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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 30,
2022.
or
☐
Transition
report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
Commission file number: 001-35376
OBLONG, INC.
(Exact Name of Registrant as Specified in its Charter)
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Delaware |
77-0312442 |
(State or Other Jurisdiction of Incorporation or
Organization) |
(I.R.S. Employer Identification No.) |
25587 Conifer Road, Suite 105-231, Conifer, CO 80433
(Address of Principal Executive Offices, including Zip
Code)
(303) 640-3838
(Registrant’s Telephone Number, including Area Code)
(Former name, former address and former fiscal year, if changed
since last report)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
Common Stock, par value $0.0001 per share |
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OBLG |
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Nasdaq Capital Market
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T during the preceding 12
months (or for such shorter period that the registrant was required
to submit such files).
Yes
☒
No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
|
|
|
|
|
|
Large accelerated filer
☐
|
Accelerated filer
☐
|
Non-accelerated filer
☒
|
Smaller reporting company ☒
|
|
Emerging growth company ☐
|
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act.)
Yes
☐
No
☒
The number of shares outstanding of the registrant’s common stock
as of November 8, 2022 was 30,816,048.
OBLONG, INC.
Index
|
|
|
|
|
|
|
|
|
PART I - FINANCIAL INFORMATION |
|
Item 1. Financial Statements
|
|
|
Condensed Consolidated Balance Sheets at September 30, 2022
(unaudited) and December 31, 2021
|
|
|
Unaudited Condensed Consolidated Statements of Operations for the
three and nine months ended September 30, 2022 and
2021
|
|
|
Unaudited Condensed Consolidated Statement of Stockholders’ Equity
for the three and nine months ended September 30, 2022 and
2021
|
|
|
Unaudited Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 2022 and 2021
|
|
|
Notes to unaudited Condensed Consolidated Financial
Statements
|
|
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
|
|
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
|
|
Item 4. Controls and Procedures
|
|
|
|
|
PART II - OTHER INFORMATION
|
|
Item 1. Legal Proceedings
|
|
Item 1A. Risk Factors
|
|
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
|
Item 3. Defaults Upon Senior Securities
|
|
Item 4. Mine Safety Disclosures
|
|
Item 5. Other Information
|
|
Item 6. Exhibits
|
|
Signatures
|
|
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This quarterly report on Form 10-Q (this “Report”) contains
statements that are considered forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and its rules and regulations (the “Securities Act”), and
Section 21E of the Securities Exchange Act of 1934, as amended, and
its rules and regulations (the “Exchange Act”). These
forward-looking statements include, but are not limited to,
statements about the plans, objectives, expectations and intentions
of Oblong, Inc. (“Oblong” or “we” or “us” or the “Company”). All
statements other than statements of current or historical fact
contained in this Report, including statements regarding Oblong’s
future financial position, business strategy, budgets, projected
costs and plans and objectives of management for future operations,
are forward-looking statements. The words “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “may,” “plan,” and similar
expressions, as they relate to Oblong, are intended to identify
forward-looking statements. These statements are based on Oblong’s
current plans, and Oblong’s actual future activities and results of
operations may be materially different from those set forth in the
forward-looking statements. These forward-looking statements are
subject to risks and uncertainties that could cause actual results
to differ materially from the statements made. Any or all of the
forward-looking statements in this Report may turn out to be
inaccurate. Oblong has based these forward-looking statements
largely on its current expectations and projections about future
events and financial trends that it believes may affect its
financial condition, results of operations, business strategy and
financial needs. The forward-looking statements can be affected by
inaccurate assumptions or by known or unknown risks, uncertainties
and assumptions. There are important factors that could cause
actual results to differ materially from those expressed or implied
by these forward-looking statements, including our plans,
objectives, expectations and intentions and other factors that are
discussed under the section entitled “Part I. Item 1A. Risk
Factors” and in our consolidated financial statements and the
footnotes thereto for the fiscal year ended December 31, 2021,
each included in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2021 filed with the Securities and Exchange
Commission (the “SEC”) on March 29, 2022, and in the section
entitled “Part II. Item 1A. Risk Factors” in our Quarterly Report
on Form 10-Q for the fiscal quarter ended June 30, 2022 filed with
the SEC on August 10, 2022 (the “Q2 2022 Quarterly Report”). Oblong
undertakes no obligation to publicly revise these forward-looking
statements to reflect events occurring after the date hereof. All
subsequent written and oral forward-looking statements attributable
to Oblong or persons acting on its behalf are expressly qualified
in their entirety by the cautionary statements contained in this
Report. Forward-looking statements in this Report include, among
other things: our expectations and estimates relating to customer
attrition, sales cycles, future revenues, expenses, capital
expenditures and cash flows; our ability to develop and launch new
product offerings; evolution of our customer solutions and our
service platforms; our ability to fund operations and continue as a
going concern; expectations regarding adjustments to our cost of
revenue and other operating expenses; our ability to finance
investments in product development and sales and marketing; our
ability to raise capital through sales of additional equity or debt
securities and/or loans from financial institutions; statements
relating to market need; our expected insurance coverage on our
second quarter 2022 casualty loss; and effectiveness of our
disclosure controls and procedures. Important factors that could
cause actual results to differ materially from those in the
forward-looking statements include, but are not limited to, those
summarized below:
•the
continued impact of the coronavirus pandemic on our business,
including its impact on our customers and other business partners,
our ability to conduct operations in the ordinary course, and our
ability to obtain capital financing important to our ability to
continue as a going concern;
•our
ability to continue as a going concern;
•our
ability to raise capital in one or more debt and/or equity
offerings in order to fund operations or any growth
initiatives;
•customer
acceptance and demand for our video collaboration services and
network applications;
•our
ability to launch new products and offerings and to sell our
solutions;
•our
ability to compete effectively in the video collaboration services
and network services businesses;
•the
ongoing performance and success of our Managed Services
business;
•our
ability to maintain and protect our proprietary
rights;
•potential
future impairment charges related to intangible
assets;
•our
ability to withstand industry consolidation;
•our
ability to adapt to changes in industry structure and market
conditions;
•actions
by our competitors, including price reductions for their
competitive services;
•the
quality and reliability of our products and services;
•the
prices for our products and services and changes to our pricing
model;
•the
success of our sales and marketing approach and efforts and our
ability to grow revenue;
•customer
renewal and retention rates;
•risks
related to the concentration of our customers and the degree to
which our sales, now or in the future, depend on certain large
client relationships;
•increases
in material, labor or other manufacturing-related
costs;
•changes
in our go-to-market cost structure;
•inventory
management and our reliance on our supply chain;
•our
ability to attract and retain highly skilled
personnel;
•our
reliance on open-source software and technology;
•potential
federal and state regulatory actions;
•our
ability to innovate technologically, and, in particular, our
ability to develop next generation Oblong technology;
•our
ability to satisfy the standards for continued listing of our
common stock on the Nasdaq Capital Market;
•changes
in our capital structure and/or stockholder mix;
•the
costs, disruption, and diversion of management’s attention
associated with campaigns commenced by activist investors;
and
•our
management’s ability to execute its plans, strategies and
objectives for future operations.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OBLONG, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value, stated value, and
shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
(Unaudited)
|
|
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash |
$ |
4,143 |
|
|
$ |
8,939 |
|
Restricted cash |
— |
|
|
61 |
|
Accounts receivable, net |
357 |
|
|
849 |
|
Inventory |
1,027 |
|
|
1,821 |
|
Prepaid expenses and other current assets |
868 |
|
|
1,081 |
|
Total current assets |
6,395 |
|
|
12,751 |
|
Property and equipment, net |
25 |
|
|
159 |
|
Goodwill |
— |
|
|
7,367 |
|
Intangibles, net |
690 |
|
|
7,562 |
|
Operating lease - right of use asset, net
|
201 |
|
|
659 |
|
Other assets |
53 |
|
|
109 |
|
Total assets |
$ |
7,364 |
|
|
$ |
28,607 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
$ |
401 |
|
|
$ |
259 |
|
Accrued expenses and other current liabilities |
1,088 |
|
|
959 |
|
Current portion of deferred revenue |
571 |
|
|
783 |
|
Current portion of operating lease liabilities |
306 |
|
|
492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
2,366 |
|
|
2,493 |
|
Long-term liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Operating lease liabilities, net of current portion |
43 |
|
|
236 |
|
Deferred revenue, net of current portion |
152 |
|
|
381 |
|
|
|
|
|
Total long-term liabilities |
195 |
|
|
617 |
|
Total liabilities |
2,561 |
|
|
3,110 |
|
Commitments and contingencies (see Note 11)
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $.0001 par value; 150,000,000 shares authorized;
30,929,331 shares issued and 30,816,048 outstanding at
September 30, 2022 and December 31, 2021
|
3 |
|
|
3 |
|
Treasury stock, 113,283 shares of common stock at
September 30, 2022 and December 31, 2021
|
(181) |
|
|
(181) |
|
Additional paid-in capital |
227,611 |
|
|
227,581 |
|
Accumulated deficit |
(222,630) |
|
|
(201,906) |
|
Total stockholders' equity |
4,803 |
|
|
25,497 |
|
Total liabilities and stockholders’ equity |
$ |
7,364 |
|
|
$ |
28,607 |
|
See accompanying notes to condensed consolidated financial
statements.
