Steve Mihaylo – Chairman & CEO Doug Gaylor – President & COO Ron Vincent – CFO Satish Bhagavatula – CTO & CIO Jeff Korn – Chief Legal Officer

William Meyers – Miller Asset Management

Good day and welcome to the Crexendo Second Quarter 2014 Earnings Call. (Operator Instructions). And at this time I would like to turn the conference over to Chief Executive Officer Steve Mihaylo.

Thank you. Good afternoon everyone. I’m Steve Mihaylo, CEO and Chairman of Crexendo. I want to welcome all of you to the Crexendo 2014 second quarter conference call. With me here today are Doug Gaylor, our President and COO; Ron Vincent, our CFO; Satish Bhagavatula, our CTO and CIO; Jeff Korn, our Chief Legal Officer. I am going to ask Jeff to read our Safe Harbor statement after that I will give some brief general overview of comments relative to the quarter. Ron will provide some color on the numbers, Doug will provide a business and sales update, Satish will give an update on technology and then we will open the call up to questions. Jeff, would you please provide the Safe Harbor statement.

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 detail in the company’s filings with the Securities and Exchange Commission, including the Form 10-K for the fiscal year ended December 31, 2013 and then 10-Qs for the period ending March 31, 2014 and June 30, 2014. Crexendo does not undertake any obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise. I’d now like to turn the call back to Steve. Steve?

Thank you Jeff. I don’t want to sound redundant but I continue to believe that we’re making good progress even though sales are not as robust as I was hoping. I’m pleased by the fact that we have had improvement in backlog and improvement in results from the dealer channel. Crexendo made a strategic decision that our smaller restructured sales force should concentrate on larger sales. We know that the larger sales are more complicated and time consuming than sales to smaller companies but strategically they are beneficial to us as a company. I’ve also found that our integrated sales process where sales work hand in hand with engineering to craft solutions to larger customers. Makes us particularly suited to this type of sale. Although the time and effort are longer when we land a larger sale they bring a substantial results, we’re working on two such deals that we expect to close sometime in the third quarter which should improve our results for the quarter. I’m also pleased with the progress of the dealer channel. We have had substantial increases in this quarter and dealer sales and I expect that trend to continue. We work every day to provide the support our dealers need and we have every reason to believe that this sales channel will bring substantial benefits to Crexendo. We continue to attract highly qualified dealers which is also a trend I expect to continue. We’re doing an excellent job of keeping expenses low as I have said before. We watch every dollar we spend and then the entire team understands the necessity to keep expenses as small as possible. I also continue to stress that cost reduction is not a trend until we reach profitability and it has to be a competency of our business forever. We’re working to reduce cost and to increase our ability to lease the phones. These two steps I should have said reduce product cost and increase the ability to lease the phones. These two steps will have substantial benefits as it will reduce our expenses and slow the rate of cash usage significantly until we achieve profitability. I continue to believe in this company I’ve signed a commitment to fund the company if necessary and that commitment is included in our 10-Q. If I did not believe in our future I would not take this step, I’m working with the Board on funding mechanisms, we’re exploring all funding options and I’m confident that we will find the right funding mechanism and we will provide the path to get us to profitability. I want to remind all of that I’m fully prepared to fund this company but as a public company I’ve a duty to all of you to explore every option. We will continue to grow the business through our sales force and the dealer program and we will continue to look for accretive acquisitions. With that I will turn the call over to Ron to give you some granularity on the numbers.

