Crexendo Inc

Previous wording

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. By providing a variety of comprehensive and scalable solutions, we are able to cater to businesses of all sizes on a monthly subscription basis without the need for expensive capital investments, regardless of where their business is in its lifecycle. Our products and services can be categorized in the following offerings:

Current wording

Crexendo, Inc. is an award-winning software technology company that is a premier provider of cloud communication platform and services, video collaboration and managed IT services tailored to businesses of all sizes. By providing a variety of comprehensive and scalable solutions, we are able to cater to businesses of all sizes on a monthly subscription basis without the need for expensive capital investments, regardless of where their business is in its lifecycle. Our products and services can be categorized in the following offerings:

Previous wording

We generate recurring revenue from our cloud telecommunications services, broadband Internet services, managed IT services, software license sales, and infrastructure as a service. Our cloud telecommunications contracts typically have a thirty-six to sixty month term. We may also charge activation and flash fees and 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. We also charge other various contracted and non-contracted fees.

Current wording

We generate recurring revenue from our cloud telecommunications services, broadband Internet services, managed IT services, software license sales, and infrastructure as a service. Our cloud telecommunications contracts typically have a thirty-nine to ninety-month term. We may also charge activation and flash fees and 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. We also charge other various contracted and non-contracted fees.

Previous wording

Our Cloud Telecommunications service revenue increased 52% or $10,153 to $29,668 for the year ended December 31, 2023 as compared to $19,515 for the year ended December 31, 2022. Our Cloud Telecommunications product revenue increased 90% or $2,593 to $5,484 for the year ended December 31, 2023 as compared to $2,891 for the year ended December 31, 2022. The year ended December 31, 2022 includes only two months of revenue from the Allegiant Networks acquisition date of November 1, 2022.

Current wording

Our Cloud Telecommunications service revenue increased 7% or $2,181 to $31,849 for the year ended December 31, 2024 as compared to $29,668 for the year ended December 31, 2023. Our Cloud Telecommunications product revenue increased 2% or $131 to $5,615 for the year ended December 31, 2024 as compared to $5,484 for the year ended December 31, 2023.

Previous wording

Our Software Solutions revenue increased 19%, or $2,899 to $18,047 for the year ended December 31, 2023 as compared to $15,148 for the year ended December 31, 2022.

Current wording

Our Software solutions revenue increased 30%, or $5,327 to $23,374 for the year ended December 31, 2024, compared to $18,047 for the year ended December 31, 2023.

Previous wording

The increase in total revenue is due to an increase in service revenue of $10,153, an increase in software solutions revenue of $2,899, and an increase in product revenue of $2,593. Our November 1, 2022 acquisition of Allegiant Networks contributed $8,886 of the increase in service revenue and $2,131 of the increase in product revenue compared to 2022.

Current wording

The increase in total revenue is due to an increase in software solutions revenue of $5,327, an increase in service revenue of $2,181, and an increase in product revenue of $131.

Previous wording

The following table reflects our income/(loss) before income taxes for the year ended December 31, 2023, compared to the year ended December 31, 2022:

Current wording

The following table reflects our income/(loss) before income tax for the year ended December 31, 2024, compared to the year ended December 31, 2023:

Previous wording

We had an income tax provision of $(98) for the year ended December 31, 2023 compared to an income tax benefit of $762 for the year ended December 31, 2022. For the year ended December 31, 2023, we recorded additional valuation allowance of $1,603 and for the year ended December 31, 2022, we recorded a valuation allowance release of $1,681.

Current wording

We had an income tax provision of $(212) for the year ended December 31, 2024 compared to an income tax provision of $(98) for the year ended December 31, 2023. For the year ended December 31, 2024, we recorded additional valuation allowance of $635 and for the year ended December 31, 2023, we recorded additional valuation allowance of $1,603.

Previous wording

The process of estimating the fair value of goodwill is subjective and required the Company to make estimates that may significantly impact the outcome of the analysis. A qualitative assessment considers events and circumstances such as macroeconomic conditions, industry and market conditions, cost factors and overall financial performance, as well as company specifications. If after performing this assessment, the Company concluded it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then the Company performed the quantitative test.

