if this story_separator_special_tag safe harbor in addition to historical information , this annual report contains forward-looking statements within the meaning of section 27a of the securities act of 1933 and section 21e of the securities exchange act of 1934. actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors , risks and uncertainties , including the risk factors set forth in item 1a . above and the risk factors set forth in this annual report . generally , the words “ anticipate ” , “ expect ” , “ intend ” , “ believe ” and similar expressions identify forward-looking statements . the forward-looking statements made in this annual report are made as of the filing date of this annual report with the sec , and future events or circumstances could cause results that differ significantly from the forward-looking statements included here . accordingly , we caution readers not to place undue reliance on these statements . we expressly disclaim any obligation to update or alter our forward-looking statements , whether , as a result of new information , future events or otherwise after the date of this document . 17 overview crexendo , inc. is a next-generation clec and an award-winning leader and provider of unified communications cloud telecom services , broadband internet services , and other cloud business services that are designed to provide enterprise-class cloud services to any size businesses at affordable monthly rates . the company has two operating segments , which consist of cloud telecommunications and web services . cloud telecommunications - our cloud telecommunications services transmit calls using ip or cloud technology , which converts voice signals into digital data packets for transmission over the internet or cloud . each of our calling plans provides a number of basic features typically offered by traditional telephone service providers , plus a wide range of enhanced features that we believe offer an attractive value proposition to our customers . this platform enables a user , via a single “ identity ” or telephone number , to access and utilize services and features regardless of how the user is connected to the internet or cloud , whether it 's from a desktop device or an application on a mobile device . we generate recurring revenue from our cloud telecommunications and broadband internet services . our cloud telecommunications contracts typically have a thirty-six to sixty month term . we generate product revenue and equipment financing revenue from the sale and lease of our cloud telecommunications equipment . revenues from the sale of equipment , including those from sales-type leases , are recognized at the time of sale or at the inception of the lease , as appropriate . our cloud telecommunications service revenue increased 27 % or $ 1,691,000 to $ 7,973,000 for the year ended december 31 , 2017 as compared to $ 6,282,000 for the year ended december 31 , 2016. our cloud telecommunications product revenue decreased 9 % or $ 128,000 to $ 1,347,000 for the year ended december 31 , 2017 as compared to $ 1,475,000 for the year ended december 31 , 2016. as of december 31 , 2017 and 2016 , our backlog was $ 19,871,000 and $ 15,921,000 , respectively . web services – we generate recurring revenue from website hosting and other professional services . our web services revenue decreased 22 % or $ 305,000 to $ 1,057,000 for the year ended december 31 , 2017 as compared to $ 1,362,000 for the year ended december 31 , 2016. results of consolidated operations the following discussion of financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto and other financial information included herein this annual report . results of consolidated operations ( in thousands , except for per share amounts ) replace_table_token_3_th year ended december 31 , 2017 compared to year ended december 31 , 2016 service revenue service revenue consists primarily of fees collected for cloud telecommunications services , professional services , interest from sales-type leases , broadband internet services , website hosting , and web management services . service revenue increased 18 % or $ 1,386,000 , to $ 9,030,000 for the year ended december 31 , 2017 as compared to $ 7,644,000 for the year ended december 31 , 2016. cloud telecommunications service revenue increased 27 % or $ 1,691,000 , to $ 7,973,000 for the year ended december 31 , 2017 as compared to $ 6,282,000 for the year ended december 31 , 2016. web service revenue decreased 22 % or $ 305,000 , to $ 1,057,000 for the year ended december 31 , 2017 as compared to $ 1,362,000 for the year ended december 31 , 2016 . 