Company: CXDO
Filing Date: 2025-03-04
Form Type: 10-K
Source: 0001654954-25-002287
Chunk: 1309

Company: Crexendo, Inc.
Filing Date: 2025-03-04
Form: 10-K
Item: Item 8
Chunk 1309
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, which is considered significant objectively verifiable negative 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. 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. 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 2032 and therefore risk is minimal. After reviewing the weight of the positive and negative evidence, management determined that the positive evidence was not sufficient enough to overcome the negative evidence of cumulative pretax losses for the three-year lookback to conclude that it is more likely than not that deferred tax assets of $5,417 are realizable.  Therefore, a valuation allowance of $5,417 was recorded against our gross deferred tax asset balance as of December 31, 2024. We also have state NOL and research and development credit carryforwards of approximately $30,266 and $13, which expire on specified dates as set forth in the rules of the various states to which the carryforwards relate. The company has recorded a valuation allowance of $13 and $19 against the research and development credit carryforwards as of December 31, 2024 and 2023, respectively.

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Accounting guidance clarifies the accounting for uncertain tax positions and requires companies to recognize the impact of a tax position in their financial statements, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. Although we believe our estimates are reasonable, there can be no assurance that the final tax outcome of these matters will not be different from that which we have reflected in our historical income tax provisions and accruals. Such a difference could have a material impact on our income tax provision and operating results in the period in which it makes such determination. The aggregate changes in the balance of unrecognized tax benefits during the years ended December 31, 2024 and 2023 were as follows (in thousands): Balance as of January 1,