307 $ 538

Prepaid Expenses

Prepaid Expenses	9 Months Ended
	Sep. 30, 2021
Prepaid Expenses
6. Prepaid Expenses	6. Prepaid Expenses Prepaid expenses consisted of the following (in thousands): September 30, December 31, 2021 2020 Prepaid corporate insurance $ 158 $ 53 Prepaid software services and support 281 20 Prepaid employee insurance premiums 78 71 Prepaid Nasdaq listing fee 15 - Other prepaid expenses 118 46 Total prepaid expenses $ 650 $ 190

Property and Equipment

Property and Equipment	9 Months Ended
	Sep. 30, 2021
Property and Equipment
7. Property and Equipment	7. Property and Equipment Property and equipment consisted of the following (in thousands): September 30, December 31, 2021 2020 Building $ 2,000 $ 2,000 Land 500 500 Computer and office equipment 1,925 1,436 Computer software 576 526 Internal-use software 14 14 Vehicles 95 - Leasehold improvements 33 - Less: accumulated depreciation (2,084 ) (1,742 ) Total property and equipment, net $ 3,059 $ 2,734 Depreciation and amortization expense is included in general and administrative expenses and totaled $63,000 and $34,000 for the three months ended September 30, 2021 and 2020, respectively and totaled $158,000 and $128,000 for the nine months ended September 30, 2021 and 2020, respectively.

Intangible Assets and Goodwill

Intangible Assets and Goodwill	9 Months Ended
	Sep. 30, 2021
Intangible Assets and Goodwill
8. Intangible Assets	8. Intangible Assets and Goodwill Acquired intangible assets subject to amortization consist of the following (in thousands): September 30, 2021 December 31, 2020 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships $ 19,882 $ (1,331 ) $ 18,551 $ 1,171 $ (919 ) $ 252 Developed technologies 5,047 (361 ) 4,686 - - - Total acquired intangible assets $ 24,929 $ (1,692 ) $ 23,237 $ 1,171 $ (919 ) $ 252 As of September 30, 2021, the weighted average remaining useful life for customer relationships was 8.5 years and developed technologies was 5.7 years. Amortization expense for customer relationships intangible assets is included in general and administrative expenses and totaled $236,000 and $16,000 for the three months ended September 30, 2021 and 2020, respectively, and totaled $412,000 and $46,000 for the nine months ended September 30, 2021 and 2020, respectively. Amortization expense for developed technologies intangible assets is included in cost of software solutions revenue and totaled $270,000 and $0 for the three months ended September 30, 2021 and 2020, respectively, and totaled $361,000 and $0 for the nine months ended September 30, 2021 and 2020, respectively. During the three months ended June 30, 2021, the Company acquired $21,520,000 in intangible assets in connection with the NetSapiens business acquisition. During the three months ended March 31, 2021, the Company acquired $2,238,000 in intangible assets in connection with the Centric Telecom business acquisition. During the year ended December 31, 2020, we reduced customer relationships by $121,000 due to an adjustment to the total consideration payable under the DoubleHorn customer relationships asset purchase agreement. As of September 30, 2021, annual amortization of definite lived intangible assets, based on existing intangible assets and current useful lives, is estimated to be the following (in thousands): Year ending December 31, 2021 remaining $ 507 2022 2,110 2023 2,553 2024 2,849 2025 and thereafter 15,218 Total $ 23,237 The following table provides a summary of changes in the carrying amounts of goodwill (in thousands): Goodwill Balance at December 31, 2020 272 Centric Telecom business acquisition 1,123 NetSapiens business acquisition 26,734 Balance at September 30, 2021 $ 28,129

Accrued Expenses

Accrued Expenses	9 Months Ended
	Sep. 30, 2021
Accrued Expenses
9. Accrued Expenses	9. Accrued Expenses Accrued expenses consisted of the following (in thousands): September 30, December 31, 2021 2020 Accrued wages, benefits and payroll taxes $ 698 $ 513 Accrued accounts payable 915 505 Accrued sales and telecommunication taxes 2,616 438 Product warranty liability 34 33 Other accrued expenses 88 139 Total accrued expenses $ 4,351 $ 1,628 The changes in aggregate product warranty liabilities for the year ended December 31, 2020 and nine months ended September 30, 2021 were as follows (in thousands): Warranty Liabilities Balance at January 1, 2020 $ 37 Accrual for warranties 33 Adjustments related to pre-existing warranties (10 ) Warranty settlements (27 ) Balance at December 31, 2020 33 Accrual for warranties 27 Warranty settlements (26 ) Balance at September 30, 2021 $ 34 Product warranty expense is included in cost of product revenue expense and totaled $15,000 and $11,000 for the three months ended September 30, 2021 and 2020, respectively, and $27,000and $29,000for the nine months ended September 30, 2021 and 2020, respectively.

Notes Payable

Notes Payable	9 Months Ended
	Sep. 30, 2021
Notes Payable
10. Notes Payable	10. Notes Payable Notes payable consists of a short and long-term financing arrangements: September 30, December 31, 2021 2020 Notes payable $ 1,891 $ 1,944 Less: current notes payable (73 ) (71 ) Notes payable, net of current portion $ 1,818 $ 1,873 On January 27, 2020, we entered into a Fixed Rate Term Loan Agreement with Bank of America, N.A. to finance Two Million Dollars ($2,000,000) to purchase our corporate office building. The Loan Agreement has a term of seven (7) years with monthly payments of Eleven Thousand Eight Hundred Forty-One and 15/100 Dollars ($11,841.15), including interest at 3.67%, beginning on March 1, 2020, secured by the office building. As of September 30, 2021, future principal payments are scheduled as follows (in thousands): Year ending December 31, 2021 remaining $ 19 2022 74 2023 76 2024 79 2025 and thereafter 1,643 Total $ 1,891

Fair Value Measurements

Fair Value Measurements	9 Months Ended
	Sep. 30, 2021
Fair Value Measurements
11. Fair Value Measurements	11. Fair Value Measurements We have financial instruments as of September 30, 2021 and December 31, 2020 for which the fair value is summarized below (in thousands): September 30, 2021 December 31, 2020 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Assets: Trade receivables, net $ 1,307 $ 1,307 $ 538 $ 538 Equipment financing receivables 1,161 1,161 1,192 1,192 Liabilities: Finance lease obligations $ 367 $ 367 $ 84 $ 84 Notes payable 1,891 1,891 1,944 1,944 Business acquisition contigent consideration 746 746 - - Liabilities for which fair value is recognized in the balance sheet on a recurring basis are summarized below as of September 30, 2021 and December 31, 2020 (in thousands): As of September 30, Fair value measurement at reporting date Description 2021 Level 1 Level 2 Level 3 Liabilities: Business acquisition contingent consideration $ 746 $ - $ - $ 746 Description As of December 31, Level 1 Level 2 Level 3 Liabilities: Asset acquisition contingent consideration $ - $ - $ - $ - The recurring Level 3 measurement of our business acquisition contingent consideration liability includes the following significant unobservable inputs at September 30, 2021 (in thousands): Contingent consideration liability Fair Value at September 30, 2021 Valuation technique Unobservable inputs Range Revenue - based payments $ 746 Discounted cash flow Discount Rate 17.38 % Probability of milestone payment 90 % Projected year of payments 2021 Level 3 instruments are valued based on unobservable inputs that are supported by little or no market activity and reflect the Company’s own assumptions in measuring fair value. Future changes in fair value of the contingent financial milestone consideration, as a result of changes in significant inputs such as the discount rate and estimated probabilities of financial milestone achievements, could have a material effect on the statement of operations and balance sheet in the period of the change. During the three months ended March 31, 2021, the Company recorded $746,000 of contingent consideration in connection with the Centric Telecom business acquisition, to be paid based on the completion of the earn-out period. During the year ended December 31, 2020, the Company reduced the contingent consideration to be paid based on the completion of the earn-out period by $121,000 and recognized a reduction in the cost of the assets acquired in the DoubleHorn Asset Acquisition. The progression of the Company’s Level 3 instruments fair valued on a recurring basis for the three months ended September 30, 2021 and the year ended December 31, 2020 are shown in the table below (in thousands): Asset and Business Acquisition Contingent Consideration Balance at January 1, 2020 $ 175 Cash payments (54 ) Adjustment (121 ) Balance at December 31, 2020 $ - Additions 746 Cash payments - Adjustment - Balance at September 30, 2021 $ 746

