UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
xQuarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended September 30, 2017.
☒    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2022.
or
¨
Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number: 001-35376
GLOWPOINT,OBLONG, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
77-0312442
(State or Other Jurisdiction of
Incorporation or Organization)
77-0312442
(I.R.S. Employer Identification No.)


1776 Lincoln Street,25587 Conifer Road, Suite 1300, Denver,105-231, Conifer, CO 8020380433
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001 per shareOBLGNasdaq 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 x ☒No o☐


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).
Yes x☒  No o☐


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 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 o☐
Accelerated filer o☐
Non-accelerated filer o☒
Smaller reporting company x☒
Emerging growth company o
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. o
☐


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 o☐ No x☒


The number of shares outstanding of the registrant’s common stock as of November 14, 2017August 8, 2022 was 36,130,195.

30,816,048.
GLOWPOINT,


OBLONG, INC.
Index
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at SeptemberJune 30, 20172022 (unaudited) and December 31, 20162021
Unaudited Condensed Consolidated Statements of Operations for the three and ninesix months ended SeptemberJune 30, 20172022 and 20162021
Unaudited Condensed Consolidated Statement of Stockholders’ Equity for the ninethree and six months ended SeptemberJune 30, 20172022 and 2021
Unaudited Condensed Consolidated Statements of Cash Flows for the ninesix months ended SeptemberJune 30, 20172022 and 20162021
Notes to unaudited Condensed Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
Signatures




CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS


This quarterly report on Form 10-Q (this “Report”) contains statements that are considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and its rules and regulations (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, and its rules and regulations (the “Exchange Act”). These forward-looking statements include, but are not limited to, statements about the plans, objectives, expectations and intentions of Glowpoint,Oblong, Inc. (“Glowpoint,” “we,” “us,”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 Glowpoint’sOblong’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 Glowpoint,Oblong, are intended to identify forward-looking statements. These statements are based on Glowpoint’sOblong’s current plans, and Glowpoint’sOblong’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. GlowpointOblong 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 discussedunder the section entitled “Risk Factors,” as well as“Part I. Item 1A. Risk Factors” and in our consolidated financial statements and the footnotes thereto for the fiscal year ended December 31, 2016 as filed with the SEC with2021, each included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2017. Glowpoint29, 2022. 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 GlowpointOblong 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; the status of our largest customer; our anticipated capital expenditures; our ability to develop and launch new product offerings; evolution of our customer solutions and our service debt obligations and fund operations;platforms; our ability to renegotiate existing financial covenants under our senior loan agreement;fund operations and continue as a going concern; expectations regarding adjustments to our cost of revenue and other operating expenses; our ability to finance investments in product development and sales and marketing; our ability to raise capital through sales of additional equity or debt securities and/or loans from financial institutions; statements relating to market need, evolution of our solutions and our service platforms; our expected insurance coverage on our second quarter 2022 casualty loss; and effectiveness of our disclosure controls and procedures. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:

•the continued impact of the coronavirus pandemic on our business, including its impact on our customers and other business partners, our ability to conduct operations in the ordinary course, and our ability to obtain capital financing important to our ability to continue as a going concern;
•our ability to continue as a going concern;
•our ability to raise capital in one or more debt and/or equity offerings in order to fund operations or any growth initiatives;
•customer acceptance and adequacydemand for our video collaboration services and network applications;
•our ability to launch new products and offerings and to sell our solutions;
•our ability to compete effectively in the video collaboration services and network services businesses;
•the ongoing performance and success of our internal controls.Managed Services business;

•our ability to maintain and protect our proprietary rights;


•potential future impairment charges related to goodwill and intangible assets;
•our ability to withstand industry consolidation;

•our ability to adapt to changes in industry structure and market conditions;
•actions by our competitors, including price reductions for their competitive services;
GLOWPOINT,•the quality and reliability of our products and services;
•the prices for our products and services and changes to our pricing model;
•the success of our sales and marketing approach and efforts and our ability to grow revenue;
•customer renewal and retention rates;
•risks related to the concentration of our customers and the degree to which our sales, now or in the future, depend on certain large client relationships;
•increases in material, labor or other manufacturing-related costs;


•changes in our go-to-market cost structure;
•inventory management and our reliance on our supply chain;
•our ability to attract and retain highly skilled personnel;
•our reliance on open-source software and technology;
•potential federal and state regulatory actions;
•our ability to innovate technologically, and, in particular, our ability to develop next generation Oblong technology;
•our ability to satisfy the standards for continued listing of our common stock on the Nasdaq Capital Market;
•changes in our capital structure and/or stockholder mix;
•the costs, disruption, and diversion of management’s attention associated with campaigns commenced by activist investors; and
•our management’s ability to execute its plans, strategies and objectives for future operations.




PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

OBLONG, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value, stated value, and shares)
June 30, 2022December 31, 2021
(Unaudited)
ASSETS
Current assets:
Cash$5,107 $8,939 
Restricted cash— 61 
Accounts receivable, net491 849 
Inventory1,078 1,821 
Prepaid expenses and other current assets1,150 1,081 
Total current assets7,826 12,751 
Property and equipment, net75 159 
Goodwill— 7,367 
Intangibles, net6,402 7,562 
Operating lease - right of use asset, net245 659 
Other assets22 109 
Total assets$14,570 $28,607 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable325 259 
Accrued expenses and other current liabilities976 959 
Current portion of deferred revenue686 783 
Current portion of operating lease liabilities378 492 
Total current liabilities2,365 2,493 
Long-term liabilities:
Operating lease liabilities, net of current portion68 236 
Deferred revenue, net of current portion213 381 
Total long-term liabilities281 617 
Total liabilities2,646 3,110 
Commitments and contingencies (see Note 11)00
Stockholders’ equity:
Common stock, $.0001 par value; 150,000,000 shares authorized; 30,929,331 shares issued and 30,816,048 outstanding at June 30, 2022 and December 31, 20213 3 
Treasury stock, 113,283 shares of common stock at June 30, 2022 and December 31, 2021(181)(181)
Additional paid-in capital227,580 227,581 
Accumulated deficit(215,478)(201,906)
Total stockholder's equity11,924 25,497 
Total liabilities and stockholders’ equity$14,570 $28,607 
See accompanying notes to condensed consolidated financial statements.
-1-
 September 30, 2017 December 31, 2016
 (Unaudited)  
ASSETS   
Current assets:   
Cash$1,439
 $1,140
Accounts receivable, net1,367
 1,635
Prepaid expenses and other current assets767
 978
Total current assets3,573
 3,753
Property and equipment, net1,339
 2,203
Goodwill7,750
 9,225
Intangibles, net658
 1,309
Other assets10
 10
Total assets$13,330
 $16,500
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Current portion of long-term debt$1,298
 $10,660
Accounts payable202
 75
Accrued expenses and other liabilities846
 1,165
Accrued dividends56
 47
Liability for common stock warrants165
 —
Accrued sales taxes and regulatory fees310
 395
Total current liabilities2,877
 12,342
Long term liabilities:   
Deferred tax liability—
 230
Long term debt, net of current portion490
 —
Total long term liabilities490
 230
Total liabilities3,367
 12,572
Commitments and contingencies (see Note 13)

 

Stockholders’ equity:   
Preferred stock, Series A-2, convertible; $.0001 par value; $7,500 stated value; 7,500 shares authorized, 32 shares issued and outstanding and liquidation preference of $237 at September 30, 2017 and December 31, 2016100
 100
Common stock, $.0001 par value; 150,000,000 shares authorized; 36,782,000 issued and 36,130,000 outstanding at September 30, 2017 and 36,659,000 issued and 36,455,000 outstanding at December 31, 20164
 4
Treasury stock, 652,000 and 204,000 shares at September 30, 2017 and December 31, 2016, respectively(353) (219)
Additional paid-in capital180,656
 180,333
Accumulated deficit(170,444) (176,290)
Total stockholders’ equity9,963
 3,928
Total liabilities and stockholders’ equity$13,330
 $16,500




GLOWPOINT,OBLONG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months EndedSix Months Ended
June 30,June 30,
2022202120222021
Revenue$1,333 $2,049 $2,865 $3,967 
Cost of revenue (exclusive of depreciation and amortization and casualty loss)926 1,249 1,959 2,539 
Gross profit407 800 906 1,428 
Operating expenses:
Research and development398 599 1,402 1,291 
Sales and marketing317 572 879 1,099 
General and administrative1,185 1,383 2,875 3,450 
Impairment charges6,408 17 7,546 48 
Casualty loss533 — 533 — 
Depreciation and amortization599 707 1,226 1,429 
Total operating expenses9,440 3,278 14,461 7,317 
Loss from operations(9,033)(2,478)(13,555)(5,889)
Interest and other expense (income), net— (232)6 (210)
Loss before income taxes(9,033)(2,246)(13,561)(5,679)
Income tax expense— — 11 — 
Net loss(9,033)(2,246)(13,572)(5,679)
Preferred stock dividends— — — 1 
Undeclared dividends— — — 366 
Induced conversion of Series A-2 Preferred Stock— — — 300 
Net loss attributable to common stockholders$(9,033)$(2,246)$(13,572)$(6,346)
Net loss attributable to common stockholders per share:
Basic and diluted net loss per share$(0.29)$(0.08)$(0.44)$(0.29)
Weighted-average number of shares of common stock:
Basic and diluted30,816 26,644 30,816 22,250 

See accompanying notes to condensed consolidated financial statements.
-2-
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Revenue$3,481
 $4,344
 $11,417
 $14,950
Operating expenses:       
Cost of revenue (exclusive of depreciation and amortization)1,988
 2,609
 6,697
 9,187
Research and development296
 229
 875
 817
Sales and marketing69
 70
 369
 576
General and administrative970
 1,664
 2,843
 4,009
Impairment charges1,707
 605
 1,712
 630
Depreciation and amortization451
 455
 1,370
 1,509
Total operating expenses5,481
 5,632
 13,866
 16,728
Loss from operations(2,000) (1,288) (2,449) (1,778)
Interest expense and other, net(197) (362) (916) (1,081)
Gain on extinguishment of debt9,045
 —
 9,045
 —
Amortization of debt discount(28) (18) (64) (54)
Interest and other income (expense), net8,820
 (380) 8,065
 (1,135)
Income (loss) before income taxes6,820
 (1,668) 5,616
 (2,913)
Income tax benefit (expense)284
 (37) 230
 (108)
Net income (loss)7,104
 (1,705) 5,846
 (3,021)
Preferred stock dividends3
 3
 9
 9
Net income (loss) attributable to common stockholders$7,101
 $(1,708) $5,837
 $(3,030)
        
Net income (loss) attributable to common stockholders per share:       
Basic net income (loss) per share$0.19
 $(0.05) $0.16
 $(0.09)
Diluted net income (loss) per share$0.19
 $(0.05) $0.15
 $(0.09)
        
Weighted-average number of shares of common stock:       
Basic36,897
 35,492
 37,078
 35,480
Diluted37,897
 35,492
 38,078
 35,480




GLOWPOINT,OBLONG, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
NineThree and Six Months Ended SeptemberJune 30, 20172022
(In thousands, except shares of A-2 Preferred Stock)shares)
(Unaudited)


Common StockTreasury Stock
SharesAmountSharesAmountAdditional Paid-In CapitalAccumulated DeficitTotal
Balance at December 31, 202130,929,331 $3 113,283 $(181)$227,581 $(201,906)$25,497 
Net loss— — — — — (4,539)(4,539)
Stock-based compensation— — — — 52 — 52 
Forfeiture of unvested stock options— — — — (84)— (84)
Balance at March 31, 202230,929,331 3 113,283 (181)227,549 (206,445)20,926 
Net loss— — — — — (9,033)(9,033)
Stock-based compensation— — — — 31 — 31 
Balance at June 30, 202230,929,331 $3 113,283 $(181)$227,580 $(215,478)$11,924 

















See accompanying notes to condensed consolidated financial statements.
-3-

 Series A-2 Preferred Stock Common Stock Treasury Stock Additional Paid-In Capital Accumulated Deficit  
 Shares Amount Shares Amount Shares Amount   Total
Balance at December 31, 201632
 $100
 36,659
 $4
 204
 $(219) $180,333
 $(176,290) $3,928
Net income—
 —
 —
 —
 —
 —
 —
 5,846
 5,846
Stock-based compensation—
 —
 —
 —
 —
 —
 377
 —
 377
Issuance of stock on vested restricted stock units—
 —
 123
 —
 —
 —
 —
 —
 —
Preferred stock dividends—
 —
 —
 —
 —
 —
 (9) —
 (9)
Issuance of shares from treasury

 

 

 

 (7,307) 2,191
 (45) 

 2,146
Purchase of treasury stock—
 —
 —
 —
 7,755
 (2,325) —
 —
 (2,325)
Balance at September 30, 201732
 $100
 36,782
 $4
 652
 $(353) $180,656
 $(170,444) $9,963



OBLONG, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
GLOWPOINT,Three and Six Months Ended June 30, 2021
(In thousands, except shares)
(Unaudited)

Series A-2 Preferred StockSeries D Preferred StockSeries E Preferred StockCommon StockTreasury Stock
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmountAdditional Paid-In CapitalAccumulated DeficitTotal
Balance at Balance at December 31, 202045 $— 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 
See accompanying notes to condensed consolidated financial statements.
-4-

OBLONG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)


Six Months Ended June 30,
20222021
Cash flows from operating activities:
Net loss$(13,572)$(5,679)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization1,226 1,429 
Bad debt expense125 449 
Stock-based compensation83 33 
Stock-based expense for services— 390 
Forfeiture of unvested stock options(84)— 
Gain on extinguishment of liability— (227)
Casualty loss on inventory533 — 
Loss on foreign currency remeasurement— 3 
Impairment charges - property and equipment— 48 
Impairment charges - right of use asset179 — 
Impairment charges - goodwill7,367 — 
Changes in operating assets and liabilities:
Accounts receivable233 1,764 
Inventory210 (1,205)
Prepaid expenses and other current assets(69)(702)
Right of use asset235 250 
Other assets87 7 
Accounts payable66 205 
Accrued expenses and other current liabilities17 408 
Deferred revenue(265)(429)
Lease liabilities(282)(414)
Net cash used in operating activities(3,911)(3,670)
Cash flows from investing activities:
Purchases of property and equipment(11)(17)
Proceeds from sale of equipment29 — 
Net cash provided by (used in) investing activities18 (17)
Cash flows from financing activities:
Proceeds from stock issuance, net of issuance costs— 11,504 
Net cash provided by financing activities— 11,504 
(Decrease) increase in cash and restricted cash(3,893)7,817 
Cash and restricted cash at beginning of period9,000 5,277 
Cash and restricted cash at end of period$5,107 $13,094 
Supplemental disclosures of cash flow information:
Reconciliation of cash and restricted cash
Cash$5,107 $13,033 
Restricted cash— 61 
Total cash and restricted cash$5,107 $13,094 
Cash paid during the period for interest$6 $2 
Non-cash investing and financing activities:
Accrued preferred stock dividends$— $1 
Inducement to convert Series A-2 Preferred Stock to common$— $300 
Common stock issued for conversion of Preferred Stock$— $3 
See accompanying notes to condensed consolidated financial statements.
-5-