Current wording

The process of estimating the fair value of goodwill is subjective and requires the Company to make estimates that may significantly impact the outcome of the analysis. A qualitative assessment considers events and circumstances such as macroeconomic conditions, industry and market conditions, cost factors and overall financial performance, as well as company specifications. If after performing this assessment, the Company concluded it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then the Company performed the quantitative test.

Previous wording

The Company estimated the fair value of the reporting unit with an income approach using the discounted cash flow (“DCF”) analysis and the Company also considered a market-based valuation methodology using comparable public company trading values and the Company’s market capitalization. Determining fair value requires the exercise of significant judgments, including the amount and timing of expected future cash flows, long-term growth rates, the discount rate and relevant comparable public company earnings multiples. The cash flows employed in the DCF analysis are based on the Company’s best estimate of future sales, earnings and cash flows after considering factors such as general market conditions and recent operating performance. The discount rate utilized in the DCF analysis is based on the reporting unit’s weighted-average cost of capital, which takes into account the relative weights of each component of capital structure (equity and debt) and represents the expected cost of new capital, adjusted as appropriate to consider the risk inherent in future cash flows of the Company’s reporting unit.

Current wording

The Company estimates the fair value of the reporting unit with an income approach using the discounted cash flow (“DCF”) analysis and the Company also considers a market-based valuation methodology using comparable public company trading values and the Company’s market capitalization. Determining fair value requires the exercise of significant judgments, including the amount and timing of expected future cash flows, long-term growth rates, the discount rate and relevant comparable public company earnings multiples. The cash flows employed in the DCF analysis are based on the Company’s best estimate of future sales, earnings and cash flows after considering factors such as general market conditions and recent operating performance. The discount rate utilized in the DCF analysis is based on the reporting unit’s weighted-average cost of capital, which takes into account the relative weights of each component of capital structure (equity and debt) and represents the expected cost of new capital, adjusted as appropriate to consider the risk inherent in future cash flows of the Company’s reporting unit.

Previous wording

The Company reviews the carrying amount of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Once an indicator of potential impairment has occurred, the impairment test is based on whether the intent is to hold the asset for continued use or to hold the asset for sale. If the intent is to hold the asset for continued use, the impairment test first requires a comparison of projected undiscounted future cash flows against the carrying amount of the asset group. If the carrying value of the asset group exceeds the estimated undiscounted future cash flows, the asset group would be deemed to be potentially impaired. The impairment, if any, would be measured based on the amount by which the carrying amount exceeds the fair value. Fair value is determined primarily using the projected future undiscounted cash flows. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair values are reduced for the cost to dispose. We recognized impairment losses of $0 and $69 in the Consolidated Statements of Operations for the years ended December 31, 2023 and 2022, respectively.

Current wording

The Company reviews the carrying amount of long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Once an indicator of potential impairment has occurred, the impairment test is based on whether the intent is to hold the asset for continued use or to hold the asset for sale. If the intent is to hold the asset for continued use, the impairment test first requires a comparison of projected undiscounted future cash flows against the carrying amount of the asset group. If the carrying value of the asset group exceeds the estimated undiscounted future cash flows, the asset group would be deemed to be potentially impaired. The impairment, if any, would be measured based on the amount by which the carrying amount exceeds the fair value. Fair value is determined primarily using the projected future undiscounted cash flows. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair values are reduced for the cost to dispose. We recognized impairment losses of $0 in the Consolidated Statements of Operations for the years ended December 31, 2024 and 2023, respectively.

Previous wording

We currently have net deferred tax assets consisting of net operating loss carryforwards, tax credit carryforwards and deductible temporary differences. Management periodically weighs the positive and negative evidence to determine if it is more likely than not that some or all of the deferred tax assets will be realized. As of December 31, 2023, excluding the gain on the sale of property and equipment, we have three years of cumulative pretax losses and the weight of all other positive and negative evidence, such as forecasts and projections of future pretax income are inherently subjective and require management to make assumption or complex judgments about matters that are inherently uncertain and therefore are not sufficient to overcome the significant negative evidence of a three year lookback cumulative loss position. Therefore, management determined that it is not more likely than not that we will be able to realize our deferred tax assets, and we have recorded a valuation allowance of $4,782 at December 31, 2023.