Income Taxes

Income Taxes	6 Months Ended
	Jun. 30, 2021
Income Taxes
12. Income Taxes	12. Income Taxes Our effective tax rate for the three months ended September 30, 2021 and 2020 was 1167.4% and 2.2%, respectively, which resulted in an income tax benefit/(provision) of $(137,000) and $(3,000), respectively. Our effective tax rate for the nine months ended September 30, 2021 and 2020 was (11.8%) and 1.1%, respectively, which resulted in an income tax benefit/(provision) of $247,000 and $(9,000), respectively. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. 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 reduce the carrying amounts of deferred tax assets by a valuation allowance if, based on the evidence available, it is more-likely-than-not that such assets will not be realized. In making the assessment under the more-likely-than-not standard, appropriate consideration must be given to all positive and negative evidence related to the realization of the deferred tax assets. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carry-forward periods by jurisdiction, unitary versus stand-alone state tax filings, our experience with loss carryforwards expiring unutilized, and all tax planning alternatives that may be available. As of December 31, 2020, management reviewed the weight of all the positive and negative evidence available. Management reviewed positive evidence such as achievement of three years of cumulative pretax income in the U.S. federal tax jurisdiction, projections of future pretax income and the duration of statutory carry-forward periods. As of December 31, 2020 the Company has achieved three years of cumulative pretax income, the achievement of three years of cumulative pretax income is objectively verifiable positive evidence and is considered significant positive evidence. Management also evaluated projections of future pretax income and the duration of statutory carry-forward periods to determine if the NOL carryforwards could be utilized in whole or in part before they expire unutilized. Forecasts and projections of future income are inherently subjective and therefore generally are given less weight, based on the extent to which the assumptions can be objectively verified based on historical experience. Management utilized historical objectively verifiable revenue growth trends and operating expense trends as assumptions for projections of future pretax income and determined that the Company would generate sufficient pre-tax income in future periods to utilize all of our deferred tax assets. Although historical trends utilized in our projections are objectively verifiable we assigned less weight to this positive evidence given the subjective nature of assumptions in projections. The combination of three years of cumulative pretax income and projections of future pretax income was considered significant positive evidence. Management reviewed negative evidence related to experience of credits and loss carryforwards expiring unutilized, and determined that although negative evidence exists, it was not significant evidence, as the current loss carryforwards do not begin to expire until 2031 and therefore risk is minimal. After reviewing the weight of the positive and negative evidence, management determined that there is sufficient positive evidence to conclude that it is more likely than not that deferred taxes of $6,054,000 are realizable, and released the valuation allowance accordingly.

Leases

Leases	9 Months Ended
	Sep. 30, 2021
Leases
13. Leases	13. Leases Lessee Accounting We determine if an agreement is a lease at inception. We lease office space, other assets, and office equipment under operating leases. We lease data center equipment, including maintenance contracts and vehicles under finance leases. Operating leases are recorded as right-of-use (“ROU”) assets and lease liabilities on the balance sheet, excluding leases that are less than 12 months. ROU assets represent our right to use the leased asset for the lease term and lease liabilities represent our obligation to make lease payments. 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 estimated incremental borrowing rate at the commencement date to determine the present value of lease payments. The operating lease ROU assets also include any lease payments made and exclude lease incentives. The Company’s lease agreements do not contain any variable lease payments, material residual value guarantees or any restrictive covenants. Our lease terms may include options, at our sole discretion, to extend or terminate the lease. At the adoption date of ASC Topic 842, the Company was reasonably certain that we would exercise our option to renew our corporate office building operating lease. Lease expense is recognized on a straight-line basis over the lease term. We previously leased our corporate office building in Tempe, Arizona from a Company that is owned by the major shareholder and CEO of the Company. The building was purchased on January 27, 2020 and the lease was cancelled. Amortization of the ROU assets and operating lease liabilities for the three months ended September 30, 2021 and 2020 was $0 and $0, respectively, and for the nine months ended September 30, 2021 and 2020 was $0 and $50,000, respectively. Rental expense incurred on operating leases for the three months ended September 30, 2021 and 2020 was approximately $0 and $0, respectively, and for the nine months ended September 30, 2021 and 2020 was approximately $0 and $25,000, respectively. We leased office space in McLean, Virginia under a non-cancelable operating lease agreement that expired on July 31, 2021. The operating lease contains customary escalation clauses. Rental expense for the three months ended September 30, 2021 and 2020 was approximately $9,000 and $0, respectively, and for the nine months ended September 30, 2021 and 2020 was $56,000 and $0, respectively. We currently lease office space in Reston, Virgina under a non-cancelable operating lease agreement that expires in 2025. The operating lease contains customary escalation clauses. Rental expense for the three months ended September 30, 2021 and 2020 was approximately $9,000 and $0, respectively, and for the nine months ended September 30, 2021 and 2020 was approximately $9,000, and $0, respectively. We currently lease office space in La Jolla, California under a non-cancelable operating lease agreement that expires in 2022. The operating lease contains customary escalation clauses. Rental expense for the three months ended September 30, 2021 and 2020 was approximately $94,000 and $0, respectively, and for the nine months ended September 30, 2021 and 2020 was approximately $124,000, and $0, respectively. We currently lease other assets under multiple operating leases. The leases expire on various dates through 2023 and the interest rates range from 3.00% to 15.09%. The expense is included in cost of product expenses and totaled approximately $20,000 and $0 for the three months ended September 30, 2021 and 2020, respectively, and for the nine months ended September 30, 2021 and 2020 was $48,000 and $0, respectively. We currently lease data center colocation space in Grand Rapids, Michigan, Las Vegas, Nevada and Dallas, Texas under non-cancelable operating lease agreements that expire in 2022. Rental expense for the three months ended September 30, 2021 and 2020 was approximately $13,000 and $0, respectively, and for the nine months ended September 30, 2021 and 2020 was approximately $21,000 and $0, respectively. We have lease agreements with lease and non-lease components, and we account for the lease and non-lease components as a single lease component. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company leases equipment and support under finance lease agreements which extends through 2025. The Company also leases three vehicles under financing agreements. One vehicle lease extends through 2021 and two vehicle leases extend through 2022. The outstanding balance for finance leases was $367,000 and $84,000 as of September 30, 2021 and December 31, 2020, respectively. The Company recorded assets classified as property and equipment under finance lease obligations of $497,000 and $129,000 as of September 30, 2021 and December 31, 2020, respectively. Related accumulated depreciation totaled $165,000 and $60,000 as of September 30, 2021 and 2020, respectively. The $39,000 in support contracts were classified as a prepaid expense and are being amortized over the service period of 3 years. One support contract expired in January 2021 and the other expires in June 2024. Amortization expense is included in general and administrative expenses and totaled $1,000 and $2,000 for the three months ended September 30, 2021 and 2020, respectively, and $4,000 and $6,000 for the nine months ended September 30, 2021 and 2020, respectively. The interest rates on the finance lease obligations range from 1.37% and 6.7% and interest expense was $2,000 and $2,000 for the three months ended September 30, 2021 and 2020, respectively and $5,000 and $5,000 for the nine months ended September 30, 2021 and 2020, respectively. The maturity of operating leases and finance lease liabilities as of September 30, 2021 are as follows: Year ending December 31, Operating Leases Finance Leases 2021 remaining $ 130 $ 23 2022 461 136 2023 58 114 2024 44 77 2025 - 31 Total minimum lease payments 693 386 Less: amount representing interest (11 ) (14 ) Present value of minimum lease payments $ 682 $ 373 Lease term and discount rate September 30, 2021 Weighted-average remaining lease term (years) Operating leases 1.6 Finance leases 3.2 Weighted-average discount rate Operating leases 4.3 % Finance leases 2.2 % Three Months Ended September 30, 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 66 Operating cash flows from finance leases 4 Financing cash flows from finance leases 71 Lessor Accounting Lessor accounting remained substantially unchanged with the adoption of ASC Topic 842. Crexendo offers its customers lease financing for the lease of our cloud telecommunication equipment (IP or cloud telephone desktop devices). We account for these transactions as sales-type leases. 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. Operating lease revenue is classified as product revenue and totaled $54,000 and $0 for the three months ended September 30, 2021 and 2020, respectively, and $148,000 and $0 for the nine months ended September 30, 2021 and 2020, respectively. Revenue from sales-type leases is recognized upon installation and the interest portion is deferred and recognized as earned. Revenue from operating leases is recognized ratably over the applicable service period. Equipment finance receivables arising from the rental of our cloud telecommunications equipment through sales-type leases, were as follows (in thousands): September 30, December 31, 2021 2020 Gross financing receivables $ 1,669 $ 1,774 Less: unearned income (508 ) (582 ) Financing receivables, net 1,161 1,192 Less: current portion of finance receivables, net (324 ) (286 ) Finance receivables due after one year $ 837 $ 906 Future minimum lease payments as of September 30, 2021, consisted of the following: Year ending December 31, Lease Receivables 2021 remaining $ 157 2022 590 2023 484 2024 308 2025 and thereafter 130 Gross equipment financing receivables 1,669 Less: unearned income (508 ) Equipment financing receivables, net $ 1,161