-1-
OBLONG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
September 30, |
|
September 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Revenue |
$ |
1,185 |
|
|
$ |
1,799 |
|
|
$ |
4,050 |
|
|
$ |
5,766 |
|
Cost of revenue (exclusive of depreciation and amortization and
casualty loss) |
841 |
|
|
1,228 |
|
|
2,800 |
|
|
3,767 |
|
Gross profit |
344 |
|
|
571 |
|
|
1,250 |
|
|
1,999 |
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
Research and development |
232 |
|
|
693 |
|
|
1,634 |
|
|
1,984 |
|
Sales and marketing |
282 |
|
|
438 |
|
|
1,161 |
|
|
1,537 |
|
General and administrative |
1,229 |
|
|
1,628 |
|
|
4,104 |
|
|
5,078 |
|
Impairment charges |
5,169 |
|
|
254 |
|
|
12,715 |
|
|
302 |
|
Casualty loss |
— |
|
|
— |
|
|
533 |
|
|
— |
|
Depreciation and amortization |
592 |
|
|
669 |
|
|
1,818 |
|
|
2,098 |
|
Total operating expenses |
7,504 |
|
|
3,682 |
|
|
21,965 |
|
|
10,999 |
|
Loss from operations |
(7,160) |
|
|
(3,111) |
|
|
(20,715) |
|
|
(9,000) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other expense (income), net |
(5) |
|
|
(2,449) |
|
|
1 |
|
|
(2,659) |
|
Loss before income taxes |
(7,155) |
|
|
(662) |
|
|
(20,716) |
|
|
(6,341) |
|
Income tax expense (benefit) |
(3) |
|
|
— |
|
|
8 |
|
|
— |
|
Net loss |
(7,152) |
|
|
(662) |
|
|
(20,724) |
|
|
(6,341) |
|
Preferred stock dividends |
— |
|
|
— |
|
|
— |
|
|
1 |
|
Undeclared dividends |
— |
|
|
— |
|
|
— |
|
|
366 |
|
Induced conversion of Series A-2 Preferred Stock |
— |
|
|
— |
|
|
— |
|
|
300 |
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders |
$ |
(7,152) |
|
|
$ |
(662) |
|
|
$ |
(20,724) |
|
|
$ |
(7,008) |
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders per share: |
|
|
|
|
|
|
|
Basic and diluted net loss per share |
$ |
(0.23) |
|
|
$ |
(0.02) |
|
|
$ |
(0.67) |
|
|
$ |
(0.28) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average number of shares of common stock: |
|
|
|
|
|
|
|
Basic and diluted |
30,816 |
|
|
30,739 |
|
|
30,816 |
|
|
25,121 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial
statements.
-2-
OBLONG, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’
EQUITY
Three and Nine Months Ended September 30, 2022
(In thousands, except shares)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
Treasury Stock
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Additional Paid-In Capital
|
|
Accumulated Deficit
|
|
Total
|
Balance at December 31, 2021 |
30,929,331 |
|
|
$ |
3 |
|
|
113,283 |
|
|
$ |
(181) |
|
|
$ |
227,581 |
|
|
$ |
(201,906) |
|
|
$ |
25,497 |
|
Net loss
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,539) |
|
|
(4,539) |
|
Stock-based compensation
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
52 |
|
|
— |
|
|
52 |
|
Forfeiture of unvested stock options |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(84) |
|
|
— |
|
|
(84) |
|
Balance at March 31, 2022 |
30,929,331 |
|
|
3 |
|
|
113,283 |
|
|
(181) |
|
|
227,549 |
|
|
(206,445) |
|
|
20,926 |
|
Net loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(9,033) |
|
|
(9,033) |
|
Stock-based compensation
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
31 |
|
|
— |
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2022 |
30,929,331 |
|
|
3 |
|
|
113,283 |
|
|
(181) |
|
|
227,580 |
|
|
(215,478) |
|
|
11,924 |
|
Net loss |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(7,152) |
|
|
(7,152) |
|
Stock-based compensation
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
31 |
|
|
— |
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2022 |
30,929,331 |
|
|
$ |
3 |
|
|
113,283 |
|
|
$ |
(181) |
|
|
$ |
227,611 |
|
|
$ |
(222,630) |
|
|
$ |
4,803 |
|
See accompanying notes to condensed consolidated financial
statements.
-3-
OBLONG, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’
EQUITY
Three and Nine Months Ended September 30, 2021
(In thousands, except shares)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A-2 Preferred Stock
|
|
|
|
|
|
Series D Preferred Stock
|
|
Series E Preferred Stock
|
|
Common Stock
|
|
Treasury Stock
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
|
|
Shares |
|
Amount |
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Additional Paid-In Capital
|
|
Accumulated Deficit
|
|
Total
|
Balance at Balance at December 31, 2020 |
45 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
1,697,958 |
|
|
$ |
— |
|
|
131,579 |
|
|
$ |
— |
|
|
7,861,912 |
|
|
$ |
1 |
|
|
113,283 |
|
|
$ |
(181) |
|
|
$ |
215,092 |
|
|
$ |
(192,855) |
|
|
$ |
22,057 |
|
Net loss |
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(3,433) |
|
|
(3,433) |
|
Stock-based compensation |
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
33 |
|
|
— |
|
|
33 |
|
Conversion of Series A-2 Preferred Stock, including dividend
accrual |
(45) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
84,292 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Conversion of Series D and E Preferred Stock |
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
(1,697,022) |
|
|
— |
|
|
(131,579) |
|
|
— |
|
|
18,762,119 |
|
|
2 |
|
|
— |
|
|
— |
|
|
(2) |
|
|
— |
|
|
— |
|
Issuance of stock for services |
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
21,008 |
|
|
— |
|
|
— |
|
|
— |
|
|
274 |
|
|
— |
|
|
274 |
|
Forfeitures of restricted stock
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
(81) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series D Preferred shares to pay withholding taxes |
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
(855) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Balance at March 31, 2021 |
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
26,729,331 |
|
|
3 |
|
|
113,283 |
|
|
(181) |
|
|
215,397 |
|
|
(196,288) |
|
|
18,931 |
|
Net loss |
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,246) |
|
|
(2,246) |
|
Issuance of stock from financing, net of issuance costs |
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4,000,000 |
|
|
— |
|
|
— |
|
|
— |
|
|
11,504 |
|
|
— |
|
|
11,504 |
|
Issuance of stock for services |
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
116 |
|
|
— |
|
|
116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2021 |
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
30,729,331 |
|
|
3 |
|
|
113,283 |
|
|
(181) |
|
|
227,017 |
|
|
(198,534) |
|
|
28,305 |
|
Net loss |
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(662) |
|
|
(662) |
|
Stock-based compensation
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
502 |
|
|
— |
|
|
502 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of stock on vested restricted stock units |
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
200 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2021 |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
$ |
— |
|
|
— |
|
|
$ |
— |
|
|
30,929,331 |
|
|
$ |
3 |
|
|
113,283 |
|
|
$ |
(181) |
|
|
$ |
227,519 |
|
|
$ |
(199,196) |
|
|
$ |
28,145 |
|
See accompanying notes to condensed consolidated financial
statements.
-4-
OBLONG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
Cash flows from operating activities: |
|
|
|
Net loss |
$ |
(20,724) |
|
|
$ |
(6,341) |
|
Adjustments to reconcile net loss to net cash used in operating
activities: |
|
|
|
Depreciation and amortization |
1,818 |
|
|
2,098 |
|
Bad debt expense |
114 |
|
|
280 |
|
Stock-based compensation |
114 |
|
|
535 |
|
Stock-based expense for services |
— |
|
|
390 |
|
Forfeiture of unvested stock options |
(84) |
|
|
— |
|
Gain on extinguishment of liabilities |
— |
|
|
(2,675) |
|
Casualty loss on inventory |
533 |
|
|
— |
|
|
|
|
|
Impairment charges - property and equipment |
37 |
|
|
98 |
|
Impairment charges - intangible assets |
5,132 |
|
|
207 |
|
Impairment charges - right of use asset |
179 |
|
|
— |
|
Impairment charges - goodwill |
7,367 |
|
|
— |
|
Changes in operating assets and liabilities: |
|
|
|
Accounts receivable |
378 |
|
|
1,610 |
|
Inventory |
261 |
|
|
(936) |
|
Prepaid expenses and other current assets |
213 |
|
|
(751) |
|
Right of use asset |
290 |
|
|
372 |
|
Other assets |
56 |
|
|
15 |
|
Accounts payable |
142 |
|
|
225 |
|
Accrued expenses and other current liabilities |
129 |
|
|
11 |
|
Deferred revenue |
(441) |
|
|
(355) |
|
Lease liabilities |
(390) |
|
|
(739) |
|
Net cash used in operating activities |
(4,876) |
|
|
(5,956) |
|
Cash flows from investing activities: |
|
|
|
Purchases of property and equipment |
(11) |
|
|
(30) |
|
Proceeds from sale of equipment |
30 |
|
|
— |
|
Net cash provided by (used in) investing activities |
19 |
|
|
(30) |
|
Cash flows from financing activities: |
|
|
|
Proceeds from stock issuance, net of issuance costs |
— |
|
|
11,504 |
|
|
|
|
|
Net cash provided by financing activities |
— |
|
|
11,504 |
|
(Decrease) increase in cash and restricted cash |
(4,857) |
|
|
5,518 |
|
Cash and restricted cash at beginning of period |
9,000 |
|
|
5,277 |
|
Cash and restricted cash at end of period |
$ |
4,143 |
|
|
$ |
10,795 |
|
|
|
|
|
Supplemental disclosures of cash flow information: |
|
|
|
|
|
|
|
Reconciliation of cash and restricted cash |
|
|
|
Cash |
$ |
4,143 |
|
|
$ |
10,734 |
|
Restricted cash |
— |
|
|
61 |
|
Total cash and restricted cash |
$ |
4,143 |
|
|
$ |
10,795 |
|
|
|
|
|
Cash paid during the period for interest |
$ |
7 |
|
|
$ |
2 |
|
Non-cash investing and financing activities: |
|
|
|
Accrued preferred stock dividends |
$ |
— |
|
|
$ |
1 |
|
Inducement to convert Series A-2 Preferred Stock to
common |
$ |
— |
|
|
$ |
300 |
|
Common stock issued for conversion of Preferred Stock |
$ |
— |
|
|
$ |
3 |
|
Lease liability and right of use asset |
$ |
11 |
|
|
$ |
— |
|
See accompanying notes to condensed consolidated financial
statements.