Current wording

We currently have net deferred tax assets consisting of net operating loss carryforwards, tax credit carryforwards and deductible temporary differences. Management periodically weighs the positive and negative evidence to determine if it is more likely than not that some or all of the deferred tax assets will be realized. As of December 31, 2024, excluding the gain on the sale of property and equipment, we have three years of cumulative pretax losses and the weight of all other positive and negative evidence, such as forecasts and projections of future pretax income are inherently subjective and require management to make assumption or complex judgments about matters that are inherently uncertain and therefore are not sufficient to overcome the significant negative evidence of a three year lookback cumulative loss position. Therefore, management determined that it is not more likely than not that we will be able to realize our deferred tax assets, and we have recorded a valuation allowance of $5,417 at December 31, 2024.

Previous wording

We provide for the estimated cost of product warranties at the time we recognize revenue. We evaluate our warranty obligations on a product group basis. Our standard product warranty terms generally include post-sales support and repairs or replacement of a product at no additional charge for a specified period of time. We base our estimated warranty obligation upon warranty terms, ongoing product failure rates, and current period product shipments. If actual product failure rates, repair rates or any other post-sales support costs were to differ from our estimates, we would be required to make revisions to the estimated warranty liability. Warranty terms generally last for the duration that the customer has service. Some third-party equipment vendors offer extended warranties. These extended warranties are sold separately and provide services in addition to assurance that the product will function as expected, including updates and patches. The Company is arranging for these services to be provided by the third-party and is acting as an agent in the transaction and records revenue on a net basis at the time of sale.

Current wording

We provide for the estimated cost of product warranties at the time we recognize revenue. We evaluate our warranty obligations on a product group basis. Our standard product warranty terms generally include post-sales support and repairs or replacement of a product at no additional charge for a specified period of time. We base our estimated warranty obligation upon warranty terms, ongoing product failure rates, and current period product shipments. If actual product failure rates, repair rates or any other post-sales support costs were to differ from our estimates, we would be required to make revisions to the estimated warranty liability. Warranty terms generally last for the duration that the customer has service. Some third-party equipment vendors offer extended warranties. These extended warranties are sold separately and provide services in addition to assurance that the product will function as expected, including updates and patches. In extended warranty transactions, the Company is arranging for these services to be provided by the third-party and is acting as an agent in the transaction and records revenue on a net basis at the time of sale.

Previous wording

Contingent liabilities require significant judgment in estimating potential payouts. Contingent considerations arising from business combinations and asset acquisitions require management to estimate future payouts based on forecasted results, which are highly sensitive to the estimates of discount rates and future revenues. These estimates can change significantly from period to period and are reviewed each reporting period to establish the fair value of the contingent liability.

Current wording

Contingent liabilities require significant judgment in estimating potential payouts. Contingent considerations arising from business combinations and asset acquisitions require management to estimate future payouts based on forecasted results, which are highly sensitive to the estimates of discount rates and future revenues. These estimates can change significantly from period to period and are reviewed each reporting period to establish the fair value of the contingent liability. Contingent liabilities for annual employee bonuses requires management to make estimates of future payouts and accrue liabilities when the future payout is probable and reasonably estimatable. The estimates are highly sensitive to future operating results such as: revenue and adjusted EBITDA.

Previous wording

We account for our share-based compensation awards using the fair-value method. The grant date fair value was determined using the Black-Scholes-Merton pricing model. The Black-Scholes-Merton valuation calculation requires us to make key assumptions such as future stock price volatility, expected terms, risk-free rates, and dividend yield. Our expected volatility is derived from our volatility rate as a publicly traded company. The expected term is based on our historical experience. The risk-free interest factor is based on the United States Treasury yield curve in effect at the time of the grant for zero coupon United States Treasury notes with maturities of approximately equal to each grant’s expected term. For the year ended December 31, 2023, one quarterly dividend of $0.005 was declared and paid, however we have assumed a 0% dividend yield for the year ended December 31, 2023. For the year ended December 31, 2022, quarterly dividends of $0.005 were declared and paid, however we have assumed a 0% dividend yield.