Nine Months Ended September 30,
 2017 2016
Cash flows from operating activities:   
Net income (loss)$5,846
 $(3,021)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
Depreciation and amortization1,370
 1,509
Bad debt expense (recovery)(8) 6
Amortization of debt discount64
 54
Non-cash interest expense213
 —
Stock-based compensation expense377
 748
Gain on debt extinguishment(9,045) —
Accrued non-cash stock-based expense—
 168
Impairment charges1,712
 630
Deferred tax provision (benefit)(230) 111
Changes in assets and liabilities:   
Accounts receivable276
 953
Prepaid expenses and other current assets211
 (342)
Other assets—
 1
Accounts payable126
 (271)
Accrued expenses and other liabilities246
 (281)
Accrued sales taxes and regulatory fees(85) —
Net cash provided by operating activities1,073
 265
Cash flows from investing activities:   
Purchases of property and equipment(93) (273)
Net cash used in investing activities(93) (273)
Cash flows from financing activities:   
Principal payments under borrowing arrangements(341) (400)
Proceeds from new loan agreements, net of expenses of $1702,030
 —
Payment of equity issuance costs(45) —
Purchase of treasury stock(2,325) (13)
Net cash used in financing activities(681) (413)
Increase (decrease) in cash and cash equivalents299
 (421)
Cash at beginning of period1,140
 1,764
Cash at end of period$1,439
 $1,343
    
Supplemental disclosures of cash flow information:   
Cash paid during the period for interest$777
 $841
    
Non-cash investing and financing activities:   
Accrued preferred stock dividends$9
 $9
Retired debt and accrued interest obligations in exchange for treasury stock$2,191
 $—
Recognition of prepaid equity issuance costs as additional paid-in capital$—
 $18






GLOWPOINT,OBLONG, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SeptemberJune 30, 20172022
(Unaudited)


Note 1 - Business Description and Significant Accounting Policies


Business Description


Glowpoint,Oblong, Inc. (“Glowpoint,” “we,” “us,”Oblong” or “we” or “us” or the “Company”“Company”) is a managed service provider of video collaboration and network applications. Our services are designed to provide a comprehensive suite of automated and concierge applications to simplify the user experience and expedite the adoption of video as the primary means of collaboration. Our customers include Fortune 1000 companies, along with small and medium enterprises in a variety of industries. We market our services globally through a multi-channel sales approach that includes direct sales and channel partners. The Company was formed as a Delaware corporation in May 2000. The Company operates in one segment.

Principles2000 and is a provider of Consolidation

The condensed consolidated financial statements include the accounts of Glowpointpatented multi-stream collaboration technologies and our 100%-owned subsidiary, GP Communications, LLC, whose business function is to provide interstate telecommunicationsmanaged services for regulatory purposes. All material inter-company balancesvideo collaboration and transactions have been eliminated in consolidation.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, 2016.2021. In the opinion of the Company's management, these interim condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of our financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.


The December 31, 20162021 year-end condensed consolidated balance sheet data in this document werewas derived from audited consolidated financial statements. These condensed consolidated financial statements and notes included in this quarterly report on Form 10-Q does not include all of the disclosures required by U.S. generally accepted accounting principles. These condensed consolidated financial statementsprinciples and should be read in conjunction with the Company's audited consolidated financial statements as of and for the fiscal year ended December 31, 20162021 and notes thereto included in the Company's fiscal 20162021 Annual Report on Form 10-K, filed with the SECSecurities and Exchange Commission (“SEC”) on March 31, 201729, 2022 (the “2016“2021 10-K”).


The results of operations and cash flows for the interim periods included in these condensed consolidated financial statements are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.


Principles of Consolidation

The condensed consolidated financial statements include the accounts of Oblong and our 100%-owned subsidiaries, (i) GP Communications, LLC (“GP Communications”), whose business function is to provide interstate telecommunications services for regulatory purposes, (ii) Oblong Industries, and (iii) Oblong Europe Limited, a subsidiary of Oblong Industries. All inter-company balances and transactions have been eliminated in consolidation. The U.S. Dollar is the functional currency for all subsidiaries.

Segments

The Company currently operates in 2 segments: (1) “Collaboration Products” which represents the Oblong Industries business surrounding our Mezzanine™ product offerings and (2) “Managed Services” which represents the Oblong (formerly Glowpoint) business surrounding managed services for video collaboration and network solutions. See Note 10 - Segment Reporting for further discussion.

Use of Estimates

Preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from the estimates made. We continually evaluate estimates used in the preparation of our consolidated financial statements for reasonableness. Appropriate

-6-

adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. The significant areas of estimation include determining the allowance for doubtful accounts, the estimated lives and recoverability of property and equipment and intangible assets, the inputs used in the valuation of goodwill and intangible assets in connection with our impairment tests, and the inputs used in the fair value of equity based awards.

Significant Accounting Policies


The significant accounting policies used in preparation of these condensed consolidated financial statements are disclosed in our 20162021 10-K, and there have been no changes to the Company'sCompany’s significant accounting policies during the ninesix months ended SeptemberJune 30, 2017.2022.


Taxes Billed to Customers and Remitted to Taxing Authorities

We recognize taxes billed to customers in revenue and taxes remitted to taxing authorities in our cost of revenue. For the three and nine months ended September 30, 2017, we included taxes of $129,000 and $422,000, respectively in revenue, and we included taxes of $116,000 and $428,000, respectively, in cost of revenue. For the three and nine months ended September 30, 2016, we included taxes of $190,000 and $660,000, respectively, in revenue, and we included taxes of $203,000 and $895,000, respectively, in cost of revenue.



- 5-


RecentRecently Issued Accounting Pronouncements


In May 2014,June 2016 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ASU 2014-09, 2016-13 as amended, “Revenue from Contracts with Customers” (Subtopic 606)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), which supersedes most existing revenue recognition guidance under U.S. generally accepted accounting principles (“U.S. GAAP”)including certain off-balance sheet financial instruments (e.g., loan commitments). The core principleexpected credit losses should consider historical information, current information, and reasonable and supportable forecasts, including estimates of ASU 2014-09 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflectsprepayments, over the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimatescontractual term. Financial instruments with similar risk characteristics may be required within the revenue recognition process than are required under existing U.S. GAAP. The standardgrouped together when estimating expected credit losses. Topic 326 is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company commenced our evaluation of the impact of the pending adoption of ASU 2014-09 on our consolidated financial statements in late 2016 and we are actively reviewing hundreds of customer contracts. Under the ASU, revenue will be recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). Given the nature of our services and terms and conditions in our contracts, the customer obtains control as we deliver services under the contract. We recognize the majority of our revenue on a monthly recurring basis as we deliver our services. The Company intends to use the retrospective approach with the cumulative effect of initially adopting ASU 2014-09 on January 1, 2018. Based on current analysis, management does not expect the adoption of ASU 2014-09 to have a material impact on our financial statements and disclosures.

In February 2016, the FASB created Topic 842 and issued ASU 2016-02, “Leases”. This guidance supersedes Topic 840, “Leases”. This ASU requires lessees to recognize a right-of-use assets and a lease liability, initially measured at the present value of the lease payments on the balance sheet. For public companies, the amendments will be effective for fiscal years beginning after December 15, 2018,2022, including interim periods within those fiscal years. Earlier application is permitted. Management is currently evaluatingThe Company has evaluated the impact of the adoption of ASU 2016-02new guidance will have on ourits consolidated financial statements, and disclosures.does not expect the impact to be material.


In August 2016,May 2021, the FASB issued ASU 2016-09, “Statement2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Cash Flows-Classification of Certain Cash ReceiptsFreestanding Equity-Classified Written Call Options. The FASB is issuing this update to clarify and Cash Payments” (Subtopic 230). This guidance clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. The amendment addresses eight specific cash flow issues with the objective of reducing the existingreduce diversity in practice. These updates arean 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 annual reporting periods beginning after December 15, 2017, and interim periods within those annual periods, with early adoption permitted. The guidance should be applied retrospectively unless it is impractical to do so; in which case, the guidance should be applied prospectively as of the earliest date practicable. Management does not expect the adoption of ASU 2016-09 to have a material impact on our financial statements.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows-Restricted Cash”(Subtopic 230). These amendments require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. The amendments do not provide definition of restricted cash or restricted cash equivalents. Effective date for public businessall entities for fiscal years beginning after December 15, 2017, and2021, including interim periods within those fiscal years. Early adoption is permitted. Management doesAn entity should apply the amendments prospectively to modifications or exchanges occurring after the effective date of the amendments. The Company has adopted this standard, effective January 1, 2022, and it did not expect the adoption of ASU 2016-18 to have any impacta material affect on our financial statementsstatements.

Casualty Loss

During the three months ended June 30, 2022, the Company discovered that $533,000 of inventory was stolen from the Company’s warehouse in City of Industry, California. This theft has been recorded as a casualty loss of $533,000 during the three and disclosures, as restricted cash is currently included in the change of cashsix months ended June 30, 2022 on the statementCompany’s condensed consolidated Statements of cash flows.
In January 2017,Operations. The theft is being investigated further by the FASB issued ASU 2017-04, “Intangibles - GoodwillLos Angeles, CA Sheriff’s Department and Other: Simplifyinga claim has been filed with the Test for Goodwill Impairment” (Subtopic 350). This guidance simplifiesCompany’s insurance company. We are seeking to recover the accounting for goodwill impairment by removal of Step 2majority of the goodwill impairment test. A goodwill impairmentloss through our insurance policies and we will nowoffset the casualty loss with the recognition of a gain of any proceeds should we subsequently receive them from our insurance company. No assurances can be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. For public companies, the standardprovided that we will be effective for calendar year-end December 15, 2020. Earlier adoption is permitted forsuccessful in recovering any impairment test performed after January 1, 2017. Management adopted this standard on a prospective basis beginning July 1, 2017.or all of the casualty loss.


Note 2 - Liquidity and Going Concern Uncertainty


As of SeptemberJune 30, 2017,2022, we had $1,439,000 of$5,107,000 in cash and working capital of $696,000. Our cash balance as of September 30, 2017 includes restricted cash of $18,000 (as discussed in Note 6).$5,461,000. For the ninesix months ended SeptemberJune 30, 2017,2022, we generatedincurred a net incomeloss of $5,846,000$13,572,000 and used $3,911,000 of net cash fromin operating activitiesactivities.

Future Capital Requirements and Going Concern

Our capital requirements in the future will continue to depend on numerous factors, including the timing and amount of $1,073,000. A substantial portionrevenue for the Company, customer renewal rates and the timing of our cash flow from operations has been dedicatedcollection of outstanding accounts receivable, in each case particularly as it relates to the paymentCompany’s major customers, the expense to deliver services, expense for sales and marketing, expense for research and development, and capital expenditures. We expect to continue to invest in product development and sales and marketing expenses with the goal of interestgrowing the Company’s revenue in the future. The Company believes that, based on our former indebtedness, thereby reducing our ability to use our cash flow to fund our operations,its current projection of revenue, expenses, capital expenditures, and investments in sales and marketing. Forcash flows, it will not have sufficient resources to fund its operations for the ninenext twelve months ended September 30,


- 6-


2017 and 2016, our cash flow from operations was reduced by $777,000 and $841,000, respectively, for interest payments on our indebtedness.

On July 31, 2017,following the Company completed a recapitalizationfiling of its debt obligations as described further in Note 8 (the “Debt Recapitalization”). As a result of the Debt Recapitalization, the Company reduced debt and accrued interest obligations by $9,362,000. Although the Debt Recapitalization significantly improved the Company’s financial position, the Companythis Report. We believe additional capital will be required to meet significant debt service obligations during the next twelve months. During the fourth quarter of 2017, the Company made a principal payment of $200,000 to Western Alliance Bankfund operations and is required to make total principalprovide growth capital including investments in technology, product development and interest payments of $152,000 to Super G Capital. During 2018, the Company is required to make total principal payments of $400,000 to Western Alliance Banksales and total principal and interest payments of $823,000 to Super G Capital.

On October 24, 2017, the Company closed a registered direct offering of 2,800 shares of Series B convertible preferred stock for total gross proceeds of $2,800,000 (see further discussion in Note 17). The net proceeds, after estimated expenses of the offering payable by the Company, are estimated to be $2,325,000 (the “Series B Offering”).

As further described in Item 2, Results of Operations, the Company anticipates continued declines in its revenue, which is expected to result in reduced cash flow from operations. The Company currently expects to use some or all of the net proceeds of the Series B Offeringmarketing. To access capital to fund investments in product development, sales and marketing expenses andoperations or provide growth capital, expenditures to develop new service offerings to reverse the Company’s revenue trends. Given the Company’s plans to increase operating expenses and capital expenditures following the closing of the Series B Offering, the Company will seek to amend certain financial covenants for fiscal years 2018 and 2019 in the Western Alliance Bank Loan Agreement. Although we expect to agree on amended covenants with Western Alliance Bank, there can be no assurance that we will successfulneed to raise capital in doing so.one or more debt and/or equity offerings. There can be no assurance that we will be successful in developing new service offerings and reversing our revenue trends. There can be no assurance that our existing cash resources and the net proceeds of the Series B Offering will be adequate to fund our operations, projected capital expenditures and debt service obligations. Therefore, the Company may raise capital in one or more offerings in the future. The holders of the Series B convertible preferred stock have the right to approve certain financings. There can be no assurance the holders of the Series B convertible preferred stock will approve such financings, that we will succeed in raising necessary capital or that any such offering will be on terms acceptable to the Company. If we cannotare unable to raise additional capital that may be needed on terms acceptable to us, it

-7-

could have a material adverse effect on the Company. The factors discussed above raise substantial doubt as to our ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from these uncertainties.


Note 3 - Capitalized Software CostsGoodwill


The Company capitalizes certain costs incurredAs of June 30, 2022 and December 31, 2021, goodwill was zero and $7,367,000, respectively, recorded in connection with developing or obtaining internal-use software. All software development costs have been appropriately accounted for as required by ASC Topic 350-40 “Intangible – Goodwill and Other – Internal-Use Software”.Capitalized software costs are included in Property and Equipment on our condensed consolidated balance sheets and are amortized over three to four years. Software costs that do not meet capitalization criteria are expensed as incurred. For the three and nine months ended September 30, 2017, we capitalized $32,000 and $90,000, respectively,October 1, 2019 acquisition of internal-use software costs and we amortized $160,000 and $480,000, respectively, of these costs. For the three and nine months ended September 30, 2016, we capitalized $89,000 and $248,000, respectively, and we amortized $145,000 and $475,000, respectively, of these costs. During the three and nine months ended September 30, 2017, we recorded impairment losses of $232,000 related to capitalized software. During the three and nine months ended September 30, 2016, we recorded $0 and $25,000, respectively, of impairment losses related to capitalized software no longer in service.Oblong Industries (our Collaboration Products reporting unit).