Commitments and Contingencies

Commitments and Contingencies	9 Months Ended
	Sep. 30, 2021
Commitments and Contingencies
14. Commitments and Contingencies	14. Commitments and Contingencies Legal Proceedings In the ordinary course of business, the Company may be involved in a variety of claims, lawsuits, investigations, and other proceedings, including patent infringement claims, employment litigation, regulatory compliance matters, and contractual disputes, that can arise in the normal course of the Company’s operations. The Company recognizes a provision when management believes information available prior to the issuance of the financial statements indicates it is probable a loss has been incurred as of the date of the financial statements and the amount of loss can be reasonably estimated. The Company adjusts the amount of the provision to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. As of September 30, 2021, the Company does not have a recorded liability for estimated losses. Legal costs are expensed as incurred.

Segments Reporting

Segments Reporting	9 Months Ended
	Sep. 30, 2021
Segments Reporting
15. Segments	15. Segment Reporting Our chief operating decision maker (who is our Chief Executive Officer) reviews our financial information presented on an operating segment basis for purposes of allocating resources and evaluating our financial performance. Following the merger with NetSapiens, Inc., the Company reorganized into two operating segments, a software solutions operating segment and a cloud telecommunications services operating segment. The cloud telecommunications services segment generates revenue from selling cloud telecommunication services, products, and other internet services. The software solutions segment generates revenue from selling perpetual software licenses and software subscriptions, subscription maintenance and support, and professional services. The Company has two reportable operating segments, which consist of cloud telecommunications services and software solutions. Segment revenue, income/(loss) from operations, other income/(expense) and income/(loss) before income tax provision are as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Revenue: Cloud telecommunications services $ 5,026 $ 4,143 $ 14,300 $ 12,064 Software solutions 3,784 - 4,796 - Consolidated revenue 8,810 4,143 19,096 12,064 Income/(loss) from operations: Cloud telecommunications services (253 ) 155 (2,004 ) 867 Software solutions 306 - (9 ) - Total operating income/(loss) 53 155 (2,013 ) 867 Other income/(expense), net: Cloud telecommunications services (22 ) (21 ) (58 ) (79 ) Software solutions (19 ) - (19 ) - Total other income/(expense), net (41 ) (21 ) (77 ) (79 ) Income/(loss) before income tax provision: Cloud telecommunications services (275 ) 134 (2,062 ) 788 Software solutions 287 - (28 ) - Income/(loss) before income tax provision $ 12 $ 134 $ (2,090 ) $ 788 Depreciation and amortization was $60,000 and $57,000 for the cloud telecommunications services segment for the three months ended September 30, 2021 and 2020, respectively. Depreciation and amortization was $152,000 and $197,000 for the cloud telecommunications segment for the nine months ended September 30, 2021 and 2020, respectively. Depreciation and amortization was $6,000 and $0 for the software solutions segment for the three months ended September 30, 2021 and 2020, respectively. Depreciation and amortization was $7,000 and $0 for the software solutions segment for the nine months ended September 30, 2021 and 2020, respectively. Interest income was $0 and $1,000 for the cloud telecommunications services segment for the three months ended September 30, 2021 and 2020, respectively. Interest income was $1,000 and $3,000 for the cloud telecommunications segment for the nine months ended September 30 2021 and 2020, respectively. Interest income was $0 for the software solutions segment for the three and nine months ended September 30, 2021 and 2020. Interest expense was $24,000 and $23,000 for the cloud telecommunications services segment for the three months ended September 30, 2021 and 2020, respectively. Interest expense was $64,000 and $54,000 for the cloud telecommunications services segment for the nine months ended September 30, 2021 and 2020, respectively. Interest expense was $0 for the software solutions segment for the three and nine months ended September 30, 2021 and 2020.

Significant Accounting Polici_2

Significant Accounting Policies (Policies)	9 Months Ended
	Sep. 30, 2021
Significant Accounting Policies
Description of Business	Description of Business –
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.
Foreign currency translation	Foreign Currency Translation - Due to changes in exchange rates between reporting periods and changes in certain account balances, the foreign currency translation adjustment will change from period to period. During the three and nine months ended September 30, 2021 and 2020, we recorded foreign currency translation gains/(losses) of $1,000, and $9,000, respectively, in our statements of comprehensive income (loss).
Cash and Cash Equivalents	Cash and Cash Equivalents –
Restricted Cash	Restricted Cash – 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, 2021 2020 Cash and cash equivalents $ 7,701 $ 15,353 Restricted cash - 100 Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statement of cash flows $ 7,701 $ 15,453
Trade Receivables	Trade Receivables –
Allowance for Doubtful Accounts	Allowance for Doubtful Accounts –
Contract Assets	Contract Assets –
Contract Costs	Contract Costs –
Inventory	Inventory –
Property and Equipment	Property and Equipment – Building 39 years Computer and office equipment 2 to 5 years Computer software 3 years Internal-use software 3 years Vehicles 5 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.
Asset Acquisitions	Asset Acquisitions –
Business Acquisition	Business Acquisitions -
Goodwill	Goodwill –
Intangible Assets	Intangible Assets –
Contract Liabilities	Contract Liabilities –
Use of Estimates	Use of Estimates –
Contingencies	C ontingencies –
Service, Software Solutions and Product Revenue Recognition	Service, Software Solutions and Product Revenue Recognition –
Cost of Service Revenue	Cost of Service Revenue –
Cost of Software Solutions Revenue	Cost of Software Solutions Revenue –
Cost of Product Revenue	Cost of Product Revenue –
Product Warranty	Product Warranty –
Contingent Consideration	Contingent Consideration –
Public offerings	Public Offering On October 21, 2020, the underwriters of the Company’s public offering exercised their option to purchase additional shares of the Company’s common stock to cover sales by the underwriters of a greater number of shares than the total set forth in the filed prospectus for the public offering. The underwriters purchased an additional 420,000 shares of common stock from the Company. The gross proceeds to the Company of the issuance were $2,310,000, and the Company received net proceeds of $2,148,000 after deducting underwriting discounts and 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
Lease Obligations	Lease Obligations – 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	Notes Payable –
Income Taxes	Income Taxes – Interest and penalties associated with income taxes are classified as income tax expense in the consolidated statements of operations.
Stock-Based Compensation	Stock-Based Compensation –
Operating Segments	Operating Segments –
Significant Customers	Significant Customers –
Recently Adopted Accounting Pronouncements	Recently Adopted Accounting Pronouncements – Income Taxes In August 2018, the FASB issued ASU 2018-13, which removes, modifies and adds to the disclosure requirements on fair value measurements in Topic 820. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this updated guidance and delay adoption of the additional disclosures until their effective date. We adopted this guidance effective January 1, 2020. The adoption of this guidance did not have a material impact on our consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350):
Recently Issued Accounting Pronouncements	Recently Issued Accounting Pronouncements – In August 2020, the FASB issued ASU 2020-06, which simplifies the accounting for convertible instruments. ASU 2020-06 eliminates certain models that require separate accounting for embedded conversion features, in certain cases. Additionally, among other changes, the guidance eliminates certain of the conditions for equity classification for contracts in an entity’s own equity. ASU 2020-06 also requires entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and include the effect of share settlement for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards. ASU 2020-06 is effective for our fiscal year beginning after December 15, 2021, including interim periods within this fiscal year. This guidance can be applied using either a modified or full retrospective approach. The Company is currently evaluating the impact this ASU will have on the financial statements and related disclosures, as well as the timing of adoption.