Current wording

We account for our share-based compensation awards using the fair-value method. The grant date fair value was determined using the Black-Scholes-Merton pricing model. The Black-Scholes-Merton valuation calculation requires us to make key assumptions such as future stock price volatility, expected terms, risk-free rates, and dividend yield. Our expected volatility is derived from our volatility rate as a publicly traded company. The expected term is based on our historical experience. The risk-free interest factor is based on the United States Treasury yield curve in effect at the time of the grant for zero coupon United States Treasury notes with maturities of approximately equal to each grant’s expected term. For the year ended December 31, 2023, one quarterly dividend of $0.005 was declared and paid, however we have assumed a 0% dividend yield for the year ended December 31, 2024.

Previous wording

The increase in service revenue is due to an increase in telecommunications services fees of $8,604, an increase in one-time fees, commissions and other of $1,192, an increase in fees, commissions, and other, recognized over time of $191, and an increase in sales-type lease interest of $166. Our November 1, 2022 acquisition of Allegiant Networks, contributed $8,886 of the total increase in service revenue. A substantial portion of Cloud Telecommunications service revenue is generated through thirty-six to sixty month service contracts.

Current wording

The increase in service revenue is due to an increase in telecommunications services fees of $1,899, an increase in fees, commissions, and other, recognized over time of $235, and an increase in sales-type lease interest of $175, offset by a decrease in one-time fees, commissions and other of $128. A substantial portion of Cloud Telecommunications service revenue is generated through thirty-six to sixty month service contracts.

Previous wording

Product revenue fluctuates from one period to the next based on timing of installations. Our typical customer installation is complete within 30-60 days. However, larger enterprise customers can take multiple months, depending on size and the number of locations. Product revenue is recognized when products have been installed and services commence. Additionally, product revenue can fluctuate due to the allocation of discounts or sales promotions across the performance obligations. The increase in product revenue is primarily related to additional product revenue of $2,131 contributed by our November 1, 2022 acquisition of Allegiant Networks during the year ended December 31, 2023 and an increase in organic product revenue of $462.

Current wording

Product revenue fluctuates from one period to the next based on timing of installations. Our typical customer installation is complete within 30-60 days. However, larger enterprise customers can take multiple months, depending on size and the number of locations. Product revenue is recognized when products have been installed and services commence. Additionally, product revenue can fluctuate due to the allocation of discounts or sales promotions across the performance obligations.

Previous wording

Backlog represents the total contract value of all contracts signed, less revenue recognized from those contracts as of December 31, 2023 and 2022. Backlog increased 40%, or $12,794 to $44,810 as of December 31, 2023 as compared to $32,016 as of December 31, 2022. Below is a table which displays the Cloud Telecommunications segment revenue backlog as of December 31, 2023 and 2022, which we expect to recognize as revenue within the next thirty-six to sixty months (in thousands):

Current wording

Remaining Performance Obligations (RPOs) represents the total contract value of all contracts signed, less revenue recognized from those contracts as of December 31, 2024 and 2023. RPOs increased 24%, or $10,559 to $55,369 as of December 31, 2024 as compared to $44,810 as of December 31, 2023. Below is a table which displays the Cloud Telecommunications segment remaining performance obligations as of December 31, 2024 and 2023, which we expect to recognize as revenue within the next thirty-six to sixty months (in thousands):

Previous wording

Cost of service revenue consists primarily of fees we pay to third-party telecommunications carriers, broadband Internet providers, software providers, costs related to installations, customer support salaries, benefits, bonuses, and share-based compensation. The following table reflects our cost of service revenue for the year ended December 31, 2023, compared to the year ended December 31, 2022:

Current wording

Cost of service revenue consists primarily of fees we pay to third-party telecommunications carriers, broadband Internet providers, software providers, costs related to installations, contract labor costs, credit card processing fees, customer support salaries, benefits, bonuses, and share-based compensation. The following table reflects our cost of service revenue for the year ended December 31, 2024, compared to the year ended December 31, 2023:

Previous wording

The increase in cost of service revenue was primarily related to additional cost of service revenue of $5,439 contributed by our November 1, 2022 acquisition of Allegiant Networks during the year ended December 31, 2023. Additionally, we had a $242 increase in salaries, benefits, bonuses, and share-based compensation related to increases in headcount to assist with the migration of our customers to our new VIP platform and expenses for the accrual of annual employee bonuses, an increase in third-party telecommunications carrier costs of $158, and an increase in other cost of service revenue of $56.

