# EDGAR Filing Document

**Accession Number:** 0001075736
**File Stem:** 0001654954-23-002840
**Filing Date:** 2023-3
**Character Count:** 34277
**Document Hash:** 477fbf5b22324638852c7706ef643c1c
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001654954-23-002840.hdr.sgml**: 20230314

**ACCESSION NUMBER**: 0001654954-23-002840

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 16

**CONFORMED PERIOD OF REPORT**: 20230314

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230314

**DATE AS OF CHANGE**: 20230314

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Crexendo, Inc.
- **CENTRAL INDEX KEY:** 0001075736
- **STANDARD INDUSTRIAL CLASSIFICATION:** TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813]
- **IRS NUMBER:** 870591719
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-32277
- **FILM NUMBER:** 23730722

**BUSINESS ADDRESS:**
- **STREET 1:** 1615 S. 52ND STREET
- **CITY:** TEMPE
- **STATE:** AZ
- **ZIP:** 85281
- **BUSINESS PHONE:** 8012270004

**MAIL ADDRESS:**
- **STREET 1:** 1615 S. 52ND STREET
- **CITY:** TEMPE
- **STATE:** AZ
- **ZIP:** 85281

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** IMERGENT INC
- **DATE OF NAME CHANGE:** 20020710

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** NETGATEWAY INC
- **DATE OF NAME CHANGE:** 19990527

?xml version="1.0" encoding="utf-8"?cxdo_8k.htm

**UNITED STATES** 

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**_______________**

**FORM 8-K**

**_______________**

**CURRENT REPORT**

**Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934**

Date of report (Date of earliest event reported): **March 14, 2023**

**_______________**

---

| |
|:---|
| **Crexendo, Inc.** |
| *(Exact Name of Registrant as Specified in Its Charter)* |

---

**_______________**

---

| | | |
|:---|:---|:---|
| **Nevada** | **001-32277** | **87-0591719** |
| *(State or Other Jurisdiction* <br>*of Incorporation)* | *(Commission* <br>*File Number)* | *(IRS Employer* <br>*Identification No.)* |

---

**<u>1615 South 52<sup>nd</sup> Street, Tempe, AZ 85281</u>**

*(Address of Principal Executive Offices) (Zip Code)*

**<u>(602) 714-8500</u>**

*(Registrant's Telephone Number, Including Area Code)*

**<u>Not applicable.</u>**

*(Former Name or Former Address, if Changed Since Last Report)*

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (<u>see</u> General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2)

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. ☐

**Item 2.02 Results of Operations and Financial Condition.**

On March 14, 2023, Crexendo, Inc. issued a press release, a copy of which is being furnished as Exhibit 99.1 hereto and is incorporated herein by reference. Pursuant to the rules and regulations of the Securities and Exchange Commission, such exhibit and the information set forth therein and herein shall be deemed "furnished" and not "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

**Item 9.01 Financial Statements and Exhibits.**

(d) Exhibits

The following exhibit is furnished with this Current Report on Form 8-K:

---

| | |
|:---|:---|
| **Exhibit No.** | **Description** |
| [99.1](cxdo_ex991.htm) | [Press release dated March 14, 2023 by Registrant, reporting its results of operations for quarter and full year 2022.](cxdo_ex991.htm) |

---

**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

---

| | | |
|:---|:---|:---|
| Dated: March 14, 2023 | **Crexendo, Inc.** | **Crexendo, Inc.** |
|  | By: | /s/ RONALD VINCENT |
|  |  | Ronald Vincent<br>Chief Financial Officer |

---

## Exhibit 99.1

**EXHIBIT 99.1**

![](cxdo_ex991img7.jpg)

**Crexendo Announces Fourth Quarter and Full Year 2022 Results**

PHOENIX, AZ—(Marketwired – March 14, 2023)

Crexendo, Inc. (NASDAQ: CXDO) is an award-winning premier provider of cloud communication platform and services, video collaboration and managed IT services designed to provide enterprise-class cloud solutions to any size business. Our solutions currently support over three million end users globally. Today, the Company reported financial results for the fourth quarter and full year ended December 31, 2022.

