Crexendo, Inc.

Previous 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:

Current wording

Crexendo, Inc. is an award-winning software technology company that is a premier provider of cloud communication platform software and unified communications as a service (UCaaS) offering, including voice, video, contact center, and managed IT services tailored to businesses of all sizes. Our cloud communications software solutions currently support over six million end users globally, through an extensive network of over 235 cloud communication platform software subscribers and our direct retail offering. Our products and services can be categorized in the following offerings:

Previous wording

Cloud Telecommunications Services – Our cloud telecommunications services transmit calls using IP or cloud technology, which converts voice signals into digital data packets for transmission over the Internet or cloud. Each of our calling plans provides a number of basic features typically offered by traditional telephone service providers, plus a wide range of enhanced features that we believe offer an attractive value proposition to our customers. This platform enables a user, via a single “identity” or telephone number, to access and utilize services and features regardless of how the user is connected to the Internet or cloud, whether it’s from a desktop device or an application on a mobile device.

Current wording

Cloud Telecommunications Services – Our cloud telecommunications services transmit calls using IP or cloud technology, which converts voice signals into digital data packets for transmission over the Internet or cloud. Each of our calling plans provides a number of basic features typically offered by traditional telephone service providers, plus a wide range of enhanced features that we believe offer an attractive value proposition to our customers. This platform enables a user, via a single “identity” or telephone number, to access and utilize services and features regardless of how the user is connected to the Internet or cloud, whether it’s from a desktop device or an application on a mobile device or computer.

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-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.

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-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.

Previous wording

We generate subscription and maintenance support revenue from customer support and other supportive services. The Company offers warranties on its products. The warranty period for our licensed software is generally 90 days. Certain of the Company's warranties are considered to be assurance-type in nature and do not cover anything beyond ensuring that the product is functioning as intended. Based on the guidance in ASC 606, assurance-type warranties do not represent separate performance obligations. The Company also sells separately-priced maintenance service contracts, which qualify as service-type warranties and represent separate performance obligations. The Company does not typically allow and has no history of accepting material product returns. Customer support includes software updates on a when-and-if-available basis, telephone support, integrated web-based support and bug fixes or patches. Subscription and maintenance support revenue is recognized ratably over the term of the customer support agreement, which is typically one year.

Current wording

We generate subscription and maintenance support revenue from customer support and other supportive services. The Company offers warranties on its products. The warranty period for our licensed software is generally 90 days. Certain of the Company's warranties are considered to be assurance-type in nature and do not cover anything beyond ensuring that the product is functioning as intended. Based on the guidance in ASC 606, assurance-type warranties do not represent separate performance obligations. The Company also sells separately-priced maintenance service contracts, which qualify as service-type warranties and represent separate performance obligations. The Company does not typically allow and has no history of accepting material product returns. Customer support includes software updates on a when-and-if-available basis, telephone support, integrated web-based support and bug fixes or patches. Subscription and maintenance support revenue is recognized ratably over the term of the customer support agreement, which is typically one to three years.

Previous wording

Cloud Telecommunications Services – Our cloud telecommunications service offering includes hardware, software, and unified IP or cloud technology over any high-speed Internet connection. These services are rendered through a variety of devices and communication solutions for businesses using user interfaces such as a Crexendo branded desktop phones and/or mobile and desktop applications. Some examples of mobile devices are Android cell phones, iPhones, iPads or Android tablets. These services enable our customers to seamlessly communicate with others through phone calls that originate/terminate on our network or PSTN networks. Our cloud telecommunications services are powered by our proprietary implementation of standards based Web and VoIP cloud technologies. Our services use our highly scalable complex infrastructure that we build and manage based on industry standard best practices to achieve greater efficiencies, better quality of service (QoS) and customer satisfaction. Our infrastructure comprises of compute, storage, network technologies, 3 rd party products and vendor relationships. We also develop end user portals for account management, license management, billing and customer support and adopt other cloud technologies through our partnerships.

Current wording

Cloud Telecommunications Services – Our cloud telecommunications service offering includes hardware, software, and unified IP or cloud technology over any high-speed Internet connection. These services are rendered through a variety of devices and communication solutions for businesses using user interfaces such as a Crexendo branded and third party desktop phones and/or mobile and desktop applications. Some examples of mobile devices are Android cell phones, iPhones, iPads or Android tablets. These services enable our customers to seamlessly communicate with others through phone calls that originate/terminate on our network or PSTN networks. Our cloud telecommunications services are powered by our proprietary implementation of standards based Web and VoIP cloud technologies. Our services use our highly scalable complex infrastructure that we build and manage based on industry standard best practices to achieve greater efficiencies, better quality of service (QoS) and customer satisfaction. Our infrastructure comprises of compute, storage, network technologies, 3 rd party products and vendor relationships. We also develop end user portals for account management, license management, billing and customer support and adopt other cloud technologies through our partnerships.