Note 4 - Goodwill

Goodwill is not amortized but is subject to periodic testing for impairment in accordance with ASC Topic 350 “Intangibles - Goodwill and Other - Testing Indefinite-Lived Intangible Assets for Impairment”. 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 as a single reporting unit. The Company used market-based approaches toTo determine the fair value of the reporting unit. These approaches used quoted market pricesunit for the goodwill impairment test, we use a weighted average of the discounted cash flow method and market-based method.

We considered the sustained decline in active marketsour stock price to be a triggering event for an interim goodwill impairment test, as of both March 31, 2022 and revenue multiplesJune 30, 2022, and we recorded impairment charges against the carrying value of Goodwill of $6,229,000 and $7,367,000 for comparable companies. Thethe three and six months ended June 30, 2022, respectively, as the carrying amount of ourthe Collaboration Products reporting unit exceeded its fair value; therefore,value on the Company recorded a goodwill impairment chargetest dates. These charges are recognized as “Impairment Charges” on our condensed consolidated Statements of $1,475,000 in the three and nine months ended September 30, 2017. The continued future decline of our revenue, cash flows and/or stock price may give rise to a triggering event that may require the Company to record additionalOperations. Following these impairment charges, onour goodwill in the future.value was reduced to zero as of June 30, 2022.


Note 54 - Intangible Assets



- 7-



The Company assessesfollowing table presents the impairmentcomponents of purchasednet intangible assets subject to amortization when events and circumstances indicatefor our Collaboration Products reporting segment (in thousands):
As of June 30, 2022As of December 31, 2021
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying AmountWeighted Average Lives
Developed technology$10,060 $(5,544)$4,516 $10,060 $(4,537)$5,523 5 years
Trade names2,410 (663)1,747 2,410 (542)1,868 10 years
Distributor relationships310 (171)139 310 (139)171 5 years
      Total$12,780 $(6,378)$6,402 $12,780 $(5,218)$7,562 

At each reporting period, we determine if there was a triggering event that the carrying value of the assets might not be recoverable.  Fair valuemay result in an impairment of our intangible assets. During the three and six months ended June 30, 2022, we considered the declines in revenue for the Collaboration Products reporting segment to be a triggering event for an impairment test of intangible assets is determined usingfor this reporting unit. Based on the relief from royalty methodology. This approach involves two steps: (a) estimating reasonable royalty rates for each intangible asset and (b) applying these royalty rates to a net revenue stream and discounting the resulting cash flows to determine fair value. This fair value is then compared with the carrying value of each intangible asset. If the carrying amountcorresponding recoverability tests of the intangible asset is greater than its implied fair value, an impairment in the amount of the excess is recognized and charged to operations. The determination of related estimated useful lives and whether or not these assets are impaired involves significant judgments, related primarily to the future profitability and/or future value of the assets. Changes in the Company’s strategic plan and/or other-than-temporary changes in market conditions could significantly impact these judgments and could require adjustments to recorded asset balances.   Long-lived assets are evaluated for impairment at least annually, as well as whenever an event or change in circumstances has occurred that could have a significant adverse effect on the fair value of long-lived assets.  The Company performed its annual evaluation of intangible assets as of September 30, 2017 andthis reporting unit, we determined that the fair value of the long-lived assets exceeds the carrying value, therefore no impairment chargeschanges were required for the three and ninesix months ended SeptemberJune 30, 2017.2022. The recoverability test consisted of comparing the estimated undiscounted cash flows expected to be generated by those assets to the respective carrying amounts, and involves significant judgements and assumptions, related primarily to the future revenue and profitability of the assets. 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 ten years in accordance with ASC Topic 350.


Related amortization expense was $580,000, $1,160,000, $613,000, and $1,224,000 for the three and six months ended June 30, 2022 and 2021, respectively.











-8-

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

Remainder of 2022$1,158 
20232,309 
20241,791 
2025241 
2026241 
Thereafter662 
Total$6,402 

Note 6 - Restricted Cash

As of September 30, 2017 and December 31, 2016, our cash balance included restricted cash of $18,000. The $18,000 letter of credit that serves as the security deposit for our lease of office space in Colorado (as discussed in Note 13) is secured by an equal amount of cash pledged as collateral and such cash is held in a restricted bank account.

Note 75 - Accrued Expenses and Other Current Liabilities


Accrued expenses and other current liabilities consisted of the following (in thousands):
June 30,December 31,
20222021
Accrued compensation costs$677 $551 
Accrued professional fees77 69 
Accrued taxes and regulatory fees84 92 
Customer deposits115 145 
Other accrued expenses and liabilities23 102 
Accrued expenses and other liabilities$976 $959 
 September 30, 2017 December 31, 2016
Accrued interest$19
 $658
Accrued compensation285
 133
Deferred rent expense52
 —
Other accrued expenses490
 374
Accrued expenses and other liabilities$846
 $1,165

Note 86 - DebtLeases


Debt consistedWe lease 3 facilities in Los Angeles, California and 1 facility in Austin, Texas, each providing office space. We also lease a facility in City of Industry, California, providing warehouse space. These leases expire between 2022 and 2024. During the six months ended June 30, 2022, we exited leases in Boston, Massachusetts and Dallas, Texas. We currently occupy the warehouse space in City of Industry, and the office facility in Austin, Texas, and we have a sublease in place for one of the Los Angeles office spaces. With the exception of these spaces described above, we currently operate out of remote employment sites with a remote office located at 25587 Conifer Road, Suite 105-231, Conifer, Colorado 80433.

Lease expenses, including common charges and net of sublet proceeds, for the three and six months ended June 30, 2022 and 2021 were $76,000, $145,000, $92,000, and $167,000, respectively.

The following provides balance sheet information related to leases as of June 30, 2022 and December 31, 2021 (in thousands):
June 30, 2022December 31, 2021
Assets
Operating lease, right-of-use asset, net$245 $659 
Liabilities
Current portion of operating lease liabilities$378 $492 
Operating lease liabilities, net of current portion68 236 
Total operating lease liabilities$446 $728 
 September 30, 2017 December 31, 2016
Main Street Term Loan$—
 $9,000
SRS Note—
 1,785
Western Alliance Bank A/R Revolver1,000
 —
Super G Loan1,096
 —
Unamortized debt discounts(308) (125)
Net carrying value1,788

10,660
Less: current maturities(1,298) (10,660)
Long-term obligations, net of debt discount$490
 $—



On July 31, 2017, the Company completed a recapitalization of its debt obligations as summarized in the table below and as described further below (the “Debt Recapitalization”). Therefore, as of July 31, 2017, there were no remaining obligations related to the Main Street Term Loan or SRS Note. The Company reduced debt and accrued interest obligations by $9,362,000 as of July 31, 2017 in the Debt Recapitalization and lowered outstanding shares of common stock by 404,587, as summarized in the following two tables.







- 8--9-



  Former Debt Obligations as of July 31, 2017 * Debt Obligations Extinguished on July 31, 2017 * New Outstanding Debt Obligations as of July 31, 2017**
Main Street Term Loan: principal $9,000,000
 $(9,000,000) —
SRS Note: principal 1,784,692
 (1,784,692) —
SRS Note: accrued interest 777,568
 (777,568) —
Western Alliance Bank: principal     $1,100,000
Super G Capital: principal     1,100,000
Total $11,562,260
 $(11,562,260) $2,200,000
* The amounts presented herein represent the gross outstanding principal amounts and exclude approximately $89,000 of unamortized debt discounts.
** The amounts presented herein represent the gross outstanding principal amounts and exclude approximately $335,000 of unamortized debt discounts.

Outstanding Shares of Common Stock on July 31, 2017 prior to the Debt Recapitalization36,534,840
Shares of common stock purchased in connection with the Main Street Payoff(7,711,517)
Shares of common stock issued in connection with the SRS Note Exchange7,306,930
Outstanding Shares of Common Stock on July 31, 2017 after the Debt Recapitalization36,130,253

The Company recorded a gain on debt extinguishment of approximately $9,045,000 (which was net of the write off of approximately $89,000 of unamortized debt discounts) during the three and nine months ended September 30, 2017 for the Debt Recapitalization. The Company recorded the net 404,587 shares purchased to treasury stock in the amount of $121,376, equal to the stock price of $0.30 per share as of July 31, 2017.

Main Street Payoff Letter and Redemption Agreement

As of June 30, 2017, the Company had outstanding borrowings of $9,000,000 with Main Street Capital Corporation (“Main Street”) under a senior secured term loan facility (the “Main Street Term Loan”). Borrowings under the Main Street Term Loan were to mature on October 17, 2018 unless sooner terminated as provided in the Main Street Loan Agreement. As of June 30, 2017, the Company was in default of certain covenants in the Main Street Term Loan. The interest rate on the Main Street Term Loan borrowings was 12% per annum and interest payments were due monthly. As of June 30, 2017, Main Street owned 7,711,517 shares, or 21%, of the Company’s outstanding common stock.

On July 31, 2017, the Company and Main Street entered into (i) a payoff letter (the “Main Street Payoff Letter”) that terminated the $9,000,000 Main Street Term Loan and (ii) a Redemption Agreement (“the Main Street Redemption Agreement”) whereby the Company purchased 7,711,517 shares of the Company’s common stock held by Main Street, in exchange for total cash payments from the Company of $2,550,000 (together the “Main Street Payoff”). On July 31, 2017, the Company funded the Main Street Payoff using $350,000 of the Company’s existing cash plus cash proceeds of $2,200,000 borrowed under loan agreements with Western Alliance Bank and Super G (each defined below).

SRS Note Exchange Agreement

As of June 30, 2017, the Company had outstanding total obligations of $2,530,000 (consisting of $1,785,000 of principal and $745,000 of accrued interest) under a promissory note (the “SRS Note”) to Shareholder Representative Services LLC (“SRS”) the Company issued in connection with the 2012 acquisition of Affinity Videonet, Inc. (“Affinity”), which was amended in February 2015. The maturity date of the SRS Note was July 6, 2017 and the interest rate on the SRS Note was 15% per annum. Payment of all interest earned after March 1, 2015 was due on July 6, 2017, unless certain trailing Adjusted EBITDA targets were met as defined in the SRS Note. In June 2017, SRS granted the Company a waiver of the final installment for 60 days. The SRS Note was subordinate to borrowings under the Main Street Loan Agreement, and was only permitted to be repaid if permitted by the terms of the Main Street Loan Agreement.

On July 31, 2017, the Company and SRS entered into a Note Exchange Agreement (the “SRS Note Exchange Agreement’) to extinguish the $2,562,000 of obligations on the SRS Note (including accrued interest for July 2017 of $32,000) in exchange for 7,306,930 shares of the Company’s common stock (the “SRS Note Exchange”). Our President, Chief Executive Officer, and Director, Peter Holst, held a 27.3% interest in the SRS Note (or $699,528 as of July 31, 2017 including accrued interest) and received 1,806,087 shares of the Company’s common stock in connection with the SRS Note Exchange (representing


- 9-


an effective exchange price into common stock of $0.387 per share). The SRS Note Exchange was negotiated and approved on behalf of the Company by a special committee of the board of directors consisting exclusively of independent, disinterested directors.

Western Alliance Bank Business Financing Agreement

On July 31, 2017, the Company and its subsidiary entered into a Business Financing Agreement with Western Alliance Bank, as lender (the “Western Alliance Bank Loan Agreement”). The Western Alliance Bank Loan Agreement provides the Company with up to a total of $1,500,000 of revolving loans (the “A/R Revolver”). The maximum amount available under the A/R Revolver is limited to the lesser of (x) $1,500,000 and (y) an amount equal to the borrowing base. The borrowing base includes 85% of the Company’s eligible accounts receivable plus a non-formula amount (which was $600,000 at closing, and which steps down to $400,000 on October 1, 2017, to $200,000 on January 1, 2018, and to $0 on April 1, 2018) (“the Non-Formula Amount”). On July 31, 2017, the Company received a loan in an amount equal to $1,100,000 under the Western Alliance Bank Loan Agreement, consisting of $500,000 based on 85% of eligible accounts receivable and $600,000 of Non-Formula Amount, the proceeds of which were used to fund the Main Street Payoff. During the three months ended September 30, 2017, the Company made a payment of $100,000 on the A/R Revolver. As of September 30, 2017, the total borrowings on the A/R Revolver were $1,000,000 and we had additional availability of $49,000. All loans under the A/R Revolver mature on July 31, 2019 (unless such loans are not supported by the borrowing base, in which case any loans exceeding the borrowing base must be immediately repaid). Given the step-down of the Non-Formula Amount as described above, the Company made a principal payment of $200,000 on October 1, 2017 and will be required to make mandatory prepayments of the loans on January 1, 2018 and April 1, 2018 in amounts equal to $200,000.

The Western Alliance Bank Loan Agreement provides that all borrowings bear interest at the prime rate (4.25% as of September 30, 2017) plus 1.75% (or a total of 6.00% as of September 30, 2017) per year. The prime rate is subject to a floor of 4.00%. Interest payments on the outstanding borrowings are due monthly. The Company may receive new borrowings on the A/R Revolver if supported by the borrowing base and may prepay borrowings under the Western Alliance Bank Loan Agreement at any time without premium or penalty, subject to certain notice requirements. The obligations of the Company under the Western Alliance Bank Loan Agreement are secured by substantially all of the assets of the Company and its subsidiary, including accounts receivable, intellectual property, equipment and other personal property. The Western Alliance Bank Loan Agreement contains certain restrictions and covenants, which, among other things, subject to certain exceptions, restrict the Company’s ability to incur additional debt or make guarantees, sell assets, make investments or loans, make distributions or create liens or other encumbrances. The Western Alliance Bank Loan Agreement also requires that we comply with certain financial covenants, including maintaining a specified asset coverage ratio, minimum levels of adjusted EBITDA, maximum levels of capital expenditures, minimum revenues vs. plan, and minimum amounts of unrestricted cash held with Western Alliance Bank (equal to $200,000 plus the amount outstanding on the Non-Formula Amount). As of September 30, 2017, the Company was in compliance with all required covenants.