Significant Accounting Polici_3

Significant Accounting Policies (Tables)	9 Months Ended
	Sep. 30, 2021
Significant Accounting Policies
Restricted cash	September 30, September 30, 2021 2020 Cash and cash equivalents $ 7,701 $ 15,353 Restricted cash - 100 Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statement of cash flows $ 7,701 $ 15,453
Property and equipment	Building 39 years Computer and office equipment 2 to 5 years Computer software 3 years Internal-use software 3 years Vehicles 5 years Leasehold improvements 2 to 5 years

Revenue (Tables)

Revenue (Tables)	9 Months Ended
	Sep. 30, 2021
Revenue
Disaggregation of revenue	Three Months Ended September 30, 2021 Cloud Software Total (In thousands) Telecommunications Solutions Reportable Segment Segment Segments Major products/services lines Desktop devices $ 701 $ - $ 701 Equipment financing revenue 63 - 63 Telecommunications services 3,718 - 3,718 Fees, commissions, and other, recognized over time 419 - 419 One time fees, commissions and other 125 - 125 Software licenses - 1,473 1,473 Subscription maintenance and support - 2,213 2,213 Professional services and other - 98 98 $ 5,026 $ 3,784 $ 8,810 Timing of revenue recognition Products, services, and fees recognized at a point in time $ 775 $ 1,917 $ 2,692 Products, services, and fees transferred over time 4,251 1,867 6,118 $ 5,026 $ 3,784 $ 8,810 Nine Months Ended September 30, 2021 Cloud Software Total (In thousands) Telecommunications Solutions Reportable Segment Segment Segments Major products/services lines Desktop devices $ 1,509 $ - $ 1,509 Equipment financing revenue 198 - 198 Telecommunications services 10,995 - 10,995 Fees, commissions, and other, recognized over time 1,252 - 1,252 One time fees, commissions and other 346 - 346 Software licenses - 2,210 2,210 Subscription maintenance and support - 2,451 2,451 Professional services and other - 135 135 $ 14,300 $ 4,796 $ 19,096 Timing of revenue recognition Products and fees recognized at a point in time $ 1,804 $ 2,633 $ 4,437 Services and fees transferred over time 12,496 2,163 14,659 $ 14,300 $ 4,796 $ 19,096 Nine Months Ended September 30, 2020 Cloud Software Total (In thousands) Telecommunications Solutions Reportable Segment Segment Segments Major products/services lines Desktop devices $ 1,317 $ - $ 1,317 Equipment financing revenue 156 - 156 Telecommunications services 9,321 - 9,321 Fees, commissions, and other, recognized over time 1,147 - 1,147 One time fees, commissions and other 123 - 123 $ 12,064 $ - $ 12,064 Timing of revenue recognition Products and fees recognized at a point in time $ 1,440 $ - $ 1,440 Services and fees transferred over time 10,624 - 10,624 $ 12,064 $ - $ 12,064
Contract balances	September 30, December 31, (In thousands) 2021 2020 Receivables, which are included in trade receivables, net of allowance for doubtful accounts $ 1,307 $ 538 Contract assets 209 159 Contract liabilities 2,884 1,228
Significant changes in the contract assets and liabilities	Nine Months Ended For the Year Ended (In thousands) September 30, 2021 December 31, 2020 Contract Assets Contract Liabilities Contract Assets Contract Liabilities Revenue recognized that was included in the contract liability balance at the beginning of the period $ - $ (986 ) $ - $ (976 ) Increase due to cash received, excluding amounts recognized as revenue during the period - 2,642 - 990 Transferred to receivables from contract assets recognized at the beginning of the period (47 ) - (21 ) - Increase due to additional unamortized discounts 97 - 158 -
Performance obligations	2021 2022 2023 2024 2025 2026 Total Desktop devices $ 242 - - - - - $ 242 Telecommunications service $ 3,905 11,306 7,699 4,967 2,165 439 $ 30,481 All consideration from contracts with customers is included in the amounts presented above

Earnings Per Common Share (Tabl

Earnings Per Common Share (Tables)	9 Months Ended
	Sep. 30, 2021
Earnings Per Common Share
Basic and diluted net income (loss) per common share	Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net income/(loss) (in thousands) (A) $ (125 ) $ 131 $ (1,843 ) $ 779 Weighted-average share reconciliation: Weighted-average basic shares outstanding (B) 21,596,415 15,244,804 19,757,658 15,058,192 Dilutive effect of stock-based awards - 2,004,231 - 1,735,704 Diluted weighted-average outstanding shares of common stock (C) 21,596,415 17,249,035 19,757,658 16,793,896 Earnings per common share: Basic (A/B) $ (0.01 ) $ 0.01 $ (0.09 ) $ 0.05 Diluted (A/C) $ (0.01 ) $ 0.01 $ (0.09 ) $ 0.05
Antidilutive securities excluded from earnings	Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Stock options 970,631 18,685 840,623 91,845

Acquisitions (Tables)

Acquisitions (Tables)	9 Months Ended
	Sep. 30, 2021
Acquisitions
Cost of acquisition	Total purchase price $ 49,062 Cash 1,658 Trade receivables 846 Prepaid expenses 57 Other current assets 319 Property and equipment, net 62 Right-of-use assets 551 Deferred tax assets 2,829 Other long-term assets 84 Intangible assets- existing technology 5,047 Intangible assets- customer relationships 16,473 Total identifiable assets 27,926 Accounts payable (438 ) Accrued expenses (2,412 ) Finance leases (17 ) Contract liabilities (1,475 ) Operating lease liabilities (379 ) Contract liabilities, net of current portion (629 ) Finance leases, net of current portion (29 ) Operating lease liabilities, net of current portion (219 ) Total liabilities assumed (5,598 ) Total goodwill $ 26,734
Pro forma information	For the Nine Months Ended September 30, (Unaudited) (In thousands) 2021 2020 Revenues $ 24,123 $ 20,867 Net income/(loss) (12,671 ) 487 Earnings per share $ (0.64 ) $ 0.03
Assets acquired and liabilities	Consideration (including estimated unpaid contingent consideration) Cash $ 2,163 Common stock 346 Contingent consideration 746 $ 3,255 Assets Cash $ 7 Accounts receivables 122 Prepaid expenses 4 Inventory 12 Other assets 12 Property and equipment 57 Right to use assets 134 Intangible assets acquired 2,238 Other long-term assets 44 Total assets acquired 2,630 Liabilities Accounts Payable 26 Accrued Expenses 187 Contract Liability 147 Operating Lease Liability 118 Direct Financing Liability 20 Total liabilities assumed 498 Net identifiable assets acquired 2,132 Goodwill 1,123 Total purchase price $ 3,255