**Financial highlights:**

· GAAP net loss of $(35.4) million and non-GAAP net income for the year of $4.1 million.

· Total revenue for the year increased 34% year-over-year to $37.6 million compared to the prior year.

· GAAP net loss of $(32.6) million and fourth quarter non-GAAP net income of $2.5 million.

· Fourth quarter revenue increased 27% to $11.4 million compared to the prior year fourth quarter.

**Financial Results for the Fourth Quarter of 2022**

Consolidated total revenue for the fourth quarter of 2022 increased 27%, or $2.4 million to $11.4 million compared to $9.0 million for the fourth quarter of 2021. The Allegiant Networks business acquisition contributed $1.8 million of the increase in consolidated total revenue in the fourth quarter of 2022.

Consolidated service revenue for the fourth quarter of 2022 increased 41%, or $1.8 million to $6.1 million compared to $4.3 million for the fourth quarter of 2021. The Allegiant Networks business acquisition contributed $1.5 million of the increase in consolidated service revenue in the fourth quarter of 2022.

Consolidated software solutions revenue for the fourth quarter of 2022 increased 14%, or $537,000 to $4.4 million compared to $3.9 million for the fourth quarter of 2021.

Consolidated product revenue for the fourth quarter of 2022 increased 16%, or $132,000 to $947,000 compared to $815,000 for the fourth quarter of 2021. The Allegiant Networks business acquisition contributed $228,000 of the additional consolidated product revenue in the fourth quarter of 2022 offset by a decrease in our product revenue of $(96,000) compared to the fourth quarter of 2021.

Consolidated operating expenses for the fourth quarter of 2022 increased 370%, or $36.3 million to $46.0 million compared to $9.8 million for the fourth quarter of 2021. Goodwill and long-lived asset impairment contributed $32.7 million of the increase in operating expenses and the Allegiant Networks business acquisition contributed $2.0 million of the increase in operating expenses. Excluding these items, operating expenses increased $1.5 million, or 16% compared to the fourth quarter of 2021.

The Company reported net loss of $(32.6) million for the fourth quarter of 2022, or $(1.33) loss per basic and diluted common share, compared to net loss of $(602,000), or $(0.03) loss per basic and diluted common share for the fourth quarter of 2021. During the fourth quarter of 2022, we recorded a goodwill impairment charge of $32.6 million and a $69,000 long-lived asset impairment, which contributed to the $(32.6) million net loss for the fourth quarter of 2022.

Non-GAAP net income of $2.5 million for the fourth quarter of 2022, or $0.10 per basic common share and $0.09 per diluted common share, compared to non-GAAP net income of $592,000 or $0.03 per basic common share and $0.02 per diluted common share for the fourth quarter of 2021.

EBITDA for the fourth quarter of 2022 of $(1.0) million loss, compared to $(102,000) loss for the fourth quarter of 2021. Adjusted EBITDA for the fourth quarter of 2022 increased to $596,000, compared to $474,000 for the fourth quarter of 2021.

![](cxdo_ex991img7.jpg)

**Financial Results for the Year ended December 31, 2022**

Consolidated total revenue for the year ended December 31, 2022 increased 34%, or $9.5 million to $37.6 million compared to $28.1 million for the year ended December 31, 2021. The Allegiant Networks business acquisition contributed $1.8 million of the increase in consolidated total revenue in the year ended December 31, 2022.

Consolidated service revenue for the year ended December 31, 2022 increased 14%, or $2.4 million to $19.5 million compared to $17.1 million for the year ended December 31, 2021. The Allegiant Networks business acquisition contributed $1.5 million of the increase in consolidated service revenue in the year ended December 31, 2022.