-5-
OBLONG, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
Note 1 - Business Description and Significant Accounting
Policies
Business Description
Oblong, Inc. (“Oblong” or “we” or “us” or the “Company”) was formed
as a Delaware corporation in May 2000 and is a provider of patented
multi-stream collaboration technologies and managed services for
video collaboration and network applications. Prior to
March 6, 2020, Oblong, Inc. was named Glowpoint, Inc.
(“Glowpoint”). On March 6, 2020, Glowpoint changed its name to
Oblong, Inc.
Basis of Presentation
The Company's fiscal year ends on December 31 of each calendar
year. The accompanying interim condensed consolidated financial
statements are unaudited and have been prepared on substantially
the same basis as our annual consolidated financial statements for
the fiscal year ended December 31, 2021. In the opinion of the
Company's management, these interim condensed consolidated
financial statements reflect all adjustments (consisting only of
normal recurring adjustments) considered necessary for a fair
statement of our financial position, results of operations and cash
flows for the periods presented. The preparation of financial
statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
condensed consolidated financial statements and the reported
amounts of revenue and expenses during the reporting periods.
Actual results could differ from these estimates.
The December 31, 2021 year-end condensed consolidated balance
sheet data in this document was derived from audited consolidated
financial statements. The condensed consolidated financial
statements and notes included in this quarterly report on Form 10-Q
do not include all disclosures required by U.S. generally accepted
accounting principles and should be read in conjunction with the
Company's audited consolidated financial statements as of and for
the year ended December 31, 2021 and notes thereto included in
the Company's fiscal 2021 Annual Report on Form 10-K, filed with
the Securities and Exchange Commission (“SEC”) on March 29,
2022 (the “2021 10-K”).
The results of operations and cash flows for the interim periods
included in these condensed consolidated financial statements are
not necessarily indicative of the results to be expected for any
future period or the entire fiscal year.
Principles of Consolidation
The condensed consolidated financial statements include the
accounts of Oblong and our 100%-owned subsidiaries, (i) GP
Communications, LLC (“GP Communications”), whose business function
is to provide interstate telecommunications services for regulatory
purposes, (ii) Oblong Industries, and (iii) Oblong Europe Limited,
a subsidiary of Oblong Industries. All inter-company balances and
transactions have been eliminated in consolidation. The U.S. Dollar
is the functional currency for all subsidiaries.
Segments
The Company currently operates in two segments: (1) “Collaboration
Products” which represents the Oblong Industries business
surrounding our
Mezzanine™ product offerings and (2)
“Managed Services” which represents the Oblong (formerly Glowpoint)
business surrounding managed services for video collaboration and
network solutions. See Note 10 - Segment Reporting for further
discussion.
Use of Estimates
Preparation of the consolidated financial statements in conformity
with U.S. generally accepted accounting principles (“U.S. GAAP”)
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual amounts could differ
from the estimates made. We continually evaluate estimates used in
the preparation of our consolidated financial statements for
reasonableness. Appropriate
adjustments, if any, to the estimates used are made prospectively
based upon such periodic evaluation. The significant areas of
estimation include determining the allowance for doubtful accounts,
the estimated lives and recoverability of property and equipment
and intangible assets, the inputs used in the valuation of goodwill
and intangible assets in connection with our impairment tests, and
the inputs used in the fair value of equity-based
awards.
Significant Accounting Policies
The significant accounting policies used in preparation of these
condensed consolidated financial statements are disclosed in our
2021 10-K, and there have been no changes to the Company’s
significant accounting policies during the nine months ended
September 30, 2022.
Recently Issued Accounting Pronouncements
In June 2016 the Financial Accounting Standards Board (“FASB”)
issued ASU 2016-13 as amended,
“Financial Instruments - Credit Losses (Topic 326).”
Topic 326 introduces an impairment model that is based on expected
credit losses, rather than incurred losses, to estimate credit
losses on certain types of financial instruments (e.g., accounts
receivable, loans and held-to-maturity securities), including
certain off-balance sheet financial instruments (e.g., loan
commitments). The expected credit losses should consider historical
information, current information, and reasonable and supportable
forecasts, including estimates of prepayments, over the contractual
term. Financial instruments with similar risk characteristics may
be grouped together when estimating expected credit losses. Topic
326 is effective for fiscal years beginning after December 15,
2022, including interim periods within those fiscal years. The
Company has evaluated the impact the new guidance will have on its
consolidated financial statements and does not expect the impact to
be material.
In May 2021, the FASB issued ASU 2021-04,
Issuer’s Accounting for Certain Modifications or Exchanges of
Freestanding Equity-Classified Written Call Options.
The FASB is issuing this update to clarify and reduce diversity in
an issuer’s accounting for modifications or exchanges of
freestanding equity classified written call options (for example,
warrants) that remain equity classified after modification or
exchange. ASU 2021-04 is effective for all entities for fiscal
years beginning after December 15, 2021, including interim periods
within those fiscal years. An entity should apply the amendments
prospectively to modifications or exchanges occurring after the
effective date of the amendments. The Company has adopted this
standard, effective January 1, 2022, and it did not have a material
effect on our financial statements.
Casualty Loss
In June 2022, the Company discovered that $533,000 of inventory was
stolen from the Company’s warehouse in City of Industry,
California. This theft has been recorded as a casualty loss of
$533,000 during the nine months ended September 30, 2022 on the
Company’s condensed consolidated Statements of Operations. The
theft is being investigated further by the Los Angeles, CA
Sheriff’s Department and a claim has been filed with the Company’s
insurance company. We are seeking to recover the majority of the
loss through our insurance policies, and we will offset the
casualty loss with the recognition of a gain of any proceeds should
we subsequently receive them from our insurance company. No
assurances can be provided that we will be successful in recovering
any or all of the casualty loss.
Note 2 - Liquidity and Going Concern Uncertainty
As of September 30, 2022, we had $4,143,000 in cash and
working capital of $4,029,000. For the nine months ended September
30, 2022, we incurred a net loss of $20,724,000 and used $4,876,000
of net cash in operating activities.
Future Capital Requirements and Going Concern
Our capital requirements in the future will continue to depend on
numerous factors, including the timing and amount of revenue for
the Company, customer renewal rates and the timing of collection of
outstanding accounts receivable, in each case particularly as it
relates to the Company’s major customers, the expense to deliver
services, expense for sales and marketing, expense for research and
development, and capital expenditures. We expect to continue to
invest in product development and sales and marketing expenses with
the goal of growing the Company’s revenue in the future. The
Company believes that, based on its current projection of revenue,
expenses, capital expenditures, and cash flows, it will not have
sufficient resources to fund its operations for the next twelve
months following the filing of this Report. We believe additional
capital will be required to fund operations and provide growth
capital including investments in technology, product development
and sales and marketing. To access capital to fund operations or
provide growth capital, we will need to raise capital in one or
more debt and/or equity offerings. There can be no assurance that
we will be successful in raising necessary capital or that any such
offering will be on terms acceptable to the Company. If we are
unable to raise additional capital that may be needed on terms
acceptable to us, it
could have a material adverse effect on the Company. The factors
discussed above raise substantial doubt as to our ability to
continue as a going concern. The accompanying condensed
consolidated financial statements do not include any adjustments
that might result from these uncertainties.
Note 3 - Goodwill
As of September 30, 2022 and December 31, 2021, goodwill
was zero and $7,367,000, respectively, the goodwill was recorded in
connection with the October 1, 2019 acquisition of Oblong
Industries (our Collaboration Products reporting
unit).
We tested goodwill for impairment on an annual basis on September
30 of each year, or more frequently if events occurred or
circumstances changed indicating that the fair value of the
goodwill may be below its carrying amount. To determine the fair
value of the reporting unit for the goodwill impairment test, we
used a weighted average of the discounted cash flow method and
market-based method.
We considered the sustained decline in our stock price to be a
triggering event for an interim goodwill impairment test, as of
both March 31, 2022 and June 30, 2022, and we recorded impairment
charges against the carrying value of Goodwill of $7,367,000 during
the first half of 2022 as the carrying amount of the Collaboration
Products reporting unit exceeded its fair value on the test dates.
These charges are recognized as “Impairment Charges” on our
condensed consolidated Statements of Operations. Following these
impairment charges, our goodwill value was reduced to zero as of
June 30, 2022.