The Western Alliance Bank Loan Agreement contains customary events of default, including failure to pay any principal or interest when due, failure to perform or observe covenants, breaches of representations and warranties, certain cross defaults, certain bankruptcy related events, monetary judgments defaults and a change in control. Upon the occurrence of an event of default, the outstanding obligations may be accelerated and become immediately due and payable.

Super G Loan Agreement and Warrant

On July 31, 2017, the Company and its subsidiary entered into a Business Loan and Security Agreement with Super G Capital, LLC (“Super G”), as lender (the “Super G Loan Agreement”) and received a term loan from Super G in an amount equal to $1,100,000, the proceeds of which were used to fund the Main Street Payoff (the “Super G Loan”).

Borrowings under the Super G Loan Agreement are to be repaid in installments (including interest) of $33,000 per month in the first 3 months following closing and approximately $68,600 per month in months four through twenty-four following closing, for total payments of $1,540,000. During the three months ended September 30, 2017, the Company made total principal and interest payments of $4,000 and $46,000, respectively, on the Super G Loan. The remaining principal balance as of September 30, 2017 is $1,096,000. Interest expense for the three months ended September 30, 2017 was $60,000. Interest payments for the fourth quarter of 2017, fiscal years 2018, and 2019 on the Super G Loan are expected to total $88,000, $246,000 and $46,000, respectively.

The obligations of the Company under the Super G Loan Agreement are secured by a second lien on substantially all of the assets of the Company and its subsidiary, including accounts receivable, intellectual property, equipment and other personal property. The security interest granted and loans made under the Super G Loan Agreement are subordinated to the security interest and loans made under the Western Alliance Bank Loan Agreement pursuant to a subordination and intercreditor agreement. The Super G Loan Agreement contains certain restrictions and covenants similar to the Western Alliance Bank Loan Agreement, and requires the


- 10-


Company to comply with certain financial covenants, including maintaining unrestricted cash with Western Alliance and maintaining minimum levels of adjusted EBITDA. As of September 30, 2017, the Company was in compliance with all required covenants.

The Super G Loan Agreement contains customary events of default, including failure to pay any principal or interest when due, failure to perform or observe covenants, breaches of representations and warranties, certain cross defaults, certain bankruptcy related events, monetary judgments defaults and failure to own 100% of the Company’s subsidiary. Upon the occurrence of an event of default, subject to the terms of the above-mentioned subordination and intercreditor agreement, the outstanding obligations may be accelerated and become immediately due and payable.

On July 31, 2017, the Company also issued a warrant that entitles Super G to purchase 550,000 shares of the Company’s common stock at an exercise price of $0.30 per share (the “Super G Warrant”). The Super G Warrant has a three year term and if the profit on such warrants is not equal to at least $165,000 over the term of the warrants, at the end of the three year term, the Company must pay an exit fee equal to the difference between $165,000 and the amount of profit recognized. As of September 30, 2017, no warrants have been exercised. The $165,000 fair value of this warrant has been recorded as a derivative liability and as a discount to the carrying amount of the debt as of September 30, 2017. The warrant liability is revalued on each balance sheet date until such instrument is exercised or expires, with any changes in the fair value between reporting periods recorded as other income or expense. During the three and nine months ended September 30, 2017, there was no change to the fair value of the warrant liability. The Company estimates the fair value of this liability using an option pricing model that is based on the individual characteristics of the warrant on the valuation date, which includes assumptions for expected volatility, expected life and risk-free interest rate, as well as the present value of the minimum cash payment component of the instrument. Changes in the assumptions used could have a material impact on the resulting fair value. The primary input affecting the value of the warrant liability is the Company’s stock price. Generally, increases (decreases) in the fair value of the underlying stock would result in a corresponding increase (decrease) in the fair value of the warrant liability.

The total debt discount on the Western Alliance Bank A/R Revolver and Super G Loan was $335,000, comprised of $170,000 of debt issuance costs and $165,000 related to the warrants issued. This debt discount is being amortized to interest expense using the effective interest method over the term of the debt. During the three and nine months ended September 30, 2017, the Company amortized $28,000 of the debt discount to interest expense. The unamortized debt discount as of September 30, 2017 is $308,000.

During the three and ninesix months ended SeptemberJune 30, 2017 total amortization2022 and 2021, payments of $125,000, $298,000, $218,000, and $451,000 were made on leases, respectively. The following table summarizes the debt discounts relatedfuture undiscounted cash payments reconciled to the Main Street Term Loan and SRS Note were $0 and $36,000, respectively, which is recorded in “Interest and Other Expense, Net” on our Condensed Consolidated Statements of Operations.

Future minimum principal payments on debt as of September 30, 2017, are as followslease liability (in thousands):
Remaining Lease Payments
2022$221 
2023225 
202417 
Total lease payments463 
Effect of discounting(17)
Total lease liability$446 
Year Ending December 31,Western Alliance BankSuper GTotal
Remaining 2017$200
$64
$264
2018400
570
970
Seven months ended July 31, 2019400
462
862
 $1,000
$1,096
$2,096


During the six months ended June 30, 2022, we did not enter into any new leases, we exited our Boston, MA and our Dallas, TX leases upon expiration, and we vacated two of the properties in Los Angeles. The properties we vacated are under leases until May 2023 and management does not expect to be able to sublet the properties given the limited time remaining on the leases. Therefore, due to not utilizing the asset, management believes that the right-of-use assets attached to these leases have lost their value. An impairment charge of $179,000 was recorded for these assets during the three months ended June 30, 2022. During the year ended December 31, 2021, we entered into 1 new operating lease, modified 1 operating lease, and terminated 2 operating leases. The following table provides a reconciliation of activity for our right-of-use (“ROU”) assets and lease liabilities (in thousands):

Right-of-Use AssetOperating Lease Liability
Balance at December 31, 2020$903 $1,432 
Additions60 60 
Terminations and Modifications192 156 
Amortization and Payments(496)(920)
Balance at December 31, 2021$659 $728 
Amortization and Payments(235)(282)
Impairment Charges(179)— 
Balance at June 30, 2022$245 $446 

The ROU assets and lease liabilities are recorded on the Company’s condensed consolidated Balance Sheets as of June 30, 2022 and December 31, 2021.

Note 97 - PreferredCapital Stock


Our CertificateCommon Stock

The Company’s common stock, par value $0.0001 per share (the “Common Stock”), is listed on The Nasdaq Capital Market (“Nasdaq”), under the ticker symbol “OBLG”. As of Incorporation authorizes us to issue up to 5,000,000June 30, 2022, we had 150,000,000 shares of preferred stock. As of September 30, 2017, there were: 100 shares of Series B-1 Preferredour Common Stock authorized, with 30,929,331 and no shares issued or outstanding; 7,500 shares of Series A-2 Preferred Stock authorized and 3230,816,048 shares issued and outstanding; and 4,000 shares of Series D Preferred Stock authorized and no shares issued or outstanding. In connection with the Series B Offering, 2,800 shares of Series B convertible preferred stock were authorized and issued as of October 24, 2017.outstanding, respectively.

Each share of Series A-2 Preferred Stock has a stated value of $7,500 per share (the “A-2 Stated Value”), a liquidation preference equal to the A-2 Stated Value, and is convertible at the holder’s election into Common Stock at a conversion price per share of $2.9835 as of September 30, 2017. Therefore, each share of Series A-2 Preferred Stock is convertible into 2,514The Company did not issue any shares of Common Stock as of September 30, 2017. The conversion price is subject to adjustment uponduring the occurrence of certain events set forth in our Certificate of Incorporation. During the ninethree and six months ended SeptemberJune 30, 2017, there were no adjustments to the conversion price. The Series B Offering completed in October 2017 resulted in an adjustment to the Series A-2 Preferred Stock conversion price to $2.40 per share.2022.









- 11--10-



Warrants


Warrants outstanding as of June 30, 2022 are as follows:

Issue DateWarrants IssuedExercise PriceExpiration Date
October 21, 2020521,500 $4.08 October 22, 2022
December 6, 2020625,000 5.49 December 7, 2022
June 30, 2021 - Series A(1)
1,000,000 4.00 January 4, 2023
June 30, 2021 - Series B3,000,000 4.40 June 30, 2024
5,146,500 
(1) Series A Warrants shown as amended on December 31, 2021

Warrant activity for the year ended December 31, 2021 is presented below. There was no warrant activity for the three or six months ended June 30, 2022.

Outstanding
Number of Warrants (in thousands)Weighted Average Exercise Price
Warrants outstanding and exercisable, December 31, 20201,146,500 $4.85 
Granted4,000,000 4.30 
Warrants outstanding and exercisable, December 31, 20215,146,500 4.42 
Warrants outstanding and exercisable, June 30, 20225,146,500 $4.42 

Treasury Shares

The Series A-2 PreferredCompany maintains treasury stock for the Common Stock is subordinate to the Series B-1 Preferred Stock but senior to all other classes of equity, has weighted average anti-dilution protection and, commencing on January 1, 2013, is entitled to cumulative dividends at a rate of 5% per annum, payable quarterly, based on the A-2 Stated Value. Once dividend payments commence, all dividends are payable at the option of the holder in cash or through the issuance of a number of additional shares of Series A-2 Preferred Stock with an aggregate liquidation preference equal to the dividend amount payable on the applicable dividend payment date. As of September 30, 2017,bought back by the Company has recorded $56,000 in accrued dividendswhen withholding shares to cover taxes on the accompanying condensed consolidated balance sheettransactions related to equity awards. There were no treasury stock transactions during the remaining Series A-2 Preferred Stock outstanding. The Company, at our option, may redeem all or a portion of the Series A-2 Preferred Stock in cash at a price per share of $8,250 per share (equal to $7,500 per share multiplied by 110%) plus all accrued and unpaid dividends.

In accordance with ASC Topic 815, we evaluated whether our convertible preferred stock contains provisions that protect holders from declines in our stock price or otherwise could result in modification of the exercise price or shares to be issued under the respective preferred stock agreements based on a variable that is not an input to the fair value of a “fixed-for-fixed” option and require derivative liability accounting. The Company determined no derivative liability is required under ASC Topic 815 with respect to our convertible preferred stock. A contingent beneficial conversion amount is required to be calculated and recognized when and if the adjusted conversion price of the convertible preferred stock is adjusted to reflect a down round stock issuance that reduces the conversion price below the $1.16 fair value of the common stock on the issuance date of the convertible preferred stock.

Note 10 - Income Taxes

During the three and ninesix months ended SeptemberJune 30, 2017,2022 or the Company recorded an income tax benefit of $284,000 and $230,000, respectively. This income tax benefit resulted from the elimination of the deferred tax liability as of September 30, 2017, which was attributable to temporary differences on goodwill. The Company has available net operating loss (“NOL”) carryforwards to offset our taxable income for both the nine monthsyear ended September 30, 2017 and projected for calendar year 2017. The Company has experienced ownership changes within the meaning of Internal Revenue Code Section 382 in previous years that impose limitations on the Company’s NOL carryforwards. The Company performed an updated Section 382 analysis following the Debt Recapitalization and Series B Offering and determined no additional limitations will be imposed.December 31, 2021.


Note 118 - Stock Based Compensation


Glowpoint 20142019 Equity Incentive Plan


On May 28, 2014,December 19, 2019, the Glowpoint,Oblong, Inc. 20142019 Equity Incentive Plan (the “2014“2019 Plan”) was approved by the Company’s stockholders at the Company’s 20142019 Annual Meeting of Stockholders. The purpose of the 20142019 Plan is an omnibus equity incentive plan pursuant to promotewhich the successCompany may grant equity and cash incentive awards to certain key service providers of the Company and to increase stockholder value by providing an additional means to attract, motivate, retain, and reward selected employees and other eligible persons throughits subsidiaries. As of June 30, 2022, the grant of equity awards. Awards may be grantedshare pool available for new grants under the 20142019 Plan to officers, employees, directors and consultants of the Company or its subsidiary. The 2014 Plan permits the grant of stock options, stock appreciation rights, restricted shares, restricted stock units, cash awards and other awards, including stock bonuses, performance stock, performance units, dividend equivalents, or similar rights to purchase or acquire shares, whether at a fixed or variable price or ratio related to the Company’s common stock, upon the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions, or any combination thereof, or any similar securities with a value derived from the value of or related to the Company’s common stock, or returns thereon. A total of 4,400,000 shares of the Company’s common stock were initially available for issuance under the 2014 Plan. As of September 30, 2017, 733,000 shares were available for issuance under the 2014 Plan.is 2,663,500.

Glowpoint 2000 Stock Incentive Plan

In June 2010, the Board terminated the Glowpoint 2000 Stock Incentive Plan (as amended, the “2000 Plan”). Notwithstanding the termination of the 2000 Plan, outstanding awards under the 2000 Plan will remain in effect in accordance with their terms. As of September 30, 2017, options to purchase a total of 3,000 shares of common stock were outstanding under the 2000 Plan. No shares are available for issuance under the 2000 Plan.

Glowpoint 2007 Stock Incentive Plan

In May 2014, the Board terminated the Glowpoint 2007 Stock Incentive Plan (the “2007 Plan”). Notwithstanding the termination of the 2007 Plan, outstanding awards under the 2007 Plan will remain in effect in accordance with their terms. As of September 30,


- 12-


2017, options to purchase a total of 1,203,000 shares of common stock and 184,000 shares of restricted stock were outstanding under the 2007 Plan. No shares are available for issuance under the 2007 Plan.


Stock Options


For the six months ended June 30, 2022 no stock options were granted, 50,000 stock options vested, 7,500 vested stock options expired and 150,000 unvested stock options were forfeited. In accordance with the 2019 Plan, these cancelled unvested options were added back into the share pool. For the six months ended June 30, 2021, 300,000 stock options were granted.