Consolidated software solutions revenue for the year ended December 31, 2022 increased 75%, or $6.5 million to $15.1 million compared to $8.7 million for the year ended December 31, 2021. Software solutions revenue from 2021 represents revenue from the NetSapiens business combination from the acquisition date of June 1, 2021.

Consolidated product revenue for the year ended December 31, 2022 increased 24%, or $567,000 to $2.9 million compared to $2.3 million for the year ended December 31, 2021. The Allegiant Networks business acquisition contributed $228,000 of the additional consolidated product revenue in the in the year ended December 31, 2022.

Consolidated operating expenses for the Year ended December 31, 2022 increased 143%, or $44.0 million to $74.9 million compared to $30.9 million for the year ended December 31, 2021. Goodwill and long-lived asset impairments contributed $32.7 million of the increase in operating expenses. The Allegiant Networks business acquisition contributed $2.0 million of the increase in operating expenses. Additionally, during the year ended December 31, 2022, we incurred $55,000 of acquisition related general and administrative expenses. Excluding these items, operating expenses increased 30%, or $9.3 million compared to the year ended December 31, 2021.

The Company reported a net loss of $(35.4) million for the year ended December 31, 2022, or a $(1.54) loss per basic and diluted common share, compared to $(2.4) million net loss, or $(0.12) per basic and diluted common share for the year ended December 31, 2021. During the fourth quarter of 2022, we recorded a goodwill impairment charge of $32.6 million and a $69,000 long-lived asset impairment, which contributed to the $(35.4) million net loss for the year ended December 31, 2022.

Non-GAAP net income of $4.1 million for the year ended December 31, 2022, or $0.18 per basic common share and $0.16 per diluted common share, compared to a non-GAAP net income of $1.7 million or $0.09 per basic common share and $0.07 per diluted common share for the year ended December 31, 2021.

EBITDA for the Year ended December 31, 2022 of $(2.0) million loss, compared to $(1.2) million loss for the year ended December 31, 2021. Adjusted EBITDA for the year ended December 31, 2022 increased to $2.5 million, compared to $1.6 million for the year ended December 31, 2021.

Total cash and cash equivalents at December 31, 2022 of $5.5 million compared to $7.5 million at December 31, 2021.

Cash used for operating activities for the year ended December 31, 2022 of $(411,000) compared to $(1.0) million used for operating activities for the year ended December 31, 2021. Cash used for investing activities for the year ended December 31, 2022 of $(1.7) million compared to $(9.9) million used for investing activities for the year ended December 31, 2021. Cash used for financing activities for the year ended December 31, 2022 of $(54,000) compared to cash provided by financing activities of $650,000 for the year ended December 31, 2021.

**Management Commentary**

Crexendo Chief Executive Officer Jeff Korn commented, "We finished the year strong and have considerable momentum behind our combined businesses as we head into 2023. In the fourth quarter we drove a 34% increase in consolidated revenue while continuing to grow on an organic basis as well. We substantially improved non-GAAP net income to $4.1 million, underscoring the inherent profitability of our operations once our performance can be viewed on a comparable basis.

We will continue recognizing synergies from our Software Solutions acquisition and will benefit from the integration and synergies from our recent Allegiant acquisition.

![](cxdo_ex991img7.jpg)

As a combined organization, we expect to drive more new sales and to realize greater expansion revenue opportunities from our collective customer base. We will also improve our cost profile substantially as we aim to increase cash flow and profitability by the end of the year."

Company President and Chief Operating Officer Doug Gaylor added, "We made considerable progress this year in architecting our vision for the future of Crexendo. With the recent management transition, we have continuity in our leadership team with a refreshed perspective on how to take our Company into its next phase of growth. Our sales and marketing teams are operating productively, and we fully expect those efforts to materialize into increased enterprise sales and improved margins in 2023. We also remain committed to our existing customers through a concerted focus on providing the best products, services and support in the industry."

