Oblong, Inc. - Quarter Report: 2021 September (Form 10-Q)

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, 2021.

☐ 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)


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:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

OBLG

Nasdaq Capital Market

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 9, 2021 was 30,816,048.

OBLONG, INC.

Index


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements		1
	Condensed Consolidated Balance Sheets at September 30, 2021 (unaudited) and December 31, 2020	1
	Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020	3
	Unaudited Condensed Consolidated Statement of Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020	6
	Notes to unaudited Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 3. Quantitative and Qualitative Disclosures About Market Risk		30
Item 4. Controls and Procedures		30

PART II - OTHER INFORMATION
Item 1. Legal Proceedings		31
Item 1A. Risk Factors		31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		31
Item 3. Defaults Upon Senior Securities		31
Item 4. Mine Safety Disclosures		31
Item 5. Other Information		31
Item 6. Exhibits		32
Signatures		33

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, 2020, each included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2021, as well as under “Part II. Item 1A. Risk Factors” in this 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 ability to meet commercial commitments; our expectations and estimates relating to customer attrition, sales cycles, future revenues, expenses, capital expenditures and cash flows; 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; our beliefs about employee relations; statements relating to market need, evolution of our solutions and our service platforms; our beliefs about the service offerings of our competitors and our ability to differentiate Oblong’s services; adequacy of our internal controls; statements regarding our information systems and our ability to protect and prevent security breaches; expectations relating to additional patent protection; and beliefs about the strength of our intellectual property, including patents. For additional information regarding known material factors that could cause our actual results to differ materially from our projected results, please see “Part II. Item 1A. Risk Factors” in this Report. 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 compete effectively in the video collaboration services and network services businesses;

•the quality and reliability of our services;

•the prices for our products and services;

•customer renewal 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;

•customer acquisition costs;

•actions by our competitors, including price reductions for their competitive services;

•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, 2021		December 31, 2020
	(Unaudited)
ASSETS
Current assets:
Cash	$	10,734	$	5,058
Restricted cash	61		158
Accounts receivable, net	1,276		3,166
Inventory	1,856		920
Prepaid expenses and other current assets	1,442		691
Total current assets	15,369		9,993
Property and equipment, net	198		573
Goodwill	7,367		7,367
Intangibles, net	8,142		10,140
Operating lease - right of use asset, net	531		903
Other assets	91		167
Total assets	$	31,698	$	29,143
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	—	$	2,014
Accounts payable	538		313
Accrued expenses and other current liabilities	990		1,201
Current portion of deferred revenue	956		1,217
Current portion of operating lease liabilities	475		830



Total current liabilities	2,959		5,575
Long-term liabilities:

Long-term debt, net of current portion	—		403
Operating lease liabilities, net of current portion	182		602
Deferred revenue, net of current portion	412		506

Total long-term liabilities	594		1,511
Total liabilities	3,553		7,086
Commitments and contingencies (see Note 12)
Stockholders’ equity:
Preferred stock Series A-2, convertible; $.0001 par value; $7,500 stated value; 7,500 shares authorized, zero and 45 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	—		—


Preferred stock Series D, convertible; $.0001 par value; $28.50 stated value; 1,750,000 shares authorized, zero and 1,697,958 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	—		—
Preferred stock Series E, convertible; $.0001 par value; $28.50 stated value; 175,000 shares authorized, zero and 131,579 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	—		—

See accompanying notes to condensed consolidated financial statements.

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Common stock, $.0001 par value; 150,000,000 shares authorized; 30,929,331 shares issued and 30,816,048 outstanding at September 30, 2021 and 7,861,912 shares issued and 7,748,629 outstanding at December 31, 2020	3		1
Treasury stock, 113,283 shares of common stock at September 30, 2021 and December 31, 2020	(181)		(181)
Additional paid-in capital	227,519		215,092
Accumulated deficit	(199,196)		(192,855)
Total stockholder's equity	28,145		22,057
Total liabilities and stockholders’ equity	$	31,698	$	29,143

See accompanying notes to condensed consolidated financial statements.

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OBLONG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Revenue	$	1,799	$	3,266	$	5,766	$	11,410
Cost of revenue (exclusive of depreciation and amortization)	1,228		1,612		3,767		5,684
Gross profit	571		1,654		1,999		5,726

Operating expenses:
Research and development	693		747		1,984		3,062
Sales and marketing	438		668		1,537		2,708
General and administrative	1,628		1,332		5,078		5,173
Impairment charges	254		117		302		667
Depreciation and amortization	669		780		2,098		2,392
Total operating expenses	3,682		3,644		10,999		14,002
Loss from operations	(3,111)		(1,990)		(9,000)		(8,276)
Interest and other expense, net	2		95		16		322
Other income	(3)		—		(227)		—
Gain on extinguishment of debt	(2,448)		—		(2,448)		—

Interest and other (income) expense, net	(2,449)		95		(2,659)		322
Loss before income taxes	(662)		(2,085)		(6,341)		(8,598)
Income tax expense	—		—		—		—
Net loss	(662)		(2,085)		(6,341)		(8,598)
Preferred stock dividends	—		4		1		12
Undeclared dividends	—		—		366		—
Induced conversion of Series A-2 Preferred Stock	—		—		300		—
Net loss attributable to common stockholders	$	(662)	$	(2,089)	$	(7,008)	$	(8,610)

Net loss attributable to common stockholders per share:
Basic and diluted net loss per share	$	(0.02)	$	(0.40)	$	(0.28)	$	(1.64)


Weighted-average number of shares of common stock:
Basic and diluted	30,739		5,257		25,121		5,237

See accompanying notes to condensed consolidated financial statements.

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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 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	—	—			—	—		—	—		200,000	—		—	—		—		—		—




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.

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OBLONG, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

Three and Nine Months Ended September 30, 2020

(In thousands, except shares)

(Unaudited)


	Series A-2 Preferred Stock			Series C Preferred Stock			Series D Preferred Stock			Series E Preferred Stock			Common Stock			Treasury Stock
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Total
Balance at December 31, 2019	32	$	—	475	$	—	1,734,901	$	—	131,579	$	—	5,266,828	$	1	105,285	$	(165)	$	207,383	$	(185,434)	$	21,785
Net loss	—	—		—	—		—	—		—	—		—	—		—	—		—		(3,129)		(3,129)
Stock-based compensation	—	—		—	—		—	—		—	—		—	—		—	—		32		—		32
Forfeitures of restricted stock	—	—		—	—		(14,441)	—		—	—		—	—		—	—		—		—		—
Preferred stock conversion	—	—		(150)	—		—	—		—	—		50,000	—		—	—		—		—		—
Issuance of preferred stock for accrued dividends	13	—		—	—		—	—		—	—		—	—		—	—		98		—		98
Preferred stock dividends	—	—		—	—		—	—		—	—		—	—		—	—		(4)		—		(4)
Purchase of treasury stock	—	—		—	—		—	—		—	—		—	—		—	(7)		—		—		(7)
Balance at March 31, 2020	45	—		325	—		1,720,460	—		131,579	—		5,316,828	1		105,285	(172)		207,509		(188,563)		18,775
Net loss	—	—		—	—		—	—		—	—		—	—		—	—		—		(3,385)		(3,385)
Stock-based compensation	—	—		—	—		—	—		—	—		—	—		—	—		29		—		29
Forfeitures of restricted stock	—	—		—	—		(17,364)	—		—	—		—	—		—	—		—		—		—

Issuance of stock on vested restricted stock units	—	—		—	—		—	—		—	—		23,334	—		—	—		—		—		—
Preferred stock dividends	—	—		—	—		—	—		—	—		—	—		—	—		(4)		—		(4)
Issuance of preferred stock for accrued dividends	—	—		—	—		—	—		—	—		—	—		—	—		1				1
Purchase of treasury stock	—	—		—	—		—	—		—	—		—	—		7,998	(9)		—		—		(9)
Balance at June 30, 2020	45	—		325	—		1,703,096	—		131,579	—		5,340,162	1		113,283	(181)		207,535		(191,948)		15,407
Net loss	—	—		—	—		—	—		—	—		—	—		—	—		—		(2,085)		(2,085)
Stock-based compensation	—	—		—	—		—	—		—	—		—	—		—	—		27		—		27

Preferred stock conversion	—	—		(75)	—		—	—		—	—		25,000	—		—	—		—		—		—

Forfeiture of restricted stock	—	—		—	—		(1,086)	—		—	—		(9,321)	—		—	—		—		—		—
Preferred stock dividends	—	—		—	—		—	—		—	—		—	—		—	—		(4)		—		(4)

Balance at September 30, 2020	45	$	—	250	$	—	1,702,010	$	—	131,579	$	—	5,355,841	$	1	113,283	$	(181)	$	207,558	$	(194,033)	$	13,345

See accompanying notes to condensed consolidated financial statements.