Previous wording

The increase in total revenue is due to an increase in software solutions revenue of $1,169, an increase in service revenue of $436, and an increase in product revenue of $148.

Current wording

The increase in total revenue is due to an increase in software solutions revenue of $1,722 and an increase in service revenue of $337, offset by a decrease in product revenue of $288.

Previous wording

The increase in income/(loss) before income tax is primarily related to an increase in revenue of $5,563, offset by an increase in operating expenses of $2,638 and a decrease in other income/(expense) of $(1,314). The increase in revenue is related to organic growth from new and existing customers. The increase in operating expenses is primarily related to an increase in commission expense of $1,111, an increase in hosting service fees of $262, an increase in contract labor and outsourced engineering services of $443, and an increase in accounting software costs of $113. The decrease in other income/(expense) is primarily related to sale of our corporate office recognized during the nine months ended September 30, 2023 of $(1,459) offset by an increase in interest income of $66 and a decrease in interest expense of $80.

Current wording

The increase in income before income taxes is primarily related to an increase in revenue of $1,771 and an increase in other income of $87, offset by an increase in operating expenses of $1,104. The increase in revenue is related to organic growth from existing customers and new customers. The increase in operating expenses is primarily related to an increase in salaries, benefits, bonuses, and share-based compensation of $532, an increase in commission expenses of $337, an increase in third-party telecommunications charges of $135, and an increase in other operating expense of $100. The increase in other income is primarily related to an increase in interest income of $83 and a decrease in interest expense of $4.

Previous wording

To evaluate our business, we consider and use non-generally accepted accounting principles (“Non-GAAP”) net income, EBITDA, 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 goodwill and long-lived asset impairment. We define EBITDA as U.S. GAAP net income/(loss) before interest expense, interest income and other expense/(income), the gain/(loss) on the sale of property and equipment, 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.

Current wording

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 goodwill and long-lived asset impairment. We define EBITDA as U.S. GAAP net income/(loss) before interest expense, interest income and other expense/(income), the gain/(loss) on the sale of property and equipment, 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.

Previous wording

The Company has two operating segments, which consist of Cloud Telecommunications Services and Software Solutions. The information below is organized in accordance with our two reportable segments. Segment operating income is equal to segment net revenue less segment cost of service revenue, cost of software solution revenue, cost of product revenue, selling and marketing, general and administrative expenses, and research and development.

Current wording

The Company has two operating segments, which consist of Cloud Telecommunications Services and Software Solutions. The information below is organized in accordance with our two reportable segments. Segment operating income is equal to segment net revenue less segment cost of service revenue, cost of software solution revenue, cost of product revenue, sales and marketing, research and development, and general and administrative expenses.

Previous wording

The increase in service revenue is due to an increase in telecommunications services fees of $453, an increase in fees, commissions, and other, recognized over time of $99, and an increase in sales-type lease interest of $40, offset by a decrease in one-time fees, commissions and other of $156.

Current wording

The increase in service revenue is due to an increase in telecommunications services fees of $306, an increase in fees, commissions, and other, recognized over time of $98, and an increase in sales-type lease interest of $46, offset by a decrease in one-time fees, commissions and other of $113. A substantial portion of Cloud Telecommunications service revenue is generated through thirty-six to sixty month service contracts.

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, contract labor costs, customer support salaries, benefits, bonuses, and share-based compensation. The following table reflects our cost of service revenue for the three months ended September 30, 2024, compared to the three months ended September 30, 2023:

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, cost of data center hosting, software costs, customer support salaries, benefits, bonuses, and share-based compensation. The following table reflects our cost of service revenue for the three months ended March 31, 2025, compared to the three months ended March 31, 2024:

Previous wording

The increase in cost of service revenue was primarily related to an increase in third-party telecommunication charges of $47, an increase in salaries, benefits, bonuses, and share-based compensation of $45, an increase in contract labor costs to assist with the migration of our customers to our new VIP platform of $43, and an increase in other cost of service revenue of $28.

Current wording

The increase in cost of service revenue was primarily related to an increase in third-party telecommunications charges of $135, an increase in salaries, benefits, bonuses, and share-based compensation of $71, an increase in contract labor costs to assist with the migration of our customers to our new VIP platform of $55, an increase in software costs of $43, an increase in data center hosting costs of $41, and an increase in other cost of service revenue of $33.