Steve Mihaylo, retiring CEO, commented "I am excited to start my retirement and turn leadership of the company to Jeff and the management team. To see our telecom offerings grow from zero to a $45M+ run rate over the last decade has been a tremendous accomplishment and I am excited to watch the company continue to prosper under Jeff's direction."

**Conference Call**

The Company is hosting a conference call today, March 14, 2023, at 4:30 PM EDT.

The dial-in number for domestic participants is 888-506-0062 and 973-528-0011 for international participants and reference participant access code 708813.

Please dial in five minutes prior to the beginning of the call at 4:30 PM EST and reference the Crexendo earnings call and access code 708813.

A replay of the call will be available until March 21, 2023, by dialing toll-free at 877-481-4010 or 919-882-2331 for international callers. The replay passcode is 47743.

**About Crexendo**

Crexendo, Inc. is an award-winning premier provider of cloud communication platform and services, video collaboration and managed IT services designed to provide enterprise-class cloud solutions to any size business. Our solutions currently support over three million end users globally.

**Safe Harbor Statement**

This press release contains forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for such forward-looking statements. The words "believe," "expect," "anticipate," "estimate," "will" and other similar statements of expectation identify forward-looking statements. Specific forward-looking statements in this press release include information about Crexendo (i) having considerable momentum behind its combined businesses; (ii) believing the results underscored the inherent profitability of our operations once our performance can be viewed on a comparable basis; (iii) completing its integration of NetSapiens and further aligning with the Allegiant team; (iv) expecting to drive more new sales and to realize greater expansion revenue opportunities from our collective customer base; (v) improving our cost profile substantially and aiming to increase cash flow and profitability by the end of the year; (vi) having made considerable progress this year in architecting our vision for the Company and having continuity in our leadership team with a refreshed perspective on how to take the Company into its next phase growth; (vii) believing the sales and marketing teams productively, efforts to materialize into increased enterprise sales and improved margins in 2023; (viii) remaining committed to our existing customers through a concerted focus on providing the best products, services and support in the industry; (ix) believing the company will continue to prosper under Jeff's direction."

For a more detailed discussion of risk factors that may affect Crexendo's operations and results, please refer to the company's Form 10-K for the year ended December 31, 2022, and quarterly Form 10-Qs as filed with the SEC. These forward-looking statements speak only as of the date on which such statements are made, and the company undertakes no obligation to update such forward-looking statements, except as required by law.

![](cxdo_ex991img7.jpg)

**Contacts**

**Company Contact:**

Crexendo, Inc.

Doug Gaylor

President and Chief Operating Officer

602-732-7990

dgaylor@crexendo.com

**Investor Relations Contact:**

Gateway Investor Relations

Matt Glover and Tom Colton

949-574-3860

CXDO@gatewayir.com

![](cxdo_ex991img7.jpg)

**CREXENDO, INC. AND SUBSIDIARIES**<br> **Consolidated Balance Sheets**<br> (In thousands, except par value and share data)<br>