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OBLONG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended September 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(6,341)	$	(8,598)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,098		2,392
Bad debt expense	280		14
Amortization of debt discount	—		53
Amortization of right of use asset	372		834


Stock-based compensation	535		89
Stock-based expense for services	390		—


Gain on extinguishment of lease liability	(227)		—
Gain on extinguishment of debt	(2,448)		—
Impairment charges - property and equipment	98		126
Impairment charges - intangible assets	207		—
Impairment charges - goodwill	—		541
Changes in operating assets and liabilities:
Accounts receivable	1,610		322
Inventory	(936)		689
Prepaid expenses and other current assets	(751)		240
Other assets	15		(32)
Accounts payable	225		15
Accrued expenses and other current liabilities	11		(184)
Deferred revenue	(355)		72
Lease liabilities	(739)		(895)
Other liabilities	—		(3)
Net cash used in operating activities	(5,956)		(4,325)
Cash flows from investing activities:
Purchases of property and equipment	(30)		(8)
Net cash used in investing activities	(30)		(8)
Cash flows from financing activities:
Proceeds from stock issuance, net of issuance costs	11,504		—
Proceeds from PPP Loan	—		2,417
Purchase of treasury stock	—		(16)
Net cash provided by financing activities	11,504		2,401
Increase (decrease) in cash and restricted cash	5,518		(1,932)
Cash and restricted cash at beginning of period	5,277		4,602
Cash and restricted cash at end of period	$	10,795	$	2,670

Supplemental disclosures of cash flow information:

Reconciliation of cash and restricted cash
Cash	$	10,734	$	2,670
Restricted cash	$	61	$	—
Total cash and restricted cash	$	10,795	$	2,670

Cash paid during the period for interest	$	3	$	159
Non-cash investing and financing activities:
Issuance of preferred stock in exchange for accrued dividends	$	—	$	99
Accrued preferred stock dividends	1		12
Inducement to convert Series A-2 Preferred Stock to common	300		—
Common stock issued for conversion of preferred stock	3		—

See accompanying notes to condensed consolidated financial statements.

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OBLONG, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

(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, 2020. 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, 2020 year-end condensed consolidated balance sheet data in this document was derived from audited consolidated financial statements. These 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, 2020 and notes thereto included in the Company's fiscal 2020 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 30, 2021 (the “2020 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) the following subsidiaries of Oblong Industries: Oblong Industries Europe, S.L. and Oblong Europe Limited. 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) the Oblong (formerly Glowpoint) business, which includes managed services for video collaboration and network applications, and 2) the Oblong Industries business, which includes products and services for visual collaboration technologies. See Note 11 - Segment Reporting for further discussion.

Use of Estimates

Preparation of the condensed 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 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 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

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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 as well as the values ascribed to assets acquired and liabilities assumed in the business combination.

Significant Accounting Policies

The significant accounting policies used in preparation of these condensed consolidated financial statements are disclosed in our 2020 10-K, and there have been no changes to the Company’s significant accounting policies during the nine months ended September 30, 2021.

Property and Equipment

Property and equipment are stated at cost and are depreciated over the estimated useful lives of the related assets, which range from three to ten years. Leasehold improvements are amortized over the shorter of either the asset’s useful life or the related lease term. Depreciation is computed on the straight-line method for financial reporting purposes. During the three and nine months ended September 30, 2021, the Company recorded asset impairment charges on property and equipment of $50,000 and $98,000, respectively, for the discontinued use of, or disposal of, property and equipment. These charges are included in “Impairment Charges” on our condensed consolidated statements of operations.

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 is currently evaluating the impact the new guidance will have on its consolidated financial statements.

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 does not expect this update to have a material effect on its consolidated financial statements.

Note 2 - Liquidity and Going Concern Uncertainty

As of September 30, 2021, we had $10,734,000 of unrestricted cash and working capital of $12,410,000. For the nine months ended September 30, 2021, we incurred a net loss of $6,341,000 and used $5,956,000 of net cash in operating activities.

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, capital expenditures, and the cost involved in protecting intellectual property rights. While our acquisition of Oblong Industries provides additional revenues to the Company, the cost to further develop and commercialize Oblong Industries’ product offerings is expected to exceed its revenues for the foreseeable future. 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 the Company’s 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.

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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.

See Note 12 - Commitments and Contingencies to our condensed consolidated financial statements for discussion regarding certain additional factors that could impact the Company’s liquidity in the future.

Note 3 - Goodwill

As of September 30, 2021 and December 31, 2020, goodwill was $7,367,000, recorded in connection with the October 1, 2019 acquisition of Oblong Industries. All goodwill as of September 30, 2021 and December 31, 2020 is recorded within the Oblong Industries reporting unit.

We test goodwill for impairment on an annual basis on September 30 of each year, or more frequently if events occur or circumstances change indicating that the fair value of the goodwill may be below its carrying amount. The Company operates two reporting segments, Oblong (formerly Glowpoint) and Oblong Industries. To determine the fair value of each reporting unit as of September 30, 2021 for the goodwill impairment test, we used a weighted average of the discounted cash flow method and a market-based method. The fair value of the Oblong Industries reporting unit exceeded its carrying amount, therefore no impairment charge on goodwill was recorded.

In the event we experience future declines in our revenue, cash flows and/or stock price, this may give rise to a triggering event that may require the Company to record impairment charges on goodwill in the future.

Note 4 - Intangible Assets

The following table presents the components of net intangible assets (in thousands):


	As of September 30, 2021								As of December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Impairment		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Oblong (formerly Glowpoint)
Affiliate network	$	994	$	(787)	$	(207)	$	—	$	994	$	(735)	$	259



Oblong Industries
Developed technology	$	10,060	$	(4,032)	$	—	$	6,028	$	10,060	$	(2,520)	$	7,540
Trade names	2,410		(482)		$	—	1,928		2,410		(302)		2,108
Distributor relationships	310		(124)		$	—	186		310		(77)		233
Subtotal	12,780		(4,638)		$	—	8,142		12,780		(2,899)		9,881
Total	$	13,774	$	(5,425)	$	(207)	$	8,142	$	13,774	$	(3,634)	$	10,140

At each reporting period, we determine if there was a triggering event that may result in an impairment of our intangible assets.

Oblong Industries Reportable Segment

During the three months ended September 30, 2021, we considered the decline in revenue for Oblong Industries to be a triggering event for a recoverability test of intangible assets for this reporting unit. Based on the corresponding recoverability tests of Oblong Industries’ intangible assets, we determined no impairment charges were required for the three months ended September 30, 2021.

Oblong (formerly Glowpoint) Reportable Segment

During the three months ended September 30, 2021, Oblong (formerly Glowpoint) stopped offering video meeting suites (“VMS”) services. VMS services were a component of Oblong’s video collaboration services revenue stream and contributed to the cashflows relating to the affiliate network intangible asset. During the three months ended September 30, 2021, we identified the cessation of our VMS services to be a triggering event for a recoverability test of the affiliate network intangible asset. Based on the corresponding recoverability test, we deemed the affiliate network intangible asset to have no remaining

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value as of September 30, 2021. Therefore, we recorded an impairment charge of $207,000 for the three months ended September 30, 2021.

Intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the assets, which range from five years to twelve years in accordance with ASC Topic 350.