Note 4 - Intangible Assets
The following table presents the components of net intangible
assets for our Collaboration Products reporting segment (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2022 |
|
As of December 31, 2021 |
|
Gross Carrying Amount |
|
Accumulated Amortization |
|
Impairment Charges |
|
Net Carrying Amount |
|
Gross Carrying Amount |
|
Accumulated Amortization |
|
Net Carrying Amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developed technology |
$ |
10,060 |
|
|
$ |
(6,049) |
|
|
$ |
(3,525) |
|
|
$ |
486 |
|
|
$ |
10,060 |
|
|
$ |
(4,537) |
|
|
$ |
5,523 |
|
Trade names |
2,410 |
|
|
(723) |
|
|
(1,483) |
|
|
204 |
|
|
2,410 |
|
|
(542) |
|
|
1,868 |
|
Distributor relationships |
310 |
|
|
(186) |
|
|
(124) |
|
|
— |
|
|
310 |
|
|
(139) |
|
|
171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
$ |
12,780 |
|
|
$ |
(6,958) |
|
|
$ |
(5,132) |
|
|
$ |
690 |
|
|
$ |
12,780 |
|
|
$ |
(5,218) |
|
|
$ |
7,562 |
|
At each reporting period, we determine if there was a triggering
event that may result in an impairment of our intangible assets.
During the three and nine months ended September 30, 2022, we
considered the declines in revenue for the Collaboration Products
reporting segment and the decline in the Company’s market
capitalization to be triggering events for an impairment test of
intangible assets for this reporting unit. Based on the
corresponding recoverability tests of the asset group for this
reporting unit, it was determined that the carrying value exceeded
the gross cash flows of the asset group. The recoverability test
consisted of comparing the estimated undiscounted cash flows
expected to be generated by those assets to the respective carrying
amounts, and involves significant judgements and assumptions,
related primarily to the future revenue and profitability of the
assets. Based on the fair value of the asset group, which was
determined using a market approach, we recorded impairment charges
of $5,132,000 for the three and nine months ended
September 30, 2022. Additionally, we re-evaluated the
remaining useful lives of our amortizing intangible assets and,
based on our current plan, we adjusted its remaining useful life to
2 years. Intangible assets with finite lives are amortized using
the straight-line method over the estimated economic lives of the
assets.
Related amortization expense was $580,000, $1,740,000, $597,000,
and $1,791,000 for the three and nine months ended September 30,
2022 and 2021, respectively.
Amortization expense for each of the next five succeeding years
will be as follows (in thousands):
|
|
|
|
|
|
|
|
Remainder of 2022 |
$ |
86 |
|
2023 |
345 |
|
2024 |
259 |
|
|
|
|
|
|
|
Total |
$ |
690 |
|
Note 5 - Accrued Expenses and Other Current
Liabilities
Accrued expenses and other current liabilities consisted of the
following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
2022 |
|
2021 |
|
|
|
|
Accrued compensation costs |
$ |
780 |
|
|
$ |
551 |
|
Accrued professional fees |
— |
|
|
69 |
|
Accrued taxes and regulatory fees |
80 |
|
|
92 |
|
Customer deposits |
120 |
|
|
145 |
|
Other accrued expenses and liabilities |
108 |
|
|
102 |
|
|
|
|
|
|
|
|
|
Accrued expenses and other liabilities |
$ |
1,088 |
|
|
$ |
959 |
|
|
|
|
|
Note 6 - Leases
We lease three facilities in Los Angeles, California and one
facility in Austin, Texas, each providing office space. We also
lease a facility in City of Industry, California, providing
warehouse space, and a short-term residential property in Los
Angeles, California. These leases expire through 2024. We currently
occupy the warehouse space in City of Industry, and the office
facility in Austin, Texas, and we have a sublease in place for one
of the Los Angeles, California office spaces. With the exception of
these spaces described above, we currently operate out of remote
employment sites with a remote office located at 25587 Conifer
Road, Suite 105-231, Conifer, Colorado 80433.
Lease expenses, including common charges and net of sublet
proceeds, for the three and nine months ended September 30,
2022 and 2021 were $92,000, $307,000, $175,000, and $602,000,
respectively.
The following provides balance sheet information related to leases
as of September 30, 2022 and December 31, 2021 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
Assets |
|
|
|
|
|
Operating lease, right-of-use asset, net |
|
$ |
201 |
|
|
$ |
659 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Current portion of operating lease liabilities |
|
$ |
306 |
|
|
$ |
492 |
|
|
Operating lease liabilities, net of current portion |
|
43 |
|
|
236 |
|
|
Total operating lease liabilities |
|
$ |
349 |
|
|
$ |
728 |
|
During the three and nine months ended September 30, 2022 and
2021, payments of $110,000, $408,000, $189,000, and $640,000 were
made on leases, respectively. The following table summarizes the
future undiscounted cash payments reconciled to the lease liability
(in thousands):
|
|
|
|
|
|
|
|
|
Remaining Lease Payments |
|
|
2022 |
|
$ |
110 |
|
2023 |
|
225 |
|
2024 |
|
17 |
|
Total lease payments |
|
352 |
|
Effect of discounting |
|
(3) |
|
Total lease liability |
|
$ |
349 |
|
During the three and nine months ended September 30, 2022, we
entered into a six-month residential lease in Los Angeles, CA.
During the nine months ended September 30, 2022, we exited our
Boston, Massachusetts and our Dallas, Texas leases upon expiration,
and we vacated two of the properties in Los Angeles, California.
The properties we vacated in Los Angeles, California are under
leases until May 2023 and management does not expect to be able to
sublet the properties given the limited
time remaining on the leases. Therefore, due to not utilizing the
asset, management believes that the right-of-use assets attached to
these leases have lost their value. An impairment charge of
$179,000 was recorded for these assets in June 2022. During the
year ended December 31, 2021, we entered into one new
operating lease, modified one operating lease, and terminated two
operating leases. The following table provides a reconciliation of
activity for our right-of-use (“ROU”) assets and lease liabilities
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Right-of-Use Asset |
|
Operating Lease Liabilities |
Balance at December 31, 2020 |
|
$ |
903 |
|
|
$ |
1,432 |
|
Additions |
|
60 |
|
|
60 |
|
Terminations and Modifications |
|
192 |
|
|
156 |
|
Amortization and Payments |
|
(496) |
|
|
(920) |
|
|
|
|
|
|
Balance at December 31, 2021 |
|
$ |
659 |
|
|
$ |
728 |
|
Additions |
|
11 |
|
|
11 |
|
|
|
|
|
|
Amortization and Payments |
|
(290) |
|
|
(390) |
|
Impairment Charges |
|
(179) |
|
|
— |
|
Balance at September 30, 2022 |
|
$ |
201 |
|
|
$ |
349 |
|
The ROU assets and lease liabilities are recorded on the Company’s
condensed consolidated Balance Sheets as of September 30, 2022
and December 31, 2021.
Note 7 - Capital Stock
Common Stock
The Company’s common stock, par value $0.0001 per share (the
“Common Stock”), is listed on The Nasdaq Capital Market (“Nasdaq”),
under the ticker symbol “OBLG”. As of September 30, 2022, we had
150,000,000 shares of our Common Stock authorized, with 30,929,331
and 30,816,048 shares issued and outstanding,
respectively.
The Company did not issue any shares of Common Stock during the
three and nine months ended September 30, 2022.
Warrants
Warrants outstanding as of September 30, 2022 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue Date |
|
Warrants Issued |
|
Exercise Price |
|
Expiration Date |
October 21, 2020 |
|
521,500 |
|
|
$ |
4.08 |
|
|
April 22, 2023 |
December 6, 2020 |
|
625,000 |
|
|
5.49 |
|
|
June 7, 2023 |
June 30, 2021 - Series A(1)
|
|
1,000,000 |
|
|
4.00 |
|
|
January 4, 2023 |
June 30, 2021 - Series B |
|
3,000,000 |
|
|
4.40 |
|
|
June 30, 2024 |
|
|
5,146,500 |
|
|
|
|
|
(1) Series A Warrants shown as amended on December 31,
2021 |
Warrant activity for the year ended December 31, 2021 is
presented below. There was no warrant activity for the three or
nine months ended September 30, 2022.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding |
|
|
Number of Warrants (in thousands)
|
|
Weighted Average Exercise Price |
Warrants outstanding and exercisable, December 31, 2020 |
|
1,146,500 |
|
|
$ |
4.85 |
|
Granted |
|
4,000,000 |
|
|
4.30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants outstanding and exercisable, December 31, 2021 |
|
5,146,500 |
|
|
4.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants outstanding and exercisable, September 30,
2022 |
|
5,146,500 |
|
|
$ |
4.42 |
|
Treasury Shares
The Company maintains treasury stock for the Common Stock shares
bought back by the Company when withholding shares to cover taxes
on transactions related to equity awards. There were no treasury
stock transactions during the nine months ended September 30, 2022
or the year ended December 31, 2021.
Note 8 - Stock Based Compensation
2019 Equity Incentive Plan
On December 19, 2019, the Oblong, Inc. 2019 Equity Incentive
Plan (the “2019 Plan”) was approved by the Company’s stockholders
at the Company’s 2019 Annual Meeting of Stockholders. The 2019 Plan
is an omnibus equity incentive plan pursuant to which the Company
may grant equity and cash incentive awards to certain key service
providers of the Company and its subsidiaries. As of September 30,
2022, the share pool available for new grants under the 2019 Plan
is 2,663,500.
