Steve Mihaylo - Chief Executive Officer Jeff Korn - Chief Legal Officer Ron Vincent - Chief Financial Officer Doug Gaylor - President and COO Satish Bhagavatula - Chief Information Officer and CTO

Robin Lochner - Verizon Jeff Bash - Private Investor Chip Saye - AWH Capital

Good day. And welcome to the Fourth Quarter 2012 Year End and Financial Results Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Steve Mihaylo, Chief Executive Officer. Please go ahead, sir.

Thank you, Stephanie, and good afternoon, everyone. Before I get started, I’m going to have Jeff Korn read our Safe Harbor statement. Jeff?

Thank you, Steve. I want to take this opportunity to remind listeners that this call will contain forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for such forward-looking statements. All statements made in this conference call other than statements of historical fact are forward-looking statements. Forward-looking statements include, but are not limited to words like, belief, expect, anticipate, estimate, will and other similar statements of expectations identifying forward-looking statements. Investors should be aware that any forward-looking statements are based on assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those discussed here today. These risk factors are explained in more detail in the company’s filings with the Securities and Exchange Commission, including the Form 10-K for the fiscal year ended December 31, 2011 and the Form 10-Qs for the year 2012, as well as the Form 10-K for the year ended December 31, 2012 when filed. Crexendo does not undertake any obligation to publicly update or revise any forward-looking statements, whether result of new information, future events or otherwise. I’d now like to turn the call back to Steve. Steve?

Thank you, Jeff. Normally what I do is I give out an overview of our previous quarter and year in this conference call. I’m going to change the format just a little, because this year I’m going to have Ron Vincent, our CFO discuss all of our financial information, instead I’m going to give you a little report of what we have done over the past year. I know I said this many times and I don’t want to sound like a broker record but I’m very optimistic about the future. Before you say, there he call us again, let me explain. Things have taken longer then I thought or want it but we have made great progress. First it was a little longer and harder task when I envision to completely transition this business from B2C to B2B. However, we have done this and we did this while improving our customer experience and service offerings through our legacy clients, while right-sizing the business. There was multitude of tasks that had to be done simultaneously. I know will not be easy, it would not be easy but I did not expect it to be this hard and take this long. Nevertheless, we have reached a more appropriate business model. We have spent considerably more time and effort fully cleaning up all the legacy issues that we expected but we are almost there, while keeping a laser focus on cost we continue to improve and update our Web Services business offerings also a difficult and time consuming task which effected sales. With the same focus on cost we continue to provide state-of-the-art telecom services that match or exceed anyone in the industry. We completely rebuild a state-of-the-art data center here in our Tempe offices, while also building much needed infrastructure again a more difficult and time consuming task than I expected. We have retooled and we reburden but has taken as long to get where we are today than I though it would. This is what is different about today than even as recently as six months ago. I’m optimistic, I see the excitement in our employees, everyday that they are aware of the success of the changes we have made and enthusiasm is going to propel us to the next level. I can also provide metrics that show why I’m optimistic, after retooling our Web Services we now have restored our backlog to historical level, which I expect will continue to improve. Our telecom sales have improved quarter-to-quarter and I fully expect that tend -- that trend to continue. I have just completed our largest to date enterprise -- we have just completed our largest to date enterprise sales and installation which was a huge success. This shows we can tackle any size job. Our Network Services sales continue to improve quarter-to-quarter, another exciting trend and as we increase the transition and amount of our recurring revenue stream we have collected our legacy receivables of slightly higher than historical rates largely attributable to the customer support we have provided. We are increasing the size of our dealer network and have gotten our first sale from the channel. I expect that to continue to gain traction and grow. The university program continues to grow and excites didn’t tackle the end customers. We are having 120 websites build now that I believe competes with website build anywhere. These are going to be the first of what I’m condensed will be many long-term happy successful customers, but we want to use many of the products and services we provide. We have changed our business and we have made it better. I have worked tirelessly with our management team. We have a budget that we believe is attainable. We have targets that we believe can be achieved. We have a sales process that we believe in. And we have the services products and people that will get us there. Our capital requirements are readily manageable. We are exploring opportunities to increase sales both organically and with well time strategic acquisitions. I’m prepared to take additional steps to fund this business if necessary. We have various options including a long mortgage of our property, our rights offering to all of our shareholders. We will do what is necessary and make -- and what make sense. I’m very excited about the progress and the future. And let me add one more thing to this. During this entire process we completely revamped our accounting system and we streamlined it. We got the cost of licenses down the vendors like Oracle and other way below what they were historically. And bottom line is we are getting it done. You are going to start seeing the results of these improvements with the current quarter and you’ll be able to compare year-over-year exactly what’s happening. So, with this, I’m going to turn it over to Ron Vincent to go through the numbers. Ron?

