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CREXENDO INC
Symbol U : EXE
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Crexendo Announces Suspension of Dividend

2012-10-24 17:26 ET - News Release

PHOENIX, AZ -- (Marketwire) -- 10/24/12

Crexendo, Inc. (NYSE MKT: EXE), a hosted services company that provides e-commerce software, website development, web hosting, search engine optimization, link building, hosted telecommunication services and broadband internet for businesses and entrepreneurs, today reported suspension of its quarterly dividend program.

Steven G. Mihaylo, Chief Executive Officer, commented, "With the company successfully redeploying assets to complete the transition to B2B operations which has essentially put the Company in the position of being a "start up," the board determined this was the time to invest all available cash directly in the business. It was concluded that it is the most prudent option to deploy our capital towards expanding and further developing our core assets. There are substantial investments that the Company is currently engaged in, including the establishment of our telecom and web services dealer programs, expanding the Crexendo University Program, improving sales leads, adding additional redundancy and upgrading our cloud infrastructure, as well as adding features to continue to make our telecom and web services the best in the industry. These investments together with the fact that our legacy receivables are declining as expected, and that the core Crexendo operations are not yet performing profitably, make it clear that it is in the best interest of our shareholders and Company to use all available resources to continuing to improve the business. We continue to cut costs, increase efficiencies and run the Company as if it were a startup; therefore the quarterly dividend is an option we can no longer afford. Management and the board of directors unanimously believe this will be a far more accretive use of capital at this time."

Mihaylo continued, "As a management team we are spending all of our time making the business more efficient and working towards reducing costs and improving the bottom line. As discussed earlier, I am very excited by our product progress, which is why it was time to start a dealer program. I continue to be impressed by the prospect of the University Program. The University Program has the dual advantage of training bright interested leaders of tomorrow on our web products and introducing them to the entire suite of Crexendo products and services while providing us with the immediate benefit of sticky business customers who can use our products now. We continue to improve our other products and services ensuring our technology is world class and continuing to improve on our intellectual property so we may provide our customers the best web and telecom services that are available. Considering the investments that we need to make in the Company and what I see as great opportunities with those investments, suspending the quarterly dividend is the right decision for our shareholders, our Company, our employees and our customers."

About Crexendo

Crexendo is a hosted services company that provides e-commerce software, website development, web hosting, search engine optimization, link building, hosted telecommunication services and broadband internet for businesses and entrepreneurs. Crexendo's services are designed to make enterprise-class hosting services available to small and medium-sized businesses at affordable monthly rates without having to make large capital investments.

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) being in the position of being a "start up,"; (ii) determining this is the time to invest all available cash directly in the business; (iii) determining that the most prudent option is to deploy its capital towards expanding and further developing its core assets; (iv) being involved in substantial investments; (v) adding features to continue to make its telecom and web services the best in the industry; (vi) determining that it is in the best interest of its shareholders and the Company to use all available resources to continuing to improve the business; (vii) continuing to cut costs, increase efficiencies and run the Company as if it were a startup; (viii) determining that the quarterly dividend is an option it can no longer afford; (ix) management and board unanimously believing suspending the dividend will be a far more accretive use of capital; (x) management team spending all of its time making the business more efficient and working towards reducing costs and improving the bottom line; (xi) being excited by its product progress; (xii) University Program having the dual advantage of training bright interested leaders of tomorrow on its web products and introducing them to the entire suite of Company products and services as well as providing the immediate benefit of sticky business customers who can use products now; (xiii) continue to improve its other products and services ensuring its technology is world class and continuing to improve on our intellectual property; (xiv)providing its customers the best web and telecom services that are available; (xv) having very great opportunities and (xvi) determining that suspending the quarterly dividend is the right decision for its shareholders, Company, employees customers.

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 period ended December 31, 2011 and Forms 10Q for the periods ending March 31, 2012 and June 30, 2012. 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.