Stock Options
For the nine months ended September 30, 2022 no stock options were
granted, 50,000 stock options vested, 7,500 vested stock options
expired, and 150,000 unvested stock options were forfeited. In
accordance with the 2019 Plan, these cancelled unvested options
were added back into the share pool. For the nine months ended
September 30, 2021, 300,000 stock options were
granted.
A summary of stock options granted, expired, and forfeited under
our plans, and options outstanding as of, and changes made during
the nine months ended September 30, 2022 and the year ended
December 31, 2021 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
Exercisable
|
|
Number of Options
|
|
Weighted Average Exercise Price
|
|
Number of Options
|
|
Weighted Average Exercise Price
|
Options outstanding and exercisable, December 31, 2020 |
107,500 |
|
|
$ |
19.64 |
|
|
107,500 |
|
|
$ |
19.64 |
|
Granted |
300,000 |
|
|
3.25 |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding and exercisable, December 31, 2021 |
407,500 |
|
|
7.57 |
|
|
107,500 |
|
|
19.64 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested |
— |
|
|
— |
|
|
50,000 |
|
|
3.25 |
|
Expired |
(7,500) |
|
|
27.40 |
|
|
(7,500) |
|
|
27.40 |
|
Forfeited |
(150,000) |
|
|
3.25 |
|
|
— |
|
|
— |
|
Options outstanding and exercisable, September 30, 2022 |
250,000 |
|
|
$ |
9.57 |
|
|
150,000 |
|
|
$ |
12.98 |
|
Additional information as of September 30, 2022 is as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding |
|
Exercisable |
Range of price |
|
Number
of Options |
|
Weighted
Average
Remaining
Contractual
Life (In Years) |
|
Weighted
Average
Exercise
Price |
|
Number
of Options |
|
Weighted
Average
Exercise
Price |
$0.00 – $10.00
|
|
152,500 |
|
|
8.63 |
|
$ |
3.34 |
|
|
52,500 |
|
|
$ |
1.20 |
|
$10.01 – $20.00
|
|
97,500 |
|
|
0.31 |
|
19.32 |
|
|
97,500 |
|
|
19.32 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000 |
|
|
5.38 |
|
$ |
9.57 |
|
|
150,000 |
|
|
$ |
12.98 |
|
The intrinsic value of vested options, unvested options and
exercised options were not significant for all periods presented.
Net stock compensation expense, related to stock options, for the
nine months ended September 30, 2022 was $30,000 made up of
$114,000 in expense offset by $84,000 related to forfeiture
credits. Stock compensation expense, related to stock
options,
was $64,000 for the nine months ended September 30, 2021. The
remaining unrecognized stock-based compensation expense for options
as of September 30, 2022 is $216,000, which will be recognized
over a weighted average period of 1.75 years.
Restricted Stock Awards
As of September 30, 2022 and 2021, there were 627 unvested
restricted stock awards outstanding, with a weighted average grant
date price of $15.80. The awards were issued in 2014 and vest over
the lesser of ten years, a change in control, or separation from
the company. Due to the variability of the vesting, the expense was
amortized over an average service period of five years, therefore,
there is no unrecognized stock-based compensation expense for
restricted stock awards as of September 30, 2022.
Restricted Stock Units
As of September 30, 2022 and 2021, there were no unvested
restricted stock units (“RSUs”) outstanding. As of September 30,
2022, 28,904 vested RSUs remain outstanding as shares of common
stock have not yet been delivered for these units in accordance
with the terms of the RSUs.
There was no stock compensation expense related to RSUs for the
three and nine months ended September 30, 2022 and there was
$438,000 in stock compensation expense related to RSUs for the
three and nine months ended September 30, 2021. There was no
remaining unrecognized stock-based compensation expense for RSUs as
of September 30, 2022.
Note 9 - Net Loss Per Share
Basic net loss per share is computed by dividing net loss
attributable to common stockholders by the weighted-average number
of shares of common stock outstanding during the period. The
weighted-average number of shares of common stock outstanding does
not include any potentially dilutive securities or unvested
restricted stock. Unvested restricted stock, although classified as
issued and outstanding at September 30, 2022 and 2021, is
considered contingently returnable until the restrictions lapse and
will not be included in the basic net loss per share calculation
until the shares are vested. Unvested restricted stock does not
contain non-forfeitable rights to dividends and dividend
equivalents. Unvested RSUs are not included in calculations of
basic net loss per share, as they are not considered issued and
outstanding at time of grant.
Diluted net loss per share is computed by giving effect to all
potential shares of common stock, including stock options,
preferred stock, RSUs, and unvested restricted stock, to the extent
they are dilutive. For the three and nine months ended
September 30, 2022 and 2021, all such common stock equivalents
have been excluded from diluted net loss per share as the effect to
net loss per share would be anti-dilutive (due to the net
loss).
The following table sets forth the computation of the Company’s
basic and diluted net loss per share (in thousands, except per
share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Numerator: |
|
|
|
|
|
|
|
Net loss |
$ |
(7,152) |
|
|
$ |
(662) |
|
|
$ |
(20,724) |
|
|
$ |
(6,341) |
|
Less: preferred stock dividends |
— |
|
|
— |
|
|
— |
|
|
(1) |
|
Less: undeclared dividends |
— |
|
|
— |
|
|
— |
|
|
(366) |
|
Less: loss on induced conversion of Series A-2 Preferred
Stock |
— |
|
|
— |
|
|
— |
|
|
(300) |
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders |
$ |
(7,152) |
|
|
$ |
(662) |
|
|
$ |
(20,724) |
|
|
$ |
(7,008) |
|
Denominator: |
|
|
|
|
|
|
|
Weighted-average number of shares of common
stock |
30,816 |
|
|
30,739 |
|
|
30,816 |
|
|
25,121 |
|
Basic and diluted net loss per share |
$ |
(0.23) |
|
|
$ |
(0.02) |
|
|
$ |
(0.67) |
|
|
$ |
(0.28) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table represents the potential shares that were
excluded from the computation of weighted-average number of shares
of common stock in computing the diluted net loss per share for the
periods presented because including them would have had an
anti-dilutive effect (due to the net loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three and Nine Months Ended September 30, |
|
2022 |
|
2021 |
Unvested restricted stock awards |
627 |
|
|
627 |
|
|
|
|
|
Outstanding stock options |
250,000 |
|
|
407,500 |
|
Warrants |
5,146,500 |
|
|
5,146,500 |
|
Note 10 - Segment Reporting
The Company currently operates in two segments: (1) “Managed
Services”, which represents the Oblong (former Glowpoint) business
surrounding managed services for video collaboration and network
applications; and (2) “Collaboration Products” which represents the
Oblong Industries business
surrounding our
Mezzanine™
product offerings.