Current wording

The increase in cost of service revenue was primarily related to an increase in contract labor costs to assist with the migration of our customers to our new VIP platform of $201, an increase in salaries, benefits, bonuses, and share-based compensation of $94, an increase in third-party telecommunications charges of $71, an increase in credit card processing fees of $68, and an increase in other cost of service revenue of $47.

Previous wording

Selling and marketing expenses consist primarily of direct and channel sales representative salaries, benefits, bonuses, and share-based compensation, partner channel commissions, amortization of costs to acquire contracts, travel expenses, lead generation services, trade shows, internal and third-party marketing costs, the production of marketing materials, and sales support software. The following table reflects our selling and marketing expenses for the year ended December 31, 2023, compared to the year ended December 31, 2022:

Current wording

Selling and marketing expenses consist primarily of direct and channel sales representative salaries, benefits, bonuses, and share-based compensation, partner channel commissions, amortization of costs to acquire contracts, travel expenses, lead generation services, trade shows, internal and third-party marketing costs, amortization of customer relationship intangible assets, the production of marketing materials, and sales support software. The following table reflects our selling and marketing expenses for the year ended December 31, 2024, compared to the year ended December 31, 2023:

Previous wording

General and administrative expenses consist of salaries, benefits, bonuses and share-based compensation for executives, administrative personnel, legal, rent, equipment, accounting and other professional services, investor relations, depreciation, amortization of intangibles, and other administrative corporate expenses. The following table reflects our general and administrative expenses for the year ended December 31, 2023, compared to the year ended December 31, 2022:

Current wording

General and administrative expenses consist of salaries, benefits, bonuses and share-based compensation for executives, administrative personnel, legal, rent, equipment, accounting and other professional services, investor relations, depreciation, amortization of intangible assets, and other administrative corporate expenses. The following table reflects our general and administrative expenses for the year ended December 31, 2024, compared to the year ended December 31, 2023:

Previous wording

The decrease in general and administrative expenses is primarily related to a decrease in administrative salaries, benefits, bonuses, and share-based compensation of $1,882 related to a decrease in share-based compensation and the reclassification of salary, wages, and benefits to the Software Solutions segment, offset by an increase in expenses for the accrual of annual employee bonuses, a decrease in telecommunication fees of $134, and a decrease in other general and administrative expenses of $40, offset by an increase in additional general and administrative expense of $1,965 contributed by our November 1, 2022 acquisition of Allegiant Networks during the year ended December 31, 2023.

Current wording

The decrease in general and administrative expenses is primarily related to a decrease in executive and administrative salaries, benefits, bonuses, and share-based compensation of $1,010 primarily due to a decrease in share-based compensation of $733 and an allocation of costs to the Software Solutions segment of $203, and a decrease in other general and administrative expenses of $32, offset by an increase of rent expense of $242 due to the leaseback of our previously sold corporate headquarters land and building and rent on our new corporate office of $80, and an increase in accounting software costs of $81 associated with service contract fees for our new accounting system.

Previous wording

Research and development expenses primarily consist of salaries, benefits, bonuses, and share-based compensation, outsourced engineering services related to the development of new cloud telecommunications features and products. The following table reflects our research and development expenses for the year ended December 31, 2023, compared to the year ended December 31, 2022:

Current wording

Research and development expenses primarily consist of salaries, benefits, bonuses, and share-based compensation, and outsourced engineering services related to the development of new cloud telecommunications features and products. The following table reflects our research and development expenses for the year ended December 31, 2024, compared to the year ended December 31, 2023:

Previous wording

Other income/(expense) primarily relates to interest expense and net foreign exchange gains or losses, offset by credit card cash back rewards. The following table reflects our other income/(expense) for the year ended December 31, 2023, compared to the year ended December 31, 2022:

Current wording

Other income/(expense) primarily relates to interest income, interest expense, net foreign exchange gains or losses, gain on the sale of property and equipment, and credit card cash back rewards. The following table reflects our other income/(expense) for the year ended December 31, 2024, compared to the year ended December 31, 2023:

Previous wording

The change in other income/(expense) is primarily related to the gain on the sale of our corporate headquarters located in Tempe, Arizona of $1,459 offset by a decrease in other income/(expense) of $29.