A summary of stock options granted, exercised, expired, and forfeited under our stock incentive plans, and stock options outstanding as of, and changes made during, the ninesix months ended SeptemberJune 30, 2017,2022 and the year ended December 31, 2021 is presented below (shares in thousands):below:


-11-

OutstandingExercisable
Outstanding ExercisableNumber of OptionsWeighted Average Exercise PriceNumber of OptionsWeighted Average Exercise Price
Options outstanding and exercisable, December 31, 2020Options outstanding and exercisable, December 31, 2020107,500 $19.64 107,500 $19.64 
GrantedGranted300,000 3.25 — — 
Number of Shares Underlying Options Weighted
Average
Exercise
Price		 Number of Shares Underlying Options Weighted
Average
Exercise
Price
Options outstanding, December 31, 20161,222
 $1.99
 1,198
 $1.99
Granted—
 —
    
Exercised—
 —
    
Options outstanding and exercisable, December 31, 2021Options outstanding and exercisable, December 31, 2021407,500 7.57 107,500 19.64 
VestedVested— — 50,000 3.25 
Expired(10) 2.37
    Expired(7,500)27.40 (7,500)27.40 
Forfeited(6) 1.93
    Forfeited(150,000)3.25 — — 
Options outstanding, September 30, 20171,206
 $1.99
 1,206
 $1.99
Options outstanding and exercisable, June 30, 2022Options outstanding and exercisable, June 30, 2022250,000 $9.57 150,000 $12.98 


Stock-basedAdditional information as of June 30, 2022 is as follows:


 OutstandingExercisable
Range of priceNumber
of Options		Weighted
Average
Remaining
Contractual
Life (In Years)		Weighted
Average
Exercise
Price		Number
of Options		Weighted
Average
Exercise
Price
$0.00 – $10.00152,500 8.88$3.34 52,500 $1.20 
$10.01 – $20.0097,500 0.5619.32 97,500 19.32 
250,000 5.63$9.57 150,000 $12.98 

The intrinsic value of vested options, unvested options and exercised options were not significant for all periods presented. Net stock compensation expense, related to stock options, is allocated as follows for the three and ninesix months ended SeptemberJune 30, 20172022 was a negative $1,000 made up of $83,000 in expense and 2016 (in thousands):
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
General and administrative$—
 $89
 $18
 $272

There is no$84,000 in forfeiture credits. No stock compensation expense, related to stock options, was recorded for the six months ended June 30, 2021. The remaining unrecognized stock-based compensation expense for stock options as of SeptemberJune 30, 2017.

2022 is $247,000, which will be recognized over a weighted average period of 2.00 years.
Restricted Stock Awards


A summaryAs of June 30, 2022 and 2021, there were 627 unvested restricted stock awards granted, vested, forfeitedoutstanding, with a weighted average grant date price of $15.80. The awards were issued in 2014 and unvested outstanding asvest over the lesser of and changes made during,ten years, a change in control, or separation from the nine months ended September 30, 2017, is presented below (shares in thousands):
 Restricted Shares Weighted Average
Grant Price
Unvested restricted shares outstanding, December 31, 2016363
 $1.08
Granted—
 —
Vested(9) 1.47
Forfeited—
 —
Unvested restricted shares outstanding, September 30, 2017354
 $1.07

The number of shares of restricted stock awards vested during the nine months ended September 30, 2017 includes 3,271 shares withheld and repurchased by the Company on behalf of employees to satisfy $1,000 of tax obligations relatingcompany. Due to the vesting of such shares. Such shares are held in the Company’s treasury stock as of September 30, 2017.

Stock-based compensation expense related to restricted stock awards is allocated as follows for the three and nine months ended September 30, 2017 and 2016 (in thousands):


- 13-


 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Cost of revenue$2
 $2
 $5
 $5
Research and development1
 1
 4
 4
General and administrative12
 24
 36
 165
 $15
 $27
 $45
 $174

Certain restricted stock awards have performance-based vesting provisions and are subject to forfeiture, in whole or in part, if these performance conditions are not achieved. Management assesses, on an ongoing basis, the probability of whether the performance criteria will be achieved and, once it is deemed probable, compensation expense is recognized over the relevant performance period. For those awards not subject to performance criteria, the costvariability of the restricted stock awardsvesting, the expense was amortized over an average service period of five years, therefore, there is expensed, which is determined to be the fair market value of the shares at the date of grant, on a straight-line basis over the vesting period.

The remainingno unrecognized stock-based compensation expense for restricted stock awards as of SeptemberJune 30, 2017 was $188,000. Of this amount, $33,000 relates to time-based awards with a remaining weighted average period of 0.55 years. The remaining $155,000 of unrecognized stock-based compensation expense relates to performance-based awards for which expense will be recognized upon it becoming probable that the Company achieves defined revenue targets and other financial goals and will expire 10 years from the grant date.2022.


Restricted Stock Units


A summaryAs of June 30, 2022 and 2021, there were no unvested restricted stock units (“RSUs”) granted, vested, forfeited and unvested outstanding as of, and changes made during, the nine months ended September 30, 2017, is presented below (shares in thousands):
 RSUs Weighted Average
Grant Price
Unvested RSUs outstanding, December 31, 20163,196
 $0.62
Granted—
 —
Vested(724) 0.42
Forfeited(85) 0.61
Unvested RSUs outstanding, September 30, 20172,387
 $0.68

outstanding. As of SeptemberJune 30, 2017, 988,0002022, 28,904 vested RSUs issued to non-employee directors remain outstanding as shares of common stock have not yet been delivered due tofor these units in accordance with the deferred payment provisions set forth in these RSUs.

As of September 30, 2017, there were approximately 1,715,000 unvested RSUs that have performance-based vesting provisions and are subject to forfeiture, in whole or in part, if these performance conditions are not achieved. Management assesses, on an ongoing basis, the probability of whether the performance criteria will be achieved and, once it is deemed probable, compensation expense is recognized over the relevant performance period. As of September 30, 2017, there were approximately 672,000 unvested RSUs that have timed-based vesting provisions, and the costterms of the RSUs is expensed, which is determined to be the fair market value of the shares at the date of grant, on a straight-line basis over the vesting period.RSUs.


Stock-basedThere was no stock compensation expense related to RSUs is allocated as follows for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016 (in thousands):


- 14-


 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Cost of revenue$10
 $9
 $29
 $26
Research and development14
 10
 43
 29
Sales and marketing2
 3
 6
 4
General and administrative55
 82
 236
 243
 $81
 $104
 $314
 $302

The2021. There was no remaining unrecognized stock-based compensation expense for RSUs as of SeptemberJune 30, 2017 was $1,161,000. Of this amount $217,000 relates to time-based RSUs with a remaining weighted average period of 0.58 years. The remaining $944,000 of unrecognized stock-based compensation expense relates to performance-based RSUs for which expense will be recognized upon it becoming probable that the Company achieves defined revenue targets and other financial goals over fiscal years 2017 and 2018.2022.


There was no tax benefit recognized for stock-based compensation for the three and nine months ended September 30, 2017 or 2016. No compensation costs were capitalized as part of the cost of an asset during the periods presented.

Note 129 - Net Income (Loss)Loss Per Share


Basic net income (loss)loss per share is computed by dividing net income (loss)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 any unvested restricted shares of common stock. These unvestedUnvested restricted shares,stock, although classified as issued and outstanding at SeptemberJune 30, 20172022 and 2016, are2021, is considered contingently returnable until the restrictions lapse and will not be included in the basic net income (loss)loss per share calculation until the shares are vested. Unvested shares of our restricted stock dodoes not

-12-

contain non-forfeitable rights to dividends and dividend equivalents. Unvested restricted stock unitsRSUs are not included in calculations of basic net income (loss)loss per share, as they are not considered issued and outstanding at time of grant.


Diluted net income (loss)loss per share is computed by giving effect to all potential shares of common stock, including stock options, preferred stock, restricted stock units,RSUs, and unvested restricted stock, awards, to the extent they are dilutive. For the three and ninesix months ended SeptemberJune 30, 2016,2022 and 2021, all such common stock equivalents have been excluded from diluted net loss per share as the effect to net loss per share would be anti-dilutive (decrease our(due to the net loss per share)loss).


The following table sets forth the computation of the Company’s basic and diluted net income (loss)loss per share (in thousands, except per share data):

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Numerator:
Net loss$(9,033)$(2,246)$(13,572)$(5,679)
Less: preferred stock dividends— — — (1)
Less: undeclared dividends— — — (366)
Less: loss on induced conversion of Series A-2 Preferred Stock— — — (300)
Net loss attributable to common stockholders$(9,033)$(2,246)$(13,572)$(6,346)
Denominator:
   Weighted-average number of shares of common stock30,816 26,644 30,816 22,250 
Basic and diluted net loss per share$(0.29)$(0.08)$(0.44)$(0.29)

- 15-


 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Numerator:       
Net income (loss)$7,104
 $(1,705) $5,846
 $(3,021)
Less: preferred stock dividends3
 3
 9
 9
Net income (loss) attributable to common stockholders$7,101
 $(1,708) $5,837
 $(3,030)
Denominator:       
Weighted-average shares outstanding - basic36,897
 35,492
 37,078
 35,480
     Add effect of dilutive securities:       
              Unvested restricted stock units672
 —
 672
 —
              Stock options outstanding—
 —
 —
 —
              Unvested restricted stock249
 —
 249
 —
Shares of common stock issuable upon conversion
of preferred stock		79
 —
 79
 —
              Weighted-average shares outstanding - diluted37,897
 35,492
 38,078
 35,480
Basic net income (loss) per share$0.19
 $(0.05) $0.16
 $(0.09)
Diluted net income (loss) per share$0.19
 $(0.05) $0.15
 $(0.09)

The weighted-average number of shares for the three and nine months ended September 30, 2017 includes 988,000 shares of vested RSUs as discussed in Note 11. The weighted-average number of shares for the three and nine months ended September 30, 2016 includes 387,000 shares of vested RSUs.


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 income (loss)loss per share for the periods presented because including them would have had an anti-dilutive effect (due to the net loss):
Three and Six Months Ended June 30,
20222021
Unvested restricted stock awards627 627 
Outstanding stock options250,000 407,500 
Warrants5,146,500 5,146,500 

Note 10 - Segment Reporting

The Company currently operates in 2 segments: (1) “Managed Services”, which represents the Oblong (former Glowpoint) business surrounding managed services for video collaboration and network applications; and (2) “Collaboration Products” which represents the Oblong Industries business surrounding our Mezzanine™ product offerings.

Certain information concerning the Company’s segments for the three and six months ended June 30, 2022 and 2021 is presented in the following tables (in thousands):

-13-

 Three and Nine Months Ended September 30,
 2017 2016
Unvested restricted stock units1,715
 3,208
Unvested restricted stock awards105
 363
Outstanding stock options1,206
 1,222
Shares of common stock issuable upon conversion of preferred stock, Series A-2—
 79
Warrants550
 —
Three Months Ended June 30, 2022
Managed ServicesCollaboration ProductsCorporateTotal
Revenue$810 $523 $— $1,333 
Cost of revenues525 401 — 926 
  Gross profit$285 $122 $— $407 
  Gross profit %35 %23 %31 %
Allocated operating expenses$1 $8,254 $— $8,255 
Unallocated operating expenses— — 1,185 1,185 
  Total operating expenses$1 $8,254 $1,185 $9,440 
Income (loss) from operations$284 $(8,132)$(1,185)$(9,033)
Interest and other expense, net— — — — 
Net income (loss) before tax$284 $(8,132)$(1,185)$(9,033)
Income tax expense(1)1 — — 
Net income (loss)$285 $(8,133)$(1,185)$(9,033)

Six Months Ended June 30, 2022
Managed ServicesCollaboration ProductsCorporateTotal
Revenue$1,776 $1,089 $— $2,865 
Cost of revenues1,170 789 — 1,959 
Gross profit$606 $300 $— $906 
Gross profit %34 %28 %32 %
Allocated operating expenses$57 $11,529 $— $11,586 
Unallocated operating expenses002,875 2,875 
Total operating expenses$57 $11,529 $2,875 $14,461 
Income (loss) from operations$549 $(11,229)$(2,875)$(13,555)
Interest and other expense, net6 — — 6 
Net income (loss) before tax$543 $(11,229)$(2,875)$(13,561)
Income tax expense8 3 — 11 
Net income (loss)$535 $(11,232)$(2,875)$(13,572)


-14-

Three Months Ended June 30, 2021
Managed ServicesCollaboration ProductsCorporateTotal
Revenue$1,078 $971 $— $2,049 
Cost of revenues739 510 — 1,249 
Gross profit$339 $461 $— $800 
Gross profit %31 %47 %39 %
Allocated operating expenses$82 $1,796 $— $1,878 
Unallocated operating expenses— — 1,400 1,400 
Total operating expenses$82 $1,796 $1,400 $3,278 
Income (loss) from operations$257 $(1,335)$(1,400)$(2,478)
Interest and other expense, net9 (241)— (232)
Income (loss) before income taxes$248 $(1,094)$(1,400)$(2,246)
Income tax expense— — — — 
Net income (loss)$248 $(1,094)$(1,400)$(2,246)

Six Months Ended June 30, 2021
Managed ServicesCollaboration ProductsCorporateTotal
Revenue$2,273 $1,694 $— $3,967 
Cost of revenues1,572 967 — 2,539 
Gross profit$701 $727 $— $1,428 
Gross profit %31 %43 %36 %
Allocated operating expenses$193 $3,626 $— $3,819 
Unallocated operating expenses— — 3,498 3,498 
Total operating expenses$193 $3,626 $3,498 $7,317 
Income (loss) from operations$508 $(2,899)$(3,498)$(5,889)
Interest and other expense, net14 (224)— (210)
Net income (loss) before tax$494 $(2,675)$(3,498)$(5,679)
Income tax expense— — — — 
Net income (loss)$494 $(2,675)$(3,498)$(5,679)

Unallocated operating expenses in Corporate include costs for the three and six months ended June 30, 2022 and 2021 that are not specific to a particular segment but are general to the group; included are expenses incurred for administrative and accounting staff, general liability and other insurance, professional fees and other similar corporate expenses.

For the three and six months ended June 30, 2022 and 2021, there was no material revenue attributable to any individual foreign country.









-15-

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

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Domestic$705 $1,227 $1,546 $2,242 
Foreign628 822 1,319 1,725 
$1,333 $2,049 $2,865 $3,967 

Disaggregated information for the Company’s revenue has been recognized in the accompanying condensed consolidated Statements of Operations and is presented below according to contract type (in thousands):
Three Months Ended June 30,
2022% of Revenue2021% of Revenue
Revenue: Managed Services
Video collaboration services$79 6 %$230 11 %
Network services723 54 %830 41 %
Professional and other services8 1 %18 1 %
      Total Managed Services revenue$810 61 %$1,078 53 %
Revenue: Collaboration Products
Visual collaboration product offerings$520 39 %$942 46 %
Licensing3 — %29 1 %
      Total Collaboration Products revenue523 39 %971 47 %
Total revenue$1,333 100 %$2,049 100 %

Six Months Ended June 30,
2022% of Revenue2021% of Revenue
Revenue: Managed Services
Video collaboration services$195 7 %$521 23 %
Network services1,544 54 %1,711 75 %
Professional and other services37 1 %41 2 %
      Total Managed Services revenue$1,776 62 %$2,273 57 %
Revenue: Collaboration Products
Visual collaboration product offerings$1,082 38 %$1,635 80 %
Licensing7 — %59 3 %
      Total Collaboration Products revenue1,089 38 %1,694 43 %
Total revenue$2,865 100 %$3,967 100 %
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.