Certain information concerning the Company’s segments for the three
and nine months ended September 30, 2022 and 2021 is presented in
the following tables (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2022 |
|
Managed Services |
|
Collaboration Products |
|
Corporate |
|
Total |
Revenue |
$ |
797 |
|
|
$ |
388 |
|
|
$ |
— |
|
|
$ |
1,185 |
|
Cost of revenues |
552 |
|
|
289 |
|
|
— |
|
|
841 |
|
Gross profit |
$ |
245 |
|
|
$ |
99 |
|
|
$ |
— |
|
|
$ |
344 |
|
Gross profit % |
31 |
% |
|
26 |
% |
|
|
|
29 |
% |
|
|
|
|
|
|
|
|
Allocated operating expenses |
$ |
— |
|
|
$ |
6,275 |
|
|
$ |
— |
|
|
$ |
6,275 |
|
Unallocated operating expenses |
— |
|
|
— |
|
|
1,229 |
|
|
1,229 |
|
Total operating expenses |
$ |
— |
|
|
$ |
6,275 |
|
|
$ |
1,229 |
|
|
$ |
7,504 |
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
$ |
245 |
|
|
$ |
(6,176) |
|
|
$ |
(1,229) |
|
|
$ |
(7,160) |
|
Interest and other expense (income), net |
1 |
|
|
(6) |
|
|
— |
|
|
(5) |
|
Net income (loss) before tax |
246 |
|
|
(6,170) |
|
|
(1,229) |
|
|
(7,155) |
|
Income tax benefit |
— |
|
|
(3) |
|
|
— |
|
|
(3) |
|
Net income (loss) |
$ |
246 |
|
|
$ |
(6,167) |
|
|
$ |
(1,229) |
|
|
$ |
(7,152) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2022 |
|
Managed Services |
|
Collaboration Products |
|
Corporate |
|
Total |
Revenue |
$ |
2,573 |
|
|
$ |
1,477 |
|
|
$ |
— |
|
|
$ |
4,050 |
|
Cost of revenues |
1,722 |
|
|
1,078 |
|
|
— |
|
|
2,800 |
|
Gross profit |
$ |
851 |
|
|
$ |
399 |
|
|
$ |
— |
|
|
$ |
1,250 |
|
Gross profit % |
33 |
% |
|
27 |
% |
|
|
|
31 |
% |
|
|
|
|
|
|
|
|
Allocated operating expenses |
$ |
57 |
|
|
$ |
17,804 |
|
|
$ |
— |
|
|
$ |
17,861 |
|
Unallocated operating expenses |
— |
|
|
— |
|
|
4,104 |
|
|
4,104 |
|
Total operating expenses |
$ |
57 |
|
|
$ |
17,804 |
|
|
$ |
4,104 |
|
|
$ |
21,965 |
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
$ |
794 |
|
|
$ |
(17,405) |
|
|
$ |
(4,104) |
|
|
$ |
(20,715) |
|
Interest and other expense (income), net |
7 |
|
|
(6) |
|
|
— |
|
|
1 |
|
Net income (loss) before tax |
787 |
|
|
(17,399) |
|
|
(4,104) |
|
|
(20,716) |
|
Income tax expense |
8 |
|
|
— |
|
|
— |
|
|
8 |
|
Net income (loss) |
$ |
779 |
|
|
$ |
(17,399) |
|
|
$ |
(4,104) |
|
|
$ |
(20,724) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2021 |
|
Managed Services |
|
Collaboration Products |
|
Corporate |
|
Total |
Revenue |
$ |
1,006 |
|
|
$ |
793 |
|
|
$ |
— |
|
|
$ |
1,799 |
|
Cost of revenues |
721 |
|
|
507 |
|
|
— |
|
|
1,228 |
|
Gross profit |
$ |
285 |
|
|
$ |
286 |
|
|
$ |
— |
|
|
$ |
571 |
|
Gross profit % |
28 |
% |
|
36 |
% |
|
|
|
32 |
% |
|
|
|
|
|
|
|
|
Allocated operating expenses |
$ |
337 |
|
|
$ |
1,717 |
|
|
$ |
— |
|
|
$ |
2,054 |
|
Unallocated operating expenses |
— |
|
|
— |
|
|
1,628 |
|
|
1,628 |
|
Total operating expenses |
$ |
337 |
|
|
$ |
1,717 |
|
|
$ |
1,628 |
|
|
$ |
3,682 |
|
|
|
|
|
|
|
|
|
Loss from operations |
$ |
(52) |
|
|
$ |
(1,431) |
|
|
$ |
(1,628) |
|
|
$ |
(3,111) |
|
Interest and other expense (income), net |
2 |
|
|
(3) |
|
|
(2,448) |
|
|
(2,449) |
|
Income (loss) before income taxes |
(54) |
|
|
(1,428) |
|
|
820 |
|
|
(662) |
|
Income tax expense |
— |
|
|
— |
|
|
— |
|
|
— |
|
Net income (loss) |
$ |
(54) |
|
|
$ |
(1,428) |
|
|
$ |
820 |
|
|
$ |
(662) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2021 |
|
Managed Services |
|
Collaboration Products |
|
Corporate |
|
Total |
Revenue |
$ |
3,279 |
|
|
$ |
2,487 |
|
|
$ |
— |
|
|
$ |
5,766 |
|
Cost of revenues |
2,293 |
|
|
1,474 |
|
|
— |
|
|
3,767 |
|
Gross profit |
$ |
986 |
|
|
$ |
1,013 |
|
|
$ |
— |
|
|
$ |
1,999 |
|
Gross profit % |
30 |
% |
|
41 |
% |
|
|
|
35 |
% |
|
|
|
|
|
|
|
|
Allocated operating expenses |
$ |
527 |
|
|
$ |
5,394 |
|
|
$ |
— |
|
|
$ |
5,921 |
|
Unallocated operating expenses |
— |
|
|
— |
|
|
5,078 |
|
|
5,078 |
|
Total operating expenses |
$ |
527 |
|
|
$ |
5,394 |
|
|
$ |
5,078 |
|
|
$ |
10,999 |
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
$ |
459 |
|
|
$ |
(4,381) |
|
|
$ |
(5,078) |
|
|
$ |
(9,000) |
|
Interest and other expense (income), net |
16 |
|
|
(227) |
|
|
(2,448) |
|
|
(2,659) |
|
Net income (loss) before tax |
443 |
|
|
(4,154) |
|
|
(2,630) |
|
|
(6,341) |
|
Income tax expense |
— |
|
|
— |
|
|
— |
|
|
— |
|
Net income (loss) |
$ |
443 |
|
|
$ |
(4,154) |
|
|
$ |
(2,630) |
|
|
$ |
(6,341) |
|
Unallocated operating expenses in Corporate include costs for the
three and nine months ended September 30, 2022 and 2021 that
are not specific to a particular segment but are general to the
group; included are expenses incurred for administrative and
accounting staff, general liability and other insurance,
professional fees and other similar corporate
expenses.
For the three months ended September 30, 2022, approximately
10% of our revenue was attributable to customers in Singapore. For
the nine months ended September 30, 2022 and the three and
nine months ended September 30, 2021, there was no material
revenue attributable to any individual foreign
country.
Revenue by geographic area is allocated as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Domestic |
$ |
575 |
|
|
$ |
1,035 |
|
|
$ |
2,120 |
|
|
$ |
3,277 |
|
Foreign |
610 |
|
|
764 |
|
|
1,930 |
|
|
2,489 |
|
|
$ |
1,185 |
|
|
$ |
1,799 |
|
|
$ |
4,050 |
|
|
$ |
5,766 |
|
|
|
|
|
|
|
|
|
Disaggregated information for the Company’s revenue has been
recognized in the accompanying condensed consolidated Statements of
Operations and is presented below according to contract type (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
2022 |
|
% of Revenue |
|
2021 |
|
% of Revenue |
Revenue: Managed Services |
|
|
|
|
|
|
|
Video collaboration services |
$ |
69 |
|
|
6 |
% |
|
$ |
179 |
|
|
10 |
% |
Network services |
716 |
|
|
60 |
% |
|
813 |
|
|
45 |
% |
Professional and other services |
12 |
|
|
1 |
% |
|
14 |
|
|
1 |
% |
Total Managed Services
revenue |
$ |
797 |
|
|
67 |
% |
|
$ |
1,006 |
|
|
56 |
% |
|
|
|
|
|
|
|
|
Revenue: Collaboration Products |
|
|
|
|
|
|
|
Visual collaboration product offerings |
$ |
385 |
|
|
33 |
% |
|
$ |
771 |
|
|
43 |
% |
|
|
|
|
|
|
|
|
Licensing |
3 |
|
|
— |
% |
|
22 |
|
|
1 |
% |
Total Collaboration Products
revenue |
388 |
|
|
33 |
% |
|
793 |
|
|
44 |
% |
Total revenue |
$ |
1,185 |
|
|
100 |
% |
|
$ |
1,799 |
|
|
100 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2022 |
|
% of Revenue |
|
2021 |
|
% of Revenue |
Revenue: Managed Services |
|
|
|
|
|
|
|
Video collaboration services |
$ |
264 |
|
|
7 |
% |
|
$ |
700 |
|
|
21 |
% |
Network services |
2,260 |
|
|
56 |
% |
|
2,524 |
|
|
77 |
% |
Professional and other services |
49 |
|
|
1 |
% |
|
55 |
|
|
2 |
% |
Total Managed Services
revenue |
$ |
2,573 |
|
|
64 |
% |
|
$ |
3,279 |
|
|
57 |
% |
|
|
|
|
|
|
|
|
Revenue: Collaboration Products |
|
|
|
|
|
|
|
Visual collaboration product offerings |
$ |
1,467 |
|
|
36 |
% |
|
$ |
2,406 |
|
|
42 |
% |
|
|
|
|
|
|
|
|
Licensing |
10 |
|
|
— |
% |
|
81 |
|
|
1 |
% |
Total Collaboration Products
revenue |
1,477 |
|
|
36 |
% |
|
2,487 |
|
|
43 |
% |
Total revenue |
$ |
4,050 |
|
|
100 |
% |
|
$ |
5,766 |
|
|
100 |
% |
The Company considers a significant customer to be one that
comprises more than 10% of the Company’s consolidated revenues or
accounts receivable. The loss of or a reduction in sales or
anticipated sales to our most significant or several of our smaller
customers could have a material adverse effect on our business,
financial condition and results of operations.
Concentration of revenues was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
|
2022 |
|
2021 |
|
Segment |
|
% of Revenue |
|
% of Revenue |
Customer A |
Managed Services |
|
53 |
% |
|
37 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
|
2022 |
|
2021 |
|
Segment |
|
% of Revenue |
|
% of Revenue |
Customer A |
Managed Services |
|
48 |
% |
|
35 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concentration of accounts receivable was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2022 |
|
|
|
2022 |
|
2021 |
|
Segment |
|
% of Accounts Receivable |
|
% of Accounts Receivable |
Customer A |
Managed Services |
|
52 |
% |
|
17 |
% |
Customer B |
Collaboration Products |
|
12 |
% |
|
— |
% |
Customer C |
Collaboration Products |
|
— |
% |
|
12 |
% |
Customer D |
Collaboration Products |
|
— |
% |
|
11 |
% |
|
|
|
|
|
|
Note 11 - Commitments and Contingencies
From time to time, we are subject to various legal proceedings
arising in the ordinary course of business, including proceedings
for which we have insurance coverage. As of the date hereof, we are
not party to any legal proceedings that we currently believe will
have a material adverse effect on our business, financial position,
results of operations or liquidity.