Thank you Steve. Consolidated revenue for the second quarter up 1.8 million compared to 2.1 million for the first quarter of this year and 2.7 million for the second quarter of the prior year. The decrease quarter-over-quarter and year-over-year with 14% and 34% respectively. The decrease quarter-over-quarter is primarily related to decrease in our web services revenues of approximately 300,000. Total operating expenses for the second quarter were 3.4 million compared to 3.8 million for the first quarter of this year and 4 million for the second quarter of the prior year. The decrease quarter-over-quarter and year-over-year was 11% and 15% respectively. We continue to watch our operating cost very closely as Steve mentioned and the decreases are the result of these efforts. Pretax loss and net loss for the second quarter of this year was 1.5 million or $0.13 per diluted common share compared to pretax and net loss of 1.6 million or $0.15 per diluted common share for the first quarter of this year and compared to 1.1 million or $0.10 per diluted common share for the second quarter of the prior year. At June 30, 2014 we had cash and cash equivalents included restricted cash of approximately 3.1 million compared to 3.6 million at December 31, 2013. Cash used for operations in the second quarter of 934,000 compared to 1.3 million for the first quarter of this year and 585,000 for the second quarter of the prior year. Cash used for investing activities in the second quarter, a 196,000 compared to 2 million provided by investing activities in the first quarter and 57,000 in the second quarter of the prior year. Cash used finance and activities in the second quarter were 18,000 compared to cash provided by financing activities of 23,000 in the first quarter, and 6000 in the second quarter of the prior year. Some segment highlights, the company has two operating segments which consist of hosted telecom service and web services. Effective April 1, 2014 the company changed its reporting segments to report the stores online and Crexendo Web Services business units as one reportable segment. The company revised its segment reporting to reflect changes and our chief operating decision maker internally measures performance and allocates resources. Segment operating results for the prior year had been revised to conform to current year segment operating results presentation and disclosures. Our hosted telecom service segment revenue for the second quarter was 963,000 compared to 955,000 for the first quarter of this year and 491,000 for the second quarter of the prior year. The increase quarter-over-quarter and year-over-year was a 1% and 96% respectively. At June 30, our backlog increased to approximately 8.4 million compared to 7.2 million at March 31, 2014. The backlog increased during the second quarter by approximately 588,000 in connection with our acquisition of One Stop Voice. The majority of our network services contracts are 36 to 60 month contracts and the backlog is expected to be recognized as revenue over this period. Web Service segment revenue for the second quarter was 845,000 compared to 1.1 million for the first quarter of this year and 2.3 million for the second quarter of the prior year. The decrease quarter-over-quarter and year-over-year was 23% and 62% respectively. Our backlog has decreased to a 177,000 at June 30. Revenue generated from cash collected on our EPTAs it was 166,000 for the second quarter compared to 320,000 for the first quarter of this year and 826,000 for the second quarter of the prior year. A decrease quarter-over-quarter and year-over-year was 48% and 80% respectively. Web site hosting revenue for the second quarter was 466,000 compared to 505,000 for the first quarter of this year and 555,000 for the second quarter of the prior year. The decrease quarter-over-quarter and year-over-year was 8% and 16% respectively. With that I will turn it over to Doug Gaylor, our President and CEO for additional comments on operations.

Thanks Ron. So during Q2 we completed an acquisition of our hosted telecom provider here in the Arizona market. We continue to build our dealer partner network. We continue to increase our direct sales pipeline with the focus on larger opportunities and we continue to reduce cost and expenses out of the business. The acquisition of One Stop Voice that nicely into our portfolio due to the fact that our engineering team was – quickly convert their phones over to our system and because the customer base is locked in for long term contracts. We’re very pleased with the results thus far and the customers are extremely satisfied with the service and support during this transition. This accretive acquisition was completed on June 1, and we were in the process of converting all of the clients over to the Crexendo platform eliminating support cost and expenses. We anticipate to complete conversion of all One Stop Voice clients to Crexendo by the end of October at which point we will recognize additional cost savings by eliminating duplicate services. Our focus on our dealer partner channel in showing positive traction as we set our highest sales results in the channel to-date during the quarter. We continue to add dealers to the program and are expanding our efforts and recruiting new partners. Additional incentives and margin opportunities for the channel are being launched this month and we’re hopeful that these additional incentives will drive more sales and success through the program. Our direct sales channel had a nice increase in quarter-over-quarter sales bookings which has helped increase our telecom backlog by 17% to $8.4 million. We continue to fill our pipeline with bigger opportunities as Steve had mentioned and our focus on these larger sized transactions by our direct sales team has produced a significant amount of large sales that are the perfect fit for Crexendo’s offerings. The cost savings for these larger opportunities along with our signature fulfillment and support services make these larger accounts a very synergistic fit for Crexendo. We’re very close to landing some very nice size accounts that could have a very nice impact on the future. We also continue to manage our cost part of the business and recognize significant reductions in SG&A for the quarter and year-to-date. As we grow our customer base and increase our call volumes we were able to negotiate better terms and prices with our network carriers and that will continue to benefit our margins. During Q2 we eliminated cost from the consolidation of the data center from our PBX Central acquisition and we anticipate seeing similar cost reductions in Q3 and Q4 as we do the same for the One Stop Voice acquisition. Our sales lead generation efforts continue to show positive results as we focus on those specific vertical markets associations and trade shows and referral programs to introduce companies to the benefits of Crexendo. Two of our largest sales during the quarter came as a result of these lead generation efforts. So as we begin Q3, we’re excited about the direction the organization has headed. We will continue to look for accretive acquisitions that are synergistic to Crexendo, that continued excitement and growth of our dealer channel combined with our success in closing and implementing larger opportunities will add to the growth in our telecom revenues and our telecom backlogs. As we continue to enhance all of our product offerings, the second half of the year is shaping up to be a much stronger second half than the first half. So now I will turn it over to Satish Bhagavatula for an engineering and technology review.