Thanks, Steve. For the year ended December 31, 2012, we had consolidated revenue of $17.2 million, compared to $48 million for 2011. Consolidated revenue for the fourth quarter of $3.1 million, compared to $3.9 million for the third quarter of 2012, and $5.7 million for the fourth quarter of 2011. As you are aware, the decrease in revenue on a quarter-over-quarter and year-over-year basis is primarily due to the suspension of our direct mail seminar sales channel. Although, we continue to collect our StoresOnline receivables from extended payment term agreement entered into prior to July 2011. These agreements typically have a 24 to 36 month payment term. Our StoresOnline revenue will continue to decrease overtime as customers complete their payment obligations. From a StoresOnline segment, we generated revenue of $2.3 million for the fourth quarter, compared to $3 million for the third quarter of 2012 and $5 million for the fourth quarter of 2011. The decrease quarter-over-quarter and year-over-year was 23% and 54%, respectively. Revenue for the year decreased 70% to $13.9 million, compared to $45.6 million for the year ended December 31, 2011. StoresOnline revenue is generated from web hosting services and cash collected on accounts receivable balances or our EPTA agreements. Web hosting generated $693,000 for the fourth quarter of 2012, compared to $777,000 for the third quarter of 2012, and $960,000 for the fourth quarter of 2011. Cash collected on EPTAs generated revenue of $1.2 million, compared to $2.1 million for the third quarter of 2012 and $3.4 million for the fourth quarter of 2011. The decrease quarter-over-quarter and year-over-year was 43% and 65%, respectively. Revenue generated from the StoresOnline segment will continue to decrease as we collect on these receivables. Based on our current collection rate we expect to collect approximately $3 million in revenue from our StoresOnline receivables over the next 12 to 18 months. Interest income from EPTAs receivable was $259,000 for the fourth quarter, compared to $406,000 for the third quarter and $1 million for the fourth quarter of 2011. The decrease quarter-over-quarter and year-over-year was 36% and 74%, respectively. We will continue to collect interest on our EPTAs receivable at a decreasing rate as the account receivable balances doing this. Crexendo Web Services segment generated revenue of $468,000 for the fourth quarter of 2012, compared to $575,000 for the third quarter of 2012 and $638,000 for the fourth quarter of 2011. The decrease quarter-over-quarter and year-over-year was 19% and 27%, respectively. Revenue for the year increased 8% to $2.5 million, compared to $2.3 million for the year ended December 31, 2011. We continue to maintain a strong backlog of $1.1 million at December 31, 2012, which is consistent with our backlog in the prior year. Crexendo Network Services segment revenue for the first, second, third and fourth quarters of 2012 were $75,000, $168,000, $235,000 and $327,000, respectively. Revenue for the year increased 632% to $805,000 for the year, compared to $110,000 for the year ended December 31, 2011. We are excited about this positive trend in our Network Services segment revenue, which primarily related to hosted telecommunication products and services. We continue to experience significant growth in our Network Services backlog, which increased to $2.4 million at December 31, 2012, compared to the $155,000 at December 31, 2011. The majority of our Network Services contracts are 36 month contract and as such the revenue associated with these bookings in this quarter will recognize over the next 36 months. Few financial highlights, at December 31, 2012 we had cash and cash equivalents excluding restricted cash of approximately $7.4 million, compared to $8.7 million at December 31, 2011, including restricted cash of $1.4 million and $1.9 million, respectively, we had $8.9 million and $10.6 million at December 31, 2012 and ’11, respectively. For the year ended December 31, 2012, we used $446,000 for operations. We used $1.1 million for investing activities, offset by $521,000 release from restricted cash and we used $143,000 for financing activities. Excuse me, we continue to have a strong working capital as of December 31, 2012 at $6.3 million, compared to $8.4 million as of December 31, 2011. Working capital excluding deferred revenue as of December 31, 2012 was $9.4 million, compared to $17.7 million at December 31, 2011. For the fourth quarter, we had a loss before income tax provision of $3.3 million and net loss of $3.2 million after income tax benefit of $82,000. For the year ended December 31, 2012, we had loss before income tax provision of $4.1 million and net loss of $3.9 million or a loss of $0.37 per diluted common share after income tax benefit of $212,000. With that, I’ll turn it over to Doug Gaylor, our President and COO.

Thanks Ron. Thanks everybody for joining us. We are seeing some nice trends and successes from our sales effort, so let me start by highlighted some of the Q4 accomplishments that Crexendo achieved. We had record sales bookings of $1.5 million for the quarter with a mix of 55% of those sales coming from telecom and 45% of the sales coming from web marketing. Overall, for the 2012 fiscal year, we had sales bookings of $5.01 million, which was an increase of 40% from $3.6 million in bookings during 2011. We had record installations of 941 telephone devices in Q4 that was up from 600 telephone devices installed in Q3, so very nice trajectory that we are seeing there. We had record sales in Network Services internet circuits with 20 accounts sold in the quarter, which was double the amount that was sold in Q3. We continue to have good traction in booking events for lead generation as we booked 18 events in the fourth quarter and those events resulted in $250,000 in sales so far with many more opportunities in the pipeline. We are also extremely excited about launching our new dealer sales program during the quarter. We currently have 12 dealer signed up for the dealer program with 60 more evaluating the program and sales of $75,000 to date. We have launched webinar and marketing campaigns during the first quarter to continue to build on the early growth of this program. The dealer sales program is the platform that should generate a lot of great excitement and sales in the future as we expect to continue to rapidly expand this program. The program is a residual base model that pays our dealers up to 25% of the recurring monthly spend of customers that they sell on Crexendo’s telecom services. During Q4, we completed one of our largest telecom installations to date and we are getting rave reviews from that client. We continue to manage the cost and efficiencies as Steve pointed out within the business and made numerous cost-cutting measures during the quarter, consolidating departments and renegotiating service and support costs. As Ron had mentioned, we continue to grow both our web and telecom revenue backlog. The nice increase to the web backlog reverses the trend of two declining quarters of web backlog and put us in a much stronger web revenue position starting in 2013. The significant increase to our telecom backlog continues to build on a very nice trend that we expect to continue. We will also be implementing an activation fee on our telecom accounts that will further improve margins and revenues for this division. Although, we have not experienced the bookings increase at the levels previously forecasted, we are seeing the most significant of our sales trend all pointing in a very positive direction. These trends along with the diligent review and management of all cost aspects of the business have help put the organization on track for much smoother selling in the future. 2012, we completed our tremendous transition from B2C company to B2B company. We had major C level management changes, calling a new President and COO, new Chief Technology Officer, new Chief Financial Officer, all during the second quarter of 2012. We hired a Director of Sale to help grow our direct sales division. We hired a Director of Dealer Sales to establish and build a dealer sales program. We relocated our entire accounting department from Utah to Arizona under the management of our new CFO. We relocated our primary data center from Utah to Arizona under Satish, our CTO. We moved to our Utah offices since our space is unacceptable. We launched our Network Services offering for reselling internet circuits and officially launched our hosted telecom offering. And finally we’ve begin our university program offering free websites for businesses through our partnership with major universities. We accomplished a lot in 2012 but we realize that we still have much more to do to realize our goals and our potential. With the majority of our legacy issues behind us we can focus all of our attention on building and increasing our sales and sales channels for 2013. I'm extremely proud of the work that we have accomplished so far in 2012 and I’m extremely excited to lead our company into the future, which is ripe with opportunity. I will now turn it over to our CTO, Satish Bhagavatula for an engineering and technology review. Satish?