COVID-19
On March 11, 2020, the World Health Organization announced that
infections of the novel Coronavirus (COVID-19) had become pandemic,
and on March 13, 2020, the U.S. President announced a National
Emergency relating to the disease. There has been continued
widespread infection in the United States and abroad, as COVID-19
has had, and continues to have, a significant impact around the
world, prompting governments and businesses to take unprecedented
measures in response. Such measures have included restrictions on
travel and business operations, temporary and permanent closures of
businesses, hybrid operations of businesses and for workers, and
quarantine and shelter-in-place orders. Some businesses have
imposed vaccine mandates and many are experiencing labor shortages.
These factors have also impacted the global supply chain, leading
to significant delays and shortages. These measures, while intended
to protect human life, have had serious adverse impacts on domestic
and foreign economies. The severity and duration of such impacts
are uncertain as new variants of the COVID-19 virus emerge and a
resulting surge in diagnosed cases may be seen. The sweeping nature
of the coronavirus pandemic makes it difficult to predict how the
Company’s business and operations will be affected in the longer
run. The COVID-19 pandemic has materially affected our revenue and
results of operations for 2020, 2021, and the nine months ended
September 30, 2022. The decreases in our revenue are primarily
attributable to the effects of the global pandemic on our channel
partners and customers as they continue to evaluate behavioral
changes in how and when employees choose to work from traditional
office environments. The Company’s results reflect the challenges
due to long and unpredictable sales cycles, delays in customer
retrofit budgets, project starts, and supply delayed orders in our
distribution channels as a direct result of customer implementation
schedules shifting due to the COVID-19 pandemic. The COVID-19
pandemic in particular has, and may continue to have, a significant
economic and business impact on our Company. During 2020, 2021, and
the nine months ended September 30, 2022, we have seen a continuing
weakness in revenue as our customers across all sectors delayed
decision making on diverse elements of communication and
collaboration technologies, in reaction to the ongoing impacts of
the COVID-19 pandemic, specifically related to how, when, and where
employees work. We continue to monitor the impact of the COVID-19
pandemic on our customers, suppliers and logistics providers, and
to evaluate governmental actions being taken to curtail and respond
to the spread of the virus. The significance and duration of the
ongoing impact on us is still uncertain. Material adverse effects
of the COVID-19 pandemic on market drivers, our customers,
suppliers or logistics providers could significantly impact our
operating results. We will continue to actively follow, assess and
analyze the ongoing impact of the COVID-19 pandemic and adjust our
organizational structure, strategies, plans and processes to
respond. Because the situation continues to evolve, we cannot
reasonably estimate the ultimate impact to our business, results of
operations, cash flows and financial position that the COVID-19
pandemic may have. Continuation of the COVID-19 pandemic and
government actions in response thereto could cause further
disruptions to our operations and the operations of our customers,
suppliers and logistics partners and could significantly adversely
affect our near-term and long-term revenues, earnings, liquidity
and cash flows.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
We are a provider of patented multi-stream collaboration products
and managed services for video collaboration and network
solutions.
Mezzanine™
Product Offerings
Our flagship product is called
Mezzanine™,
a family of turn-key products that enable dynamic and immersive
visual collaboration across
multi-users, multi-screens, multi-devices, and
multi-locations.
Mezzanine™
allows multiple
people to share, control and arrange content simultaneously, from
any location, enabling all participants to see the same content in
its entirety at the same time in identical formats, resulting in
dramatic enhancements to both in-room and virtual videoconference
presentations. Applications include video telepresence, laptop and
application sharing, whiteboard sharing and slides. Spatial input
allows content to be spread across screens, spanning different
walls, scalable to an arbitrary number of displays and interaction
with our proprietary wand device.
Mezzanine™
substantially
enhances day-to-day virtual meetings with technology that
accelerates decision making, improves communication, and increases
productivity.
Mezzanine™ scales up to support the most immersive and commanding
innovation centers; across to link labs, conference spaces, and
situation rooms; and down for the smallest work groups.
Mezzanine’s digital collaboration platform can be sold as delivered
systems in various configurations for small teams to total
immersion experiences. The family includes the 200 Series (two
display screen), 300 Series (three screen), and 600 Series (six
screen). We also sell maintenance and support contracts related to
Mezzanine™.
Historically, customers have used Mezzanine™ products in
traditional office and operating center environments such as
conference rooms or other presentation spaces. As discussed below,
sales of our Mezzanine product have been adversely affected by
commercial response to the COVID-19 pandemic. Like many technology
companies in recent months, we will continue to monitor and manage
our costs relative to demand with the goal of growing the Company’s
revenue in the future. To the extent we believe new investments in
product development, marketing, or sales are warranted as a result
of changes in market demand, we believe additional capital will be
required to fund those efforts and our ongoing
operations.
Managed Services for Video Collaboration
We provide a range of managed services for video collaboration,
from automated to orchestrated, to simplify the user experience in
an effort to drive adoption of video collaboration throughout our
customers’ enterprise. We deliver our services through a hybrid
service platform or as a service layer on top of our customers’
video infrastructure. We provide our customers with i) managed
videoconferencing, where we set up and manage customer
videoconferences and ii) remote service management, where we
provide 24/7 support and management of customer video
environments.
Managed Services for Network
We provide our customers with network solutions that ensure
reliable, high-quality and secure traffic of video, data and
internet. Network services are offered to our customers on a
subscription basis. Our network services business carries variable
costs associated with the purchasing and reselling of this
connectivity.
Oblong’s Results of Operations
Three Months Ended
September 30, 2022 (the
“2022 Third Quarter”) compared to the Three Months Ended
September 30, 2021 (the “2021 Third Quarter”)
Segment Reporting
The Company currently operates in two segments: (1) “Collaboration
Products,” which represents the Oblong Industries business
surrounding our
Mezzanine™ product offerings and (2)
“Managed Services,” which represents the Oblong (formerly
Glowpoint) business surrounding managed services for video
collaboration and network solutions. Certain information concerning
the Company’s segments for the three months ended September 30,
2022 is presented in the following table (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2022 |
|
Managed Services |
|
Collaboration Products |
|
Corporate |
|
Total |
Revenue |
$ |
797 |
|
|
$ |
388 |
|
|
$ |
— |
|
|
$ |
1,185 |
|
Cost of revenues |
552 |
|
|
289 |
|
|
— |
|
|
841 |
|
Gross profit |
$ |
245 |
|
|
$ |
99 |
|
|
$ |
— |
|
|
$ |
344 |
|
Gross profit % |
31 |
% |
|
26 |
% |
|
|
|
29 |
% |
|
|
|
|
|
|
|
|
Allocated operating expenses |
$ |
— |
|
|
$ |
6,275 |
|
|
$ |
— |
|
|
$ |
6,275 |
|
Unallocated operating expenses |
— |
|
|
— |
|
|
1,229 |
|
|
1,229 |
|
Total operating expenses |
$ |
— |
|
|
$ |
6,275 |
|
|
$ |
1,229 |
|
|
$ |
7,504 |
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
$ |
245 |
|
|
$ |
(6,176) |
|
|
$ |
(1,229) |
|
|
$ |
(7,160) |
|
Interest and other expense (income), net |
1 |
|
|
(6) |
|
|
— |
|
|
(5) |
|
Net income (loss) before tax |
246 |
|
|
(6,170) |
|
|
(1,229) |
|
|
(7,155) |
|
Income tax benefit |
— |
|
|
(3) |
|
|
— |
|
|
(3) |
|
Net income (loss) |
$ |
246 |
|
|
$ |
(6,167) |
|
|
$ |
(1,229) |
|
|
$ |
(7,152) |
|
Unallocated operating expenses in Corporate include costs during
the 2022
Third Quarter that are not specific to a particular segment but are
general to the group; included are expenses incurred for
administrative and accounting staff, general liability and other
insurance, professional fees and other similar corporate
expenses.
Revenue.
Total revenue decreased 34% in the 2022 Third Quarter compared to
the 2021 Third Quarter. The following table summarizes the changes
in components of our revenue (in thousands), and the significant
changes in revenue are discussed in more detail below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
2022 |
|
% of Revenue |
|
2021 |
|
% of Revenue |
Revenue: Managed Services |
|
|
|
|
|
|
|
Video collaboration services |
$ |
69 |
|
|
6 |
% |
|
$ |
179 |
|
|
10 |
% |
Network services |
716 |
|
|
60 |
% |
|
813 |
|
|
45 |
% |
Professional and other services |
12 |
|
|
1 |
% |
|
14 |
|
1 |
% |
Total Managed Services
revenue |
$ |
797 |
|
|
67 |
% |
|
$ |
1,006 |
|
|
56 |
% |
|
|
|
|
|
|
|
|
Revenue: Collaboration Products |
|
|
|
|
|
|
|
Visual collaboration product offerings |
$ |
385 |
|
|
33 |
% |
|
$ |
771 |
|
|
43 |
% |
Licensing |
3 |
|
|
— |
% |
|
22 |
|
|
1 |
% |
Total Collaboration Products
revenue |
388 |
|
|
33 |
% |
|
793 |
|
|
44 |
% |
Total revenue |
$ |
1,185 |
|
|
100 |
% |
|
$ |
1,799 |
|
|
100 |
% |
Managed Services
•The
decrease in revenue for video collaboration services is mainly
attributable to lower revenue from existing customers (either from
reductions in price or level of services) and loss of customers to
competition.
•The
decrease in revenue for network services is mainly attributable to
net attrition of customers and lower demand for our services given
the competitive environment and pressure on pricing that exists in
the network services business.