-16-

Concentration of revenues was as follows:
Three Months Ended June 30,
20222021
Segment% of Revenue% of Revenue
Customer AManaged Services48 %32 %
Customer BCollaboration Products11 %5 %

Six Months Ended June 30,
20222021
Segment% of Revenue% of Revenue
Customer AManaged Services46 %34 %


Concentration of accounts receivable was as follows:

As of June 30, 2022
20222021
Segment% of Accounts Receivable% of Accounts Receivable
Customer AManaged Services42 %22 %
Customer BManaged Services7 %13 %
Customer CCollaboration Products10 %— %

Note 1311 - Commitments and Contingencies


Operating Leases

We lease two facilitiesFrom time to time, we are subject to various legal proceedings arising in Denver, CO and Oxnard, CA that are under operating leases through December 2018 and March 2020, respectively. Boththe ordinary course of these leases require us to pay increases in real estate taxes, operating costs and repairs over certain base year amounts. Rent expensebusiness, including proceedings for the three and nine months ended September 30, 2017 were $74,000 and $221,000, respectively. Rent expense for the three and nine months ended September 30, 2016 were $72,000 and $218,000, respectively.

Future minimum rental commitments under all non-cancelable operating leases as of September 30, 2017, are as follows (in thousands):


- 16-


Year Ending December 31, 
Remaining 2017$75
2018308
201988
202023
 $494

Commercial Commitments

Wewhich we have entered into a number of agreements with our suppliers to purchase communications and consulting services. Someinsurance coverage. As of the agreements require a minimum amount of servicesdate hereof, we are not party to be purchased over the life of the agreement, or during a specified period of time. Glowpoint believesany legal proceedings that itwe currently believe will meet its commercial commitments. Historically, in certain instances where Glowpoint did not meet the minimum commitments, no penalties for minimum commitments have been assessed and the Company has entered into new agreements. It has been our experience that the prices and terms of successor agreements are similar to those offered by other suppliers. Glowpoint does not believe that any loss contingency related to a potential shortfall should be recorded in the consolidated financial statements because it is not probable, from the information available and from prior experience, that Glowpoint has incurred a liability.

Letters of Credit

As of September 30, 2017, the Company had an outstanding irrevocable standby letter of credit with Wells Fargo Bank, N.A., for $18,000 to serve as our security deposit for our lease of office space in Colorado. See Note 6.

Note 14 – Major Customers

Major customers are defined as direct customers or channel partners that account for more than 10% of the Company’s revenue. For the three months ended September 30, 2017, two major customers represented 23% and 16%, respectively of our revenue. For the nine months ended September 30, 2017, these same customers represented 22% and 16%, respectively of our revenue and represented 57% and 13%, respectively, of our accounts receivable balance at September 30, 2017. For the three months ended September 30, 2016, the same two major customers represented 17% and 13%, respectively, of our revenue. For the nine months ended September 30, 2016, these same customers represented 16% and 12%, respectively of our revenue.

In January 2017, our largest customer filed a voluntary petition for protection under Chapter 11 of the United States Bankruptcy Code. This customer has paid us in full for all amounts that were due as of their bankruptcy filing date. Since the bankruptcy filing date, we have continued to perform services for this customer, and we have received payments in accordance with payment terms and expect to continue to do so. A rejection of our contract with this customer by the bankruptcy estate could have a material adverse effect on our business, financial conditionposition, results of operations or liquidity.

COVID-19

On March 11, 2020, the World Health Organization announced that infections of the novel Coronavirus (COVID-19) had become pandemic, and on March 13, 2020, the U.S. President announced a National Emergency relating to the disease. There has been continued widespread infection in the United States and abroad, as COVID-19 has had, and continues to have, a significant impact around the world, prompting governments and businesses to take unprecedented measures in response. Such measures have included restrictions on travel and business operations, temporary closures of businesses, hybrid operations of businesses and for workers, and quarantine and shelter-in-place orders. Some businesses have imposed vaccine mandates and many businesses are experiencing labor shortages. These factors have also impacted the supply chain, leading to significant delays and shortages. These measures, while intended to protect human life, have had serious adverse impacts on domestic and foreign economies. The severity and duration of such impacts are uncertain as new variants of the COVID-19 virus emerge and a resulting surge in diagnosed cases may be seen. The sweeping nature of the coronavirus pandemic makes it 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 2020, 2021, and the six months ended June 30, 2022. The decreases in our revenue are primarily attributable to the effects of the global pandemic on our channel partners and customers as any reductionthey 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 useCOVID-19 pandemic. The COVID-19 pandemic in particular has, and may continue to have, a significant economic and business impact on our Company. During 2020, 2021, and the first half of 2022, 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

-17-

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 services or the business failure by one ofcustomers, suppliers and logistics partners and could significantly adversely affect our major customers or wholesale channel partners could have such a result.near-term and long-term revenues, earnings, liquidity and cash flows.

Note 15 - Geographical Data
For the three and nine months ended September 30, 2017 and 2016, there was no material revenue attributable to any individual foreign country. Revenue by geographic area, based on customer location, is allocated as follows (in thousands):

-18-
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Domestic$2,408
 $3,158
 $8,059
 $10,971
Foreign1,073
 1,186
 3,358
 3,979
Total Revenue$3,481
 $4,344
 $11,417
 $14,950
Long-lived assets were 100% located in domestic markets as of September 30, 2017 and December 31, 2016.
Note 16 - Related Party Transactions



- 17-



As of June 30, 2017, Peter Holst, the Company’s President and CEO and a prior stockholder of Affinity, held a 27.3% interest in the SRS Note, which was issued to SRS on behalf of the prior stockholders of Affinity in October 2012. See Note 8 for a description of the terms of the SRS Note. As of July 31, 2017, there were no remaining obligations related to the SRS Note, see further discussion of the Debt Recapitalization in Note 8. Our President, Chief Executive Officer, and Director, Peter Holst, held a 27.3% interest in the SRS Note (or $699,528 as of July 31, 2017 including accrued interest) and received 1,806,087 shares of the Company’s common stock in connection with the SRS Note Exchange (representing an effective exchange price into common stock of $0.387 per share). The SRS Note Exchange was negotiated and approved on behalf of the Company by a special committee of the board of directors consisting exclusively of independent, disinterested directors.
As of June 30, 2017, Main Street owned 7,711,517 shares, or 21%, of the Company’s outstanding common stock. Main Street was the Company’s senior debt lender (see Note 8). On July 31, 2017, the Company purchased the 7,711,517 shares of common stock from Main Street, see further discussion of the Debt Recapitalization in Note 8.

Transactions with related parties, including the transactions referred to above, are reviewed and approved by independent members of the Board of Directors of the Company in accordance with the Company’s Code of Business Conduct and Ethics.

Note 17 - Subsequent Events

On October 24, 2017, the Company closed a registered direct offering of 2,800 shares of Series B convertible preferred stock for total gross proceeds of $2,800,000. The net proceeds, after estimated expenses of the offering payable by the Company, are estimated to be $2,325,000 (the “Series B Offering”). The shares of Series B convertible preferred stock were sold at a price equal to their stated value of $1,000 per share and are convertible into shares of the Company’s common stock at a conversion price of $0.28 per share, subject to customary adjustments. The shares of Series B convertible preferred stock were offered and sold pursuant to a prospectus supplement dated October 23, 2017 and an accompanying base prospectus dated January 28, 2016 in the Company’s existing shelf registration statement on Form S-3 (333-209013) that was declared effective by the Securities and Exchange Commission on January 28, 2016. The Company has agreed to provide the Purchasers a right of participation for up to 100% of any future offering of its common stock or other securities or equity linked debt obligations for 24 months following the closing date. In addition, the Company has agreed, within 60 days after the closing date, to expand the size of the board to six members and to appoint a new independent director agreeable to the lead investor in the offering (the “Lead Investor”). Subject to limited exceptions, for as long as at least 333 shares of Series B convertible preferred stock remain outstanding and unconverted (subject to adjustment for stock splits, stock dividends, recapitalizations, reorganizations, reclassifications, combinations and subdivisions or similar events occurring after the date of the Purchase Agreement with respect to the Series B convertible preferred stock), the Company may not issue any common stock or convertible securities (or modify any of the foregoing that may be outstanding) to any person, or incur any debt, without the express written consent of the Lead Investor in the Series B Offering.


- 18-




ItemITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Overview


Glowpoint, Inc. (“Glowpoint,” “we,” “us,” or the “Company”) isWe are a managed service provider of patented multi-stream collaboration products and managed services for video collaboration and network applications. solutions.

Mezzanine™ Product Offerings

Our services are designedflagship product is called Mezzanine™, a family of turn-key products that enable dynamic and immersive visual collaboration across multi-users, multi-screens, multi-devices, and multi-locations.Mezzanine™ allows multiple people to share, control and arrange content simultaneously, from any location, enabling all participants to see the same content in its entirety at the same time in identical formats, resulting in dramatic enhancements to both in-room and virtual videoconference presentations. Applications include video telepresence, laptop and application sharing, whiteboard sharing and slides. Spatial input allows content to be spread across screens, spanning different walls, scalable to an arbitrary number of displays and interaction with our proprietary wand device. Mezzanine™ substantially enhances day-to-day virtual meetings with technology that accelerates decision making, improves communication, and increases productivity. Mezzanine™ scales up to support the most immersive and commanding innovation centers; across to link labs, conference spaces, and situation rooms; and down for the smallest work groups. Mezzanine’s digital collaboration platform can be sold as delivered systems in various configurations for small teams to total immersion experiences. The family includes the 200 Series (two display screen), 300 Series (three screen), and 600 Series (six screen). We also sell maintenance and support contracts related to Mezzanine™.

Historically, customers have used Mezzanine™ products in conventional commercial real estate spaces such as conference rooms. As discussed below, sales of our Mezzanine product have been adversely affected by commercial response to the COVID-19 pandemic. 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. 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.

Managed Services for Video Collaboration

We provide a comprehensive suiterange of managed services for video collaboration, from automated and concierge applicationsto orchestrated, to simplify the user experience and expedite thein an effort to drive adoption of video as the primary means of collaboration. Our customers include Fortune 1000 companies, along with small and medium enterprises in a variety of industries.collaboration throughout our customers’ enterprise. We marketdeliver our services globally through a multi-channel sales approachhybrid service platform or as a service layer on top of our customers’ video infrastructure. We provide our customers with i) managed videoconferencing, where we set up and manage customer videoconferences and ii) remote service management, where we provide 24/7 support and management of customer video environments.

Managed Services for Network

We provide our customers with network solutions that includes direct salesensure reliable, high-quality and channel partners. secure traffic of video, data and internet. Network services are offered to our customers on a subscription basis. Our network services business carries variable costs associated with the purchasing and reselling of this connectivity.

Oblong’s Results of Operations

Three Months EndedJune 30, 2022 (the“2022 Second Quarter”) compared to the Three Months Ended June 30, 2021 (the “2021 Second Quarter”)

Segment Reporting

The Company was formed as a Delaware corporation in May 2000. The Companycurrently operates in one segment.two segments: (1) “Collaboration Products,” which represents the Oblong Industries business surrounding our Mezzanine™ product offerings and (2) “Managed Services,” which represents the Oblong (formerly Glowpoint) business surrounding managed services for video collaboration and network solutions. Certain information concerning the Company’s segments for the three months ended June 30, 2022 is presented in the following table (in thousands):


We experienced

-19-

Three Months Ended June 30, 2022
Managed ServicesCollaboration ProductsCorporateTotal
Revenue$810 $523 $— $1,333 
Cost of revenues525 401 — 926 
  Gross profit$285 $122 $— $407 
  Gross profit %35 %23 %31 %
Allocated operating expenses$1 $8,254 $— $8,255 
Unallocated operating expenses— — 1,185 1,185 
  Total operating expenses$1 $8,254 $1,185 $9,440 
Income (loss) from operations$284 $(8,132)$(1,185)$(9,033)
Interest and other expense, net— — — — 
Net income (loss) before tax$284 $(8,132)$(1,185)$(9,033)
Income tax expense(1)1 — — 
Net income (loss)$285 $(8,133)$(1,185)$(9,033)


Unallocated operating expenses in Corporate include costs during the 2022Second Quarter that are not specific to a particular segment but are general to the group; included are expenses incurred for administrative and accounting staff, general liability and other insurance, professional fees and other similar corporate expenses.

Revenue. Total revenue decreased 35% in the 2022 Second Quarter compared to the 2021 Second Quarter. The following table summarizes the changes in components of our revenue (in thousands), and the significant declineschanges in revenue during 2015are discussed in more detail below.
Three Months Ended June 30,
2022% of Revenue2021% of Revenue
Revenue: Managed Services
Video collaboration services$79 6 %$230 11 %
Network services723 54 %830 41 %
Professional and other services8 1 %181 %
      Total Managed Services revenue$810 61 %$1,078 53 %
Revenue: Collaboration Products
Visual collaboration product offerings$520 39 %$1,635 46 %
Licensing3 — %59 1 %
      Total Collaboration Products revenue$523 39 %$971 47 %
Total revenue$1,333 100 %$2,049 100 %

Managed Services

•The decrease in revenue for video collaboration services is mainly attributable to lower revenue from existing customers (either from reductions in price or level of services) and 2016 that have continued into the nine months ended September 30, 2017. Theseloss of customers to competition.

•The decrease in revenue declines are primarily duefor network services is mainly attributable to net attrition of customers and lower demand for our services given the competitive environment and pressure on pricing that exists in our industry.

On July 31, 2017, the Company completed a recapitalization of its debt obligations as described further above in Note 8 (the “Debt Recapitalization”). As a result of the Debt Recapitalization, the Company reduced debt and accrued interest obligations by $9,362,000. Although the Debt Recapitalization significantly improved the Company’s financial position, the Company will be required to meet significant debt service obligations during the next twelve months.
On October 24, 2017, the Company closed a registered direct offering of 2,800 shares of Series B convertible preferred stock for total gross proceeds of $2,800,000 (see further discussion in Note 17). The net proceeds, after estimated expenses of the offering payable by the Company, are estimated to be $2,325,000 (the “Series B Offering”).

See further discussion of the Company’s business, future plans and liquidity in Results of Operations and Liquidity and Capital Resources below.