Current wording

The change in other income/(expense) is primarily from the gain on sale of our corporate office building reported during the year ended December 31, 2023 of $1,459 and a decrease in other income of $3, offset by an increase in interest income of $189 and a decrease in interest expense of $73.

Previous wording

Software solutions revenue consists primarily of software license fees, subscription maintenance and support, professional services, and annual user group meeting fees. Software licenses are billed by the number of concurrent sessions a Partner has purchased or subscribes to. Subscription maintenance and support is ongoing and provides for software updates and improvements, support for add-on modules, bug fixes, and other general maintenance items. Professional services and other revenues consist of professional services such as the installation of software and integration of other modules, training and implementation as well as custom mobile branding. The following table reflects our service revenue for the year ended December 31, 2023, compared to the year ended December 31, 2022:

Current wording

Software solutions revenue consists primarily of software license fees, subscription maintenance and support, professional services, and annual user group meeting fees. Software licenses are billed by the number of concurrent sessions a customer has purchased or subscribes to. Subscription maintenance and support is ongoing and provides for software updates and improvements, support for add-on modules, bug fixes, and other general maintenance items. Professional services and other revenues consist of professional services such as the installation of software and integration of other modules, training and implementation as well as custom mobile branding. The following table reflects our service revenue for the year ended December 31, 2024, compared to the year ended December 31, 2023:

Previous wording

The increase is primarily related to a $2,352 increase in recurring software license and maintenance and support subscriptions an increase in professional services of $307, and an increase in perpetual software license revenue of $240.

Current wording

The increase in software solutions revenue is primarily related to an increase in recurring software license and maintenance and support subscriptions of $3,278, an increase in perpetual software license revenue of $1,420, and an increase in professional services and other revenue of $629.

Previous wording

Backlog represents the total contract value of all contracts signed, less revenue recognized from those contracts as of December 31, 2023 and 2022. Backlog increased 29%, or $4,292 to $19,122 as of December 31, 2023 as compared to $14,830 as of December 31, 2022. Below is a table which displays the Software Solutions segment revenue backlog as of December 31, 2023 and 2022, which we expect to recognize as revenue within the next thirty-six months (in thousands):

Current wording

Remaining Performance Obligations (RPOs) represents the total contract value of all contracts signed, less revenue recognized from those contracts as of December 31, 2024 and 2023. RPOs increased 58%, or $11,140 to $30,262 as of December 31, 2024 as compared to $19,122 as of December 31, 2023. Below is a table which displays the Software solutions segment remaining performance obligations as of December 31, 2024 and 2023, which we expect to recognize as revenue within the next thirty-six months (in thousands):

Previous wording

Cost of software solutions revenue consists primarily of salaries, benefits, bonuses, and amortization expense related to the technology, cost of data center hosting, third-party software modules, annual user group meeting costs, and outsourced services required to install and support software solutions. The following table reflects our cost of service revenue for the year ended December 31, 2023, compared to the year ended December 31, 2022:

Current wording

Cost of software solutions revenue consists primarily of salaries, benefits, bonuses, and share-based compensation, amortization expense for developed technologies intangible assets, cost of data center hosting, third-party software, annual user group meeting costs, and outsourced services required to install and support software solutions. The following table reflects our cost of service revenue for the year ended December 31, 2024, compared to the year ended December 31, 2023:

Previous wording

The increase in cost of service revenue is primarily related an increase in software costs of $294, an increase in annual user group meeting expenses of $223, an increase in outside consulting services of $179, an increase in salaries, benefits, bonuses, and share-based compensation of $117, offset by the reclassification of $452 of research and development expenses out of cost of service revenue after carefully reviewing operating expenses, that qualify as research and development operating expenses, and a decrease in other cost of software solutions revenue of $71.