---

| | | |
|:---|:---|:---|
|  | **December 31,** | **December 31,** |
|  | **2022** | **2021** |
| **Assets** |  |  |
| Current assets: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Cash and cash equivalents | $5475 | $7468 |
| &nbsp;&nbsp;&nbsp;&nbsp; Trade receivables, net of allowance for doubtful accounts of $131 as of December 31, 2022 and $72 as of December 31, 2021 | 3297 | 2177 |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract assets | 318 | 261 |
| &nbsp;&nbsp;&nbsp;&nbsp; Inventories | 679 | 231 |
| &nbsp;&nbsp;&nbsp;&nbsp; Equipment financing receivables | 635 | 332 |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract costs | 841 | 648 |
| &nbsp;&nbsp;&nbsp;&nbsp; Prepaid expenses | 431 | 358 |
| &nbsp;&nbsp;&nbsp;&nbsp; Income tax receivable |  | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp; Other current assets | 674 | 74 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total current assets | 12350 | 11560 |
| Long-term equipment financing receivables, net | 1255 | 942 |
| Property and equipment, net | 3315 | 2989 |
| Deferred income tax assets, net |  | 986 |
| Operating lease right-of-use assets | 1081 | 532 |
| Intangible assets, net | 26725 | 22161 |
| Goodwill | 9454 | 36972 |
| Contract costs, net of current portion | 1304 | 697 |
| Other long-term assets | 150 | 313 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total Assets | $55634 | $77152 |
| **Liabilities and Stockholders' Equity** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Accounts payable | $1206 | $476 |
| &nbsp;&nbsp;&nbsp;&nbsp; Accrued expenses | 4890 | 4904 |
| &nbsp;&nbsp;&nbsp;&nbsp; Finance leases | 95 | 110 |
| &nbsp;&nbsp;&nbsp;&nbsp; Notes payable | 420 | 1873 |
| &nbsp;&nbsp;&nbsp;&nbsp; Operating lease liabilities | 363 | 447 |
| &nbsp;&nbsp;&nbsp;&nbsp; Income tax payable | 79 | 24 |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract liabilities | 3338 | 2738 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total current liabilities | 10391 | 10572 |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract liabilities, net of current portion | 247 | 290 |
| &nbsp;&nbsp;&nbsp;&nbsp; Finance leases, net of current portion | 98 | 193 |
| &nbsp;&nbsp;&nbsp;&nbsp; Notes payable, net of current portion | 2605 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Line of credit | 82 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Operating lease liabilities, net of current portion | 752 | 164 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total liabilities | 14175 | 11219 |
| Commitments and contingencies (Note 17) |  |  |
| Stockholders' equity: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Preferred stock, par value $0.001 per share - authorized 5,000,000 shares; none issued |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Common stock, par value $0.001 per share - authorized 50,000,000 shares, 25,670,773 shares issued and outstanding as of December 31, 2022 and 22,054,239 shares issued and outstanding as of December 31, 2021 | 26 | 22 |
| &nbsp;&nbsp;&nbsp;&nbsp; Additional paid-in capital | 129192 | 118432 |
| &nbsp;&nbsp;&nbsp;&nbsp; Accumulated deficit | (87946) | (52533) |
| &nbsp;&nbsp;&nbsp;&nbsp; Accumulated other comprehensive income | 187 | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total stockholders' equity | 41459 | 65933 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total Liabilities and Stockholders' Equity | $55634 | $77152 |

---

![](cxdo_ex991img7.jpg)

**CREXENDO, INC. AND SUBSIDIARIES**

**Consolidated Statements of Operations**

(In thousands, except per share and share data)

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| Service revenue | $19515 | $17102 |
| Software solutions | 15148 | $8666 |
| Product revenue | 2891 | $2324 |
| &nbsp;&nbsp;&nbsp;&nbsp; Total revenue | 37554 | 28092 |
| Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Cost of service revenue | 6711 | 5104 |
| &nbsp;&nbsp;&nbsp;&nbsp; Cost of software solutions | 5336 | 4031 |
| &nbsp;&nbsp;&nbsp;&nbsp; Cost of product revenue | 1637 | 1525 |
| &nbsp;&nbsp;&nbsp;&nbsp; Selling and marketing | 11725 | 8260 |
| &nbsp;&nbsp;&nbsp;&nbsp; General and administrative | 12904 | 10586 |
| &nbsp;&nbsp;&nbsp;&nbsp; Research and development | 3955 | 1396 |
| &nbsp;&nbsp;&nbsp;&nbsp; Goodwill and long-lived asset impairment | 32678 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total operating expenses | 74946 | 30902 |
| Loss from operations | (37392) | (2810) |
| Other income/(expense): |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Interest income |  | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp; Interest expense | (78) | (84) |
| &nbsp;&nbsp;&nbsp;&nbsp; Other income/(expense), net | 1295 | (17) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total other income/(expense), net | 1217 | (100) |
| Loss before income tax | (36175) | (2910) |
| Income tax benefit | 762 | 465 |
| Net loss | $(35413) | $(2445) |
| Earnings per common share: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Basic | $(1.54) | $(0.12) |
| &nbsp;&nbsp;&nbsp;&nbsp; Diluted | $(1.54) | $(0.12) |
| Weighted-average common shares outstanding: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Basic | 22939514 | 20275691 |
| &nbsp;&nbsp;&nbsp;&nbsp; Diluted | 22939514 | 20275691 |