Thank you Doug. Greetings everyone. I’m glad to report that we made significant improvements to our services, products and technology during Q2. These enhancements have been in the areas of increased operational efficiencies of our cloud services, improved features and new functionality in our telecom platform maintenance of our current web hosting platforms and release first version of our new web platform code name Slingshot. As our telecom customers continue to increase we have seen a remarkable growth in the traffic and stress on our infrastructure. The recent successful relocation of PBX Central infrastructure from Austin to Phoenix demonstrates that our infrastructure is scalable and that it could withstand the continued growth of the Crexendo base. We have installed new circuits from level 3 to Tier 1 carrier to improve our network reach to our customer premise, reduce latencies and deliver higher quality web services to our customers through the public internet. We finished the fiscal build out and laying of the fiber into our facility to allow for additional diverse entrances to protect against potential cable cost that are outside Crexendo’s control. The addition of level 3 will help us improve our service margins greatly due to further reduced telecom service cost. We continue to invest heavily in adding enhanced external monitoring capabilities to our platform and availability of services wider to our cloud offering both for telecom and web. This continuous analysis monitoring and evaluation process better prepares us from (indiscernible) and the public internet upstream from us, telecom carrier’s upstream and faulty equipment within our infrastructure. Our StoresOnline 7.0 platform continues to service most of our web hosting and e-commerce customers today. Although we have fees to add major new features to our 7.0 platform we continue to make small improvements and regular fixes to adapt to the changing landscape due to the service engine of this browser updates and internet standards. While supporting our existing e-commerce platform our development team is focusing in developing our next generation web builder Slingshot. After finishing up a great beta file offering of Slingshot at Biola University in Q1, we received a great deal of positive feedbacks. We also introduced Slingshot to a few web agencies also known as developers that specialized in developing websites for businesses in Q1. We addressed on critical feedback and released our first version of Slingshot to everyone. Prospects and customers may visit slingshot.crexendo.com and take a test run at it. As with any product, the first version is the hardest to achieve, thereafter incremental changes are made as customers start using the product. Slingshot originally is meant to help build simple, do-it-yourself websites and is not ready to replace our existing platform by any means. As this platform matures over subsequent releases it will serve as a front end to our powerful e-commerce backend. On our telecom platform we continue to roll our new updates every four weeks. During Q2 of 2014, we added support for additional Yealink devices. Crexendo platform now supports the Yealink T22P to allow smoother migration of One Stop Voice customer’s base into Crexendo platform. Much of the emphasis on the telecom development was spent on enhancing Crexendo platform to allow for migration of the OSV, One Stop Voice space. We continue to add such productivity features regularly thus enhancing our product and service offering. Product teams spend considerable amount of time evaluating and identifying third party technology partnerships to allow for penetrating larger telecom prospects and requirements of high end cost into our applications, outbound productive dialers, skills-based routing, reporting and CRM integration. We believe such strategic partnerships will help us in deploying more desktop to enterprises. Also during Q2, heavy emphasis was made on completing total integration of PBX Central business, technology and infrastructure into Crexendo’s infrastructure. June marked one year anniversary of PBX Central acquisition, this consultation of data centers and infrastructure will bring additional cost savings thus improving our margins and operational efficiencies. We’re hopeful our value add continues to increase as we take on more strategic partnerships which are in the works. We continue to look into big technology partnerships, opportunities to augment our internal development for us to grow our product portfolio. We continue to adopt more cloud technologies to allow for greater automation of our business which internal improves our margin and enables us to better serve our customers. With that I will now turn it over to Steve Mihaylo.