Thank you, Doug. Greetings everyone. I'm glad to report that we’ve had great success in 2012 and most notably during Q4 last year. All these accomplishment reflect increased efficiencies of our technology, infrastructure, personnel and performance of our carriers. As Doug mentioned, we successfully moved our primary data center from Utah to Arizona without disrupting any services to our customers, web and telecom alike. We believe Arizona is less prone to climatic disruptions and offers a good foundation to Crescendo as we grow our business. As part of the move, we were able to consolidate some of our carrier contracts and reduced costs. This was very timely, as it has allowed us to deliver better quality of service to many of our customers across United States. Although, we have -- although we have good relations with our current carriers, we continue to evaluate various tier-1 carriers to improve our presence, reach and cost. We have seen considerable growth in the telephone deployment and we will continue to preserve and maintain the state-of-the-art data center. Due to the shift in the business from B2C to B2B, we’ve lost some web engineering talent during 2012, including our Director of Web Engineering. In Q4 of last year, considerable effort was made to hire engineering talent in Arizona and the corresponding engineering team in Utah and Arizona. We hired a new Director of Web engineering, who comes with many years of experience in web technologies and software development. We continue to invest in the usability of our product and the on-boarding of new customers, as we ramp up our University Program. On our telecom platform, we added significant amount of new features throughout the year, including but not limited to scalability, stability, reporting and call center functionality. Some of the features we added were automatic call recording, call monitoring, whisper and barge. Although many of these features were improvement for some of our current customer requirements, they are available to all our customers immediately, which is one of the so many benefits of our hosted platform. We also officially started rolling out IP 300G, a high-end gigabit color display PoE form, which has been very well received by our base and current prospects. We continue to adopt more cloud technologies to allow for greater automation of our business in IP division, which in turn increases efficiencies in how we deliver our services to our customer and improves our margin. With that, I will now turn it over to Steve.

Thank you, Satish. At this time, we are going to open this up to questions from our audience. So you might want to give them a few minutes to respond, Stephanie?

Thank you. (Operator Instructions)

Who is our first one, again?

Our first question will come from Robin Lochner.

Good afternoon, Robin. Robin Lochner - Verizon: Hi. Good afternoon, Steve. I had a couple quick questions.

Okay. Robin Lochner - Verizon: Given the optimism about the future and the progress that you’ve made in just reporting on, do you think we are close to the point where a few of the insiders of the company other than yourself would begin buying the stock?

Well, I can’t talk for anybody else but I’m certainly buying the stocks. So if any of you want to sell your stock just give me a ring. Robin Lochner - Verizon: Okay. Given the excitement and the success of the University Partner Program, all the colleges and universities that were in that program, candidates to buy Crexendo services and have any of them actually bought the services?

We’ve actually talked to one of the universities and we will be talking to another one soon, and they have just signed about three months before with another vendor. But, yeah, that’s a very possibility. Everyone on the planet that uses telecommunication services in a business is a potential prospect of ours. Robin Lochner - Verizon: Okay. We are now kind of almost at the end of the first quarter in mid-March. All the positive trends that you’ve just reported for the fourth quarter continuing in the first quarter. I mean I obviously don't have full first quarter results yet. But when we were listening to the first quarter results, is there any reason to assume based on what you've seen so far that you won't be reporting a continuation of the trajectory that you just talked about it in the fourth quarter?

Yeah. The answer is yeah and maybe, Doug, would you like to comment a little on that?

Sure. Sales on about telecom and web are extremely strong so far this quarter and I don't anticipate any reason why we would not see these trends continuing. Robin Lochner - Verizon: Okay. And then on the previous call, I think there have been, maybe a brief mention about the possibility of M&A activity in 2013. When you had talked about potentially taking out a loan for the business, or mortgaging the building or having a rights offering, would the purpose of that funding be to fund M&A activity? And is there anything along those lines on the horizon?

