cxdo_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from ________ to ________.

Commission file number 001-32277

Crexendo, Inc.

(Exact name of registrant as specified in its charter)

Nevada		87-0591719
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

1615 South 52nd Street, Tempe, AZ		85281
(Address of Principal Executive Offices)		(Zip Code)

(602) 714-8500

(Registrant’s telephone number, including area code)

_____________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (check one).

Large accelerated filer	☐		Accelerated filer	☐
Non-accelerated Filer	☐	(Do not check if a smaller reporting company)	Smaller reporting company	☒
			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒.

The number of shares outstanding of the registrant’s common stock as of April 30, 2022 was 22,421,707.

INDEX

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements.	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	41

Item 4.	Controls and Procedures	42


PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	43

Item 1A.	Risk Factors	43

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43

Item 6.	Exhibits	43

Signatures		44

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Crexendo, Inc. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited, in thousands, except par value and share data)

	March 31, 2022			December 31, 2021

Assets
Current assets:
Cash and cash equivalents	$	5,690		$	7,468
Trade receivables, net of allowance for doubtful accounts of $50 as of March 31, 2022 and $72 as of December 31, 2021		2,702			2,177
Contract assets		240			261
Inventories		233			231
Equipment financing receivables		446			332
Contract costs		861			648
Prepaid expenses		599			358
Income tax receivable		-			11
Other current assets		45			74
Total current assets		10,816			11,560

Long-term equipment financing receivables, net		918			942
Property and equipment, net		2,953			2,989
Deferred income tax assets, net		986			986
Operating lease right-of-use assets		586			532
Intangible assets, net		21,612			22,161
Goodwill		36,972			36,972
Contract costs, net of current portion		727			697
Income tax receivable, net of current portion		177			-
Other long-term assets		328			313
Total Assets	$	76,075		$	77,152

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	449		$	476
Accrued expenses		4,240			4,904
Finance leases		109			110
Notes payable		1,854			1,873
Operating lease liabilities		441			447
Income tax payable		-			24
Contract liabilities		2,549			2,738
Total current liabilities		9,642			10,572

Contract liabilities, net of current portion		236			290
Finance leases, net of current portion		166			193
Operating lease liabilities, net of current portion		224			164
Total liabilities		10,268			11,219

Stockholders' equity:
Preferred stock, par value $0.001 per share - authorized 5,000,000 shares; none issued		—			—
Common stock, par value $0.001 per share - authorized 50,000,000 shares, 22,395,477 shares issued and outstanding as of March 31, 2022 and 22,054,239 shares issued and outstanding as of December 31, 2021		22			22
Additional paid-in capital		119,535			118,432
Accumulated deficit		(53,753	)		(52,533	)
Accumulated other comprehensive income		3			12
Total stockholders' equity		65,807			65,933

Total Liabilities and Stockholders' Equity	$	76,075		$	77,152

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

CREXENDO, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited, in thousands, except per share and share data)

	Three Months Ended March 31,
	2022			2021
Service revenue	$	4,398		$	4,139
Software solutions revenue		3,268			-
Product revenue		492			368
Total revenue		8,158			4,507

Operating expenses:
Cost of service revenue		1,436			1,259
Cost of software solutions revenue		1,661			-
Cost of product revenue		317			225
Selling and marketing		2,584			1,279
General and administrative		3,249			2,216
Research and development		304			350
Total operating expenses		9,551			5,329

Loss from operations		(1,393	)		(822	)

Other income/(expense):
Interest expense		(19	)		(19	)
Other income/(expense), net		(9	)		2
Total other expense, net		(28	)		(17	)

Loss before income tax		(1,421	)		(839	)

Income tax benefit		201			124

Net loss	$	(1,220	)	$	(715	)

Earnings per common share:
Basic	$	(0.05	)	$	(0.04	)
Diluted	$	(0.05	)	$	(0.04	)

Weighted-average common shares outstanding:
Basic		22,236,362			18,189,783
Diluted		22,236,362			18,189,783

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

CREXENDO, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income

(Unaudited, in thousands)

	Three Months Ended March 31,
	2022			2021
Net loss	$	(1,220	)	$	(715	)
Other comprehensive income/(loss), net of tax
Foreign currency translation loss		(9	)		-
Total other comprehensive loss		(9	)		-
Comprehensive loss	$	(1,229	)	$	(715	)

The accompanying notes are an integral part of the condensed consolidated financial statements.

Table of Contents

CREXENDO, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

Three Months Ended March 31, 2022 and 2021

(Unaudited, in thousands, except share data)

								Accumulated
					Additional			Other						Total
	Common Stock				Paid-in			Comprehensive			Accumulated			Stockholders'
	Shares		Amount		Capital			Income			Deficit			Equity
Balance, January 1, 2022		22,054,239	$	22	$	118,432		$	12		$	(52,533	)	$	65,933
Share-based compensation		-		-		1,053			-			-			1,053
Vesting of restricted stock units		103,657		-		-			-			-			-
Foreign currency translation adjustment, net of tax		-		-		-			(9	)		-			(9	)
Issuance of common stock for exercise of stock options		237,581		-		278			-			-			278
Taxes paid on the net settlement of stock options and RSUs		-		-		(117	)		-			-			(117	)
Dividends declared		-		-		(111	)		-			-			(111	)
Net loss		-		-		-			-			(1,220	)		(1,220	)
Balance, March 31, 2022		22,395,477	$	22	$	119,535		$	3		$	(53,753	)	$	65,807

SEC Form 10-Q filed by Crexendo Inc.