18 product revenue product revenue consists primarily of fees collected for the sale of desktop phone devices and third party equipment . product revenue decreased by 9 % or $ 128,000 , to $ 1,347,000 for the year ended december 31 , 2017 as compared to $ 1,475,000 for the year ended december 31 , 2016. product revenue fluctuates from one period to the next based on timing of installations . our typical customer installation is complete within 30 days . however , larger enterprise customers can take multiple months , depending on size and the number of locations . product revenue is recognized when products have been installed and services commence . we believe growth will initially be seen through increase in our backlog . story_separator_special_tag research and development expenses decreased 8 % or $ 67,000 , to $ 726,000 for the year ended december 31 , 2017 as compared to $ 793,000 for the year ended december 31 , 2016 due to fluctuations in salary and benefits . selling and marketing selling and marketing expenses consist primarily of direct sales representative salaries and benefits , partner channel commissions , the production of marketing materials and sales support software . selling and marketing expenses increased 16 % or $ 393,000 , to $ 2,924,000 for the year ended december 31 , 2017 as compared to $ 2,531,000 for the year ended december 31 , 2016. the increase in selling and marketing expense was due to an increase in salary and benefits of $ 328,000 resulting from hiring additional sales representatives to support our partner channel , and an increase in commission expenses of $ 311,000 directly related to overall increase in sales and revenue , offset by a decrease in sales support software costs of $ 125,000 , a decrease in business development costs of $ 87,000 , and a decrease in bad debt expense of $ 34,000 . 23 general and administrative general and administrative expenses consist of salaries and benefits for executives , administrative personnel , legal , rent , accounting , other professional services , and other administrative corporate expenses . general and administrative expenses decreased 13 % or $ 524,000 , to $ 3,661,000 for the year ended december 31 , 2017 as compared to $ 4,185,000 for the year ended december 31 , 2016. the decrease in general and administrative expenses is primarily due to a company-wide reduction in general and administrative expenses as we continue to cut unnecessary expenses . salary and benefits decreased $ 179,000 resulting from a decrease in headcount , software support decreased $ 153,000 resulting from utilizing more affordable software , delaware franchise fee tax decreased $ 61,000 due to reincorporating in nevada , computer equipment decreased $ 50,000 primarily due to a one-time charge in 2016 , corporate audit and tax fees decreased $ 44,000 due to reduced audit fees resulting from a change in auditors , depreciation and amortization expense decreased $ 30,000 due to certain intangible assets and fixed assets becoming fully amortized , and a decrease of $ 37,000 in it consulting fees , offset by a $ 30,000 increase in legal fees . consolidated general and administrative expenses decreased 17 % , or $ 829,000 to $ 4,071,000 for the year ended december 31 , 2017 compared to $ 4,900,000 for the year ended december 31 , 2016. other expense other expense primarily consists of interest expense , offset by sublease rental income . net other expense increased 408 % or $ 147,000 to $ 183,000 for the year ended december 31 , 2017 as compared to $ 36,000 for the year ended december 31 , 2016. we incurred interest expense on our related party note payable and a decrease in sublease income resulting from completion of our lease agreement obligation in the fourth quarter of 2016 and related sub-lease . operating results of our web services segment ( in thousands ) replace_table_token_9_th 24 quarterly financial information replace_table_token_10_th replace_table_token_11_th year ended december 31 , 2017 compared to year ended december 31 , 2016 service revenue service revenue from web services is generated primarily through website hosting , professional web management services , and extended payment term agreements ( eptas ) . web services revenue decreased 22 % or $ 305,000 , to $ 1,057,000 for the year ended december 31 , 2017 as compared to $ 1,362,000 for the year ended december 31 , 2016. the decrease in service revenue is primarily due to a decrease in hosting revenue of $ 208,000 , a $ 59,000 decrease in epta revenue due to decrease in outstanding receivables , and a decrease of $ 38,000 from a decline in web management professional services . cost of service revenue cost of service revenue consists primarily of bandwidth , customer service costs , and outsourcing fees related to fulfillment of our professional web management services . cost of service revenue decreased 42 % or $ 86,000 , to $ 117,000 for the year ended december 31 , 2017 as compared to $ 203,000 for the year ended december 31 , 2016. the cost of service revenue decrease is primarily related to cost savings from bringing customer support in house at the end of 2016. research and development research and development expenses primarily consist of salaries and benefits , and related expenses which are attributable to the development of our website development software products . research and development expenses decreased 27 % or $ 9,000 , to $ 24,000 for the year ended december 31 , 2017 as compared to $ 33,000 for the year ended december 31 , 2016. the decrease was primarily related to a reduction of salaries and benefits expenses . 