Previous wording

The increase in selling and marketing expense is primarily related to an increase in commission expense of $342 directly related to the increase in revenue, an increase in salaries, benefits, bonuses, and share-based compensation of $100, an increase in marketing costs of $42, and an increase in other sales and marketing expense of $25.

Current wording

The increase in selling and marketing expense is primarily related to an increase in commission expense of $161 directly related to the increase in revenue and an increase in other sales and marketing expense of $22, offset by a decrease in bad debt related to a decrease in our credit loss reserve of $127.

Previous wording

The increase in general and administrative expenses is primarily related to an increase of $77 in telecommunication fees, an increase in accounting software costs of $27 associated with service contract fees for our new accounting system, and an increase in other general and administrative expenses of $6, offset by a decrease in executive and administrative salaries, benefits, bonuses, and share-based compensation of $62.

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 $201, a decrease in telecommunication fees of $44, and a decrease in other general and administrative expenses of $2, offset by an increase in accounting software costs of $27 associated with service contract fees for our new accounting system.

Previous wording

The decrease in research and development expenses is primarily related to the allocation of engineering resources to the Software Solutions segment of $191 as we finalize the migration of our classic customers to our VIP platform, offset by an increase in other research and development expenses of $8.

Current wording

The decrease in research and development expenses is primarily related to the allocation of engineering resources to our Software Solutions segment of $130 as we finalize the migration of our customers to our VIP platform and a decrease in other research and development expenses of $7.

Previous wording

Operating Results of Software Solutions segment (in thousands):

Current wording

Operating Results of our Software Solutions segment (in thousands):

Previous wording

The increase in software solutions revenue is primarily related to an increase in recurring software license and maintenance and support subscriptions of $536, an increase in in perpetual software license revenue of $493, and an increase in professional services and other revenue of $140.

Current wording

The increase in software solutions revenue is primarily related to an increase in perpetual software license revenue of $1,064 and an increase in recurring software license and maintenance and support subscriptions of $676, offset by a decrease in professional services and other revenue of $18.

Previous wording

The increase in selling and marketing expense is primarily related to an increase in commission expense of $143 directly related to the increase in revenue, an increase in marketing materials and trade shows of $103, and an increase in other selling and marketing costs of $16, offset by a decrease in salaries, benefits, bonuses, and share-based compensation of $52 due to the allocation of marketing resources to the Cloud Telecommunications segment.

Current wording

The increase in selling and marketing expense is primarily related to an increase in commission expense of $176 directly related to the increase in revenue and an increase in marketing materials and trade shows of $78, offset by a decrease in sales support software of $16 and a decrease in other selling and marketing costs of $32.

Previous wording

General and administrative expenses consist of salaries and benefits for executives, 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 three months ended September 30, 2024, compared to the three months ended September 30, 2023:

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 three months ended March 31, 2025, compared to the three months ended March 31, 2024:

Previous wording

The increase in general and administrative expenses is primarily related to an increase in salaries, benefits, bonuses, and share-based compensation of $230, an increase in accounting software costs of $32 associated with service contract fees for our new accounting system, an increase in consulting fees of $21, an increase in professional service fees of $14, and an increase in other general and administrative expenses of $41.

Current wording

The increase in general and administrative expenses is primarily related to an increase in salaries, benefits, bonuses, and share-based compensation of $338, an increase in professional service costs of $28, an increase in accounting software costs of $27 associated with service contract fees for our new accounting system, an increase in consulting fees of $21, and an increase in other general and administrative expenses of $29.

Previous wording

Research and development expenses primarily consists of salaries, benefits, bonuses, share-based compensation, and outsourcing engineering services related to the development of our software solutions. The following table reflects our research and development expenses for the three months ended September 30, 2024, compared to the three months ended September 30, 2023:

Current wording

Research and development expenses primarily consist of salaries, benefits, bonuses, share-based compensation, and outsourcing engineering services related to the development of our software solutions. The following table reflects our research and development expense for the year end March 31, 2024, compared to the year ended March 31, 2023:

Previous wording

The increase in research and development expenses is primarily related to an increase in salaries, benefits, bonuses, and share-based compensation of $315 due to the allocation of resources from the Cloud Telecommunications segment as we finalize the migration of our classic customers to the VIP platform, an increase in outsourced engineering services expenses of $64, and an increase in other research and development expenses of $1.