Trade Receivables net (Tables)

Trade Receivables net (Tables)	9 Months Ended
	Sep. 30, 2021
Trade Receivables net
Trade receivables, net	September 30, December 31, 2021 2020 Gross trade receivables $ 1,347 $ 559 Less: allowance for doubtful accounts (40 ) (21 ) Trade receivables, net $ 1,307 $ 538 Current trade receivables, net $ 1,280 $ 538 Long-term trade receivables, net 27 - Trade receivables, net $ 1,307 $ 538

Prepaid Expenses (Tables)

Prepaid Expenses (Tables)	9 Months Ended
	Sep. 30, 2021
Prepaid Expenses
Prepaid expenses	September 30, December 31, 2021 2020 Prepaid corporate insurance $ 158 $ 53 Prepaid software services and support 281 20 Prepaid employee insurance premiums 78 71 Prepaid Nasdaq listing fee 15 - Other prepaid expenses 118 46 Total prepaid expenses $ 650 $ 190

Property and Equipment (Tables)

Property and Equipment (Tables)	9 Months Ended
	Sep. 30, 2021
Property and Equipment
Property and equipment	September 30, December 31, 2021 2020 Building $ 2,000 $ 2,000 Land 500 500 Computer and office equipment 1,925 1,436 Computer software 576 526 Internal-use software 14 14 Vehicles 95 - Leasehold improvements 33 - Less: accumulated depreciation (2,084 ) (1,742 ) Total property and equipment, net $ 3,059 $ 2,734

Intangible Assets and Goodwill

Intangible Assets and Goodwill (Tables)	9 Months Ended
	Sep. 30, 2021
Intangible Assets and Goodwill
Intangible assets	September 30, 2021 December 31, 2020 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships $ 19,882 $ (1,331 ) $ 18,551 $ 1,171 $ (919 ) $ 252 Developed technologies 5,047 (361 ) 4,686 - - - Total acquired intangible assets $ 24,929 $ (1,692 ) $ 23,237 $ 1,171 $ (919 ) $ 252
Amortization of intangible assets	Year ending December 31, 2021 remaining $ 507 2022 2,110 2023 2,553 2024 2,849 2025 and thereafter 15,218 Total $ 23,237
Goodwill carrying amount	Goodwill Balance at December 31, 2020 272 Centric Telecom business acquisition 1,123 NetSapiens business acquisition 26,734 Balance at September 30, 2021 $ 28,129

Accrued Expenses (Tables)

Accrued Expenses (Tables)	9 Months Ended
	Sep. 30, 2021
Accrued Expenses
Accrued expenses	September 30, December 31, 2021 2020 Accrued wages, benefits and payroll taxes $ 698 $ 513 Accrued accounts payable 915 505 Accrued sales and telecommunication taxes 2,616 438 Product warranty liability 34 33 Other accrued expenses 88 139 Total accrued expenses $ 4,351 $ 1,628
Product warranty liabilities	Warranty Liabilities Balance at January 1, 2020 $ 37 Accrual for warranties 33 Adjustments related to pre-existing warranties (10 ) Warranty settlements (27 ) Balance at December 31, 2020 33 Accrual for warranties 27 Warranty settlements (26 ) Balance at September 30, 2021 $ 34

Notes Payable (Tables)

Notes Payable (Tables)	9 Months Ended
	Sep. 30, 2021
Notes Payable
Notes payable	September 30, December 31, 2021 2020 Notes payable $ 1,891 $ 1,944 Less: current notes payable (73 ) (71 ) Notes payable, net of current portion $ 1,818 $ 1,873
Principal payments of notes payable	Year ending December 31, 2021 remaining $ 19 2022 74 2023 76 2024 79 2025 and thereafter 1,643 Total $ 1,891

Fair Value Measurements (Tables

Fair Value Measurements (Tables)	9 Months Ended
	Sep. 30, 2021
Fair Value Measurements
Financial instruments	September 30, 2021 December 31, 2020 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value Assets: Trade receivables, net $ 1,307 $ 1,307 $ 538 $ 538 Equipment financing receivables 1,161 1,161 1,192 1,192 Liabilities: Finance lease obligations $ 367 $ 367 $ 84 $ 84 Notes payable 1,891 1,891 1,944 1,944 Business acquisition contigent consideration 746 746 - -
Liabilities for which fair value is recognized	As of September 30, Fair value measurement at reporting date Description 2021 Level 1 Level 2 Level 3 Liabilities: Business acquisition contingent consideration $ 746 $ - $ - $ 746 Description As of December 31, Level 1 Level 2 Level 3 Liabilities: Asset acquisition contingent consideration $ - $ - $ - $ -
Progression of level 3 instruments	Contingent consideration liability Fair Value at September 30, 2021 Valuation technique Unobservable inputs Range Revenue - based payments $ 746 Discounted cash flow Discount Rate 17.38 % Probability of milestone payment 90 % Projected year of payments 2021
Fair value on recurring basis	Asset and Business Acquisition Contingent Consideration Balance at January 1, 2020 $ 175 Cash payments (54 ) Adjustment (121 ) Balance at December 31, 2020 $ - Additions 746 Cash payments - Adjustment - Balance at September 30, 2021 $ 746

Leases (Tables)

Leases (Tables)	9 Months Ended
	Sep. 30, 2021
Leases
Maturity of finance lease liabilities	Year ending December 31, Operating Leases Finance Leases 2021 remaining $ 130 $ 23 2022 461 136 2023 58 114 2024 44 77 2025 - 31 Total minimum lease payments 693 386 Less: amount representing interest (11 ) (14 ) Present value of minimum lease payments $ 682 $ 373
Lease term and discount	Lease term and discount rate September 30, 2021 Weighted-average remaining lease term (years) Operating leases 1.6 Finance leases 3.2 Weighted-average discount rate Operating leases 4.3 % Finance leases 2.2 %
Cash paid for amounts included in the measurement of lease liabilities	Three Months Ended September 30, 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 66 Operating cash flows from finance leases 4 Financing cash flows from finance leases 71
Equipment finance receivables	September 30, December 31, 2021 2020 Gross financing receivables $ 1,669 $ 1,774 Less: unearned income (508 ) (582 ) Financing receivables, net 1,161 1,192 Less: current portion of finance receivables, net (324 ) (286 ) Finance receivables due after one year $ 837 $ 906
Future aggregate minimum lease obligations under operating leases	Year ending December 31, Lease Receivables 2021 remaining $ 157 2022 590 2023 484 2024 308 2025 and thereafter 130 Gross equipment financing receivables 1,669 Less: unearned income (508 ) Equipment financing receivables, net $ 1,161

Segments Reporting (Tables)