25 general and administrative general and administrative expenses consist of salaries and benefits for executives , administrative personnel , legal , rent , accounting , other professional services , and other administrative corporate expenses . general and administrative expenses decreased 43 % or $ 305,000 , to $ 410,000 for the year ended december 31 , 2017 as compared to $ 715,000 for the year ended december 31 , 2016. the decrease in general and administrative expenses is primarily due to less of an allocation of corporate general and administrative expenses resulting from the 22 % decrease in service revenue for the year ended december 31 , 2017 compared to the year ended december 31 , 2016 , and a company-wide reduction in general and administrative expenses as we continue to cut unnecessary expenses . consolidated general and administrative expenses decreased 17 % , or $ 829,000 to $ 4,071,000 for the year ended december 31 , 2017 compared to $ 4,900,000 for the year ended december 31 , 2016. other income/

liquidity and capital resources as of december 31 , 2017 and 2016 , we had cash and cash equivalents of $ 1,282,000 and $ 619,000 , respectively . changes in cash and cash equivalents are dependent upon changes in , among other things , working capital items such as deferred revenues , accounts payable , accounts receivable , and various accrued expenses , as well as purchases of property and equipment and changes in our capital and financial structure due to debt repayments and issuances , stock option exercises , sales of equity investments and similar events . our operations for the third and fourth quarters of 2017 generated positive cash flows and we believe this trend will continue . we believe that our operations along with existing liquidity sources will satisfy our cash requirements for at least the next 12 months . if the assumptions underlying our business plan regarding future revenue and expenses change or if unexpected opportunities or needs arise , we may seek to raise additional cash by selling equity or debt securities . working capital working capital increased 739 % or $ 421,000 to $ 478,000 as of december 31 , 2017 as compared to $ 57,000 as of december 31 , 2016. the increase in working capital is primarily related to an increase in cash and cash equivalents of $ 663,000 , a decrease in accounts payable of $ 37,000 , a decrease in accrued expenses of $ 36,000 , an increase in trade receivables , net of allowance for doubtful accounts , of $


 Write a concise suspicious activity report of the following text delimited by triple backquotes. Return your response as a formal report which covers the key points highlighting the location,dates,entity names and account holder information in chronological order of the text.
     ```liquidity and capital resources as of december 31 , 2017 and 2016 , we had cash and cash equivalents of $ 1,282,000 and $ 619,000 , respectively . changes in cash and cash equivalents are dependent upon changes in , among other things , working capital items such as deferred revenues , accounts payable , accounts receivable , and various accrued expenses , as well as purchases of property and equipment and changes in our capital and financial structure due to debt repayments and issuances , stock option exercises , sales of equity investments and similar events . our operations for the third and fourth quarters of 2017 generated positive cash flows and we believe this trend will continue . we believe that our operations along with existing liquidity sources will satisfy our cash requirements for at least the next 12 months . if the assumptions underlying our business plan regarding future revenue and expenses change or if unexpected opportunities or needs arise , we may seek to raise additional cash by selling equity or debt securities . working capital working capital increased 739 % or $ 421,000 to $ 478,000 as of december 31 , 2017 as compared to $ 57,000 as of december 31 , 2016. the increase in working capital is primarily related to an increase in cash and cash equivalents of $ 663,000 , a decrease in accounts payable of $ 37,000 , a decrease in accrued expenses of $ 36,000 , an increase in trade receivables , net of allowance for doubtful accounts , of $
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 Suspicious Activity Report : if this story_separator_special_tag safe harbor in addition to historical information , this annual report contains forward-looking statements within the meaning of section 27a of the securities act of 1933 and section 21e of the securities exchange act of 1934. actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors , risks and uncertainties , including the risk factors set forth in item 1a . above and the risk factors set forth in this annual report . generally , the words “ anticipate ” , “ expect ” , “ intend ” , “ believe ” and similar expressions identify forward-looking statements . the forward-looking statements made in this annual report are made as of the filing date of this annual report with the sec , and future events or circumstances could cause results that differ significantly from the forward-looking statements included here . accordingly , we caution readers not to place undue reliance on these statements . we expressly disclaim any obligation to update or alter our forward-looking statements , whether , as a result of new information , future events or otherwise after the date of this document . 