Well, yeah. Yeah to the acquisitions. I mentioned that in my opening statement that we are going to look at that as another means of growing our business. As far as potential loans or mortgages or rights offering and any of that, it’s basically the auditors that have to look out 15-months in advance and look at whether or not we have enough cash to make the transition from a company that's basically been a start-up this year and all of last year to an operating company with profits. Right now, they feel it might be slim and they’ve asked me to step up to the plate, which I have and given them the assurances that this will happen. So we don't expect it but if we do need it, we would fund the business either through a loan from myself, a mortgage on our building or rights offering to all of our shareholders. Obviously, a loan would be the quickest and easiest thing to do. As far as needing money for acquisitions, the only acquisitions we are looking at ones were it makes sense to do it with stock. But more importantly, we feel there is a lot of acquisitions out there we can get seller financing from. In other words, the seller of the business would take a portion of the revenue stream as compensation. So, I shouldn’t require any cash out of pocket. It’s all sellers financing. So, I don’t think we are going to need money for that, Robin. Robin Lochner - Verizon: Okay. That sounds good. And I mean I know rights offering is just a hypothetical possibility. But if that were to come into play, is it safe to assume that you would act as a backstop in such an offering?

Absolutely. Robin Lochner - Verizon: Okay. That’s all I had today. Thank you and congratulations on the progress you’ve made.

Thank you, Robin.

Our next question is from Jeff Bash.

Good afternoon, Jeff. Jeff Bash - Private Investor: Hi. Steve. How are you?

Good. How are you doing? Jeff Bash - Private Investor: Okay. Let me start with one for Doug. Could you give me a general overview of how you see the -- let’s say the market opportunity, perhaps in terms of size, how you see the potential for penetration of your technology into this market? Is it well recognized and well into the market and what do you see in terms of competition?

Sure. So if you look at the -- let me start with hosted telecom first. If you look at the hosted telecom industry, Infonetics Research which is an industry experts in our field. They estimate that the revenue is generated through hosted telecom and voice over IP services, is going to go from a $12 billion industry in 2010, 2011 to upwards of $75 billion industry by the end of 2015. So the amount of opportunity out there is tremendous. We anticipate trying to take our share of that business opportunity out there and are gearing up to do so. The majority of business customers out there today still have traditional telephone systems. When I say the majority, the high majority probably in the 90% range until all of those customers are potential opportunities for us. All of those customers have traditional phone systems with traditional dial tone and traditional expenses associated with the dial tone long-distance, et cetera. Our solutions in many cases save them 25%, 35%, 50% in some cases on their monthly telecom expenses. We anticipate by going out through our dual approach strategy for our direct sales and through our dealer sales of being able to capitalize on that. Our dealer program, three months in the making now of developing all the processes and put everything in place. Now, we are ready to go out and launch this with all of our dealers, potential prospects out there. That’s a huge opportunity for us because getting out to the masses out there. Businesses that are in the sector today are looking for solutions to move to the cloud because their traditional hardware-based solutions are going by the wayside. So there going to be looking for a partner and we feel we are the perfect partner, perfect fit for them. Our program is very attractive, very aggressive compared to a lot of our competitors. When we look at our competitive industry out there, there are a lot of competitors out there. A lot of these competitors are using off-the-shelf type hosted solutions from companies like BroadSoft, Asterisk and et cetera. When we look at those particular resellers out there, there is no uniqueness to them. There is no differentiating factors to them. The fact that we manufacture our own product, the fact that we are the designers and the engineers of our platform, the fact that we have a different approach, the fact that we have the experience in the industry, I think gives us a huge advantage over our competition. So we are spending a lot of time to build the right program, but I'm extremely confident that we are going to be able to take advantage of the huge growth that we see in hosted telecom over the next few years. To flip to the other side, just real briefly on web. Again, tremendous opportunity in web marketing, lots of competition in the web marketing, much more competition in the web marketing than in the hosted telecom but still a great opportunity out there. Our object is that that every business has a website out there and most of them need our services because if they are not found on the first page of the search engine results, we can help them out. So lots of opportunity, I couldn’t be more optimistic about the opportunity ahead of us. Jeff Bash - Private Investor: Okay.

We also think -- was part of your question, the size of some of the organizations that we’ve sold to. Jeff Bash - Private Investor: No. But I would be interested in hearing.

Well, we’ve got at least four, five customers, multi-location. Customers with in excess of 500 devices and we are seeing a lot of this. We’ve built a lot of functionality into our switch that other companies don't have the ability to provide. It allows us to do multi-location customers very easily. In some cases, the customers are thinking that that they actually just have to shift them the phones and they plug them in on the right desk. And they were just really, really happy and we’ve got customers all over the United States that we serve out of our primary data center which is Tempe, Arizona. We have them as far east as New York, as far as southeast is Florida. So the point, I'm trying to, make here is we are able to do larger installations and we will be doing more multi-location installations in the future. Jeff Bash - Private Investor: Okay. Great. I have one follow-up question for Doug. When you lose a piece of business you bid on, would you say it's priced company capability? They weren't that serious and stayed really incumbent or what?