Results of Operations

Three and Nine Months Ended September 30, 2017 (the“2017 Quarter,” the “2017 Period,” respectively) compared to Three and Nine Months Ended September 30, 2016 (the “2016 Quarter,” the “2016 Period,” respectively)

Revenue. Total revenue decreased $863,000 to $3,481,000 (or 20%) in the 2017 Quarter from $4,344,000 in the 2016 Quarter. Total revenue decreased $3,533,000 to $11,417,000 (or 24%) in the 2017 Period from $14,950,000 in the 2016 Period. The following table summarizes the changes in the components of our revenue (in thousands):
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Revenue       
Video collaboration services$2,085
 $2,494
 $6,876
 $8,403
Network services1,325
 1,805
 4,288
 6,168
Professional and other services71
 45
 253
 379
Total revenue$3,481
 $4,344
 $11,417
 $14,950

Revenue for video collaboration services decreased $409,000 (or 16%) to $2,085,000 in the 2017 Quarter from $2,494,000 in the 2016 Quarter and decreased $1,527,000 (or 18%) to $6,876,000 in the 2017 Period from $8,403,000 in the 2016 Period. The decreases in video collaboration services revenue are mainly attributable as follows:

(i) approximately 33% and 40% of the decreases between the 2017 Quarter and the 2016 Quarter and the 2017 Period and the 2016 Period, respectively, are due to lower revenue for existing customers (either from reductions in price or level of services);



- 19-


(ii) approximately 48% and 37% of the decreases between the 2017 Quarter and the 2016 Quarter and the 2017 Period and the 2016 Period, respectively, are due to lower customer demand for our services related to video meeting suites as a result of increased usage of desktop and mobile video products and technologies; and

(iii) approximately 19% and 21% of the decreases between the 2017 Quarter and the 2016 Quarter and the 2017 Period and the 2016 Period, respectively, are due to loss of customers to competition between 2016 and 2017.

Revenue for network services decreased $480,000 (or 27%) to $1,325,000 in the 2017 Quarter from $1,805,000 in the 2016 Quarter and decreased $1,880,000 (or 30%) to $4,288,000 in the 2017 Period from $6,168,000 in the 2016 Period. The decreases are mainly attributable to net attrition of customers and lower demand for these services given the competitive environment and pressure on pricing that exists in the network services business.


Revenue for professional and other services increased $26,000 (or 58%) to $71,000

-20-

•We expect revenue declines in our Managed Services segment will continue in the 2017 Quarter from $45,000future.

Collaboration Products
•The decrease in the 2016 Quarter and decreased $126,000 (or 33%) to $253,000 in the 2017 Period from $379,000 in the 2016 Period. The decreases are mainlyrevenue for visual collaboration product offerings is primarily attributable to lower professional support services.

We expect that the year-over-year total revenue trend foreffects of the 2016 PeriodCOVID-19 pandemic on our existing and target customers as they evaluate how and when to re-open their conventional office and conference facility footprints, as Mezzanine™ products are currently used in conventional spaces such as conference rooms. The Company’s results reflect the 2017 Period will continue for the remainderchallenges 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 2017 and into 2018 given the dynamic and competitive environment for video collaboration and network services, andcustomer implementation schedules shifting due to the limited resourcesCOVID-19 pandemic. The COVID-19 pandemic in particular has, and may continue to have, a significant economic and business impact on our Company. During 2020, 2021 and the first half of 2022, we had available to us (priorsaw a weakness in revenue as our prospective customers across all sectors delayed order placements in reaction to the Series B Offering)ongoing impacts of the pandemic that caused our customers to investsuspend or postpone real estate retrofit projects due to budget and occupancy uncertainties. We continue to monitor the impact of the pandemic on our customers, suppliers and logistics providers, and evaluate governmental actions being taken to curtail and respond to the spread of the virus. The significance and duration of the ongoing impact on us is still uncertain. Material adverse effects of the COVID-19 pandemic on market drivers, our customers, suppliers or logistics providers may be expected to continue to significantly impact our operating results. We will continue to actively follow, assess and analyze the ongoing impact of the pandemic and adjust our organizational structure, strategies, plans and processes to respond. Because the situation continues to evolve, we cannot reasonably estimate the ultimate impact to our business, results of operations, cash flows and financial position that the pandemic may have. Continuation of thepandemic and government actions in salesresponse thereto could cause further disruptions to our operations and marketing to increase revenue. We remain focused on new customer acquisition and increasing salesthe operations of our video collaboration solutions. However, we believe that sales cycles associated with sellingcustomers, suppliers and logistics partners and may be expected to continue to significantly adversely affect our services directly to enterprise IT organizationsnear-term and through our channel partners typically range from six to eighteen months. The Company currently expects to use some or all of the net proceeds of the Series B Offering to fund investments in product development, saleslong-term revenues, earnings, liquidity and marketing expenses and capital expenditures in order to develop new service offerings to reverse the Company’s revenue trends. These factors create uncertainty as to when, and if, we will be able to stabilize and ultimately grow our revenue (see the 2016 10-K for further discussion).cash flows.


Cost of Revenue (exclusive of depreciation and amortization)amortization and casualty loss). Cost of revenue, exclusive of depreciation and amortization and casualty loss, includes all internal and external costs related to the delivery of revenue. Cost of revenue also includes the cost for taxes which have been billed to customers.

Cost of revenue decreased to $1,988,000by segment is presented in the 2017 Quarter from $2,609,000 in the 2016 Quarter. This $621,000following table (in thousands):
Three Months Ended June 30,
20222021
Cost of Revenue
Managed Services$525 $739 
Collaboration Products401 510 
Total cost of revenue$926 $1,249 

The decrease in cost of revenue is mainly attributable to lower costs associated with the $863,000 decrease in revenue during the same period. Cost of revenue decreased to $6,697,000 in the 2017 Period from $9,187,000 in the 2016 Period. This $2,490,000 decrease in cost of revenue is mainly attributable to lower costs associated with the $3,533,000 decrease in revenue during the same period. We reduced costs related to revenue in these areas during the 2017 Quarter and 2017 Period: personnel costs, network costs, taxes, and external costs associated with video meeting suites. Cost of revenue, as a percentage of total revenue, was 57% and 60% for the 2017 Quarter and 2016 Quarter, respectively, and 59% and 61% for the 2017 Period and 2016 Period, respectively. The improvement in cost of revenueCompany’s gross profit as a percentage of revenue is mainly attributablewas 31% in the 2022 Second Quarter compared to lower taxes and fixed network costs.39% in the 2021 Second Quarter.














-21-

Operating expenses are presented in the following table (in thousands):

Three Months Ended June 30,
20222021$ Change% Change
Operating expenses:
Research and development$398 $599 $(201)(34)%
Sales and marketing317 572 (255)(45)%
General and administrative1,185 1,383 (198)(14)%
Impairment charges6,408 17 6,391 37594 %
Casualty loss533 — 533 100 %
Depreciation and amortization599 707 (108)(15)%
Total operating expenses$9,440 $3,278 $6,162 188 %

Research and Development. Research and development expenses include internal and external costs related to developing new serviceproduct offerings andas well as features and enhancements to our existing services. Researchproduct offerings. The decrease in research and development expenses increasedfor the 2022 Second Quarter compared to $296,000 in the 20172021 Second Quarter from $229,000 in the 2016 Quarter and increased to $875,000 in the 2017 Period from $817,000 in the 2016 Period. These increases are primarily attributable to increased time spent by developers on research and development projects in 2017.

Sales and Marketing Expenses. Sales and marketing expenses decreased to $69,000 in the 2017 Quarter from $70,000 in the 2016 Quarter. Sales and marketing expenses decreased to $369,000 in the 2017 Period from $576,000 in the 2016 Period. This decrease is primarily attributable to lower headcount and corresponding personnel costs of $44,000 and $371,000,due to reduced headcount, partially offset by ana $66,000 increase in third partyconsulting and outsourced labor costs between these periods.

Sales and Marketing Expenses. The decrease in sales and marketing expenses for 2022 Second Quarter compared to the 2021 Second Quarter is mainly attributable to the lower personnel costs of $37,000due to reduced headcount and $202,000, respectively, between the 2017 and 2016 Quarters and the 2017 and 2016 Periods.lower marketing costs.


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. GeneralThe decrease in general and administrative expenses decreased by $694,000 to $970,000 infor the 20172022 Second Quarter from $1,664,000 in the 2016 Quarter. This decrease is primarily attributable to a decrease of $403,000 in costs relatedcompared to the UTC Litigation, (see the 2016 10-K for further discussion of this litigation which was settled on September 30, 2016), lower stock-based compensation expense of $128,000, and a decrease in administrative and overhead costs of $67,000. General and administrative costs decreased by $1,166,000 to $2,843,000 in the 2017 Period from $4,009,000 in the 2016 Period. This decrease2021 Second Quarter is mainly attributable to a decrease in bad debt expense of $636,000 in costs related to the UTC Litigation, lower stock-based compensation expense$195,000.



- 20-


of $390,000, and a decrease of $118,000 in administrative and overhead expenses. Additionally, we incur significant audit, legal, insurance and other administrative costs as a publicly traded corporation. These costs are included in general and administrative expenses. As our revenue declines, our costs associated with being a publicly traded corporation increase as a percentage of revenue.

Impairment Charges.Impairment The impairment charges in the 20172022 Second Quarter and 2017 Period were $1,707,000 and $1,712,000, respectively, as compared to $605,000 and $630,000 in the 2016 Quarter and 2016 Period, respectively. The impairment losses for the 2017 Quarter and 2017 Period are primarilymainly attributable to impairment charges of $1,475,000 on goodwill for our Collaboration Products reporting unit, and $232,000the impairment in the 2021 Second Quarter was attributable to impairment charges on capitalized softwareproperty and equipment no longer in service. The impairment losses for the 2016 Quarter and 2016 Period are primarily attributable to capitalized software no longer in service. The continued future declineFuture declines of our revenue, cash flows and/or stock price may give rise to a triggering event that may require the Company to record impairment charges in the future related to our goodwill, intangible assets and other long-lived assets.


Casualty Loss. During the second quarter of 2022, the Company discovered that $533,000 of inventory was stolen from the Company’s warehouse in City of Industry, California. This theft has been recorded as a casualty loss of $533,000 during the three and six months ended June 30, 2022 on the Company’s condensed consolidated Statements of Operations. The theft is being investigated further by the Los Angeles, CA Sheriff’s Department and a claim has been filed with the Company’s insurance company. We are seeking to recover the majority of the loss through our insurance policies and we will offset the casualty loss with the recognition of a gain of any proceeds should we subsequently receive them from our insurance company. No assurances can be provided that we will be successful in recovering any or all of the casualty loss.

Depreciation and Amortization Expenses. DepreciationThe decrease in depreciation and amortization expenses decreasedfor the 2022 Second Quarter compared to $451,000the 2021 Second Quarter is mainly attributable to the disposition and impairment of certain assets during the second half of 2021 and the first half of 2022, as well as a decrease in depreciation as certain assets became fully depreciated.

Loss from Operations. The increase in the 2017Company’s loss from operations for the 2022 Second Quarter from $455,000 incompared to the 20162021 Second Quarter and decreased to $1,370,000 in the 2017 Period from $1,509,000 in the 2016 Period. These decreases areis mainly attributable to lower revenue and gross profit and higher operating expenses as addressed above.








-22-

Six Months Ended June 30, 2022 compared to the Six Months Ended June 30, 2021

Segment Reporting

Certain information concerning the Company’s two segments for the six months ended June 30, 2022 is presented in the following table (in thousands):

Six Months Ended June 30, 2022
Managed ServicesCollaboration ProductsCorporateTotal
Revenue$1,776 $1,089 $— $2,865 
Cost of revenues1,170 789 — 1,959 
Gross profit$606 $300 $— $906 
Gross profit %34 %28 %32 %
Allocated operating expenses$57 $11,529 $— $11,586 
Unallocated operating expenses2,875 2,875 
Total operating expenses$57 $11,529 $2,875 $14,461 
Income (loss) from operations$549 $(11,229)$(2,875)$(13,555)
Interest and other expense, net6 — — 6 
Net income (loss) before tax$543 $(11,229)$(2,875)$(13,561)
Income tax expense8 3 — 11 
Net income (loss)$535 $(11,232)$(2,875)$(13,572)

Unallocated operating expenses in Corporate include costs during the first half of 2022 that are not specific to a particular segment but are general to the group; included are expenses incurred for administrative and accounting staff, general liability and other insurance, professional fees and other similar corporate expenses.

Revenue. Total revenue decreased 28% in the first half of 2022 compared to the first half of 2021. The following table summarizes the changes in components of our revenue (in thousands), and the significant changes in revenue are discussed in more detail below.
Six Months Ended June 30,
2022% of Revenue2021% of Revenue
Revenue: Managed Services
Video collaboration services$195 7 %$521 23 %
Network services1,544 54 %1,711 75 %
Professional and other services37 1 %412 %
Total Managed Services revenue$1,776 62 %$2,273 57 %
Revenue: Collaboration Products
Visual collaboration product offerings$1,082 38 %$1,635 80 %
Licensing$7 — %$59 3 %
Total Collaboration Products revenue$1,089 38 %$1,694 43 %
Total revenue$2,865 100 %$3,967 100 %




-23-

Managed Services

•The decrease in revenue for video collaboration services is mainly attributable to lower revenue from existing customers (either from reductions in price or level of services) and loss of customers to competition.

•The decrease in revenue for network services is mainly attributable to net attrition of customers and lower demand for our services given the competitive environment and pressure on pricing that exists in the network services business.

•We expect revenue declines in our Managed Services segment will continue in the future.

Collaboration Products
•The decrease in revenue for visual collaboration product offerings is primarily attributable to the effects of the COVID-19 pandemic on our existing and target customers as they evaluate how and when to re-open their conventional office and conference facility footprints, as Mezzanine™ products are currently used in conventional spaces such as conference rooms, as discussed above in - Oblong’s Results of Operations - Three Months Ended June 30, 2022 (the “2022 Second Quarter”) compared to the Three Months Ended June 30, 2021 (the “2021 Second Quarter”).

Cost of Revenue (exclusive of depreciation expenseand amortization and casualty loss). Cost of revenue, exclusive of depreciation and amortization and casualty loss, includes all internal and external costs related to the delivery of revenue. Cost of revenue also includes taxes which have been billed to customers. Cost of revenue by segment is presented in the following table (in thousands):
Six Months Ended June 30,
20222021
Cost of Revenue
Managed Services$1,170 $1,572 
Collaboration Products789 967 
Total cost of revenue$1,959 $2,539 

The decrease in cost of revenue is mainly attributable to lower costs associated with the decrease in revenue during the same period. The Company’s gross profit as a percentage of revenue was 32% for the first half of 2022, and 36% for the first half of 2021.

Operating expenses are presented in the following table (in thousands):

Six Months Ended June 30, 2022
20222021$ Change% Change
Operating expenses:
Research and development$1,402 $1,291 $111 9 %
Sales and marketing879 1,099 (220)(20)%
General and administrative2,875 3,450 (575)(17)%
Impairment charges7,546 48 7,498 15621 %
Casualty loss533 — 533 100 %
Depreciation and amortization1,226 1,429 (203)(14)%
Total operating expenses$14,461 $7,317 $(7,666)130 %

Research and Development. Research and development expenses include internal and external costs related to developing new product offerings as well as features and enhancements to our existing product offerings. The increase in research and development expenses for the first half of 2022 compared to the first half of 2021 is primarily attributable to a $300,000

-24-

increase in consulting and outsourced labor costs between these periods, partially offset by lower personnel costs due to reduced headcount.