17 overview crexendo , inc. is a next-generation clec and an award-winning leader and provider of unified communications cloud telecom services , broadband internet services , and other cloud business services that are designed to provide enterprise-class cloud services to any size businesses at affordable monthly rates . the company has two operating segments , which consist of cloud telecommunications and web services . cloud telecommunications - our cloud telecommunications services transmit calls using ip or cloud technology , which converts voice signals into digital data packets for transmission over the internet or cloud . each of our calling plans provides a number of basic features typically offered by traditional telephone service providers , plus a wide range of enhanced features that we believe offer an attractive value proposition to our customers . this platform enables a user , via a single “ identity ” or telephone number , to access and utilize services and features regardless of how the user is connected to the internet or cloud , whether it 's from a desktop device or an application on a mobile device . we generate recurring revenue from our cloud telecommunications and broadband internet services . our cloud telecommunications contracts typically have a thirty-six to sixty month term . we generate product revenue and equipment financing revenue from the sale and lease of our cloud telecommunications equipment . revenues from the sale of equipment , including those from sales-type leases , are recognized at the time of sale or at the inception of the lease , as appropriate . our cloud telecommunications service revenue increased 27 % or $ 1,691,000 to $ 7,973,000 for the year ended december 31 , 2017 as compared to $ 6,282,000 for the year ended december 31 , 2016. our cloud telecommunications product revenue decreased 9 % or $ 128,000 to $ 1,347,000 for the year ended december 31 , 2017 as compared to $ 1,475,000 for the year ended december 31 , 2016. as of december 31 , 2017 and 2016 , our backlog was $ 19,871,000 and $ 15,921,000 , respectively . web services – we generate recurring revenue from website hosting and other professional services . our web services revenue decreased 22 % or $ 305,000 to $ 1,057,000 for the year ended december 31 , 2017 as compared to $ 1,362,000 for the year ended december 31 , 2016. results of consolidated operations the following discussion of financial condition and results of operations should be read in conjunction with the consolidated financial statements and notes thereto and other financial information included herein this annual report . results of consolidated operations ( in thousands , except for per share amounts ) replace_table_token_3_th year ended december 31 , 2017 compared to year ended december 31 , 2016 service revenue service revenue consists primarily of fees collected for cloud telecommunications services , professional services , interest from sales-type leases , broadband internet services , website hosting , and web management services . service revenue increased 18 % or $ 1,386,000 , to $ 9,030,000 for the year ended december 31 , 2017 as compared to $ 7,644,000 for the year ended december 31 , 2016. cloud telecommunications service revenue increased 27 % or $ 1,691,000 , to $ 7,973,000 for the year ended december 31 , 2017 as compared to $ 6,282,000 for the year ended december 31 , 2016. web service revenue decreased 22 % or $ 305,000 , to $ 1,057,000 for the year ended december 31 , 2017 as compared to $ 1,362,000 for the year ended december 31 , 2016 . 18 product revenue product revenue consists primarily of fees collected for the sale of desktop phone devices and third party equipment . product revenue decreased by 9 % or $ 128,000 , to $ 1,347,000 for the year ended december 31 , 2017 as compared to $ 1,475,000 for the year ended december 31 , 2016. product revenue fluctuates from one period to the next based on timing of installations . our typical customer installation is complete within 30 days . however , larger enterprise customers can take multiple months , depending on size and the number of locations . product revenue is recognized when products have been installed and services commence . we believe growth will initially be seen through increase in our backlog . story_separator_special_tag research and development expenses decreased 8 % or $ 67,000 , to $ 726,000 for the year ended december 31 , 2017 as compared to $ 793,000 for the year ended december 31 , 2016 due to fluctuations in salary and benefits . selling and marketing selling and marketing expenses consist primarily of direct sales representative salaries and benefits , partner channel commissions , the production of marketing materials and sales support software . selling and marketing expenses increased 16 % or $ 393,000 , to $ 2,924,000 for the year ended december 31 , 2017 as compared to $ 2,531,000 for the year ended december 31 , 2016. the increase in selling and marketing expense was due to an increase in salary and benefits of $ 328,000 resulting from hiring additional sales representatives to support our partner channel , and an increase in commission expenses of $ 311,000 directly related to overall increase in sales and revenue , offset by a decrease in sales support software costs of $ 125,000 , a decrease in business development costs of $ 87,000 , and a decrease in bad debt expense of $ 34,000 . 