Right now, there is two factors. On the telecom side, it's probably just having a green salesman out there sometimes. We actually increased some of our pricing because we were so far into the competition. We added an implementation charge and we increased the cost on some of our telephone sets. So in that case, it’s usually just ourselves. There should be no reason why we lose deals, but we do occasionally on hosted telecom. On the web services as Doug pointed out, that’s a very competitive industry and there are maybe times where we are losing on price. So, I’m going to let -- Doug actually will give you his take on this.

Yeah. I think as more and more customers on the telecom side consider cloud communications, I think the challenge a year and a half ago was a little uncertainty on moving to the cloud. I think a lot of that uncertainty is gone by the wayside. People feel lot more comfortable with the cloud as a very reliable solution for them, in a lot of cases much more reliable than their old traditional system. So when we do lose opportunities, Jeff, I would say that we are losing opportunities on occasion to customers either staying in trends with what they have. They don't want to make the move to the cloud or they're just putting up decision. We rarely lose opportunities head-to-head for competitive reasons. We tend to lose them because the customers just decide that they are not going to move forward with any solution and they put it on the back burner, which still leaves us an opportunity for the future. On rare occasions, there are some feature sets that aren’t as conducive to the cloud that we are currently and diligently working on, such as high-end ACD type applications. We’ve come a long way in the last year with our ACD responsibilities and if you look at our ACD offerings today, I would say that we compete with about 95% of the marketplace that we need to compete with. There are going to be some high-end applications we would want to go after. Southwest Airlines call center with our ACD packages today. But for most ACD offerings, we are very competitive today. On the website as Steve said a lot of competition so. Jeff Bash - Private Investor: The University Program there I presume is sort of a unique approach, which might be less subject to competitions. Is that fair to say?

Exactly. So by living in with the premium approach with our University Program, getting a free custom built website by the University Program is a great advantage because customers would have to spend a lot of money to get a similar type product offering to build a website. Once they have the website with us, that’s a great customer for us to go out and cross-sell opportunities. So now if they are a customer and they already know who Crexendo is, we can go out there and talk to them about telecom offerings and web marketing offerings. And it makes for a much smoother sale opportunity because we are already a known entity. We don’t have to prove ourselves. They’ve already got our platform.

There is something else, Jeff and I realize we have announced this before. But I think it’s part of what I alluded to when I made my opening remarks. We are different than a lot of telecom hosting companies. First of all, we have a very expensive engineering staff and we can respond to customers who want quicker. We are pushing out new apps and new services every four to six weeks in our software releases. And I’m going to let, Satish talk about this in a minute. But unlike any other hosted telecom companies that we know of, we are an actual registered telephone company in the States and in Canada. We are a CLEC, that’s a local exchange carrier and I don't know of the single other company that is and that’s a great deal of protection to the consumer and the business that goes with our services. The other thing and one of the things that scares people a little as they say well, the quality of service is not quite as good as the old switch telephone network. And I’m here to tell you that we feel we’ve actually exceeded the quality of service on the old telephone network and I’m going to let Satish tell you why. Satish, could you just give your five minute, shorter version of portion on that.

I’ll keep it short. Thank you, Steve. Jeff, I’ll just quickly comment on it. Most of our technology, they’ve had good background in telephone equipment for Time Now and we are renovating very rapidly and we follow lot of SaaS and clouds principles. So we developed and adopted on a regular cycle for the software. They mature software development lifecycle. We’re constantly improvising on our functionality like task bar. So whenever we have occasions where we have lost potentially or what we sense as what we lost to because of feature parity or lack of functionality, we quickly discuss with our customers. We engage with our customers that they mature product management process and discuss with them to see, what are the pinpoints to see how we can address that and we are able to pin back into a full loop and address, represent and rate it very quickly within the next six weeks or whenever the thing would be. So that’s how we do it. As for the comparative advantage, one of the things that they’ve done, I think one of the good things that came out of dot.com burst of the 90s was that the infrastructure and the fibers that were made out across was humongous and there’s an enormous amount of capacity in dot fiber which has allowed us to grow tremendously within the industry with respect to streaming or real-time communications, if you will. So I don’t believe or we don’t believe there is a need or necessity to build that give pipes to every little customer, which many of our competitors do. What we’ve been able to do is and we’ve been able to prove this throughout this year. We have taken on very large installation like what Steve and Doug were mentioning about and have been able to deliver very good quality offering and voice to their premise without having to require them to expense, take on additional expenses of quality, network infrastructure. Having said that, there is always a complimentary offering that our network services solutions may have been able to provide them bandwidth that they needed to, which makes it much more lucrative option for customer. So I think that’s a great opportunity for us from a cost perspective but also enormous amount of advantage that we have in Crescendo that some or many of our competitors may not have. Jeff Bash - Private Investor: Okay.

Just one more comment and everyone around here is making fun of me right now but anyway. We have a customer out in Texas that’s out in a real location and they actually have to go with wireless solution on their data circuits. And we have over a 100 telephones, desktops in that particular customers’ location over a fairly large campus and it’s working beautifully. So it’s not only on the cloud, it’s reaching the cloud through the air. You know, it’s a wireless connection. So that’s the kind of capability we have compared to a lot of the other companies out there. And I really feel that this year and next year, you’re going to see some remarkable growth in what we’re doing. Jeff Bash - Private Investor: Terrific. I’ll take too much time but I’ve got two more questions.

Okay. Jeff Bash - Private Investor: University program, I mentioned six now. What do you think for the fall semester is possible? I don’t remember if you said anything on that.