The weighted average economic lives for the components of intangible assets are as follows:






Oblong Industries
Developed technology			5 years
Trade names			10 years
Distributor relationships			5 years

Related amortization expense was $597,000, $1,791,000, $611,000, and $1,835,000 for the three and nine months ended September 30, 2021 and 2020, respectively.

Amortization expense for each of the next five succeeding years will be as follows (in thousands):


Remainder of 2021	$	580
2022	2,316
2023	2,309
2024	1,792
2025	241
Thereafter	904
Total	$	8,142

Note 5 - Accrued Expenses and Other Current Liabilities

Accrued expenses and other liabilities consisted of the following (in thousands):


	September 30,		December 31,
	2021		2020

Accrued compensation costs	$	421	$	411
Accrued professional fees	208		236
Accrued taxes and regulatory fees	172		137
Customer deposits	51		127
Other accrued expenses and liabilities	138		286

Accrued dividends on Series A-2 Preferred Stock	—		4
Accrued expenses and other current liabilities	$	990	$	1,201

Note 6 - Debt

Debt consisted of the following (in thousands):


	September 30,		December 31,
	2021		2020
PPP Loan Principal	$	—	$	2,417
Less: current portion of long-term debt	—		2,014
Long-term debt, net of current portion	$	—	$	403

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Paycheck Protection Program Loan

On April 10, 2020 (the “Origination Date”), the Company received $2,417,000 in aggregate loan proceeds (the “PPP Loan”) from MidFirst Bank (the “Lender”) pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The PPP Loan was evidenced by a Promissory Note (the “Note”), dated April 10, 2020, by and between the Company and the Lender. Subject to the terms of the Note, the PPP Loan bore interest at a fixed rate of one percent (1.0%) per annum. Payments of principal and interest were deferred for the first six months following the Origination Date. The PPP Loan was unsecured and guaranteed by the U.S. Small Business Administration (the “SBA”).

The PPP provided for forgiveness of up to the full amount borrowed as long as the Company uses the loan proceeds during the 24-week period following disbursement for eligible purposes as described in the CARES Act and related guidance. On July 28, 2021, the Company received notice that the PPP Loan had been forgiven in its entirety.

As of December 31, 2020, the Company accounted for payments that are due within 12 months of the balance sheet date as current liabilities and payments due thereafter as non-current liabilities. As of September 30, 2021, there is no remaining principal balance or accrued interest on the Note due to the forgiveness of the Note received on July 28, 2021. The Company recognized a gain on debt extinguishment of $2,448,000 during the three and nine months ended September 30, 2021, comprised of $2,417,000 of Note principal and $31,000 of accrued interest as of the date of forgiveness.

Note 7 - Capital Stock

Common Stock

On February 1, 2021, the Company, acting pursuant to authorization from its Board of Directors, determined to voluntarily withdraw the listing of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), from the NYSE American Stock Exchange (the “NYSE American”) and transfer such listing to The Nasdaq Capital Market (“Nasdaq”). The Company’s listing and trading of its Common Stock on the NYSE American ended at market close on February 11, 2021, and trading began on Nasdaq at market open on February 12, 2021, and is continuing to trade under the ticker symbol “OBLG”. As of September 30, 2021, we had 150,000,000 shares of our Common Stock authorized, with 30,929,331 and 30,816,048 shares issued and outstanding, respectively.

During the nine months ended September 30, 2021 and 2020, 18,846,411 and 75,000 shares of the Company’s Common stock were issued in relation to preferred stock conversions, respectively, and 200,000 and 23,334 shares were issued as stock-based compensation, respectively.

Issuance for Professional Service Fees

On December 10, 2020, the Company issued 50,000 shares of Common Stock as payment for services, with a fair value equal to $348,000, related to a financial advisory agreement entered into on December 1, 2020.

On January 21, 2021, the Company issued 21,008 shares of Common Stock as payment for services, with a fair value equal to $100,000, related to a financial advisory agreement entered into on January 15, 2021.

During the nine months ended September 30, 2021, the Company recorded stock-based professional services expense of $390,000 relating to the issuance of the shares above, which is included as a component of general and administrative expense in the accompanying condensed consolidated statements of operations.

Issuance Pursuant to Equity Financing

On June 30, 2021, the Company closed on a concurrent public offering of 4,000,000 shares of Common Stock, Series A Warrants to purchase 1,000,000 shares of the Company’s Common Stock at an exercise price of $4.00 per share, and private placement of Series B Warrants to purchase 3,000,000 shares of common stock at an exercise price of $4.40 per share for gross proceeds of $12,400,000. Issuance costs for this transaction were $896,000, resulting in net proceeds of $11,504,000.

Warrants

On October 21, 2020, the Company issued warrants to purchase up to 521,500 shares of Common Stock pursuant to a securities purchase agreement with certain accredited investors. The Warrants have a term of 2 years, are initially exercisable at $4.08 per share and are subject to cashless exercise if, at the time of exercise, the Warrant Shares are not subject to an effective

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resale registration statement. The Warrants are also subject to adjustment in the event of (i) stock splits and dividends, (ii) subsequent rights offerings, (iii) pro-rata distributions, and (iv) certain fundamental transactions, including but not limited to the sale of the Company, business combinations, and reorganizations. The Warrants do not have any price protection or price reset provisions with respect to future issuances of securities. The fair value of the Warrants was recorded to additional paid-in capital during the year ended December 31, 2020. As of September 30, 2021, no warrants had been exercised.

On December 6, 2020, the Company issued warrants to purchase up to 625,000 shares of Common Stock pursuant to a securities purchase agreement with certain accredited investors. The Warrants have a term of 2 years, are initially exercisable at $5.49 per share and are subject to cashless exercise if, at the time of exercise, the Warrant Shares are not subject to an effective resale registration statement. The Warrants are also subject to adjustment in the event of (i) stock splits and dividends, (ii) subsequent rights offerings, (iii) pro-rata distributions, and (iv) certain fundamental transactions, including but not limited to the sale of the Company, business combinations, and reorganizations. The Warrants do not have any price protection or price reset provisions with respect to future issuances of securities. The fair value of the Warrants was recorded to additional paid-in capital during the year ended December 31, 2020. As of September 30, 2021, no warrants had been exercised.

On June 30, 2021, the Company issued Series A Warrants to purchase up to 1,000,000 shares of Common Stock, and Series B Warrants to purchase up to 3,000,000 shares of Common Stock, pursuant to a securities purchase agreement with certain accredited investors. The Series A Warrants have a term of 6 months and are initially exercisable at $4.00 per share. The Series B Warrants have a term of 3 years, commencing six months and one day from the date of issuance, and are initially exercisable at $4.40 per share. All of the warrants are subject to cashless exercise if, at the time of exercise, the Warrant Shares are not subject to an effective resale registration statement. The Warrants are also subject to adjustment in the event of (i) stock splits and dividends, (ii) subsequent rights offerings, (iii) pro-rata distributions, and (iv) certain fundamental transactions, including but not limited to the sale of the Company, business combinations, and reorganizations. The Warrants do not have any price protection or price reset provisions with respect to future issuances of securities. The fair value of the Series A and B Warrants was recorded to additional paid-in capital during the nine months ended September 30, 2021. As of September 30, 2021, no warrants had been exercised.

Warrant activity for the nine months ended September 30, 2021 and the year ended December 31, 2020 is presented below.


	Outstanding
	Number of Warrants (in thousands)	Weighted Average Exercise Price
Warrants outstanding and exercisable, December 31, 2019	72	0.01
Granted	1,147	4.85
Exercised	(72)	0.01


Warrants outstanding and exercisable, December 31, 2020	1,147	$	4.85
Granted	4,000	4.30



Warrants outstanding and exercisable, September 30, 2021	5,147	$	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 stock compensation transactions. The following table shows the activity for Treasury Stock during the year ended December 31, 2020 (in thousands). There were no treasury stock transactions during the nine months ended September 30, 2021.


	Shares	Value
Treasury Shares as of December 31, 2019	105	$	(165)
Purchases to cover stock compensation taxes	8	(16)

Treasury Shares as of December 31, 2020	113	$	(181)


Treasury Shares as of September 30, 2021	113	$	(181)

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Note 8 - Preferred Stock

Our Certificate of Incorporation authorizes the issuance of up to 5,000,000 shares of preferred stock. As of September 30, 2021, we had 1,941,250 designated shares of preferred stock and no shares of preferred stock issued and outstanding. As of December 31, 2020, we had 1,829,582 shares of preferred stock outstanding.