23 general and administrative general and administrative expenses consist of salaries and benefits for executives , administrative personnel , legal , rent , accounting , other professional services , and other administrative corporate expenses . general and administrative expenses decreased 13 % or $ 524,000 , to $ 3,661,000 for the year ended december 31 , 2017 as compared to $ 4,185,000 for the year ended december 31 , 2016. the decrease in general and administrative expenses is primarily due to a company-wide reduction in general and administrative expenses as we continue to cut unnecessary expenses . salary and benefits decreased $ 179,000 resulting from a decrease in headcount , software support decreased $ 153,000 resulting from utilizing more affordable software , delaware franchise fee tax decreased $ 61,000 due to reincorporating in nevada , computer equipment decreased $ 50,000 primarily due to a one-time charge in 2016 , corporate audit and tax fees decreased $ 44,000 due to reduced audit fees resulting from a change in auditors , depreciation and amortization expense decreased $ 30,000 due to certain intangible assets and fixed assets becoming fully amortized , and a decrease of $ 37,000 in it consulting fees , offset by a $ 30,000 increase in legal fees . consolidated general and administrative expenses decreased 17 % , or $ 829,000 to $ 4,071,000 for the year ended december 31 , 2017 compared to $ 4,900,000 for the year ended december 31 , 2016. other expense other expense primarily consists of interest expense , offset by sublease rental income . net other expense increased 408 % or $ 147,000 to $ 183,000 for the year ended december 31 , 2017 as compared to $ 36,000 for the year ended december 31 , 2016. we incurred interest expense on our related party note payable and a decrease in sublease income resulting from completion of our lease agreement obligation in the fourth quarter of 2016 and related sub-lease . operating results of our web services segment ( in thousands ) replace_table_token_9_th 24 quarterly financial information replace_table_token_10_th replace_table_token_11_th year ended december 31 , 2017 compared to year ended december 31 , 2016 service revenue service revenue from web services is generated primarily through website hosting , professional web management services , and extended payment term agreements ( eptas ) . web services revenue decreased 22 % or $ 305,000 , to $ 1,057,000 for the year ended december 31 , 2017 as compared to $ 1,362,000 for the year ended december 31 , 2016. the decrease in service revenue is primarily due to a decrease in hosting revenue of $ 208,000 , a $ 59,000 decrease in epta revenue due to decrease in outstanding receivables , and a decrease of $ 38,000 from a decline in web management professional services . cost of service revenue cost of service revenue consists primarily of bandwidth , customer service costs , and outsourcing fees related to fulfillment of our professional web management services . cost of service revenue decreased 42 % or $ 86,000 , to $ 117,000 for the year ended december 31 , 2017 as compared to $ 203,000 for the year ended december 31 , 2016. the cost of service revenue decrease is primarily related to cost savings from bringing customer support in house at the end of 2016. research and development research and development expenses primarily consist of salaries and benefits , and related expenses which are attributable to the development of our website development software products . research and development expenses decreased 27 % or $ 9,000 , to $ 24,000 for the year ended december 31 , 2017 as compared to $ 33,000 for the year ended december 31 , 2016. the decrease was primarily related to a reduction of salaries and benefits expenses . 25 general and administrative general and administrative expenses consist of salaries and benefits for executives , administrative personnel , legal , rent , accounting , other professional services , and other administrative corporate expenses . general and administrative expenses decreased 43 % or $ 305,000 , to $ 410,000 for the year ended december 31 , 2017 as compared to $ 715,000 for the year ended december 31 , 2016. the decrease in general and administrative expenses is primarily due to less of an allocation of corporate general and administrative expenses resulting from the 22 % decrease in service revenue for the year ended december 31 , 2017 compared to the year ended december 31 , 2016 , and a company-wide reduction in general and administrative expenses as we continue to cut unnecessary expenses . consolidated general and administrative expenses decreased 17 % , or $ 829,000 to $ 4,071,000 for the year ended december 31 , 2017 compared to $ 4,900,000 for the year ended december 31 , 2016. other income/