                      CREXENDO, INC. AND SUBSIDIARIES
                   Condensed Consolidated Balance Sheets
              (In thousands, except par value and share data)
                                (unaudited)

                                                               December 31,
                                                June 30, 2012      2011
                                                -------------  ------------
Assets

Current Assets:
  Cash and cash equivalents                     $       8,443  $      8,658
  Restricted cash                                       1,965         1,965
  Trade receivables, net of allowance of
   doubtful accounts of $852 as of June 30,
   2012 and $3,512 as of December 31, 2011              7,735         9,420

  Inventories                                             204           232
  Equipment financing receivables                           9             -
  Income taxes receivable                                 514           552
  Prepaid expenses and other                              762           725
                                                -------------  ------------
    Total Current Assets                               19,632        21,552

Certificate of deposit                                    500           500
Long-term trade receivables, net of allowance
 of doubtful accounts of $185 as of June 30,
 2012 and $1,949 as of December 31, 2011                1,625         6,097
Long term equipment financing receivables                  16             -
Property and equipment, net                             3,718         4,055
Deferred income tax assets, net                           272           279
Intangible assets                                          42            79
Goodwill                                                  265           265
Other long-term assets                                    213           233
                                                -------------  ------------
    Total Assets                                $      26,283  $     33,060
                                                =============  ============

Liabilities and Stockholders' Equity

Current Liabilities:
  Accounts payable                              $         463  $      1,153
  Accrued expenses and other                            1,718         2,240
  Dividend payable                                          -           211
  Deferred income tax liability                           272           279
  Deferred revenue, current portion                     7,774         9,288
                                                -------------  ------------
    Total Current Liabilities                          10,227        13,171

Deferred revenue, net of current portion                1,637         6,123
Other long-term liabilities                               250           419
                                                -------------  ------------
    Total Liabilities                                  12,114        19,713
                                                -------------  ------------

Stockholders' Equity:
  Preferred stock, par value $0.001 per share
   - authorized 5,000,000 shares; none issued               -             -
  Common stock, par value $0.001 per share -
   authorized 100,000,000 shares; 10,669,201
   shares outstanding as of June 30, 2012 and
   10,523,078 shares outstanding as of
   December 31, 2011                                       11            11
  Additional paid-in capital                           49,680        48,938
  Accumulated deficit                                 (35,522)      (35,602)
                                                -------------  ------------
    Total Stockholders' Equity                         14,169        13,347
                                                -------------  ------------

    Total Liabilities and Stockholders' Equity  $      26,283  $     33,060
                                                =============  ============




                      CREXENDO, INC. AND SUBSIDIARIES
              Condensed Consolidated Statements of Operations
              (In thousands, except per share and share data)
                                (unaudited)

                    Three Months Ended June 30,   Six Months Ended June 30,
                   ----------------------------  --------------------------
                        2012           2011          2012          2011
                   -------------  -------------  ------------  ------------

Revenue            $       4,914  $      17,496  $     10,169  $     32,064
Operating
 expenses:
  Cost of revenue          1,298          7,675         2,719        13,980
  Selling and
   marketing                 984         10,076         1,917        18,839
  General and
   administrative          2,741          3,333         5,774         6,092
  Research and
   development               505            871         1,099         1,743
                   -------------  -------------  ------------  ------------
    Total
     operating
     expenses              5,528         21,955        11,509        40,654
                   -------------  -------------  ------------  ------------

Loss from
 operations                 (614)        (4,459)       (1,340)       (8,590)
                   -------------  -------------  ------------  ------------

Other income
 (expense):
  Interest income            524          1,316         1,266         2,469
  Interest expense             -             (1)            -            (2)
  Other income
   (expense), net            (14)           (39)           14           (33)
                   -------------  -------------  ------------  ------------
    Total other
     income, net             510          1,276         1,280         2,434
                   -------------  -------------  ------------  ------------

Loss before income
 tax provision              (104)        (3,183)          (60)       (6,156)

Income tax benefit
 (provision)                 (13)        (6,162)          140        (5,040)