Segments Reporting (Tables)	9 Months Ended
	Sep. 30, 2021
Segments Reporting
Information on reportable segments and reconciliation to condensed consolidated net (loss) income	Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Revenue: Cloud telecommunications services $ 5,026 $ 4,143 $ 14,300 $ 12,064 Software solutions 3,784 - 4,796 - Consolidated revenue 8,810 4,143 19,096 12,064 Income/(loss) from operations: Cloud telecommunications services (253 ) 155 (2,004 ) 867 Software solutions 306 - (9 ) - Total operating income/(loss) 53 155 (2,013 ) 867 Other income/(expense), net: Cloud telecommunications services (22 ) (21 ) (58 ) (79 ) Software solutions (19 ) - (19 ) - Total other income/(expense), net (41 ) (21 ) (77 ) (79 ) Income/(loss) before income tax provision: Cloud telecommunications services (275 ) 134 (2,062 ) 788 Software solutions 287 - (28 ) - Income/(loss) before income tax provision $ 12 $ 134 $ (2,090 ) $ 788

Significant Accounting Polici_4

Significant Accounting Policies (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020	Sep. 30, 2020	Dec. 31, 2019
Significant Accounting Policies
Cash and cash equivalents	$ 7,701		$ 15,353
Restricted cash	0		100
Total cash, cash equivalents, and restricted cash shown in the condensed consolidated statement of cash flows	$ 7,701	$ 17,679	$ 15,453	$ 4,280

Significant Accounting Polici_5

Significant Accounting Policies (Details 1)	9 Months Ended
	Sep. 30, 2021
Computer Software
Depreciable lives	3
Vehicles
Depreciable lives	5
Building
Depreciable lives	39
Computer and Office Equipment
Depreciable lives	2 to 5
Internal-use Software
Depreciable lives	3
Leasehold Improvements
Depreciable lives	to 5

Significant Accounting Polici_6

Significant Accounting Policies (Details Narrative) - USD ($)	1 Months Ended		3 Months Ended	9 Months Ended		12 Months Ended
	Oct. 21, 2020	Sep. 28, 2020	Mar. 31, 2021	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Significant Accounting Policies
Underwriting discounts comminsssions	$ 2,148,000	$ 674,000
Offering expenses		$ 328,000
Shares of common stock, sold		1,750,000
Foreign currency translation gains/(losses)				$ 1,000	$ 9,000
Cash and Cash Equivalents				6,742,000		$ 17,175,000
Restricted Cash				0		100,000
Restricted Cash wavied			$ 100,000
Common stock price per share		$ 5.50
Offering price		$ 9,625,000
Restricted cash excess of federally insured limits				0		100,000
Net proceeds		$ 8,623,000
Additional shares of common stock	420,000
Additional shares of common stock, amount	$ 2,310,000
Capitalized contract costs				1,215,000		123,000
Capitalized contract costs amortization				$ 444,000		$ 368,000
Trade account payable rate				10.00%		11.00%
Change in the valuation allowance for net deferred income tax assets				$ 7,487,000

Revenue (Details)

Revenue (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Major product services lines
Desktop services	$ 701,000	$ 489,000	$ 1,509,000	$ 1,317,000
Equipment financing revenue	63,000	59,000	198,000	156,000
Telecommunications services	3,718,000	3,182,000	10,995,000	9,321,000
Revenue	8,810,000	4,143,000	19,096,000	12,064,000
Fees, commissions and other recognized over time	419,000	373,000	1,252,000	123,000
One time fees , commissions and other	125,000	40,000	346,000
Software Licenses	0		0
Subscription maintenance and support	0		0
Professional servicing and other	0		0
Service lines	5,026,000		14,300,000	12,064,000
Time of revenue recognition
Products services and fees recognized at a point in time	775,000	529,000	1,804,000	1,440,000
Products services and fees transferred over time	4,251,000	3,614,000	12,496,000	10,624,000
Software Solution Segment
Major product services lines
Desktop services	0	0	0	0
Equipment financing revenue	0	0	0	0
Telecommunications services	0	0	0	0
Revenue	3,784,000	0	4,796,000	0
Fees, commissions and other recognized over time	0	0	0	0
Software Licenses	1,473,000		2,210,000	0
Subscription maintenance and support	2,213,000		2,451,000	0
Professional servicing and other	98,000		135,000	0
Service lines	3,784,000		4,796,000	0
Time of revenue recognition
Products services and fees recognized at a point in time	1,867,000	0	2,163,000	0
Products services and fees transferred over time	1,917,000	0	2,633,000	0
Cloud Telecommunications Segment
Major product services lines
Desktop services	701,000	489,000	1,509,000	1,317,000
Equipment financing revenue	63,000	59,000	198,000	156,000
Telecommunications services	3,718,000	3,182,000	10,995,000	9,321,000
Revenue	4,767,000	4,143,000	19,096,000	12,064,000
Fees, commissions and other recognized over time	419,000	373,000	1,252,000	1,147,000
One time fees , commissions and other	125,000	40,000	346,000	123,000
Software Licenses	1,473,000		2,210,000
Subscription maintenance and support	2,213,000		2,451,000
Professional servicing and other	98,000		135,000
Service lines	8,810,000	4,143,000	19,096,000	12,064,000
Time of revenue recognition
Products services and fees recognized at a point in time	536,000	529,000	447,000	1,440,000
Products services and fees transferred over time	$ 4,231,000	$ 3,614,000	$ 14,659,000	$ 10,624,000

Revenue (Details 1)

Revenue (Details 1) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Revenue
Receivables, which are included in trade receivables, net of allowance for doubtful accounts	$ 1,307	$ 538
Contract assets	209	159
Contract liabilities	$ 2,884	$ 1,228

Revenue (Details 2)

Revenue (Details 2) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Contract Assets
Revenue recognized that was included in the contract liability balance at the beginning of the period	$ 0	$ 0
Increase due to cash received, excluding amounts recognized as revenue during the period	0	0
Transferred to receivables from contract assets recognized at the beginning of the period	(47)	(21)
Increase due to additional unamortized discounts	97	158
Contract Liabilities
Revenue recognized that was included in the contract liability balance at the beginning of the period	(986)	(976)
Increase due to cash received, excluding amounts recognized as revenue during the period	2,642	990
Transferred to receivables from contract assets recognized at the beginning of the period	0	0
Increase due to additional unamortized discounts	$ 0	$ 0

Revenue (Details 3)

Revenue (Details 3) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2026	Dec. 31, 2025	Dec. 31, 2024	Dec. 31, 2023	Dec. 31, 2022
Deferred Revenue, Revenue Recognized	$ 30,481,000
Telecommunications Services
Deferred Revenue, Revenue Recognized	30,841,000	$ 439,000	$ 2,165,000	$ 4,967,000	$ 7,699,000	$ 11,306,000
Desktop Devices
Deferred Revenue, Revenue Recognized	$ 242,000	$ 0	$ 0	$ 0	$ 0	$ 0

Earnings Per Common Share (Deta

Earnings Per Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended						9 Months Ended
	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2021	Sep. 30, 2020
Earnings Per Common Share
Net income	$ (125)	$ (1,003)	$ (715)	$ 131	$ 508	$ 140	$ (1,843)	$ 779
Weighted-average share reconciliation:
Basic	21,596,415			15,244,804			19,757,658	15,058,192
Dilutive effect of stock-based awards				2,004,231			0	1,735,704
Diluted	21,596,415			17,249,035			19,757,658	16,793,896
Earnings per common share:
Basic	$ (0.01)			$ 0.01			$ (0.09)	$ 0.05
Diluted	$ (0.01)			$ 0.01			$ (0.09)	$ 0.05

Earnings Per Common Share (De_2

Earnings Per Common Share (Details 1) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Earnings Per Common Share
Shares excluded from earnings	970,631	18,658	840,623	91,845

Acquisitions (Details)