Current wording

The increase in cost of software solutions revenue is primarily related to an increase in third-party hosting service costs of $399, an increase in salaries, benefits, bonuses, and share-based compensation of $322, an increase in software costs of $293, an increase in annual user group meeting expenses of $142, and an increase in other cost of software solutions revenue of $10.

Previous wording

Selling and marketing expenses consist primarily of sales and marketing salaries, benefits, bonuses, commissions, share-based compensation, travel expenses, lead generation services, trade shows, third-party marketing services, the production of marketing materials, UGM costs, and sales support software. The following table reflects our selling and marketing expenses for the year ended December 31, 2023, compared to the year ended December 31, 2022:

Current wording

Selling and marketing expenses consist primarily of sales and marketing salaries, benefits, bonuses, commissions, share-based compensation, travel expenses, lead generation services, trade shows, third-party marketing services, the production of marketing materials, annual user group meeting costs, and sales support software. The following table reflects our selling and marketing expenses for the year ended December 31, 2024, compared to the year ended December 31, 2023:

Previous wording

The increase in selling and marketing expense is primarily related to an increase in additional selling and marketing expense of $2,178 contributed by our November 1, 2022 acquisition of Allegiant Networks during the year ended December 31, 2023 and an increase in commission expense of $742 directly related to the increase in revenue, an increase in salaries, benefits, bonuses, and share-based compensation of $60, and an increase in other selling and marketing expenses of $37.

Current wording

The increase in selling and marketing expense is primarily related to an increase in commission expense of $436 directly related to the increase in revenue, an increase in marketing materials and trade shows of $215, an increase in sales support software of $90, and an increase in other selling and marketing costs of $16, offset by a decrease in salaries, benefits, bonuses, and share-based compensation of $203 due to the allocation of marketing resources to the Cloud Telecommunications Services segment.

Previous wording

General and administrative expenses consist of salaries and benefits for executives, administrative personnel, amortization of intangible asset related to customer lists, legal, rent, equipment, accounting and other professional services, and other administrative corporate expenses. The following table reflects our general and administrative expenses for the year ended December 31, 2023, compared to the year ended December 31, 2022:

Current wording

General and administrative expenses consist of salaries, benefits, bonuses and share-based compensation for executives and administrative personnel, amortization of trademark and trade name intangible assets, legal, rent, equipment, accounting and other professional services, consulting fees and other administrative corporate expenses. The following table reflects our general and administrative expenses for the year ended December 31, 2024, compared to the year ended December 31, 2023:

Previous wording

Other income/(expense) primarily relates to interest expense, net foreign exchange gains or losses, and other income and expenses. The following table reflects our other expense for the year ended December 31, 2023, compared to the year ended December 31, 2022:

Current wording

Other income/(expense) primarily relates to net foreign exchange gains or losses and other income and expenses. The following table reflects our other income/(expense) for the year ended December 31, 2024, compared to the year ended December 31, 2023:

Previous wording

The decrease in other income/(expense) is primarily related to the prior year release of a sales tax accrual of $1,435, offset by a decrease in foreign exchange losses of $133, and an increase in other income of $80.

Current wording

The change in other income/(expense) is primarily related to a decrease in other income of $96 and a decrease in foreign exchange gains/(losses) of $64.

Previous wording

Liquidity is a measure of our ability to access sufficient cash flows to meet the short-term and long-term cash requirements of our business operations. We finance our operations primarily through services, software solutions, and product sales to our customers. As of December 31, 2023 and 2022, we had cash and cash equivalents of $10,347 and $5,475, respectively. Changes in cash and cash equivalents are dependent upon changes in, among other things, working capital items such as contract liabilities, contract costs, accounts payable, accounts receivable, prepaid expenses, and various accrued expenses, as well as purchases of property and equipment, asset acquisitions, business combinations, and changes in our capital and financial structure due to debt repayments and issuances, stock option exercises, sales of equity investments and similar events. We believe that our operations along with existing liquidity sources will satisfy our cash requirements for at least the next 12 months.