                   -------------  -------------  ------------  ------------
Net (loss) income  $        (117) $      (9,345) $         80  $    (11,196)
                   =============  =============  ============  ============

Net income (loss)
 per common share:
  Basic            $       (0.01) $       (0.88) $       0.01  $      (1.05)
  Diluted          $       (0.01) $       (0.88) $       0.01  $      (1.05)

Dividends per
 common share:     $        0.00  $        0.02  $       0.02  $       0.04

Weighted average
 common shares
 outstanding:
  Basic               10,634,104     10,642,384    10,582,372    10,640,489
  Diluted             10,634,104     10,642,384    10,614,888    10,640,489




                      CREXENDO, INC. AND SUBSIDIARIES
          Condensed Consolidated Statement of Stockholders' Equity
                       Six Months Ended June 30, 2012
                     (In thousands, except share data)
                                (unaudited)


                     Common Stock
                  ------------------
                                     Additional                   Total
                                       Paid-in   Accumulated  Stockholders'
                    Shares    Amount   Capital     Deficit        Equity
                  ----------  ------ ----------  -----------  -------------
Balance, December
 31, 2011         10,523,078  $   11 $   48,938  $   (35,602) $      13,347
  Expense for
   stock options
   granted to
   employees               -       -        455            -            455
  Proceeds from
   the exercise
   of stock
   options           146,123       -        498            -            498
  Dividends
   declared                -       -       (211)           -           (211)
  Net income               -       -          -           80             80
                  ----------  ------ ----------  -----------  -------------
Balance, June 30,
 2012             10,669,201  $   11 $   49,680  $   (35,522) $      14,169
                  ==========  ====== ==========  ===========  =============



                      CREXENDO, INC. AND SUBSIDIARIES
              Condensed Consolidated Statements of Cash Flows
                               (In thousands)
                                (unaudited)

                                                  Six Months Ended June 30,
                                                 --------------------------
                                                     2012          2011
                                                 ------------  ------------

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)                                $         80  $    (11,196)
Adjustments to reconcile net income to netcash
 provided by (used for) operating activities:
  Depreciation and amortization                           759           704
  Impariment of inventory and intangible assets             -         1,075
  Expense for stock options issued to employees           455           362
Deferred income tax provision                               -         5,973
Change in uncertain tax positions                        (167)            -
Changes in assets and liabilities:
  Trade receivables                                     6,157        (3,223)
  Equipment financing receivables                         (25)            -
  Inventories                                              28           345
  Income taxes receivable                                  38           570
  Prepaid expenses and other                              (37)          411
  Other long-term assets                                   20            (8)
  Accounts payable, accrued expenses and other           (573)       (1,624)
  Deferred revenue                                     (6,000)        4,773
  Other long-term liabilities                               4          (931)
                                                 ------------  ------------
    Net cash provided by (used for) operating
     activities                                           739        (2,769)
                                                 ------------  ------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Acquisition of property and equipment                (1,024)         (348)
  Investment in subsidiary                                  -           (56)
                                                 ------------  ------------
    Net cash used for investing activities             (1,024)         (404)
                                                 ------------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from exercise of stock options                 498            60
  Repurchase of common stock                                -           (89)
  Payments made on contingent consideration                (6)            -
  Dividend payments                                      (422)         (427)
                                                 ------------  ------------
    Net cash provided by (used for) financing
     activities                                            70          (456)
                                                 ------------  ------------

NET DECREASE IN CASH AND CASH EQUIVALENTS                (215)       (3,629)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD          8,658        14,207
                                                 ------------  ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD         $      8,443  $     10,578
                                                 ============  ============

Supplemental disclosure of cash flow
 information:
Cash paid (received) during the period:
  Interest                                       $          -  $          1
  Income taxes                                            (11)         (569)
Supplemental disclosure of non-cash investing
 and financing information:
  Dividends declared                                        -           213
  Purchase of property and equipment included in
   accounts payable                                        16           395



Contact:

Crexendo, Inc.
Steven G. Mihaylo
CEO
775-530-3955
Stevemihaylo@crexendo.com

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