Acquisitions (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Acquisitions
Total purchase price	$ 49,062
Cash	1,658
Trade receivables	846	$ 538
Prepaid expense	57
Other current assets	319
Property and equipment net	62
Right of use assets	551
Deferred tax assets	2,829
Other long term assets	84
Intangible assets - existing technology	5,047
Intangible assets customer relatonships	16,473
Total identifiable assets	27,926
Account payable	(438)
Accrued expenses	(2,412)
Finance leases current portion	(17)
Contract liabilities	(1,475)
Operating lease liabilities current portion	(379)
Contract liabilities net of current portion	(629)
Finance leases net of current portion	(29)
Operating lease liabilities net of current portion	(219)
Total liabilities assumed	(5,598)
Total goodwill	$ 26,734

Acquisitions (Details 1)

Acquisitions (Details 1) - USD ($) $ / shares in Units, $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Acquisitions
Revenues	$ 24,123	$ 20,867
Net income (loss) operations	$ (12,671)	$ (487)
Earning per share attributiable	$ (0.64)	$ (0.03)

Acquisitions (Details 2)

Acquisitions (Details 2) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020
Cash	$ 7,701	$ 15,353
Operating lease liability	682
Goodwill	26,734
Total purchase price	49,062
Centric Telecom, Inc.
Cash consideration	2,163
Common stock	346
Contingent consideration	746
Total consideration	3,255
Cash	7
Accounts receivables	122
Prepaid expenses	4
Inventory	12
Other assets	12
Property and equipment	57
Right to use assets	134
Intangible assets acquired	2,238
Other long-term assets	44
Total assets acquired	2,630
Accounts payable	26
Accrued expenses	187
Contract liability	147
Operating lease liability	118
Direct financing liability	20
Total liabilities assumed	498
Net identifiable assets acquired	2,132
Goodwill	1,123
Total purchase price	$ 3,255

Acquisitions (Details Narrative

Acquisitions (Details Narrative) - USD ($)	Jan. 14, 2021	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Business Acquisition description	the Company acquired 100% of the issued and outstanding shares of Centric Telecom, Inc., a provider of telecommunications products, services, and solutions in Northern Virginia. The aggregate purchase price of $3,255,000 consisted of $2,163,000 of cash paid at closing, 46,662 shares of our common stock with an estimated fair value of $346,000 issued at closing, and $746,000 of estimated contingent consideration to be paid
Aggregate purchase price		$ 49,100,000		$ 49,100,000
Comon stock shares for services				4,482,328
Consideration amount				$ 16,900,000
Aggregate vaue of comon stock				22,100,000
Deductible tax purposes				$ 1,123,000
weighted average cost of rate		4.30%		4.30%
General and administrative expenses		$ 0	$ 2,000,000	$ 50,000,000	$ 6,000,000
Allocated goodwill				26,700,000
Stock options				$ 1,150,000	$ 377,000
Merger [Member] | June 1, 2021 [Member]
Comon stock shares for services		3,097,309		3,097,309
weighted average cost of rate		22.50%		22.50%
General and administrative expenses		$ 4,000,000		$ 1,015,000
Intangible assets, estimated uselful life				A preliminary estimate of $5.0 million has been allocated to existing technology, an intangible asset with an estimated useful life of approximately 6 years. A preliminary estimate of $16.5 million has been allocated to customer relationships with an estimated life of approximately 9 years
Cash amount		10,000,000		$ 10,000,000
Stock options		$ 39,000,000		$ 39,000,000
Common stock price per share		$ 5.47		$ 5.47
Aggregate exercise price				$ 5,600,000

Trade Receivables net (Details)

Trade Receivables net (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Trade Receivables net
Gross trade receivables	$ 1,347	$ 559
Less allowance for doubtful accounts	(40)	(21)
Trade receivables, net	1,307	538
Current trade receivables, net	1,280	538
Long-term trade receivables, net	27	0
Trade ReceivablesTrade Receivables	$ 846	$ 538

Prepaid Expenses (Details)

Prepaid Expenses (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Prepaid Expenses
Prepaid corporate insurance	$ 158	$ 53
Prepaid software services and support	281	20
Prepaid employee insurance premiums	78	71
Prepaid Nassdaq listing fee	15	0
Other prepaid expenses	118	46
Total prepaid assets	$ 650	$ 190

Property and Equipment (Details

Property and Equipment (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Less: accumulated depreciation	$ (2,084)	$ (1,742)
Total property and equipment, net	3,059	2,734
Building
Property and equipment, gross	2,000	2,000
Lands
Property and equipment, gross	500	500
Computer and Office Equipment
Property and equipment, gross	1,925	1,436
Computer Software
Property and equipment, gross	576	526
Vehicles
Property and equipment, gross	95	0
Leasehold Improvements
Property and equipment, gross	33	0
Internal-use Software
Property and equipment, gross	$ 14	$ 14

Property and Equipment (Detai_2

Property and Equipment (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Property and Equipment
Depreciation and amortization expense	$ 63,000	$ 34,000	$ 158,000	$ 128,000

Intangible Assets and Goodwil_2

Intangible Assets and Goodwill (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Carrying amount of intangible, gross	$ 24,929	$ 1,171
Less: accumulated amortization	(1,692)	(919)
Carrying amount of intangible, net	23,237	252
Devloped Technologies
Carrying amount of intangible, gross	4,686	0
Less: accumulated amortization	(361)	0
Carrying amount of intangible, net	5,047	0
Customer Relationships
Carrying amount of intangible, gross	19,882	1,171
Less: accumulated amortization	(1,331)	(919)
Carrying amount of intangible, net	$ 18,551	$ 252

Intangible Assets and Goodwil_3

Intangible Assets and Goodwill (Details 1) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Intangible Assets and Goodwill
2021 remaining	$ 507
2022	2,110
2023	2,553
2024	2,849
2025 and thereafter	15,218
Carrying amount of intangible, net	$ 23,237	$ 252

Intangible Assets and Goodwil_4

Intangible Assets and Goodwill (Details 2)	9 Months Ended
	Sep. 30, 2021USD ($)
Intangible Assets and Goodwill
Goodwill, Beginning Balance	$ 272,000
Centric telecom business acquisition	1,123,000
NetSapiens business acquisition	26,734,000
Goodwill, Ending Balance	$ 28,129

Intangible Assets and Goodwil_5

Intangible Assets and Goodwill (Details Narrative) - USD ($)	3 Months Ended				9 Months Ended		12 Months Ended
	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020	Dec. 31, 2020
Intangible Assets and Goodwill
Software solution revenue	$ 270,000			$ 0	$ 361,000	$ 0
Devloped technologies					5 years 8 months 12 days
Weighted average remaining useful life for customer relationships					8 years 6 months
Amortization expense	$ 236,000			$ 16,000	$ 412,000	$ 46,000
Acquired of intangible assets		$ 21,520,000	$ 2,238,000				$ 121,000

Accrued Expenses (Details)

Accrued Expenses (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Accrued Expenses
Accrued wages and benefits	$ 698	$ 513
Accrued accounts payable	915	505
Accrued sales and telecommunications taxes	2,616	438
Product warranty liability	34	33
Other accrued expenses	88	139
Total accrued expenses	$ 4,351	$ 1,628

Accrued Expenses (Details 1)

Accrued Expenses (Details 1) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Accrued Expenses
Beginning balance	$ 33	$ 37
Accrual for warranties	27	33
Adjustments related to pre-existing warranties		(10)
Warranty settlements	(26)	(27)
Ending balance	$ 34	$ 33

Accrued Expenses (Details Narra

Accrued Expenses (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Accrued Expenses
Product warranty expense	$ 15,000	$ 11,000	$ 27,000	$ 29,000

Notes Payable (Details)

Notes Payable (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Notes Payable
Notes payable	$ 1,891	$ 1,944
Less: current notes payable	(73)	(71)
Notes payable, net of current portion	$ 1,818	$ 1,873

Notes Payable (Details 1)

Notes Payable (Details 1) $ in Thousands	Sep. 30, 2021USD ($)
Notes Payable
2021 remaining	$ 19
2022	74
2023	76
2024	79
2025 and thereafter	1,643
Total	$ 1,891