Well, we’ll grow 120 this semester, probably a little less than that in the summer session and then maybe as many as 250. We agree with that in the fall semester. So that will be close to 400 or 500. Now, that doesn’t sound like much compared to what StoresOnline used to do, but these are customers that are happy with this and they like what they say and it’s an opportunity for car sales. Next year, I think we can probably don’t let again. So maybe upward of 1000 next year and then the following year, it will really start to gain traction. But this is something that will be very difficult for any competitor to achieve or even penetrate. And it’s an area that we may get to the point where we have to get our affiliate program and dealer programs to kick in a little quicker. So we have the mid source for the free website customers. Right now, we do it through tradeshows. But in some cases, we had a semester until when we were five or 10 website short because of that. So I’m very optimistic about that. And we’re adding functionality, I forgot to mention that to our web product that we’re in beta test right now on linking in the quick books and other accounting systems. And maybe we want to say what else we’ve done on that, Satish.

Lot of the things is part of the new strategic initiative for us to be able to drive more by boosting revenue through the university program and bringing on board. But the same time, we have too keep the cost of implementation shorter unlike in our previous model there, they used to take a lot of money to actually implement the website system. So fundamentally, one of the things that has to happen is the ease of use and the target visibility on what we call the way customer signs up and onboards to a platform is a very important key aspects that needs to be developed. So as I mentioned earlier, I’ll bring on new talent and director of web engineering has helped us focus on those areas and have new task bars in terms of how we can accomplish that. We have a great platform that we have used in the business. And we’re trying to build on top of it to be able to comp a lot of our greater functionality and greater adoption where the customers are able to go online and sign up and very easily get a feel for our builder. And then Steve also talked about back office integrations for our e-commerce vendors and stuff such as quick book and stuff. We’ve done a lot of other things but pay down lot of business vendors. So that’s just very common place but it’s important for us to stay on top of these things to be comparative with other vendors out there. Jeff Bash - Private Investor: Thank you. I’ve got one last financial question and I’ll….

Okay. Jeff Bash - Private Investor: I’ll give way to the patient people behind me. Segment operating expenses in Q3 on web went from 1406 to 2200 in Q4 as reported. And the network went from 827 to 2300. These are systematic increases. I suspect it’s more of a change in now expenses were allocated between corporate and segment as opposed to really very dramatic increase in money expenses. Is that correct or am I wrong?

That’s right. We’re right now reporting the -- if you recall from the product year, and the quarterly and annual balance, we reported at four segments, which was corporate and allocated cost. As we’ve taken a look at the ability how the chief operating decision maker makes decisions for the business. It’s important that we’re looking at all the costs takes to run these businesses, each of the segment. And as we’ve done that and we budgeted our business that way, we changed the way we reported this year end report. So when you see that in the 10-K, it will have owing to three segments with all the cost allocated to each of those three segments.

And I think furthermore Jeff, you are going to be impressed with the Congress network we made, all the areas, the cost areas, the expense areas, starting out in the first quarter of this year. So make a lot more sense and as the very end of the legacy receivables run off then they are going to have good clean comparisons going forward as well. Jeff Bash - Private Investor: Great. And I just want to make one last observation. I have been involved with this story for nearly 10 years now. And for the first time, I saw the hearing, the things were in place to become a good company. And now you just to have go out become one -- become a big company, that’s what I meant to say. And now you have just go out and become one?

And I agree with that. And I’ve been involved in this business as a CEO for four years and in the investment for six years or so. Along with you and the other shareholders, I have no choice except to make this success for all of us and the entire management team has incentives and place to do the same. And we’re all very excited about that. Jeff Bash - Private Investor: Thanks very much for the time.

Thank you. Jeff Bash - Private Investor: Good luck.

Thanks Jeff.

And we do have another question. We’ll take our next question from Chip Saye. Chip Saye - AWH Capital: Hey Steve, how are you doing?

I’m doing well. How are you? Chip Saye - AWH Capital: Very good. I just want to ask you a couple of questions and make sure I heard right. I’m looking at your year-over-year numbers, taking your cash and your stricter cash, your AR, it’s gone from about $26 million to $12 million. And that’s a pretty steep drop, which we knew is going to happen but we didn’t know what was going to happen. And so we didn’t get the bump in revenues like we thought we’re going to have. I just want to make sure I heard you right on what opportunities or what you could do to make sure we have enough cash to operate the business in the next year or two?

Well, thank you, Chip. First of all, a lot of decrease in the cash and available funds was result of having a down size of the organization. There is a cost that goes with that. And I asked some of the same questions that all of you or specifically you are asking. But it helped us refine a lot of different things. First of all, just to give you an example of someone who is streamlining, we’ve done around here. When I came into the business, we had 35 people in our accounting department. How many are in at now, Ron?

Eight.