Series A-2 Preferred Stock

As of December 31, 2020, there were 45 shares of Series A-2 Preferred Stock issued and outstanding. Each share of Series A-2 Preferred Stock had a stated value of $7,500 per share (the “A-2 Stated Value”), a liquidation preference equal to the Series A-2 Stated Value, and was convertible at the holder’s election into common stock at a conversion price per share of $16.11. Therefore, each share of Series A-2 Preferred Stock was convertible into 466 shares of common stock, for an aggregate of 20,954 shares of common stock.

The Series A-2 Preferred Stock was senior to all outstanding classes of the Company’s equity and was entitled to cumulative dividends at a rate of 5.0% per annum. As of December 31, 2020, the Company had recorded $4,000 in accrued dividends on the accompanying condensed consolidated Balance Sheets related to the Series A-2 Preferred Stock outstanding. During the nine months ended September 30, 2021, an additional $1,000 dividend was recorded.

On January 28, 2021, the Company entered into an agreement with the holder of the Series A-2 Preferred Stock to convert the stated value of all outstanding shares of the Series A-2 Preferred Stock, 45 shares, into 84,292 shares of the Company’s common stock, at a negotiated conversion price of $4.00 per share, after taking into consideration accrued and unpaid dividends. The incremental cost of inducing the conversion was approximately $300,000 and was treated similar to a preferred dividend, increasing the net loss attributable to common stockholders.

Series D and E Preferred Stock

In connection with the Oblong Industries acquisition, on October 1, 2019 (the “Closing Date”), the Company issued an aggregate of 1,686,659 shares of Series D Preferred Stock and an aggregate of 49,967 restricted shares of Series D Preferred Stock (“Restricted Series D Preferred Stock”), the latter of which were subject to vesting over a two-year period following the Closing Date.

Pursuant to the terms of the Series D Certificate of Designations, each share of Series D Preferred Stock was entitled to receive an annual dividend equal to 6.0% of its then-existing Accrued Value per annum, commencing on the first anniversary of the issuance of the Series D Preferred Stock (or October 1, 2020). Prior to the first anniversary of the issuance of the Series D Preferred Stock no dividends accrued on such stock. Dividends were cumulative and accrued daily in arrears. The accrued value of the Series D Preferred Stock was increased by the amount of such dividends from October 1, 2020 through the date of conversion as described below.

During the year ended December 31, 2020, 28,618 shares of Restricted Series D Preferred Stock were forfeited and 8,325 shares of Series D Preferred Stock were surrendered to cover the taxes on vesting shares. During the three months ended March 31, 2021, 81 shares of Restricted Series D Preferred Stock were forfeited and 855 shares of Series D Preferred Stock were surrendered to cover the taxes on vesting shares.

On October 1, 2019, Oblong entered into a Series E Preferred Stock Purchase Agreement relating to the offer and sale by the Company of up to 131,579 shares of its Series E Preferred Stock at a price of $28.50 per share. The Company sold a total of 131,579 shares of Series E Preferred Stock for net proceeds of approximately $3,750,000. The 131,579 shares of Series E Preferred Stock had an aggregate accrued value of $3,750,000 and upon their conversion would convert at a conversion price of $2.85 per share into 1,315,790 common shares.

Pursuant to the terms of the Series E Certificate of Designations, each share of Series E Preferred Stock was entitled to receive an annual dividend equal to 6.0% of its then-existing Accrued Value per annum, commencing on the first anniversary of the issuance of the Series E Preferred Stock (or October 1, 2019 or December 18, 2019, as applicable). Prior to the first anniversary of the issuance of the Series E Preferred Stock no dividends accrued on such stock. Dividends were cumulative and accrue daily in arrears. The accrued value of the Series E Preferred Stock was increased by the amount of such dividends from October 1, 2020 through the date of conversion as described below.

The terms of the Company’s Series D and Series E Preferred Stock provided that such shares were automatically convertible into a number of shares of the Company’s Common Stock equal to the accrued value of the preferred shares (initially $28.50),

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plus any accrued dividends thereon, divided by the conversion price (initially $2.85 per share, subject to specified adjustments) upon the completion of both (i) approval of such conversion by the Company’s stockholders entitled to vote thereon (which occurred on December 19, 2019); and (ii) the receipt of all required authorizations and approval of a new listing application for the Company following the Company’s October 2019 acquisition of Oblong Industries, Inc. from the NYSE American or any such other exchange upon which the Company’s securities are then listed for trading. The Company determined that this conversion condition was completed in its entirety, and the Series D and E Preferred Stock automatically converted to shares of Common Stock pursuant to their terms, effective upon the commencement of trading of the Company’s Common Stock on Nasdaq as described above, on February 12, 2021.

As of the date of conversion, the Company had 1,697,022 shares of Series D Preferred Stock and 131,579 shares of Series E Preferred Stock outstanding, respectively. The outstanding shares of Series D and Series E Preferred stock were converted into 17,416,939 and 1,345,180 shares of Common Stock, respectively, after taking into consideration all accrued and unpaid dividends.

Following the conversion of the Series A-2, Series D, and Series E Preferred Stock, the Company no longer has shares of Preferred Stock issued and outstanding.

Note 9 - 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, 2021, the share pool available for new grants under the 2019 Plan is 2,513,500.

Stock Options

On June 28, 2021, the Company granted 300,000 stock options to certain employees. These options have a term of 10 years, vest equally over 3 years, 1/3 upon each anniversary of the grant date, and have an exercise price of $3.25 per share. Using the Black-Scholes option pricing model, the options were determined to have a fair value of $745,000 which will be expensed ratably over the vesting term. No stock options were granted during the year ended December 31, 2020. The fair value of each stock option granted was estimated using the following weighted average assumptions:


			June 28, 2021
Risk free interest rate			0.47%
Expected maturity			3 years
Expected volatility			136%

Expected dividend yields			—
Weighted average grant date fair value per share			$2.48

A summary of stock options activity during the nine months ended September 30, 2021 and the year ended December 31, 2020 is presented below:


	Outstanding			Exercisable
	Number of Options	Weighted Average Exercise Price		Number of Options	Weighted Average Exercise Price
Options outstanding, December 31, 2019	215,345	$	12.27	215,345	$	12.27


Expired	(107,845)	4.92		—	—

Options outstanding, December 31, 2020	107,500	$	19.64	107,500	$	19.64
Granted	300,000	3.25		—	—



Options outstanding, September 30, 2021	407,500	$	7.57	107,500	$	19.64

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Additional information as of September 30, 2021 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	302,500	9.68	$	3.30	2,500	$	9.00
$10.01 – $20.00	97,500	1.31	19.32		97,500	19.32
$20.01 – $30.00	2,500	0.68	21.80		2,500	21.80
$30.01 – $40.00	5,000	0.45	30.20		5,000	30.20

	407,500	7.51	$	7.57	107,500	$	19.64

The intrinsic value of vested options, unvested options and exercised options were not significant for all periods presented. There was $64,000 and zero stock compensation expense, recorded as a component of Research and Development and General and Administrative expense, related to stock options for the three and nine months ended September 30, 2021 and 2020, respectively, and $681,000 remaining as unrecognized stock-based compensation expense for options as of September 30, 2021, which will be recognized over a weighted average period of 2.75 years.

Restricted Stock Awards

As of September 30, 2021 and 2020, 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 stock-based compensation expense for restricted stock awards for the three and nine months ended September 30, 2021 or 2020.

Restricted Stock Units

On August 18, 2021, the Company granted 200,000 restricted stock units (“RSUs”) to certain board members. These RSUs vested immediately upon issuance. The price per share of the Company’s common stock was $2.19 on the grant date, resulting in a total fair value of $438,000 which was included in general and administrative expense, as stock-based compensation expense, upon issuance. No RSUs were granted during the year ended December 31, 2020 and $6,000 of stock compensation expense was recorded for existing RSUs for the nine months ended September 30, 2020. There was no remaining unrecognized stock-based compensation expense for RSUs at September 30, 2021.