Current wording

The increase in research and development expenses is primarily related to an increase in salaries, benefits, bonuses, and share-based compensation of $357 due to the allocation of resources from the Cloud Telecommunications Services segment as we finalize the migration of our customers to the VIP platform and from an increase in headcount, and an increase in outsourced engineering services expenses of $61, offset by a decrease in other research and development expenses of $7.

Previous wording

Other income/(expense) primarily relates to net foreign exchange gains or losses and other income and expenses. The following table reflects our other expense for the three months ended September 30, 2024, compared to the three months ended September 30, 2023:

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 three months ended March 31, 2025, compared to the three months ended March 31, 2024:

Previous wording

The change in other income/(expense) is primarily related to a decrease in other income of $97 offset by an increase in foreign exchange gains of $40.

Current wording

The change in other income/(expense) is primarily related to a decrease in other income of $25 and an increase in foreign exchange gains/(losses) of $24.

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 September 30, 2024 and December 31, 2023, we had cash and cash equivalents of $15,451 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.

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 March 31, 2025 and December 31, 2024, we had cash and cash equivalents of $21,207 and $18,193, 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 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 nine months ended September 30, 2024, compared to the nine months ended September 30, 2023:

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 three months ended March 31, 2025, compared to the three months ended March 31, 2024:

Previous wording

The net cash provided by operating activities for the nine months ended September 30, 2023 was primarily driven by share-based compensation of $3,117, non-cash expenses for depreciation and amortization of $2,695, and a gain on disposal of property and equipment of $1,459, our net loss for the nine months ended September 30, 2023 of $423, a decrease in inventories of $207, and a decrease in other assets of $210, offset by an increase in contract costs of $994, an increase in equipment financing receivables of $770, an increase in trade receivables of $584, an increase in prepaid expenses of $560, a decrease in contract liabilities of $409, and a decrease in accounts payable and accrued expenses of $169.

Current wording

The net cash provided by operations for the three months ended March 31, 2025 was primarily driven by our net income of $1,171, non-cash expenses for depreciation and amortization of $771, share-based compensation of $726, and a decrease in trade receivables of $292, offset by a decrease in accounts payable and accrued expenses of $695, a decrease in contract liabilities of $334, an increase in equipment financing receivables of $241, an increase in contract costs of $192, and an increase in inventory of $183.

Previous wording

The net cash provided by operating activities for the nine months ended September 30, 2024 was primarily driven by non-cash expenses for depreciation and amortization of $2,505, share-based compensation of $2,293, our net income for the nine months ended September 30, 2024 of $1,170, an increase in accounts payable and accrued expenses of $695, and an increase in contract liabilities of $335, offset by an increase in contract costs of $867, an increase in prepaid expense of $819, an increase in equipment financing receivables of $585, an increase in trade receivables of $277, and an increase in inventories of $169.

Current wording

The net cash used in operations for the three months ended March 31, 2024 was primarily driven by an increase in trade receivables of $740, an increase in equipment financing receivables of $137, an increase in contract costs of $379, an increase in prepaid expense of $391, and a decrease in accounts payable and accrued expenses of $1,099, offset by non-cash expenses for depreciation and amortization of $840 and share-based compensation of $728, our net income for the three months ended March 31, 2024 of $434 and an increase in contract liabilities of $508.

Previous wording

Cash provided by or used in investing activities is driven by the purchase of property and equipment, business combinations, and asset acquisitions. The following table reflects our net cash provided by/(used in) investing activities for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023:

Current wording

Cash provided by or used in investing activities is driven by the purchase of property and equipment, business combinations, and asset acquisitions. The following table reflects our net cash provided by/(used in) investing activities for the three months ended March 31, 2025, compared to the three months ended March 31, 2024:

Previous wording

Cash provided by or used in financing activities is driven by the proceeds from the exercise of options, taxes paid on the net settlement of stock options and RSUs, payments of contingent consideration, proceeds from finance leases and notes payable, repayments made on finance leases and notes payable, proceeds and repayments on line of credit, and proceeds from the issuance of common stock in connection with an offering. The following table reflects our net cash provided by/(used in) financing activities for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023:

Current wording

Cash provided by or used in financing activities is driven by the proceeds from the exercise of options, taxes paid on the net settlement of stock options and RSUs, payments of contingent consideration, proceeds from notes payable, repayments made on finance leases and notes payable, proceeds and repayments on line of credit, dividend payments, and proceeds from the issuance of common stock in connection with an offering. The following table reflects our net cash provided by financing activities for the three months ended March 31, 2025, compared to the three months ended March 31, 2024:

Previous wording

Net cash provided by financing activities for the nine months ended September 30, 2024 primarily relates to cash received from the exercise of stock options of $1,573, offset by repayments made on notes payable of $340, the payments of employee tax withholdings from the net settlement of stock options and RSUs of $166, and repayments made on finance leases of $56.