•We
expect revenue declines in our Managed Services segment will
continue in the future.
Collaboration Products
•The
decrease in revenue for our product offerings is primarily
attributable to the effects of the COVID-19 pandemic on our
existing and target customers as they continue to evaluate
behavioral changes in how and when employees choose to work from
traditional office environments. The Company’s results reflect the
challenges of long and unpredictable sales cycles, delays in
customer retrofit budgets for commercial real estate spaces,
project delays, and prospective orders in our distribution channels
as a direct result of partner and customer implementation schedules
shifting due to the COVID-19 pandemic. The COVID-19 pandemic in
particular has, and may continue to have, a significant economic
and business impact on our Company. During 2020, 2021 and the nine
months ended September 30, 2022, we saw continued weakness in
revenue as our partners and customers across all sectors delayed
potential orders in reaction to the ongoing impacts of the pandemic
that caused our customers to suspend or postpone technology
changes/upgrades due to budget and occupancy uncertainties. We
continue to monitor the impact of the pandemic on our customers,
suppliers and logistics providers, and evaluate governmental
actions being taken to curtail and respond to the spread of the
virus. The significance and duration of the ongoing impact on us is
still uncertain. Material adverse effects of the COVID-19 pandemic
on market drivers, our partners and customers, suppliers or
logistics providers may be expected to continue to significantly
impact our operating results. We will continue to actively follow,
assess and analyze the ongoing impact of the pandemic and adjust
our organizational structure, strategies, plans and processes to
respond. Because the situation continues to evolve, we cannot
reasonably estimate the ultimate impact to our business, results of
operations, cash flows and financial position that the pandemic may
have. Continuation of the
pandemic and government actions in response thereto could cause
further disruptions to our operations and the operations of our
customers, suppliers and logistics partners and may be expected to
continue to significantly adversely affect our near-term and
long-term revenues, earnings, liquidity and cash
flows.
Cost of Revenue (exclusive of depreciation and amortization and
casualty loss).
Cost of revenue, exclusive of depreciation and amortization and
casualty loss, includes all internal and external costs related to
the delivery of revenue. Cost of revenue also includes taxes which
have been billed to customers. Cost of revenue by segment is
presented in the following table (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
2022 |
|
2021 |
Cost of Revenue |
|
|
|
Managed Services |
$ |
552 |
|
|
$ |
721 |
|
Collaboration Products |
289 |
|
|
507 |
|
Total cost of revenue |
$ |
841 |
|
|
$ |
1,228 |
|
The decrease in cost of revenue is mainly attributable to lower
costs associated with the decrease in revenue during the same
period. The Company’s gross profit as a percentage of revenue was
29% in the 2022 Third Quarter compared to 32% in the 2021 Third
Quarter.
Operating expenses are presented in the following table (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
|
|
|
|
2022 |
|
2021 |
|
$ Change |
|
% Change |
Operating expenses: |
|
|
|
|
|
|
|
Research and development |
$ |
232 |
|
|
$ |
693 |
|
|
$ |
(461) |
|
|
(67) |
% |
Sales and marketing |
282 |
|
|
438 |
|
|
(156) |
|
|
(36) |
% |
General and administrative |
1,229 |
|
|
1,628 |
|
|
(399) |
|
|
(25) |
% |
Impairment charges |
5,169 |
|
|
254 |
|
|
4,915 |
|
|
1935 |
% |
|
|
|
|
|
|
|
|
Depreciation and amortization |
592 |
|
|
669 |
|
|
(77) |
|
|
(12) |
% |
Total operating expenses |
$ |
7,504 |
|
|
$ |
3,682 |
|
|
$ |
3,822 |
|
|
104 |
% |
Research and Development.
Research and development expenses include internal and external
costs related to developing new product offerings as well as
features and enhancements to our existing product offerings. The
decrease in research and development expenses for the 2022 Third
Quarter compared to the 2021 Third Quarter is primarily
attributable to lower personnel costs due to reduced headcount
between these periods.
Sales and Marketing Expenses.
The decrease in sales and marketing expenses for 2022 Third Quarter
compared to the 2021 Third Quarter is mainly attributable to lower
personnel costs due to reduced headcount between these
periods.
General and Administrative Expenses.
General and administrative expenses include direct corporate
expenses and costs of personnel in the various corporate support
categories, including executive, finance and accounting, legal,
human resources and information technology. The decrease in general
and administrative expenses for the 2022 Third Quarter compared to
the 2021 Third Quarter is mainly attributable to a decrease in
stock-based compensation expense.
Impairment Charges.
The impairment charges of $5,169,000 in the 2022 Third Quarter were
attributable to impairment of long-lived assets. In addition to the
impairment charges of $5,132,000 related to intangible assets
(see
Note 4 - Intangible Assets)
we also recorded impairment charges of $37,000 related to property
and equipment in our Collaboration Products segment. The impairment
in the 2021 Third Quarter was attributable to impairment charges on
property and equipment and intangible assets no longer in service.
Future declines of our revenue, cash flows and/or market
capitalization may give rise to a triggering event that may require
the Company to record impairment charges in the future related to
our intangible assets and other long-lived assets.
Depreciation and Amortization.
The decrease in depreciation and amortization expenses for the 2022
Third Quarter compared to the 2021 Third Quarter is mainly
attributable to the disposition and impairment of certain assets
during the second half of 2021 and the first nine months of 2022,
as well as a decrease in depreciation as certain assets became
fully depreciated.
Loss from Operations.
The decrease in the Company’s loss from operations for the 2022
Third Quarter compared to the 2021 Third Quarter is mainly
attributable to lower operating expenses as addressed
above.
Nine Months Ended September 30, 2022 compared to the Nine
Months Ended September 30, 2021
Segment Reporting
Certain information concerning the Company’s two segments for the
nine months ended September 30, 2022 is presented in the
following table (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2022 |
|
Managed Services |
|
Collaboration Products |
|
Corporate |
|
Total |
Revenue |
$ |
2,573 |
|
|
$ |
1,477 |
|
|
$ |
— |
|
|
$ |
4,050 |
|
Cost of revenues |
1,722 |
|
|
1,078 |
|
|
— |
|
|
2,800 |
|
Gross profit |
$ |
851 |
|
|
$ |
399 |
|
|
$ |
— |
|
|
$ |
1,250 |
|
Gross profit % |
33 |
% |
|
27 |
% |
|
|
|
31 |
% |
|
|
|
|
|
|
|
|
Allocated operating expenses |
$ |
57 |
|
|
$ |
17,804 |
|
|
$ |
— |
|
|
$ |
17,861 |
|
Unallocated operating expenses |
— |
|
|
— |
|
|
4,104 |
|
|
4,104 |
|
Total operating expenses |
$ |
57 |
|
|
$ |
17,804 |
|
|
$ |
4,104 |
|
|
$ |
21,965 |
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
$ |
794 |
|
|
$ |
(17,405) |
|
|
$ |
(4,104) |
|
|
$ |
(20,715) |
|
Interest and other expense (income), net |
7 |
|
|
(6) |
|
|
— |
|
|
1 |
|
Net income (loss) before tax |
787 |
|
|
(17,399) |
|
|
(4,104) |
|
|
(20,716) |
|
Income tax expense |
8 |
|
|
— |
|
|
— |
|
|
8 |
|
Net income (loss) |
$ |
779 |
|
|
$ |
(17,399) |
|
|
$ |
(4,104) |
|
|
$ |
(20,724) |
|
Unallocated operating expenses in Corporate include costs during
the nine months ended September 30, 2022 that are not specific to a
particular segment but are general to the group; included are
expenses incurred for administrative and accounting staff, general
liability and other insurance, professional fees and other similar
corporate expenses.
Revenue.
Total revenue decreased 30% in the nine months ended September 30,
2022 compared to the nine months ended September 30, 2021. The
following table summarizes the changes in components of our revenue
(in thousands), and the significant changes in revenue are
discussed in more detail below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
2022 |
|
% of Revenue |
|
2021 |
|
% of Revenue |
Revenue: Managed Services |
|
|
|
|
|
|
|
Video collaboration services |
$ |
264 |
|
|
7 |
% |
|
$ |
700 |
|
|
21 |
% |
Network services |
2,260 |
|
|
56 |
% |
|
2,524 |
|
|
77 |
% |
Professional and other services |
49 |
|
|
1 |
% |
|
55 |
|
2 |
% |
Total Managed Services revenue |
$ |
2,573 |
|
|
64 |
% |
|
$ |
3,279 |
|
|
57 |
% |
|
|
|
|
|
|
|
|
Revenue: Collaboration Products |
|
|
|
|
|
|
|
Visual collaboration product offerings |
$ |
1,467 |
|
|
36 |
% |
|
$ |
2,406 |
|
|
42 |
% |
|
|
|
|
|
|
|
|
Licensing |
10 |
|
|
— |
% |
|
81 |
|
|
1 |
% |
Total Collaboration Products revenue |
1,477 |
|
|
36 |
% |
|
2,487 |
|
|
43 |
% |
Total revenue |
$ |
4,050 |
|
|
100 |
% |
|
$ |
5,766 |
|
|
100 |
% |
Managed Services
•The
decrease in revenue for video collaboration services is mainly
attributable to lower revenue from existing customers (either from
reductions in price or level of services) and loss of customers to
competition.