Current wording

Liquidity is a measure of our ability to access sufficient cash flows to meet the short-term and long-term cash requirements of our business operations. We finance our operations primarily through services, software solutions, and product sales to our customers. As of December 31, 2024 and 2023, we had cash and cash equivalents of $18,193 and $10,347, respectively. Changes in cash and cash equivalents are dependent upon changes in, among other things, working capital items such as contract liabilities, contract costs, accounts payable, accounts receivable, prepaid expenses, and various accrued expenses, as well as purchases of property and equipment, asset acquisitions, business combinations, and changes in our capital and financial structure due to debt repayments and issuances, stock option exercises, sales of equity investments and similar events. We believe that our operations along with existing liquidity sources will satisfy our cash requirements for at least the next 12 months.

Previous wording

Cash provided by or used in operating activities is driven by our net loss, adjustments to reconcile to net cash provided by or used in operating activities, the timing of customer collections, as well as the amount and timing of disbursements to our vendors, the amount of cash we invest in personnel, marketing, and infrastructure costs to support the anticipated growth of our business. The following table reflects our net cash provided by/(used in) operating activities for the year ended December 31, 2023, compared to the year ended December 31, 2022:

Current wording

Cash provided by or used in operating activities is driven by our net income/(loss), adjustments to reconcile to net cash provided by or used in operating activities, the timing of customer collections, as well as the amount and timing of disbursements to our vendors, the amount of cash we invest in personnel, marketing, and infrastructure costs to support the anticipated growth of our business. The following table reflects our net cash provided by/(used in) operating activities for the year ended December 31, 2024, compared to the year ended December 31, 2023:

Previous wording

The net cash used in operations for the year ended December 31, 2022, was primarily driven by our net loss of $35,413, the non-cash release of sales tax accrual of $1,435, an increase in trade receivables receivable of $361, an increase in equipment financing receivables of $616, an increase in contract costs of $788, an increase in other assets of $544, and a decrease in contract liabilities of $360, offset by non-cash expenses for depreciation and amortization of $2,747, share-based compensation $4,374, and goodwill and long-lived asset impairment of $32,678, and an increase in accounts payable and accrued expenses of $246.

Current wording

The net cash provided by operations for the year ended December 31, 2024 was primarily driven by non-cash expenses for depreciation and amortization of $3,331, share-based compensation of $3,028, our net income of $1,677, an increase in accounts payable and accrued expenses of $1,275, and an increase in contract liabilities of $784, offset by an increase in contract costs of $1,192, an increase in trade receivables of $876, an increase in equipment financing receivables of $822, an increase in prepaid expenses of $368, and an increase in other assets of $346 primarily related to the capitalization of professional service fees for our new accounting system of $234.

Previous wording

The net cash provided by operations was primarily driven by non-cash expenses for depreciation and amortization of $3,573 and share-based compensation of $3,849, a decrease in inventories of $297, a decrease in other assets of $651, and an increase in accounts payable and accrued expenses of $623, offset by our net loss for the year ended December 31, 2023 of $362, the gain on disposal of property and equipment of $1,459, an increase in trade receivables of $164, an increase in contract assets of $109, an increase in equipment financing receivables of $905, an increase in contract costs of $1,473, and a decrease in contract liabilities of $997.

Current wording

The net cash provided by operations for the year ended December 31, 2023 was primarily driven by non-cash expenses for depreciation and amortization of $3,573 and share-based compensation of $3,849, a decrease in inventories of $297, a decrease in other assets of $651, and an increase in accounts payable and accrued expenses of $623, offset by our net loss for the year ended December 31, 2023 of $362, the gain on disposal of property and equipment of $1,459, an increase in trade receivables of $164, an increase in contract assets of $109, an increase in equipment financing receivables of $905, an increase in contract costs of $1,473, and a decrease in contract liabilities of $997.

Previous wording

Net cash used in investing activities for the year ended December 31, 2022 primarily relates to the purchases of property and equipment of $289 and the acquisition of a business, net of cash acquired of $1,414.

Current wording

Net cash used in investing activities for the year ended December 31, 2024 primarily relates to the purchases of property and equipment of $27.