Sales and Marketing Expenses. The decrease in sales and marketing expenses for the first half of 2022 compared to the first half of 2021 is mainly attributable to lower personnel costs due to reduced headcount and lower marketing costs.

General and Administrative Expenses. General and administrative expenses include direct corporate expenses and costs of personnel in the various corporate support categories, including executive, finance and accounting, legal, human resources and information technology. The decrease in general and administrative expenses for the first half of 2022 compared to the first half of 2021 is mainly attributable to decreases of $390,000 in stock-based expense for professional service fees and $324,000 in bad debt expense, partially offset by an increase in assets that became fully depreciated in 2017.personnel expenses, primarily attributable to receiving an Employee Retention Credit (“ERC”) during the first half of 2021 and not during the first half of 2022.


Loss from Operations. Impairment Charges.The Company recorded a loss from operations of $2,000,000impairment charges in the 2017 Quarter as compared to a loss from operationsfirst half of $1,288,000 in the 2016 Quarter. The Company recorded a loss from operations of $2,449,000 in the 2017 Period as compared to $1,778,000 in the 2016 Period. The increase in our loss from operations from the 2016 Quarter to the 2017 Quarter and the 2016 Period to the 2017 Period2022 are primarily attributable to impairment charges on goodwill for our Collaboration Products reporting unit and the impairment of the right-of-use assets associated with two of our Los Angeles, CA leases. The impairment charge in the first half of 2021 was attributable to impairment charges on property and equipment no longer in service. Future declines of our revenue, cash flows and/or stock price may give rise to a triggering event that may require the Company to record impairment charges in the future related to our intangible assets and other long-lived assets.

Casualty Loss. During the second quarter of 2022, the Company discovered that $533,000 of inventory was stolen from the Company’s warehouse. This theft has been recorded as a casualty loss of $533,000 during the three and six months ended June 30, 2022 on the Company’s condensed consolidated Statements of Operations. The theft is being investigated further by the Los Angeles, CA Sheriff’s Department and a claim has been filed with the Company’s insurance company. We are seeking to recover the majority of the loss through our insurance policies and we will offset the casualty loss with the recognition of a gain of any proceeds should we subsequently receive them from our insurance company. No assurances can be provided that we will be successful in recovering any or all of the casualty loss.

Depreciation and Amortization. The decrease in depreciation and amortization expenses for the first half of 2022 compared to the first half of 2021 is mainly attributable to the disposition and impairment of certain assets during the second half of 2021 and the first half of 2022 as well as a decrease in depreciation as certain assets became fully depreciated.

Loss from Operations. The increase in the Company’s loss from operations for the first half of 2022 compared to the first half of 2021 is mainly attributable to lower revenue partially offset by lowerand gross profit and higher operating expenses as discussedaddressed above.


Adjusted EBITDAOff-Balance Sheet Arrangements


Adjusted EBITDA,As of June 30, 2022, we had no off-balance sheet arrangements.

Inflation

Management does not believe inflation had a non-GAAPsignificant effect on the condensed consolidated financial measure, is defined as net income (loss) before depreciation, amortization, taxes, stock-based compensationstatements for the periods presented.

Critical Accounting Policies

There have been no changes to our critical accounting policies during the six months ended June 30, 2022. Critical accounting policies and stock-based expense, impairment charges and interest and other income (expense), net. Adjusted EBITDA is not intended to replace operating loss, net income (loss), cash flow or other measures of financial performance reportedthe significant estimates made in accordance with U.S. GAAP. Rather, Adjusted EBITDA is an important measure used by management to assesssuch 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 operating performance offootnotes thereto, each included in our Annual Report on Form 10-K for the Company and is used infiscal year ended December, 31, 2021, filed with the calculation of financial covenants in the Western Alliance Bank and Super G loan agreements. Adjusted EBITDA as defined here may not be comparable to similarly titled measures reported by other companies due to differences in accounting policies. A reconciliation of net income (loss) to Adjusted EBITDA is shown below:SEC on March 29, 2022 (the “2021 Annual Report”).
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Net income (loss)$7,104
 $(1,705) $5,846
 $(3,021)
Depreciation and amortization451
 455
 1,370
 1,509
Interest and other (income) expense, net(8,820) 380
 (8,065) 1,135
Income tax (benefit) expense(284) 37
 (230) 108
EBITDA *(1,549) (833) (1,079) (269)
Stock-based compensation96
 221
 377
 748
Stock-based expense—
 168
 —
 168
Impairment charges1,707
 605
 1,712
 630
Adjusted EBITDA$254
 $161
 $1,010
 $1,277
* Represents a loss


Liquidity and Capital Resources


As of SeptemberJune 30, 2017,2022, we had $1,439,000 of$5,107,000 in cash and working capital of $696,000. Our cash balance as of September 30, 2017 includes restricted cash of $18,000 (as discussed in Note 6).$5,461,000. For the ninesix months ended SeptemberJune 30, 2017,2022, we generatedincurred a net incomeloss of $5,846,000$13,572,000 and used $3,911,000 of net cash provided byin operating activitiesactivities.


-25-

Our capital requirements in the future will continue to depend on numerous factors, including the timing and amount of $1,073,000. A substantial portionrevenue for the Company, customer renewal rates and the timing of our cash flow from operations has been dedicatedcollection of outstanding accounts receivable, in each case particularly as it relates to the paymentCompany’s major customers, the expense to deliver services, expense for sales and marketing, expense for research and development, and capital expenditures. We expect to continue to invest in product development and sales and marketing expenses with the goal of interestgrowing the Company’s revenue in the future. The Company believes that, based on our former indebtedness, thereby reducing our ability to use our cash flow to fund our operations,its current projection of revenue, expenses, capital expenditures, and investments in sales and marketing. Forcash flows, it will not have sufficient resources to fund its operations for the ninenext twelve months ended September 30,


- 21-


2017 and 2016, our cash flow from operations was reduced by $777,000 and $841,000, respectively, for interest payments on our indebtedness.

On July 31, 2017,following the Company completed a recapitalizationfiling of its debt obligations as described further above in Note 8 (the “Debt Recapitalization”). As a result of the Debt Recapitalization, the Company reduced debt and accrued interest obligations by $9,362,000. Although the Debt Recapitalization significantly improved the Company’s financial position, the Companythis Report. We believe additional capital will be required to meet significant debt service obligations during the next twelve months. During the fourth quarter of 2017, the Company made a principal payment of $200,000 to Western Alliance Bankfund operations and is required to make total principalprovide growth capital including investments in technology, product development and interest payments of $152,000 to Super G Capital. During 2018, the Company is required to make total principal payments of $400,000 to Western Alliance Banksales and total principal and interest payments of $823,000 to Super G Capital.
On October 24, 2017, the Company closed a registered direct offering of 2,800 shares of Series B convertible preferred stock for total gross proceeds of $2,800,000 (see further discussion in Note 17). The net proceeds, after estimated expenses of the offering payable by the Company, are estimated to be $2,325,000 (the “Series B Offering”).

As further described in Item 2, Results of Operations, the Company anticipates continued declines in its revenue, which is expected to result in reduced cash flow from operations. The Company currently expects to use some or all of the net proceeds of the Series B Offeringmarketing. To access capital to fund investments in product development, sales and marketing expenses, andoperations or provide growth capital, expenditures to develop new service offerings to reverse the Company’s revenue trends. Given the Company’s plans to increase operating expenses and capital expenditures following the closing of the Series B Offering, the Company will seek to amend certain financial covenants for fiscal years 2018 and 2019 in the Western Alliance Bank Loan Agreement. Although we expect to agree on amended covenants with Western Alliance Bank, there can be no assurance that we will successfulneed to raise capital in doing so.one or more debt and/or equity offerings. There can be no assurance that we will be successful in developing new service offerings and reversing our revenue trends. There can be no assurance that our existing cash resources and the net proceeds of the Series B Offering will be adequate to fund our operations, projected capital expenditures, and debt service obligations. Therefore, the Company may raise capital in one or more offerings in the future. The holders of the Series B convertible preferred stock have the right to approve certain financings. There can be no assurance the holders of the Series B convertible preferred stock will approve such financings, that we will succeed in raising necessary capital or that any such offering will be on terms acceptable to the Company. If we cannotare unable to raise additional capital that may be needed on terms acceptable to us, it could have a material adverse effect on the Company. The factors discussed above raise substantial doubt as to our ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from these uncertainties.


Off-Balance Sheet Arrangements

As of September 30, 2017, 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, 2017. 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 our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7, as well as in our consolidated financial statements and the footnotes thereto included in our 2016 10-K.

ItemITEM 3. Quantitative and Qualitative Disclosures About Market RiskQUANTITATIVE 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.


ItemITEM 4. Controls and ProceduresCONTROLS AND PROCEDURES


Disclosure Controls and Procedures



- 22-



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 SeptemberJune 30, 2017.2022. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of SeptemberJune 30, 2017,2022, 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 SeptemberJune 30, 20172022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



PART II - OTHER INFORMATION


ItemITEM 1. Legal ProceedingsLEGAL PROCEEDINGS


None.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.


ItemITEM 1A. Risk FactorsRISK FACTORS


A description of the risks associated with our business, financial conditions and results of operations is set forth in “Part I.Item 1A1A. Risk Factors” of our 2021 Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and filed with the SEC on March 31, 2017. ThereReport. Except as set forth below, there have been no material changes to these risks during the ninesix months ended SeptemberJune 30, 2017.2022. The risks described in the 2021 Annual 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.



-26-

We may incur non-cash impairment charges for our right-of-use and intangible assets which would negatively impact our operating results. The failure to use the full value of our right-of-use assets, such as that which occurred in the second quarter of 2022, could result in significant impairment charges which could have an adverse effect on our results of operations.

The Company assesses the impairment of purchased intangible assets subject to amortization when events and circumstances indicate that the carrying value of the assets might not be recoverable. The determination of related estimated useful lives and whether or not these assets are impaired involves significant judgments, related primarily to the future profitability and/or future value of the assets. Changes in the Company’s strategic plan and/or other-than-temporary changes in market conditions could significantly impact these judgments and could require adjustments to recorded asset balances. As a result of declines in revenue for the Collaboration Products reporting segment, we concluded that a triggering event had occurred and conducted impairment testing of our intangible assets during the six months ended June 30, 2022. Based on the corresponding recoverability tests of the intangible assets for the Collaboration Products reporting unit, we determined that no impairment changes were required for the six months ended June 30, 2022. The recoverability test consisted of comparing the estimated undiscounted cash flows expected to be generated by those assets to the respective carrying amounts.

The fair value determinations underlying the quantitative aspect of our impairment testing require considerable judgment and are sensitive to changes in underlying assumptions, estimates and market factors. Estimating the fair value of our intangible assets requires us to make assumptions and estimates regarding our future plans, as well as industry, economic and regulatory conditions. If current expectations are not met, or if market factors outside of our control change significantly, then our intangible assets might become impaired in the future, adversely affecting our operating results. The carrying amounts of our intangible assets are susceptible to impairment risk if there are unfavorable changes in such assumptions, estimates, and market factors. To the extent that we experience future declines in revenue, business conditions deteriorate, or key assumptions and estimates differ significantly from our management’s expectations, it may be necessary to recognize an impairment charge in the future.

Cyber-attacks, data breaches or malware or a breach of our physical security systems may disrupt our business operations, result in the loss of critical and confidential information, harm our operating results and financial condition, and damage our reputation; and cyber-attacks or data breaches on our customers’ networks, or in cloud-based services provided by or enabled by us, could result in claims of liability against us, damage our reputation or otherwise harm our business. In the ordinary course of providing video communications services, we transmit sensitive and proprietary information of our customers. We are dependent on the proper function, availability and security of our information systems, including without limitation those systems utilized in our operations. We have undertaken measures to protect the safety and security of our inventory and of our information systems and the data maintained within those systems, and on an annual basis, we test the adequacy of our security measures. Despite our implementation of security measures, there can be no assurance our safety and security measures will detect and prevent security breaches in a timely manner or otherwise prevent damage or interruption of our systems and operations or inventory theft. The products and services we sell to customers, and our servers, data centers and the cloud-based solutions on which our data, and data of our customers, suppliers and business partners are stored, are vulnerable to improper functioning, cyber-attacks, data breaches, malware, and similar disruptions from unauthorized access or tampering by malicious actors or inadvertent error. Any such event could compromise our products, services and networks or those of our customers, and the proprietary information stored on our systems or those of our customers could be improperly accessed, processed, disclosed, lost or stolen, which could subject us to liability to our customers, suppliers, business partners and others, give rise to legal/regulatory action, and could have a material adverse effect on our business, operating results and financial condition and may cause damage to our reputation. A security breach at any one of our physical facilities, such as that occurred in the second quarter of 2022, could result in a significant loss of inventory, or increase expenses relating to the resolution and future prevention of similar thefts, any of which could have an adverse effect on our business, financial condition and results of operations. Efforts to limit the ability of malicious actors to disrupt the operations of the Internet or undermine our own security efforts may be costly to implement and meet with resistance and may not be successful. Breaches of security in our customers’ networks, or in cloud-based services provided by or enabled by us, regardless of whether the breach is attributable to a vulnerability in our products or services, could result in claims of liability against us, damage our reputation, or otherwise harm our business.


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

Unregistered Sales of Equity Securities and Use of Proceedsby 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.


The Company purchased 7,711,517 shares of the Company’s common stock (and recorded such shares in treasury stock) in connection with the Debt Recapitalization (see Note 8 above) during the time period covered by this Report.



-27-

ItemITEM 3. Defaults upon Senior SecuritiesDEFAULTS UPON SENIOR SECURITIES


Not applicable.None.


ItemITEM 4. Mine Safety DisclosuresMINE SAFETY DISCLOSURES


Not applicable.



- 23-


ItemITEM 5. Other InformationOTHER INFORMATION


None.






- 24--28-



ItemITEM 6. ExhibitsEXHIBITS


Exhibit

Number
Description
3.1
31.1*
Certificate of Designations of the Series B Convertible Preferred Stock, as filed and corrected.
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.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema
101.CALXBRL Taxonomy Extension Calculation Linkbase
101.DEFXBRL Taxonomy Extension Definition Linkbase
101.LABXBRL Taxonomy Extension Label Linkbase
101.PREXBRL Taxonomy Extension Presentation Linkbase


* Filed herewith.

** Furnished herewith.







- 25--29-




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.
August 10, 2022GLOWPOINT, INC.
By:
11/14/2017By:/s/ Peter Holst
Peter Holst
Chief Executive Officer
(Principal Executive Officer)


11/14/2017August 10, 2022By:/s/ David Clark
David Clark
Chief Financial Officer
(Principal Financial and Accounting Officer)



- 26--30-