Thank you Satish. Now we will start taking questions now.

(Operator Instructions). And we will take our first question from William Meyers with Miller Asset Management. William Meyers – Miller Asset Management: Can you give us any further color on this pipeline, you did say something about the size of possible sales, is it perfect fit for you, what kind of size are we talking about when you --

We’re talking about 2 to 3 orders that range in size from about 500,000 to a $1 million of backlog. The larger one in the $1 million range will bring in about $200,000 to $300,000 in cash which will actually reduce our cash usage in the third quarter from approximately 900,000 in the second quarter down to about 600,000 or 700,000 in the third quarter. William Meyers – Miller Asset Management: I guess what I was hoping for was something about the number of seats or personnel that are --

The larger deal is six locations with about 500 Crexendo Desktop Telephones and another 2500 what we call digital phone adapters where the client brings their own telephone to plugin into our network.

And then I just wanted to check back on Slingshot, so you are releasing or did release a new system, so you’re not really looking to totally ramp down the web revenues. You’re going to maintain part of that business that’s profitable for you?

There is two objectives here and one of the things that Ron neglected the point out, is that the delta between first quarter last year and this quarter were a combination of web services which you did point out but it's also the differed contracts that we had from stores online. That was even smaller in the first quarter and smaller again in the second quarter. We consider it to not be material going forward in the third and fourth quarter of this year. There is only about 250,000 to 300,000 that will trickle in over the next year and half, two years, so it's really a small number. But getting back to Slingshot one of the things that the development group does there and in addition to developing Slingshot, they are actually probably spending is more – as much more time on maintaining the services for StoresOnline 7.0 and it's important to note that any customer from the 7.0 will be grandfathered. So in other words except for maybe usage increases their hosting will remain the same, their service will remain the same and we will continue to do bug fixes and support and all of that sort of thing for 7.0. Slingshot is going to be the platform going forward and in that case we have three pricing plans, one for folks that just want to host with us and build the websites themselves, another one which will give them support and building the website and then the third one that gives them even higher say platinum type service for the website and of course the pricing is different on each case. And we will be aggressively marketing that starting actually this week or next week. Our website will change and the pricing plans and the information that’s available to current customers and future customers. I might also add that during the quarter we introduced a free version of Crexendo Mobile which any of you can download from your – from the Google Playstore or the Apple iStore and this gives you three or I should say 30 days of free usage and then if you want to continue using it after that it's $9.95 per month. In the first month we had that available with no advertising, nothing. We had over 600 folks download the software. It's still too soon to tell how many of them will convert to paying customers but I would encourage all of you to use that software and get your friends and family to use it. It allows you to call free anywhere in the United States, in Canada and for a nominal charge which is very competitive. I think the most we charge is $0.05 a minute to places like China and India and so on. So I would encourage you to give it a test drive. I know here again I probably gave you more information than you asked for William, but we believe in total transparency and full disclosure here at Crexendo.

(Operator Instructions). At this time we have nothing further in the queue. I will turn things back over to management for any additional or closing remarks.

I’ve only one more comment and that is that I believe this quarter will mark the low mark as far as sales and that’s because most of the extended contracts from StoresOnline are finished, we have a very small backlog of SEO customers and now we’re concentrating on telecom and web hosting. The web hosting we would expect to get that to the point where it will be stabilized and then grow gradually and then more rapidly in coming quarters. The telecom piece as we had dealers and we had more large customers should show very nice increases throughout the rest of this year as Doug pointed out and well into the future. Next year I think you will see very, very increases in sales and the cash burn will go down significantly to the point where we will start generating cash sometime next year. I can’t predict when because we haven't introduced our lower price end points and we haven't started the leasing of equipment which means it's a cash sales as opposed to a rental but that will start momentarily. We have already introduced it to our sales people and now we’re going to introduce it in the coming week or two to our dealer customers. So having said that, we appreciate all of you being on the call today and we look forward to talking to you next quarter. Thank you very much everyone.

And again this does conclude today’s conference call. Thank you all for your participation and we now disconnect.