Eight people. So we went from 35 to 8. Some of those people relocated which there was a cost involved but most of them were hired here. The results are cost of severance and other expenses, involvement in the transitioning the business. We totally change from an Oracle-based accounting system to a cloud-base accounting system at a very reduced cost. But there were also legacy contracts with Oracle and other vendors that we had been wind down and that’s our plan. As long as a shorter bliss, you’re going to see dramatic drops in G&A and other expenses in the coming year. I would venture this safe property somewhere in the neighborhood of 40% year-over-year. That didn’t occur for me in ‘11 to ‘12, 2011 to 2012 because there were a lot of costs associated with legacy business and just winding it down customer support levels and so on. We’ve now got a very stable group of hosted web customers. We’ve got a stable group of telecom customers and long and short of it is, we don’t need to have the amount of support that we did last year and the year before. So there’s a lot of cost that will be winding down here, starting in the first quarter of this year. But we’re not going to quit with just first quarter of this year. We’re going to continue to work on those costs. There is still vendor agreements that we’re working on. We’re renegiotiating contracts. There may be a literally a handful of additional people that we’ll have to make changes with but its’ not going to be anything like it’s been in the past. We are down to our quarter. We are down to our fighting ways and I expect that we’ll be able to maintain those levels. Another things that’s interesting about this business compared to the old [Intel] model that I ran before this, all of our switches and stuff were mostly in one facility and where we had 700 technicians on the road with trucks and inventory and all of that, remember that’s required in this business. So we can run very large business with probably 10 or 12 people there, mainly our data center. Right now, it’s just a couple of people. But even as big as [Intel] got, we can do that with probably 10 or 12 compared to 700. So those are the kind of productivity gains that we’re seeing in this business. And I’m very, very confident that the forecast we have in place now with the tools we’ve developed will be achievable and exceedable. So that’s where we’re going .That’s where we’ve been. Chip Saye - AWH Capital: Okay. You mentioned, my question really also was about, so I hear you on reducing the expenses. So we won’t have as much loss next year. But number two, in the event that as you said the orders, once you look out 15 months in advance and make sure you have enough cash in the event, if I heard you correctly, you would back stop the company with a loan or personal loan, takeout loan, or rights offering. There are other things that you’re looking at, right?

That’s correct. Chip Saye - AWH Capital: Okay.

And whenever our board decides to do, I’m willing to step up to the point through the entire amount if we don’t have other shareholders in the rights offering. They would join me. Chip Saye - AWH Capital: Okay. All right, number two, your dealer program. I know, it’s just now going to start and it sounds like you had one sale for $75.000 in the fourth quarter. What could that program be in 2013? Could you put any revenue numbers around there?

I’m going to let Doug talk about that. But at [Intel] we have well in excess of 500 dealers. And we’ve got a much bigger pool of dealers to draw from such as office supply companies, furniture companies, any one that sells into the enterprise or a business community, a copier machines companies, all of that. And Doug will handle the answer to your question. Chip Saye - AWH Capital: Okay.

Yeah. As we look at our dealer program, as I mentioned we’ve got 12 dealers signed on now, continuing to see sales, actually, brought in two sales today from a dealer program. So we’re continuing to see more and more sales and more and more opportunities coming out of the channel. We currently have a list of over 60 dealers that are interested in the program. That number will continue to grow as we build our program. And so let’s get more and more dealer opportunities out there. Keep in mind, I mean, a typical dealer out there might have three or four -- our largest dealer out here today, I think he’s got 10 sales. We have set on the street. So that allows us to have multiple, multiple feet on the street without having the overhead and expense for having these great sales forces out there selling our product. Only challenge that we’re going to have is that we’re going to be another product. We’re not going to be the only products. For companies that are service and support that are iron and telecom, maybe they are only telecom product. But for telecom dealers and distributors out there today, maybe another product for them and getting their mind share, we’ve got a training program and a deliverable program to hopefully get more of that mind share. So what I want all of the 10 dealers per month that are coming on to be able to sell 15 deals per month every month from day one, that would be a great thing to happen. The reality is that it is going to take a little time for them to get up to speed on our products and offerings. But the nice part about our dealer program is that we kept it extremely simple so that we do get that mind share. Competitively, a lot of the competition is extremely hard for reps to pick up a new product. With the Crexendo Solution, it’s very simple. And it’s not a lot of moving parts there. There are two telephone, color display and a standard display and very simple for them to price that, very simple for them to do a ROI cost competitive analysis. And so we’re anticipating great things coming out of the dealer program. And the more dealers we get on board -- I think it will probably see the 30-70 rule or the 80-20 rule where we get some really, really big heavy hitter dealers that produce a lot. We’ll get other dealers that buy the product but don’t produce as much. But we’re taking all comers right now. So our dealer program is really, really aggressive. And as we bring more and more dealers on, I couldn't be more excited about the opportunities that it’s going to bring. Chip Saye - AWH Capital: I appreciate that. Let’s say 75,000 in first month. What it should be growing -- going up every month you think. What do you think it could be?

I anticipate nice increases there month over month as we bring on more dealers. More dealers means more sales people on the street and more sales people on the street means more opportunities in the pipeline. So as that pipeline continues to grow I wouldn't have any doubts that pipeline is going to continue to grow and grow and grow and that’s going to continue to increase our sales month after month. Chip Saye - AWH Capital: Okay. Sticking with you, Doug, if you don’t mind on the number of reps. I know you guys had a, I guess, middle of last year you were having a situation, where you were hiring a lot of guys and having to get rid of some guys that didn’t produce. And that's part of what took you longer to get your revenues up than you anticipated. Where do you stand now in terms of reps. Have you got a good core group or are you still in the process of training those guys. Could you talk about that?