As of September 30, 2021, there were no unvested restricted stock units (“RSUs”) outstanding and 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.

Restricted Series D Preferred Stock

In connection with the acquisition of Oblong Industries in 2019, all options to purchase shares of Oblong Industries’ common stock held by existing employees of Oblong Industries were canceled and exchanged for an aggregate of 49,967 shares of Restricted Series D Preferred Stock, which were subject to vesting over a two-year period following the closing date. This vesting period and compensation expense were accelerated, in February 2021, when the Restricted Series D shares were converted to shares of Common Stock. Refer to Note 8 - Preferred Stock for discussion on the conversion of the Series D Restricted Preferred Stock.

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Stock-based compensation expense relating to Restricted Series D Preferred Stock is allocated as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Research and development	$	—	$	11	$	17	$	39
Sales, general and administrative	$	—	$	17	$	16	$	44
	$	—	$	28	$	33	$	83

During the nine months ended September 30, 2021 81 shares of Restricted Series D Preferred Stock were forfeited. During the three and nine months ended September 30, 2020, 1,086 and 32,891 shares of Restricted Series D Preferred Stock were forfeited, respectively. As of September 30, 2021, no shares of Restricted Series D Preferred Stock remain outstanding and there was no remaining unrecognized stock-based compensation expense.

Note 10 - 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, 2021 and 2020, 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, 2021 and 2020, 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,
	2021		2020		2021		2020
Numerator:
Net loss	$	(662)	$	(2,085)	$	(6,341)	$	(8,598)
Less: preferred stock dividends	—		(4)		(1)		(12)
Less: undeclared dividends	—		—		$	(366)	$	—
Less: loss on induced conversion of Series A-2 Preferred Stock	—		—		$	(300)	$	—
Net loss attributable to common stockholders	$	(662)	$	(2,089)	$	(7,008)	$	(8,610)
Denominator:
Weighted-average number of shares of common stock for basic and diluted net loss per share	30,739		5,257		25,121		5,237







Basic and diluted net loss per share	$	(0.02)	$	(0.40)	$	(0.28)	$	(1.64)

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):

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	Nine Months Ended
	September 30,
	2021	2020


Outstanding stock options	407,500	107,500
Unvested restricted stock awards	627	627
Shares of common stock issuable upon conversion of Series A-2 preferred stock	—	15,545

Shares of common stock issuable upon conversion of Series C preferred stock	—	83,333
Shares of common stock issuable upon conversion of Series D preferred stock	—	17,030,960
Shares of common stock issuable upon conversion of Series E preferred stock	—	1,315,790
Warrants	5,146,500	72,394

Note 11 - Segment Reporting

The Company currently operates in two segments: (1) the Oblong (formerly Glowpoint) business, which includes managed services for video collaboration and network applications; and (2) the Oblong Industries business, which includes products and services for visual collaboration technologies.

Certain information concerning the Company’s segments for the three and nine months ended September 30, 2021 and 2020 is presented in the following tables (in thousands):


	Three Months Ended September 30, 2021
	Oblong (formerly Glowpoint)			Oblong Industries			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)
Net income (loss) before tax	$	(54)		$	(1,428)		$	820	$	(662)
Income tax	$	—		$	—		$	—	$	—
Net income (loss)	$	(54)		$	(1,428)		$	820	$	(662)

-17-


	Nine Months Ended September 30, 2021
	Oblong (formerly Glowpoint)			Oblong Industries			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	$	—		$	—		$	—	$	—
Net income (loss)	$	443		$	(4,154)		$	(2,630)	$	(6,341)


	Three Months Ended September 30, 2020
	Oblong (formerly Glowpoint)			Oblong Industries			Corporate		Total
Revenue	$	1,324		$	1,942		$	—	$	3,266
Cost of revenues	893			719			—		1,612
Gross profit	$	431		$	1,223		$	—	$	1,654
Gross profit %	33		%	63		%			51		%

Allocated operating expenses	$	1,187		$	1,477		$	—	$	2,664
Unallocated operating expenses	—			—			980		980
Total operating expenses	$	1,187		$	1,477		$	980	$	3,644

Loss from operations	$	(756)		$	(254)		$	(980)	$	(1,990)
Interest and other expense, net	5			90			—		95
Net loss before taxes	$	(761)		$	(344)		$	(980)	$	(2,085)
Income tax	$	—		$	—		$	—	$	—
Net loss	$	(761)		$	(344)		$	(980)	$	(2,085)

-18-


	Nine Months Ended September 30, 2020
	Oblong (formerly Glowpoint)			Oblong Industries			Corporate		Total
Revenue	$	4,741		$	6,669		$	—	$	11,410
Cost of revenues	2,948			2,736			—		5,684
Gross profit	$	1,793		$	3,933		$	—	$	5,726
Gross profit %	38		%	59		%			50		%

Allocated operating expenses	$	3,398		$	7,545		$	—	$	10,943
Unallocated operating expenses	—			—			3,059		3,059
Total operating expenses	$	3,398		$	7,545		$	3,059	$	14,002

Loss from operations	$	(1,605)		$	(3,612)		$	(3,059)	$	(8,276)
Interest and other expense, net	12			310			—		322
Net loss before tax	$	(1,617)		$	(3,922)		$	(3,059)	$	(8,598)
Income tax	—			—			—		—
Net loss	(1,617)			(3,922)			$	(3,059)	$	(8,598)

Unallocated operating expenses include costs for the three and nine months ended September 30, 2021 and 2020 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 and nine months ended September 30, 2021 and 2020, there was no material revenue attributable to any individual foreign country. Approximately 1% of foreign revenue is billed in foreign currency and foreign currency gains and losses are not material.

Revenue by geographic area is allocated as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Domestic	$	1,035	$	2,080	$	3,277	$	7,536
Foreign	764		1,186		2,489		3,874
	$	1,799	$	3,266	$	5,766	$	11,410

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):

-19-


	Three Months Ended September 30,
	2021		% of Revenue		2020		% of Revenue
Revenue: Oblong (formerly Glowpoint)
Video collaboration services	$	179	10	%	$	249	8	%
Network services	813		45	%	1,028		31	%
Professional and other services	14		1	%	47		1	%
Total Oblong (formerly Glowpoint) revenue	$	1,006	56	%	$	1,324	40	%

Revenue: Oblong Industries
Visual collaboration product offerings	$	771	43	%	1,686		52	%

Licensing	22		1	%	256		8	%
Total Oblong Industries revenue	$	793	44	%	1,942		60	%
Total revenue	$	1,799	100	%	$	3,266	100	%


	Nine Months Ended September 30,
	2021		% of Revenue		2020		% of Revenue
Revenue: Oblong (formerly Glowpoint)
Video collaboration services	$	700	12	%	$	1,722	15	%
Network services	2,524		44	%	2,844		25	%
Professional and other services	55		1	%	175		2	%
Total Oblong (formerly Glowpoint) revenue	$	3,279	57	%	$	4,741	42	%

Revenue: Oblong Industries
Visual collaboration product offerings	$	2,406	42	%	4,931		43	%
Professional services	—		—	%	898		8	%
Licensing	81		1	%	840		7	%
Total Oblong Industries revenue	$	2,487	43.13	%	6,669		58	%
Total revenue	$	5,766	100	%	$	11,410	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,
		2021		2020
	Segment	% of Revenue		% of Revenue
Customer A	Oblong (formerly Glowpoint)	37	%	23	%
Customer B	Oblong Industries	—	%	20	%

-20-


		Nine Months Ended September 30,
		2021		2020
	Segment	% of Revenue		% of Revenue
Customer A	Oblong (formerly Glowpoint)	35	%	23	%
Customer B	Oblong Industries	—	%	27	%

Concentration of accounts receivable was as follows:


		As of September 30,
		2021		2020
	Segment	% of Accounts Receivable		% of Accounts Receivable
Customer A	Oblong (formerly Glowpoint)	17	%	20	%
Customer B	Oblong (formerly Glowpoint)	—	%	15	%
Customer C	Oblong Industries	12	%	—	%
Customer D	Oblong Industries	11	%	—	%