Current wording

Net cash provided by financing activities for the three months ended March 31, 2025, primarily relates to cash received from the exercise of stock options of $1,979, offset by repayments made on notes payable of $117, the payments of employee tax withholdings from the net settlement of stock options and RSUs of $80, and repayments made on finance leases of $19.

Previous wording

Net cash used in financing activities for the nine months ended September 30, 2023 primarily relates to the repayments made on notes payable of $2,143, the payments of employee tax withholdings from the net settlement of stock options and RSUs of $264, dividend payments of $130, repayments made on a line of credit of $82, and repayments made on finance leases of $76, offset by proceeds from notes payable of $278 and cash received from the exercise of stock options of $93.

Current wording

Net cash provided by financing activities for the three months ended March 31, 2024, primarily relates to cash received from the exercise of options of $1,049, offset by repayments made on finance leases of $18, repayments made on notes payable of $112, and employee tax withholdings from the net settlement of stock options and RSUs of $60.

Previous wording

On November 1, 2022, the Company completed the acquisition of Allegiant Networks, LLC, a Kansas limited liability company (the “Allegiant Networks”) to acquire from Seller one hundred percent (100%) of the issued and outstanding shares of Allegiant Networks in exchange for (i) a cash payment at closing in the amount of $2.0 million, (ii) a three-year promissory note by the Company in favor of Seller in the amount of $1.1 million, and (iii) 2,461,538 shares of the Company’s common stock, par value $0.001 per share. In connection with this transaction, the seller Bryan Dancer, became a greater than five percent shareholder of the Company. Therefore, the three-year promissory note in the amount of $1.1 million, is considered a related party transaction. The loan agreement has a term of three (3) years with quarterly payments of Ninety-Eight Thousand Three Hundred Eighty-one Dollars ($98,381), including interest at 4.00%, beginning on April 1, 2023. As of September 30, 2024 and December 31, 2023, the outstanding balance of the related party note payable was $570 and $843, respectively. During the three months ended September 30, 2024 and 2023, the Company paid principal of $92 and $88, respectively, and interest of $6 and $10, respectively. During the nine months ended September 30, 2024 and 2023, the Company paid principal of $272 and $257, respectively, and interest of $22 and $37, respectively.

Current wording

On November 1, 2022, the Company completed the acquisition of Allegiant Networks, LLC, a Kansas limited liability company (the “Allegiant Networks”) to acquire from Seller one hundred percent (100%) of the issued and outstanding shares of Allegiant Networks in exchange for (i) a cash payment at closing in the amount of $2.0 million, (ii) a three-year promissory note by the Company in favor of Seller in the amount of $1.1 million, and (iii) 2,461,538 shares of the Company’s common stock, par value $0.001 per share. In connection with this transaction, the seller Bryan Dancer, became a greater than five percent shareholder of the Company. Therefore, the three-year promissory note in the amount of $1.1 million, is considered a related party transaction. The loan agreement has a term of three (3) years with quarterly payments of Ninety-Eight Thousand Three Hundred Eighty-one Dollars ($98,381), including interest at 4.00%, beginning on April 1, 2023. As of March 31, 2025 and December 31, 2024, the outstanding balance of the related party note payable was $384 and $478, respectively. During the three months ended March 31, 2025 and 2024, the Company paid principal of $94 and $90, respectively and interest of $4 and $8, respectively.

Previous wording

On February 1, 2024, the Company entered into a consulting agreement with Steven G. Mihaylo, Chairman Emeritus of the board of directors and a greater than five percent shareholder. In exchange for his consulting services, Mr. Mihaylo is to receive monthly consideration of $14 or $168 annually. During the three months ended September 30, 2024 and 2023, the Company paid $42 and $0, respectively, and $112 and $0 for the nine months ended September 30, 2024 and 2023, respectively.

Current wording

On February 1, 2024, the Company entered into a consulting agreement with Steven G. Mihaylo, Chairman Emeritus of the board of directors and a greater than five percent shareholder. In exchange for his consulting services, Mr. Mihaylo is to receive monthly consideration of $14 or $168 annually. During the three months ended March 31, 2025 and 2024, the company paid $42 and $28, respectively.