Yeah. We’ve got a much more tenured group today at the end of year. When we finished the 2012, we’re at 23 reps which was down significantly from where it was midyear. Again weeding out the dead weight and making sure that we’re putting the training in the emphasis on the direct sales force that we have. So, the force that we have continues to increase their average sales and increase the average sales per rep. As we look at the opportunities, it’s extremely expensive. And as we’re looking at right sizing the business, going out there and bringing on additional sales reps a $40,000 a pop get to be extremely expensive. Lot less expensive to rollout a dealer program were bringing. Dealers that have multiple, multiple sales channels and sales reps out there with no cost associated with this. So obviously, a much more lucrative opportunity to grow that channel. The direct channel we’ll continue to grow. We’ve got a focus there and the training mission there to make sure these guys are putting up the right numbers. We’re seeing some great initiatives right now, with some verticals that we’ve had some tremendous success in. So with the numbers that I'm seeing so far in Q1, the trends are all pointing in the right direction. And I'm extremely excited about what we’re bringing in from the direct channel. So the direct channel will continue to support. I anticipate the dealer channel but then hopefully the mid part, latter part of this year, far so passing the direct channel because I'll have more feet on the street, more opportunities coming to the channel. Chip Saye - AWH Capital: Okay. That’s very helpful. I guess, this will be back for Steve and maybe to a less for you Doug. You refer to this as like a start up in 2012. And I was a year of transition and you guys done this once before. Well, what do you think you underestimate or did wrong this time? And I know that Steve you have been there four years. You’ve been involved with it for six years. It's like, why they’ve taken, why is it taken so long to work? I mean, yeah.

Jeff. It hasn’t taken so long to work. It’s sheer stuff that legacy issues slowed us down so much. We had 11 law suits from Attorney’s General around the country when I came in there. We have the country of Australia that was selling us -- suing us. We had 23 AGs around the country that were threatening law suits. We cleaned up every bit of that, thanks to Jeff Korn and one other associate. But Jeff did most of the heavy hitting. So one lawyer and one person to get that much accomplished is close to walking on waters you can come. We had customers that were suing us. We had customers that were complaining for the better business who were voicing the hundreds, thousands, I'm not even sure. We have an M rating at the better business where we have an A rating today. So the headwinds that were created by that and the distractions and it also hurt us on trying to get our telecom licenses. It probably took us three times as long to get our telecom licenses, as if we’ve taken if we didn’t have any of those other issues. They looked at the legacy business and they thought that was going to be model going forward and they rightfully criticize this for that. But all of that’s been cleaned up. We had an accounting system that was very manually driven, that's totally automated now. So there were a lot of issues that we didn’t understand in the infrastructure and the legacy issues that slowed us down. 99% of that is behind us now. We have two AGs that are still kind of monitoring the situation. And we have this legacy situation to clean up in our Orem office. But outside of that, the legacy stuff is complete and I would expect that all of the legacy stuff, including the receivables will be complete by the end of this year. So, I wish I’ve been a little more color buoyant about some of the legacy problems. But quite frankly, you just never can do enough due diligence and even if I tried to do more due diligence, I couldn’t able to cover some of the issues that we ultimately resolve in this company and we are very proud of our people and we are very proud of the job we’ve done. It just took a little longer than we thought. But no we can concentrate all of our efforts on sales and marketing and that’s what we’re doing. Chip Saye - AWH Capital: And because of this legacy issues that transition from Orem to Arizona, you may have not has been -- may not has been as focus on the sales and marketing as you would have otherwise?

Well, we couldn’t and plus we have to write software code for our telecom products, it took us over three and half years to write the telecom code and now we’re in a position where we can write new apps to the telecom. We can get customers that other people can’t touch because we have the engineering stuff to write the apps for our new customer, our very large customer, when those opportunities become available. So because we’re actually creating the technology, that also takes a little bit longer. But now we’ve got a creative and it’s a case of just expanding what we have. We have the same issue with our Web Services, not Web Services but our Web Tool, our website building. We have a good solid website building but it still was more good to people that understood it and could build quickly on it, so we've been improving the user experience by improving the user interface. We've also have the apps and functionality like, apps that allow us to find through accounting systems, apps that give us more tools in the way of templets and that’s sort of thing. So, as Satish pointed out, we are a hosting company, that’s our number one focus to build recurring revenue through hosting versus selling services and hardware. We still sell services in the SAR area, but the hosting is our primary function to recurring revenue. Chip Saye - AWH Capital: Okay. And this is follow-up on I think Jeff's question. You are in six schools now and I think he was asking not to number the websites that you had build, but how many schools you anticipate maybe in your program in the fall?

Well, by the fall we should be in probably about Doug, Doug you’ve got a better handle on that.

Yeah. We are in six schools now. We are currently talking to a lot of additional universities that would anticipate by the fall maybe eight to 10. So as we continue to expand out. And one other things that university program, it takes a lot of resources to get it launch and so as much as I’d like to get more and more the universities onboard, getting more than two to four at the time becomes very challenging. So I would probably say that, while we are looking at fall eight to 10 would be a reasonable number. Chip Saye - AWH Capital: Okay. All right. We will be watching in 2013.

Okay. Thank you. Chip Saye - AWH Capital: Thanks guys.

Thanks, Chip. Chip Saye - AWH Capital: Okay.

And there are no other questions at this time. Once again…

Okay. If no other questions at this time, Operator, we are going conclude the meeting and we look forward to meeting with all of you at the end of our first quarter. Thank you very much and have a good day.

Thank you. This does conclude today's conference. Thank you for your participation.