---

![](cxdo_ex991img7.jpg)

**CREXENDO, INC. AND SUBSIDIARIES**

**Consolidated Statements of Cash Flows**

(In thousands)

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** |
| CASH FLOWS FROM OPERATING ACTIVITIES |  |  |
| Net loss | $(35413) | $(2445) |
| Adjustments to reconcile net loss to net cash used for operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Depreciation and amortization | 2747 | 1626 |
| &nbsp;&nbsp;&nbsp;&nbsp; Deferred tax asset | (936) | (499) |
| &nbsp;&nbsp;&nbsp;&nbsp; Share-based compensation | 4374 | 1628 |
| &nbsp;&nbsp;&nbsp;&nbsp; Goodwill and long-lived asset impairment | 32678 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Non-cash release of sales tax accrual | (1435) |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Non-cash operating lease amortization | (23) |  |
| Changes in assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Trade receivables | (361) | (501) |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract assets | (57) | (102) |
| &nbsp;&nbsp;&nbsp;&nbsp; Equipment financing receivables | (616) | (82) |
| &nbsp;&nbsp;&nbsp;&nbsp; Inventories | 36 | 285 |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract costs | (788) | (270) |
| &nbsp;&nbsp;&nbsp;&nbsp; Prepaid expenses | (25) | (92) |
| &nbsp;&nbsp;&nbsp;&nbsp; Income tax receivable | 11 | (7) |
| &nbsp;&nbsp;&nbsp;&nbsp; Other assets | (544) | 245 |
| &nbsp;&nbsp;&nbsp;&nbsp; Accounts payable and accrued expenses | 246 | (245) |
| &nbsp;&nbsp;&nbsp;&nbsp; Income tax payable | 55 | 24 |
| &nbsp;&nbsp;&nbsp;&nbsp; Contract liabilities | (360) | (571) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash used for operating activities | (411) | (1006) |
| CASH FLOWS FROM INVESTING ACTIVITIES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Purchase of property and equipment | (289) | (101) |
| &nbsp;&nbsp;&nbsp;&nbsp; Acquisition of a business, net of cash acquired | (1414) | (9766) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash used for investing activities | (1703) | (9867) |
| CASH FLOWS FROM FINANCING ACTIVITIES |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Borrowings on line of credit, net | 82 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Payment of contingent consideration |  | (746) |
| &nbsp;&nbsp;&nbsp;&nbsp; Repayments made on finance leases | (110) | (99) |
| &nbsp;&nbsp;&nbsp;&nbsp; Repayments made on notes payable | (90) | (71) |
| &nbsp;&nbsp;&nbsp;&nbsp; Proceeds from exercise of options | 816 | 1729 |
| &nbsp;&nbsp;&nbsp;&nbsp; Dividend payments | (462) |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Taxes paid on the net settlement of stock options and RSUs | (290) | (163) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net cash provided by/(used for) financing activities | (54) | 650 |
| Effect of exchange rate changes on cash | 175 | 12 |
| NET DECREASE IN CASH AND CASH EQUIVALENTS | (1993) | (10211) |
| CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR | 7468 | 17679 |
| CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR | $5475 | $7468 |
| Supplemental disclosure of cash flow information: |  |  |
| Cash used during the year for: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Income taxes, net | $(118) | $(15) |
| &nbsp;&nbsp;&nbsp;&nbsp; Interest expense | $(78) | $(84) |
| Supplemental disclosure of non-cash investing and financing information: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Stock issued for acquisitions | $6326 | $17288 |
| &nbsp;&nbsp;&nbsp;&nbsp; Stock options issued in connection with the merger with NetSapiens | $- | $22120 |
| &nbsp;&nbsp;&nbsp;&nbsp; Property and equipment financed through finance leases | $- | $273 |
| &nbsp;&nbsp;&nbsp;&nbsp; Prepaid assets financed through finance leases | $- | $14 |

