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, 2024

☐ 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, 2024 was 26,628,022.

INDEX

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements.	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4.	Controls and Procedures	39

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 6.	Exhibits	41
Signatures		42

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, 2024			December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	11,041		$	10,347
Trade receivables, net of allowance of $125 and $116, respectively		4,216			3,476
Inventories		381			382
Equipment financing receivables, net of allowance of $58 and $56, respectively		884			856
Contract costs		1,601			1,345
Prepaid expenses		899			508
Other current assets		23			35
Total current assets		19,045			16,949

Contract assets, net of allowance of $82 and $85, respectively		320			342
Long-term equipment financing receivables, net of allowance of $122 and $115, respectively		1,869			1,768
Property and equipment, net		590			670
Operating lease right-of-use assets		860			1,009
Intangible assets, net		22,796			23,556
Goodwill		9,454			9,454
Contract costs, net of current portion		2,396			2,273
Other long-term assets		137			139
Total Assets	$	57,467		$	56,160

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	619		$	769
Accrued expenses		5,002			5,951
Finance leases		76			75
Notes payable		462			457
Operating lease liabilities		476			566
Income tax payable		80			53
Contract liabilities		2,898			2,390
Total current liabilities		9,613			10,261

Contract liabilities, net of current portion		198			198
Finance leases, net of current portion		4			23
Notes payable, net of current portion		475			592
Operating lease liabilities, net of current portion		412			473
Total liabilities		10,702			11,547

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, 26,628,022
shares issued and outstanding as of March 31, 2024 and 26,130,218 shares issued
and outstanding as of December 31, 2023		27			26
Additional paid-in capital		134,604			132,888
Accumulated deficit		(88,033	)		(88,467	)
Accumulated other comprehensive income		167			166
Total stockholders' equity		46,765			44,613

Total Liabilities and Stockholders' Equity	$	57,467		$	56,160

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,
	2024			2023
Service revenue	$	7,845		$	7,158
Software solutions revenue		5,146			4,108
Product revenue		1,295			1,225
Total revenue		14,286			12,491

Operating expenses:
Cost of service revenue		3,109			3,044
Cost of software solutions revenue		1,392			1,185
Cost of product revenue		730			839
Selling and marketing		4,027			3,809
General and administrative		3,296			3,997
Research and development		1,249			1,191
Total operating expenses		13,803			14,065

Income/(loss) from operations		483			(1,574	)

Other income/(expense):
Interest expense		(13	)		(42	)
Other income/(expense), net		(9	)		58
Total other income/(expense), net		(22	)		16

Income/(loss) before income tax		461			(1,558	)

Income tax (provision)/benefit		(27	)		(24	)

Net income/(loss)	$	434		$	(1,582	)

Earnings per common share:
Basic	$	0.02		$	(0.06	)
Diluted	$	0.01		$	(0.06	)

Weighted-average common shares outstanding:
Basic		26,314,903			25,734,049
Diluted		30,142,100			25,734,049

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/(Loss)

(Unaudited, in thousands)

	Three Months Ended March 31,
	2024		2023
Net income/(loss)	$	434	$	(1,582	)
Other comprehensive income/(loss), net of tax
Foreign currency translation gain/(loss)		1		(21	)
Total other comprehensive income/(loss)		1		(21	)
Comprehensive income/(loss)	$	435	$	(1,603	)

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, 2024 and 2023

(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, 2024		26,130,218	$	26	$	132,888		$	166	$	(88,467	)	$	44,613
Share-based compensation		-		-		728			-		-			728
Foreign currency translation adjustment, net of tax		-		-		-			1		-			1
Issuance of common stock for exercise of stock options		497,804		1		1,048			-		-			1,049
Taxes paid on the net settlement of stock options and RSUs		-		-		(60	)		-		-			(60	)
Net income/(loss)		-		-		-			-		434			434
Balance, March 31, 2024		26,628,022	$	27	$	134,604		$	167	$	(88,033	)	$	46,765

								Accumulated
					Additional			Other						Total
	Common Stock				Paid-in			Comprehensive			Accumulated			Stockholders'
	Shares		Amount		Capital			Income			Deficit			Equity
Balance, January 1, 2023		25,670,773	$	26	$	129,192		$	187		$	(87,946	)	$	41,459
Cumulative effect of accounting change		-		-		-			-			(159	)		(159	)
Share-based compensation		-		-		1,414			-			-			1,414
Vesting of restricted stock units		266,278		-		-			-			-			-
Foreign currency translation adjustment, net of tax		-		-		-			(21	)		-			(21	)
Issuance of common stock for exercise of stock options		35,553		-		40			-			-			40
Taxes paid on the net settlement of stock options and RSUs		-		-		(257	)		-			-			(257	)
Net income/(loss)		-		-		-			-			(1,582	)		(1,582	)
Balance, March 31, 2023		25,972,604	$	26	$	130,389

SEC Form 10-Q filed by Crexendo Inc.