Note 12 - Commitments and Contingencies

Operating Leases

We currently lease three facilities in Los Angeles, California, one facility in Boston, Massachusetts, and one facility in Dallas, Texas, all providing office space. We also lease space in City of Industry, California, providing warehouse space. These leases expire between 2022 and 2023. During 2020, we exited leases in Herndon, Virginia; Atlanta, Georgia; Houston, Texas; London, England, and a warehouse space in Los Angeles, California. In February 2021, we exited an office space lease in Los Altos, California, when the Company elected to not renew the lease. In June 2021, we entered into a settlement agreement with the landlord of our Munich, Germany office space, to exit the lease early in exchange for €125,000. At the time of the settlement, the remaining liability was €316,000, resulting in a gain of €191,000 ($227,000), which is recorded as other income on the condensed consolidated statement of operations during the nine months ended September 30, 2021. We currently occupy two of the facilities in Los Angeles and the warehouse space in City of Industry; we have subleases in place for the third Los Angeles property, the Dallas property, and the Boston property. Lease expenses, net of common charges and sublet proceeds, for the three and nine months ended September 30, 2021 and 2020 were $85,000, $252,000, $267,000, and $915,000, respectively.

The Company primarily leases facilities for office and data center space under non-cancellable operating leases for its U.S. and international locations that expire at various dates through 2023. For leases with a term greater than 12 months, the Company recognizes a right-of-use asset and a lease liability based on the present value of lease payments over the lease term. Variable lease payments are not included in the lease payments to measure the lease liability and are expensed as incurred. The Company’s leases have remaining terms of one to three years and some of the leases include a Company option to extend the lease term for less than twelve months to five years, or more, which if reasonably certain to exercise, the Company includes in the determination of lease payments. The lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As the Company's leases do not provide a readily determinable implicit rate, the Company uses the incremental borrowing rate at lease commencement, which was determined using a portfolio approach, based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. Operating lease expense is recognized on a straight-line basis over the lease term.

Leases with an initial term of 12 months or less are not recognized on the balance sheet and the expense for these short-term leases is recognized on a straight-line basis over the lease term. Common area maintenance fees (or CAMs) and other charges related to these leases continue to be expensed as incurred.

-21-

The following provides balance sheet information related to leases were as follows (in thousands):


		September 30, 2021
Assets
	Operating lease, right-of-use asset, net	$	531

Liabilities
	Current portion of operating lease liabilities	$	475
	Operating lease liabilities, net of current portion	182
	Total operating lease liabilities	$	657

The following table summarizes the future undiscounted cash payments reconciled to the lease liability (in thousands):


Remaining Lease Payments

Remainder of 2021	$	189
2022	379
2023	116
Total lease payments	$	684
Effect of discounting	(27)
Total operating lease liabilities	$	657

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 is a possibility of continued widespread infection in the United States and abroad, with the potential for catastrophic impact. National, state and local authorities have required or recommended social distancing and imposed or are considering quarantine and isolation measures on large portions of the population, including mandatory business closures. These measures, while intended to protect human life, are expected to have serious adverse impacts on domestic and foreign economies of uncertain severity and duration. The sweeping nature of the coronavirus pandemic makes it extremely 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 the three and nine months ended September 30, 2021. The decreases in our revenue are primarily attributable to the effects of the global pandemic on our channel partners and customers as they evaluate how and when to re-open their commercial real estate footprints. 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. In the first nine months of 2021, following a slowdown throughout 2020, we have seen a continuing weakness in revenue as our customers across all sectors delayed order placements in reaction to the ongoing impacts of the COVID-19 pandemic that caused our customers to suspend or postpone real estate retrofit projects due to budget and occupancy uncertainties. 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.

NOTE 13 - Related Party

Effective August 16, 2021, Matthew Blumberg was appointed to the Company’s Board of Directors. Mr. Blumberg is the Co-Founder and CEO of Bolster, an on-demand executive talent marketplace that helps accelerate companies’ growth by connecting them with experienced, highly vetted executives for interim, fractional, advisory, project-based or board roles. During the nine months ended September 30, 2021, the Company paid Bolster $31,000 for fractional labor.

-22-

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

Oblong, Inc. (“Oblong” or “we” or “us” or the “Company”) was formed as a Delaware corporation in May 2000 and prior to March 6, 2020, was named Glowpoint, Inc. (“Glowpoint”). On October 1, 2019, the Company closed an acquisition of all of the outstanding equity interests of Oblong Industries, Inc., a privately held Delaware corporation founded in 2006. Pursuant to the merger Agreement Oblong Industries became a wholly owned subsidiary of the Company. On March 6, 2020, Glowpoint changed its name to Oblong, Inc. In this Report, we use the terms “Oblong” or “we” or “us” or the “Company” to refer to (i) Oblong (formerly Glowpoint), for periods prior to the closing of the merger and (ii) the “Company” or Oblong, Inc. (formerly Glowpoint) and Oblong Industries for periods after the closing of the merger. For purposes of segment reporting, we refer to the Oblong (formerly Glowpoint) business as “Glowpoint” herein, and to the Oblong Industries business as “Oblong Industries” herein.

We believe there is a substantial market opportunity for Oblong Industries’ product offerings and services, and we are in the process of transforming our offerings to meet the evolving needs of our customers. As part of the transformation of our business, we are evolving certain aspects of our model by designing and developing software to include subscription-based offerings. Historically, our technology products and services have been developed and consumed in conventional commercial real estate spaces such as conference rooms. We have experienced decreases in our revenue primarily attributable to the effects of the global COVID-19 pandemic on our channel partners and customers as they evaluate how and when to re-open their commercial real estate footprints. As our core collaboration products evolve, we expect to add more contemporary software features along with expanded accessibility beyond commercial spaces through both hybrid and SaaS offerings delivered in the cloud. These initiatives will require significant investment in technology and product development and sales and marketing. We believe additional capital will be required to fund these investments and our operations. If we do not complete the transformation, or if we fail to manage the transformation successfully and in a timely manner, our revenue, business and operating results may be adversely affected.

Oblong’s (formerly Glowpoint) business has experienced revenue declines in recent years which we expect to continue. We currently expect to continue operating the Oblong (formerly Glowpoint) business as part of our Company, however, we plan to seek opportunities in the future to divest some or all of Oblong’s (formerly Glowpoint) business.

Oblong’s Results of Operations

Three Months Ended September 30, 2021 (the “2021 Third Quarter”) compared to the Three Months Ended September 30, 2020 (the “2020 Third Quarter”)

Segment Reporting

The Company currently operates in two segments: 1) the Oblong (formerly Glowpoint) business, which mainly consists of managed services for video collaboration and network applications and 2) the Oblong Industries business, which consists of products and services for visual collaboration technologies. Certain information concerning the Company’s segments for the three months ended September 30, 2021 and 2020 is presented in the following table (in thousands):

-23-


	Three Months Ended September 30, 2021
	Oblong (formerly Glowpoint)			Oblong Industries			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)
Net income (loss) before tax	$	(54)		$	(1,428)		$	820	$	(662)
Income tax	$	—		$	—		$	—	$	—
Net income (loss)	$	(54)		$	(1,428)		$	820	$	(662)


	Three Months Ended September 30, 2020
	Oblong (formerly Glowpoint)			Oblong Industries			Corporate		Total
Revenue	$	1,324		$	1,942		$	—	$	3,266
Cost of revenues	893			719			—		1,612
Gross profit	$	431		$	1,223		$	—	$	1,654
Gross profit %	33		%	63		%			51		%

Allocated operating expenses	$	1,187		$	1,477		$	—	$	2,664
Unallocated operating expenses	$	—		$	—		980		980
Total operating expenses	$	1,187		$	1,477		$	980	$	3,644

Loss from operations	$	(756)		$	(254)		$	(980)	$	(1,990)
Interest and other expense, net	5			90			$	—	95
Net loss before taxes	$	(761)		$	(344)		$	(980)	$	(2,085)
Income tax	$	—		$	—		$	—	$	—
Net loss	$	(761)		$	(344)		$	(980)	$	(2,085)

Unallocated operating expenses include costs 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 $1,467,000 (or 45%) to $1,799,000 in the 2021 Third Quarter from $3,266,000 in the 2020 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.