Notes Payable (Details Narrativ

Notes Payable (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Notes Payable
Agreement term			7 years
Purchase of building	$ 2,000,000		$ 2,000,000
Interest rate	1.37%	6.70%	3.00%	15.09%
Monthly payment			$ 11,841

Fair Value Measurements (Detail

Fair Value Measurements (Details) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Liabilities:
Notes payable	$ 1,891	$ 1,944
Business acquisition contingent consideration	746	0
Carrying Value
Liabilities:
Trade receivables, net	1,307	538
Equipment financing receivables	1,161	1,192
Finance lease obligations	367	84
Notes payable	1,891	1,944
Business acquisition contingent consideration	746	0
Estimated Fair Value
Liabilities:
Trade receivables, net	1,307	538
Equipment financing receivables	1,161	1,192
Finance lease obligations	367	84
Notes payable	1,891	1,944
Business acquisition contingent consideration	$ 746	$ 0

Fair Value Measurements (Deta_2

Fair Value Measurements (Details 1) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Business/asset acquisition contingent consideration	$ 746	$ 0
Level 1
Business/asset acquisition contingent consideration	0	0
Level 2
Business/asset acquisition contingent consideration	0	0
Level 3
Business/asset acquisition contingent consideration	$ 746	$ 0

Fair Value Measurements (Deta_3

Fair Value Measurements (Details 2) - Level 3 $ in Thousands	9 Months Ended
	Sep. 30, 2021USD ($)
Revenue - based payments	$ 746
Valuation technique	Discounted cash flow
Unobservable inputs	Discount Rate
Range	17.38%
Probability of milestone payment	90.00%
Projected year of payments	2021

Fair Value Measurements (Deta_4

Fair Value Measurements (Details 3) - USD ($) $ in Thousands	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Fair Value Measurements
Beginning balance	$ 0	$ 175
Additions	746
Cash payments	0	(54)
Adjustment	0	(121)
Ending balance	$ 746	$ 0

Fair Value Measurements (Deta_5

Fair Value Measurements (Details Narrative) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2021	Dec. 31, 2020
Fair Value Measurements
Continguent consideration	$ 746,000	$ 121,000

Income Taxes (Details Narrative

Income Taxes (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Income Taxes
Effective tax rate	1167.40%	2.20%	11.80%	1.10%
Deferred taxes			$ 6,054,000
Income tax benefit/(provision)	$ (137,000)	$ 3,000	$ 247,000	$ 9,000

Leases (Details)

Leases (Details)	Sep. 30, 2021USD ($)
Operating Leases
2021 remaining	$ 130,000
2022	461,000
2023	58,000
2024	44
2025	0
Total minimum lease payment	693,000
Less: amount representing interest	(11,000)
Present value of minimum lease payments	682,000
Finance Leases
2021 remaining	23,000
2022	136,000
2023	114,000
2024	77,000
2025	31,000
Total minimum lease payment	386,000
Less: amount representing interest	(14,000)
Present value of minimum lease payments	$ 373,000

Leases (Details 1)

Leases (Details 1)	9 Months Ended
	Sep. 30, 2021
Leases
Weighted-average remaining lease term - operating leases	1 year 7 months 6 days
Weighted-average remaining lease term - finance leases	3 years 2 months 12 days
Weighted-average discount rate - operating leases	4.30%
Weighted-average discount rate- finance leases	2.20%

Leases (Details 2)

Leases (Details 2) $ in Thousands	3 Months Ended
	Sep. 30, 2021USD ($)
Leases
Operating cash flows from operating leases	$ 66
Operating cash flows from finance leases	4
Financing cash flows from finance leases	$ 71

Leases (Details 3)

Leases (Details 3) - USD ($) $ in Thousands	Sep. 30, 2021	Dec. 31, 2020
Leases
Gross financing receivables	$ 1,669	$ 1,774
Less unearned income	(508)	(582)
Financing receivables, net	1,161	1,192
Less: current portion of finance receivables, net	(324)	286
Finance receivables due after one year	$ 837	$ 906

Leases (Details 4)

Leases (Details 4) $ in Thousands	Sep. 30, 2021USD ($)
Leases
2021 remaining	$ 157
2022	590
2023	484
2024	308
2025 and thereafter	130
Gross equipment financing receivables	1,669
Less: unearned income	508
Equipment financing receivables, net	$ 1,161

Leases (Details Narrative)

Leases (Details Narrative) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Amortization of the ROU assets and operating lease liabilities	$ 0	$ 0	$ 0	$ 50,000
Rental expense incurred on operating leases	0	0	0	25,000
Rent expense	13,000	0	21,000	0
Product revenue services	54,000	0	148,000	0
General and administrative expenses	$ 0	$ 2,000	$ 50,000	$ 6,000
Interest rate	1.37%	6.70%	3.00%	15.09%
Product expense	$ 20,000	$ 0	$ 48,000	$ 0
Interest expenses	24	23	$ 64	54
Lease description			The outstanding balance for finance leases was $367,000 and $84,000 as of September 30, 2021 and December 31, 2020, respectively. The Company recorded assets classified as property and equipment under finance lease obligations of $497,000 and $129,000 as of September 30, 2021 and December 31, 2020, respectively. Related accumulated depreciation totaled $165,000 and $60,000 as of September 30, 2021 and 2020, respectively. The $39,000 in support contracts were classified as a prepaid expense and are being amortized over the service period of 3 years
Non-cancelable operating lease agreement [Member]
Rental expense incurred on operating leases	9,000	0	$ 9,000	0
Virgina [Member]
Rental expense incurred on operating leases	9,000	0	56,000	0
California [Member]
Rental expense incurred on operating leases	$ 94,000	$ 0	$ 124,000	$ 0

Segments Reporting (Details)

Segments Reporting (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Income/(loss) before income tax provision
Income/(loss) before income tax provision tax	$ 12,000	$ 134,000	$ (2,090,000)	$ 788,000
Cloud telecommunications services	(275,000)	134,000	(2,062,000)	788,000
Software solutions	287,000	0	(28,000)	0
Total other income expense net	(41,000)	(21,000)	(77,000)	(79,000)
Cloud Telecommunications Segment
Income/(loss) before income tax provision
Cloud telecommunications services	5,026,000	4,143,000	14,300,000	12,064,000
Software solutions	3,784,000	0	4,796,000	0
Consolidated revenue	8,810,000	4,143,000	19,096,000	12,064,000
Cloud Telecommunications Segment 1
Income/(loss) before income tax provision
Cloud telecommunications services	(253,000)	155,000	(2,004,000)	867,000
Software solutions	53,000	155,000	(2,013,000)	867,000
Total operating income loss	306,000	0	(9,000)	0
Cloud Telecommunications Segment 2
Income/(loss) before income tax provision
Cloud telecommunications services	(22,000)	(21,000)	(58,000)	(79,000)
Software solutions	(19,000)	0	(19,000)	0
Total other income expense net	$ (41,000)	$ (21,000)	$ (77,000)	$ (79,000)

Segments Reporting (Details Nar

Segments Reporting (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2021	Sep. 30, 2020	Sep. 30, 2021	Sep. 30, 2020
Depreciation and amortization	$ 63,000	$ 34,000	$ 158,000	$ 128,000
Interest expense	24,000	23,000	64,000	54,000
Cloud Telecommunications
Depreciation and amortization	60,000	57,000	152,000	197,000
Interest expense	24,000	23,000	64,000	54,000
Interest income	0	1,000,000	1,000	3,000
Software Solutions [Member]
Depreciation and amortization	6,000	0	7,000,000	0
Interest expense	0	0	0	0
Interest income	$ 0	$ 0	$ 0	$ 0