---

![](cxdo_ex991img7.jpg)

**CREXENDO, INC. AND SUBSIDIARIES**

**Supplemental Segment Financial Data**

(In thousands)

---

| | | |
|:---|:---|:---|
|  | **Year Ended December 31,**  | **Year Ended December 31,**  |
|  | **2022** | **2021** |
| Revenue: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Cloud telecommunications service | $22406 | $19426 |
| &nbsp;&nbsp;&nbsp;&nbsp; Software solutions | 15148 | 8666 |
| Consolidated revenue | 37554 | 28092 |
| Loss from operations: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Cloud telecommunications services | (3877) | (2643) |
| &nbsp;&nbsp;&nbsp;&nbsp; Software solutions | (33515) | (167) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total operating loss | (37392) | (2810) |
| Other income/(expense), net: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Cloud telecommunications services | (71) | (70) |
| &nbsp;&nbsp;&nbsp;&nbsp; Software solutions | 1288 | (30) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total other income/(expense), net | 1217 | (100) |
| Loss before income tax benefit: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Cloud telecommunications services | (3948) | (2713) |
| &nbsp;&nbsp;&nbsp;&nbsp; Software solutions | (32227) | (197) |
| Loss before income tax benefit | $(36175) | $(2910) |

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![](cxdo_ex991img7.jpg)

**Use of Non-GAAP Financial Measures**

To evaluate our business, we consider and use non-generally accepted accounting principles ("Non-GAAP") net income and Adjusted EBITDA as a supplemental measure of operating performance. These measures include the same adjustments that management takes into account when it reviews and assesses operating performance on a period-to-period basis. We consider Non-GAAP net income to be an important indicator of overall business performance because it allows us to evaluate results without the effects of share-based compensation, acquisition related expenses, changes in fair value of contingent consideration, amortization of intangibles, and long-lived asset impairment. We define EBITDA as U.S. GAAP net income/(loss) before interest expense, interest income and other expense/(income), goodwill and long-lived asset impairments, provision/(benefit) for income taxes, and depreciation and amortization. We believe EBITDA provides a useful metric to investors to compare us with other companies within our industry and across industries. We define Adjusted EBITDA as EBITDA adjusted for acquisition related expenses, changes in fair value of contingent consideration and share-based compensation. We use Adjusted EBITDA as a supplemental measure to review and assess operating performance. We also believe use of Adjusted EBITDA facilitates investors' use of operating performance comparisons from period to period, as well as across companies.

In our March 14, 2023 earnings press release, as furnished on Form 8-K, we included Non-GAAP net income, EBITDA and Adjusted EBITDA. The terms Non-GAAP net income, EBITDA, and Adjusted EBITDA are not defined under U.S. GAAP, and are not measures of operating income, operating performance or liquidity presented in analytical tools, and when assessing our operating performance, Non-GAAP net income, EBITDA, and Adjusted EBITDA should not be considered in isolation, or as a substitute for net income/(loss) or other consolidated income statement data prepared in accordance with U.S. GAAP. Some of these limitations include, but are not limited to:

· EBITDA and Adjusted EBITDA do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

· they do not reflect changes in, or cash requirements for, our working capital needs;

· they do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debt that we may incur;

· they do not reflect income taxes or the cash requirements for any tax payments;

· although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will be replaced sometime in the future, and EBITDA and Adjusted EBITDA do not reflect any cash requirements for such replacements;

· while share-based compensation is a component of operating expense, the impact on our financial statements compared to other companies can vary significantly due to such factors as the assumed life of the options and the assumed volatility of our common stock; and

· other companies may calculate EBITDA and Adjusted EBITDA differently than we do, limiting their usefulness as comparative measures.