-24-


	Three Months Ended September 30,
	2021		% of Revenue		2020		% of Revenue
Revenue: Oblong (formerly Glowpoint)
Video collaboration services	$	179	10	%	$	249	8	%
Network services	813		45	%	1,028		31	%
Professional and other services	14		1	%	47		1	%
Total Oblong (formerly Glowpoint) revenue	$	1,006	56	%	$	1,324	40	%

Revenue: Oblong Industries
Visual collaboration product offerings	$	771	43	%	$	1,686	52	%

Licensing	22		1	%	$	256	8	%
Total Oblong Industries revenue	$	793	44	%	$	1,942	60	%
Total revenue	$	1,799	100	%	$	3,266	100	%

Oblong (formerly Glowpoint)

•Revenue for video collaboration services decreased $70,000 (or 28%) to $179,000 in the 2021 Third Quarter from $249,000 in the 2020 Third Quarter. This decrease is mainly attributable to lower revenue from existing customers (either from reductions in price or level of services) and loss of customers to competition.

•Revenue for network services decreased $215,000 (or 21%) to $813,000 in the 2021 Third Quarter from $1,028,000 in the 2020 Third Quarter. This decrease 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.

•Revenue for professional and other services decreased $33,000 (or 70%) to $14,000 in the 2021 Third Quarter from $47,000 in the 2020 Third Quarter. This decrease is mainly attributable to lower resale of video equipment.

Oblong Industries

•Revenue for visual collaboration product offerings decreased $915,000 or (54%) to $771,000 in the 2021 Third Quarter from $1,686,000 in the 2020 Third Quarter. This decrease is primarily attributable to the effects of the global COVID-19 pandemic on our channel partners and customers as they evaluate how and when to re-open their commercial real estate footprints. 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. In the first nine months of 2021, following a slowdown throughout 2020, we have seen a continuing weakness in revenue as our customers across all sectors delayed order placements in reaction to the ongoing impacts of the COVID-19 pandemic that caused our customers to suspend or postpone real estate retrofit projects due to budget and occupancy uncertainties.

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.

-25-

•Revenue for licensing decreased $234,000 (or 91.4%) to $22,000 in the 2021 Third Quarter from $256,000 in the 2020 Third Quarter. A former customer terminated the licensing of our technology effective December 31, 2020. Our licensing revenue for the 2020 Third Quarter was primarily attributable to this customer.

Cost of Revenue (exclusive of depreciation and amortization). Cost of revenue, exclusive of depreciation and amortization, 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,
	2021		2020
Cost of Revenue
Oblong (formerly Glowpoint)	$	721	$	893
Oblong Industries	507		719
Total cost of revenue	$	1,228	$	1,612

Cost of revenue decreased to $1,228,000 in the 2021 Third Quarter from $1,612,000 in the 2020 Third Quarter. This decrease in cost of revenue is mainly attributable to lower costs associated with the decrease in revenue between the 2021 Third Quarter and the 2020 Third Quarter and the Employee Retention Credit (“ERC”) of $66,000 which reduced labor costs in cost of revenue for the 2021 Third Quarter.

Research and Development. Research and development expenses include internal and external costs related to developing new service offerings and features and enhancements to our existing services. Research and development expenses decreased to $693,000 in the 2021 Third Quarter from $747,000 in the 2020 Third Quarter. This decrease is primarily attributable to recognition of the ERC of $98,000 which reduced labor costs in research and development for Third Quarter 2021; partially offset by an increase in stock-based expense of $18,000.

Sales and Marketing Expenses. Sales and marketing expenses decreased to $438,000 in the 2021 Third Quarter from $668,000 in the 2020 Third Quarter. This decrease is primarily attributable to a reduction in headcount from Third Quarter 2020 to Third Quarter 2021, a reduction in lease expense as we closed several office locations in 2020 and 2021, and recognition of the ERC of $52,000 which reduced labor costs in sales and marketing for Third Quarter 2021.

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. General and administrative expenses increased to $1,628,000 in the 2021 Third Quarter from $1,332,000 in the 2020 Third Quarter. This increase is primarily attributable to an increase of $461,000 in stock-based expense from Third Quarter 2020 to Third Quarter 2021, partially offset by a reduction in headcount from Third Quarter 2020 to Third Quarter 2021, and recognition of the ERC of $92,000, which reduced labor costs in general and administrative for Third Quarter 2021.

Impairment Charges. In the 2021 Third Quarter we recorded $254,000 of impairment charges related to property and equipment and intangible assets no longer in service. We recorded $117,000 of impairment charges in the 2020 Third Quarter, related to property and equipment no longer in service.

Depreciation and Amortization Expenses. Depreciation and amortization expenses decreased to $669,000 in the 2021 Third Quarter from $780,000 in the 2020 Third Quarter. This decrease is mainly attributable to the disposition and impairment of certain assets in 2020 and 2021 as well as a decrease in depreciation as certain assets became fully depreciated.

Loss from Operations. The Company recorded a loss from operations of $3,111,000 in the 2021 Third Quarter as compared to a loss from operations of $1,990,000 in the 2020 Third Quarter. This increase in our loss from operations from the 2020 Third Quarter to the 2021 Third Quarter is mainly attributable to lower revenue and gross profit.

-26-

Nine Months Ended September 30, 2021 compared to the Nine Months Ended September 30, 2020

Segment Reporting

The Company currently operates in two segments: 1) the Oblong (formerly Glowpoint) business, which mainly consists of managed services for video collaboration and network applications and 2) the Oblong Industries business, which consists of products and services for visual collaboration technologies. Certain information concerning the Company’s segments for the nine months ended September 30, 2021 and 2020 is presented in the following table (in thousands):


	Nine Months Ended September 30, 2021
	Oblong (formerly Glowpoint)			Oblong Industries			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	$	—		$	—		$	—	$	—
Net income (loss)	$	443		$	(4,154)		$	(2,630)	$	(6,341)


	Nine Months Ended September 30, 2020
	Oblong (formerly Glowpoint)			Oblong Industries			Corporate		Total
Revenue	$	4,741		$	6,669		$	—	$	11,410
Cost of revenues	2,948			2,736			—		5,684
Gross profit	$	1,793		$	3,933		$	—	$	5,726
Gross profit %	38		%	59		%			50		%

Allocated operating expenses	$	3,398		$	7,545		$	—	$	10,943
Unallocated operating expenses	—			—			3,059		3,059
Total operating expenses	$	3,398		$	7,545		$	3,059	$	14,002

Loss from operations	$	(1,605)		$	(3,612)		$	(3,059)	$	(8,276)
Interest and other expense, net	12			310			—		322
Net loss before tax	$	(1,617)		$	(3,922)		$	(3,059)	$	(8,598)
Income tax	—			—			—		—
Net loss	(1,617)			(3,922)			$	(3,059)	$	(8,598)

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Revenue. Total revenue decreased $5,644,000 (or 49%) to $5,766,000 in the Nine Months Ended September 30, 2021 from $11,410,000 in the Nine Months Ended September 30, 2020. 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,
	2021		% of Revenue		2020		% of Revenue
Revenue: Oblong (formerly Glowpoint)
Video collaboration services	$	700	12	%	$	1,722	15	%
Network services	2,524		44	%	2,844		25	%
Professional and other services	55		1	%	175		2	%
Total Oblong (formerly Glowpoint) revenue	$	3,279	57	%	$	4,741	42	%

Revenue: Oblong Industries
Visual collaboration product offerings	$	2,406	42	%	$	4,931	43	%
Professional services	—		—	%	898		8	%
Licensing	81		1	%	840		7	%
Total Oblong Industries revenue	$	2,487	43	%	$	6,669	58	%
Total revenue	$	5,766	100	%	$	11,410	100	%

Oblong (formerly Glowpoint)

•Revenue for video collaboration services decreased $1,022,000 (or 59%) to $700,000 in the Nine Months Ended September 30, 2021 from $1,722,000 in the Nine Months Ended September 30, 2020. This decrease is mainly attributable to lower revenue from existing customers (either from reductions in price or level of services) and loss of customers to competition.