We compensate for these limitations by relying primarily on our U.S. GAAP results and using Non-GAAP net income, EBITDA, and Adjusted EBITDA only as supplemental support for management's analysis of business performance. Non-GAAP net income, EBITDA and Adjusted EBITDA are calculated as follows for the periods presented.

**Reconciliation of Non-GAAP Financial Measures**

In accordance with the requirements of Regulation G issued by the SEC, we are presenting the most directly comparable U.S. GAAP financial measures and reconciling the unaudited Non-GAAP financial metrics to the comparable U.S. GAAP measures.

![](cxdo_ex991img7.jpg)

**Reconciliation of U.S. GAAP Net Income to Non-GAAP Net Income**

**(Unaudited)**

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
|  | (In thousands) | (In thousands) | (In thousands) | (In thousands) |
| U.S. GAAP net income/(loss) | $(32601) | $(602) | $(35413) | $(2445) |
| &nbsp;&nbsp;&nbsp;&nbsp; Share-based compensation | 1612 | 478 | 4374 | 1628 |
| &nbsp;&nbsp;&nbsp;&nbsp; Acquisition related expenses | 24 | (28) | 55 | 1037 |
| &nbsp;&nbsp;&nbsp;&nbsp; Change in fair value of contigent consideration |  | 126 |  | 126 |
| &nbsp;&nbsp;&nbsp;&nbsp; Goodwill and long-lived asset impairment | 32678 |  | 32678 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Amortization of intangible assets | 786 | 618 | 2435 | 1391 |
| Non-GAAP net income | $2499 | $592 | $4129 | $1737 |
| Non-GAAP net income per common share: |  |  |  |  |
| Basic | $0.10 | $0.03 | $0.18 | $0.09 |
| Diluted | $0.09 | $0.02 | $0.16 | $0.07 |
| Weighted-average common shares outstanding: |  |  |  |  |
| Basic | 24425421 | 21792137 | 22939514 | 20275691 |
| Diluted | 26633630 | 26068825 | 25783179 | 23408162 |

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 **Reconciliation of U.S. GAAP Net Income to EBITDA to Adjusted EBITDA**

**(Unaudited)**

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **Three Months Ended December 31,** | **Three Months Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
|  | **2022** | **2021** | **2022** | **2021** |
|  | (In thousands) | (In thousands) | (In thousands) | (In thousands) |
| U.S. GAAP net loss | $(32601) | $(602) | $(35413) | $(2445) |
| &nbsp;&nbsp;&nbsp;&nbsp; Depreciation and amortization | 885 | 695 | 2747 | 1626 |
| &nbsp;&nbsp;&nbsp;&nbsp; Interest expense | 21 | 20 | 78 | 84 |
| &nbsp;&nbsp;&nbsp;&nbsp; Interest income and other expense/(income) | (1576) | 3 | (1295) | 16 |
| &nbsp;&nbsp;&nbsp;&nbsp; Goodwill and long-lived asset impairment | 32678 |  | 32678 |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Income tax provision/(benefit) | (447) | (218) | (762) | (465) |
| EBITDA | (1040) | (102) | (1967) | (1184) |
| &nbsp;&nbsp;&nbsp;&nbsp; Acquisition related expenses | 24 | (28) | 55 | 1037 |
| &nbsp;&nbsp;&nbsp;&nbsp; Change in fair value of contingent consideration |  | 126 |  | 126 |
| &nbsp;&nbsp;&nbsp;&nbsp; Share-based compensation | 1612 | 478 | 4374 | 1628 |
| Adjusted EBITDA | $596 | $474 | $2462 | $1607 |

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