•Revenue for network services decreased $320,000 (or 11%) to $2,524,000 in the Nine Months Ended September 30, 2021 from $2,844,000 in the Nine Months Ended September 30, 2020. This decrease 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.

•Revenue for professional and other services decreased $120,000 (or 69%) to $55,000 in the Nine Months Ended September 30, 2021 from $175,000 in the Nine Months Ended September 30, 2020. This decrease is mainly attributable to lower resale of video equipment.

Oblong Industries

•Revenue for visual collaboration product offerings decreased $2,525,000 or (51%) to $2,406,000 in the Nine Months Ended September 30, 2021 from $4,931,000 in the Nine Months Ended September 30, 2020. This decrease is primarily attributable to the effects of the global COVID-19 pandemic on our channel partners and customers as they evaluate how and when to re-open their commercial real estate footprints. 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. In the first nine months of 2021, following a slowdown throughout 2020, we have seen a continuing weakness in revenue as our customers across all sectors delayed order placements in reaction to the ongoing impacts of the COVID-19 pandemic that caused our customers to suspend or postpone real estate retrofit projects due to budget and occupancy uncertainties.

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•Revenue for professional services decreased 100% in the Nine Months Ended September 30, 2021 from $898,000 in the Nine Months Ended September 30, 2020. A former customer terminated our professional services effective April 30, 2020 due to COVID-19. Our professional services revenue for the Nine Months Ended September 30, 2020 was primarily attributable to this customer. We do not expect to generate revenue from professional services in 2021 and in the future.

•Revenue for licensing decreased $759,000 (or 90%) to $81,000 in the Nine Months Ended September 30, 2021 from $840,000 in the Nine Months Ended September 30, 2020. A former customer terminated the licensing of our technology effective December 31, 2020. Our licensing revenue for the Nine Months Ended September 30, 2020 was primarily attributable to this customer.


	Nine Months Ended September 30,
	2021		2020
Cost of Revenue
Oblong (formerly Glowpoint)	$	2,293	$	2,948
Oblong Industries	$	1,474	$	2,736
Total cost of revenue	$	3,767	$	5,684

Cost of revenue decreased to $3,767,000 in the Nine Months Ended September 30, 2021 from $5,684,000 in the Nine Months Ended September 30, 2020. This decrease in cost of revenue is mainly attributable to lower costs associated with the decrease in revenue between the Nine Months Ended September 30, 2021 and the Nine Months Ended September 30, 2020 and the ERC of $192,000 attributable to cost of revenue labor for the Nine Months Ended September 30, 2021.

Research and Development. Research and development expenses include internal and external costs related to developing new service offerings and features and enhancements to our existing services. Research and development expenses decreased to $1,984,000 in the Nine Months Ended September 30, 2021 from $3,062,000 in the Nine Months Ended September 30, 2020. This decrease is primarily attributable to a reduction in headcount from the 2020 period to the 2021 period and the ERC of $271,000 attributable to research and development labor for the Nine Months Ended September 30, 2021.

Sales and Marketing Expenses. Sales and marketing expenses decreased to $1,537,000 in the Nine Months Ended September 30, 2021 from $2,708,000 in the Nine Months Ended September 30, 2020. This decrease is primarily attributable to a reduction in headcount from the 2020 period to the 2021 period, a reduction in lease expense as we closed several office locations in 2020 and 2021, and the ERC of $150,000 attributable to sales and marketing labor for the Nine Months Ended September 30, 2021.

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. General and administrative expenses decreased to $5,078,000 in the Nine Months Ended September 30, 2021 from $5,173,000 in the Nine Months Ended September 30, 2020. This decrease is primarily attributable to a reduction in headcount from the 2020 period to the 2021 period and the ERC of $261,000 attributable to general and administrative labor for the Nine Months Ended September 30, 2021, partially offset by a total increase of $851,000 in stock-based compensation and professional services expense from the 2020 period to the 2021 period.

Impairment Charges. Impairment charges in the Nine Months Ended September 30, 2021 were $302,000 as compared to $667,000 in the Nine Months Ended September 30, 2020. The impairment charges in the 2021 period are attributable to impairment charges on property, equipment, and intangible assets no longer in service, and the impairment charges in the 2020 period was attributable to property and equipment no longer in service, and Oblong (formerly Glowpoint) goodwill.

Depreciation and Amortization Expenses. Depreciation and amortization expenses decreased to $2,098,000 in the Nine Months Ended September 30, 2021 from $2,392,000 in the Nine Months Ended September 30, 2020. This decrease is mainly attributable to the disposition and impairment of certain assets in 2020 and 2021 as well as a decrease in depreciation as certain assets became fully depreciated.

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Loss from Operations. The Company recorded a loss from operations of $9,000,000 in the Nine Months Ended September 30, 2021 as compared to a loss from operations of $8,276,000 in the Nine Months Ended September 30, 2020. This increase in our loss from operations from the 2020 period to the 2021 period is mainly attributable to lower revenue and gross profit, partially offset by lower operating expenses as addressed above.

Off-Balance Sheet Arrangements

As of September 30, 2021, we had no off-balance sheet arrangements.

Inflation

Management does not believe inflation had a significant effect on the condensed consolidated financial statements for the periods presented.

Critical Accounting Policies

There have been no changes to our critical accounting policies during the nine months ended September 30, 2021. Critical accounting policies and the significant estimates made in accordance with such policies are regularly discussed with our Audit Committee. Those policies are discussed under “Critical Accounting Policies” in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as in our condensed consolidated financial statements and the footnotes thereto, each included in our 2020 10-K.

Liquidity and Capital Resources

As of September 30, 2021, we had $10,734,000 of cash and working capital of $12,410,000. For the nine months ended September 30, 2021, we incurred a net loss of $6,341,000 and used $5,956,000 of net cash in operating activities. Cash provided by financing activities during the nine months ended September 30, 2021 was $11,504,000, attributable to a closing on June 30, 2021 of a concurrent public offering of 4,000,000 shares of the Company’s Common Stock, warrants to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $4.00 per share (the “Series A Warrants”), and private placement of warrants to purchase 3,000,000 shares of common stock at an exercise price of $4.40 per share (the “Series B Warrants”) for gross proceeds of $12,400,000. Issuance costs for this transaction were $896,000, resulting in net proceeds of $11,504,000.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by the rules and regulations of the SEC, we are not required to provide this information.

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ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2021. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2021, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms and are designed to ensure that information required to be disclosed by the Company in the reports we file or submit under the Exchange Act is accumulated and communicated to the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

No change in our internal control over financial reporting occurred during the fiscal quarter ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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.

ITEM 1A. RISK FACTORS

A description of the risks associated with our business, financial conditions and results of operations is set forth under the heading “Updating Risk Factors” in our Current Report on Form 8-K filed June 28, 2021 (the “Current Report”). The risks described in the Current Report are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Unregistered Sales of Equity Securities by the Company

There have been no unregistered sales of securities by the Company during the period covered by this Report that have not been previously reported in a Current Report on Form 8-K.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS


Exhibit Number						Description
31.1*						Rule 13a—14(a)/15d—14(a) Certification of the Chief Executive Officer.
31.2*						Rule 13a—14(a)/15d—14(a) Certification of the Chief Financial Officer.
32.1**						Section 1350 Certification of the Chief Executive Officer and Chief Financial Officer.
101.INS						XBRL Instance Document
101.SCH						XBRL Taxonomy Extension Schema
101.CAL						XBRL Taxonomy Extension Calculation Linkbase
101.DEF						XBRL Taxonomy Extension Definition Linkbase
101.LAB						XBRL Taxonomy Extension Label Linkbase
101.PRE						XBRL Taxonomy Extension Presentation Linkbase

* Filed herewith.

** Furnished herewith.

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	OBLONG, INC.

November 10, 2021	By:	/s/ Peter Holst
		Peter Holst
		Chief Executive Officer
		(Principal Executive Officer)


November 10, 2021	By:	/s/ David Clark
		David Clark
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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