UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended SeptemberJune 30, 2022.2023.
or
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number: 001-35376
OBLONG, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware77-0312442
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)

25587 Conifer Road, Suite 105-231, Conifer, CO 80433
(Address of Principal Executive Offices, including Zip Code)

(303) 640-3838
(Registrant’s Telephone Number, including Area Code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each 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 No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company 
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)
Yes No

The number of shares outstanding of the registrant’s common stock as of November 8, 2022August 9, 2023 was 30,816,048.2,929,109.



OBLONG, INC.
Index
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at SeptemberJune 30, 20222023 (unaudited) and December 31, 20212022
Unaudited Condensed Consolidated Statements of Operations for the three and ninesix months ended SeptemberJune 30, 20222023 and 20212022
Unaudited Condensed Consolidated StatementStatements of Changes in Stockholders’ Equity for the three and ninesix months ended SeptemberJune 30, 20222023 and 20212022
Unaudited Condensed Consolidated Statements of Cash Flows for the ninesix months ended SeptemberJune 30, 20222023 and 20212022
Notes to unaudited Condensed Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
Signatures




CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q (this “Report”) contains statements that are considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and its rules and regulations (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, and its rules and regulations (the “Exchange Act”). These forward-looking statements include, but are not limited to, statements about the plans, objectives, expectations and intentions of Oblong, Inc. (“Oblong” or “we” or “us” or the “Company”). All statements other than statements of current or historical fact contained in this Report, including statements regarding Oblong’s future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” and similar expressions, as they relate to Oblong, are intended to identify forward-looking statements. These statements are based on Oblong’s current plans, and Oblong’s actual future activities and results of operations may be materially different from those set forth in the forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. Any or all of the forward-looking statements in this Report may turn out to be inaccurate. Oblong has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and assumptions. There are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including our plans, objectives, expectations and intentions and other factors that are discussed under the section entitled “Part I. Item 1A. Risk Factors” and in our consolidated financial statements and the footnotes thereto for the fiscal year ended December 31, 2021,2022, each included in our Annual Report on Form 10-K for the fiscal year ended December 31, 20212022 filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2022, and in the section entitled21, 2023, as well as under “Part II. Item 1A. Risk Factors” in our Q1 2023 Quarterly Report on Form 10-Q, for the fiscal quarterthree months ended June 30, 2022March 31, 2023, filed with the SEC on AugustMay 10, 2022 (the “Q2 2022 Quarterly Report”).2023. Oblong undertakes no obligation to publicly revise these forward-looking statements to reflect events occurring after the date hereof. All subsequent written and oral forward-looking statements attributable to Oblong or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this Report. Forward-looking statements in this Report include, among other things: our expectations and estimates relating to customer attrition, demand for our product offerings, sales cycles, future revenues, expenses, capital expenditures and cash flows; our ability to develop and launch new product offerings; evolution of our customer solutions and our service platforms; our ability to fund operations and continue as a going concern; expectations regarding adjustments to our cost of revenue and other operating expenses; our ability to finance investments in product development and sales and marketing; the future exercise of warrants; our ability to raise capital through sales of additional equity or debt securities and/or loans from financial institutions; our beliefs about the ongoing performance and success of our Managed Service business; statements relating to market need;need and evolution of the industry, our expected insurance coverage onsolutions and our second quarter 2022 casualty loss; and effectivenessservice platforms; adequacy of our disclosure controls and procedures.internal controls. 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;expectation surrounding liquidity for at least the next 12 months from the filing date of this Report with the SEC;
our ability to raise capital in one or more debt and/or equity offerings in order to fund operations or any growth initiatives;
customer acceptance and demand for our video collaboration services and network applications;
our ability to launch new products and offerings and to sell our solutions;
our ability to compete effectively in the video collaboration services and network services businesses;
the ongoing performance and success of our Managed Services business;
our ability to maintain and protect our proprietary rights;
potential future impairment charges related to intangible assets;
our ability to withstand industry consolidation;
our ability to adapt to changes in industry structure and market conditions;
actions by our competitors, including price reductions for their competitive services;
the quality and reliability of our products and services;
the prices for our products and services and changes to our pricing model;
the success of our sales and marketing approach and efforts, and our ability to grow revenue;
customer renewal and retention rates;



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





PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

OBLONG, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par value, stated value, and shares)
September 30, 2022December 31, 2021June 30, 2023December 31, 2022
(Unaudited)(Unaudited)
ASSETSASSETSASSETS
Current assets:Current assets:Current assets:
CashCash$4,143 $8,939 Cash$6,872 $3,085 
Restricted cash— 61 
Accounts receivable, netAccounts receivable, net357 849 Accounts receivable, net244 415 
Inventory1,027 1,821 
Inventory, netInventory, net402 723 
Prepaid expenses and other current assetsPrepaid expenses and other current assets868 1,081 Prepaid expenses and other current assets836 649 
Total current assetsTotal current assets6,395 12,751 Total current assets8,354 4,872 
Property and equipment, netProperty and equipment, net25 159 Property and equipment, net— 
Goodwill— 7,367 
Intangibles, netIntangibles, net690 7,562 Intangibles, net432 604 
Operating lease - right of use asset, netOperating lease - right of use asset, net201 659 Operating lease - right of use asset, net65 142 
Other assetsOther assets53 109 Other assets22 40 
Total assetsTotal assets$7,364 $28,607 Total assets$8,873 $5,661 
LIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITYLIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:Current liabilities:Current liabilities:
Accounts payableAccounts payable$401 $259 Accounts payable$136 $184 
Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities1,088 959 Accrued expenses and other current liabilities763 1,074 
Current portion of deferred revenueCurrent portion of deferred revenue571 783 Current portion of deferred revenue234 436 
Current portion of operating lease liabilitiesCurrent portion of operating lease liabilities306 492 Current portion of operating lease liabilities68 219 
Total current liabilitiesTotal current liabilities2,366 2,493 Total current liabilities1,201 1,913 
Long-term liabilities:Long-term liabilities:Long-term liabilities:
Operating lease liabilities, net of current portionOperating lease liabilities, net of current portion43 236 Operating lease liabilities, net of current portion— 17 
Deferred revenue, net of current portionDeferred revenue, net of current portion152 381 Deferred revenue, net of current portion57 114 
Total long-term liabilities195 617 
Total liabilitiesTotal liabilities2,561 3,110 Total liabilities1,258 2,044 
Commitments and contingencies (see Note 11)Commitments and contingencies (see Note 11)Commitments and contingencies (see Note 11)
Stockholders’ equity:Stockholders’ equity:Stockholders’ equity:
Common stock, $.0001 par value; 150,000,000 shares authorized; 30,929,331 shares issued and 30,816,048 outstanding at September 30, 2022 and December 31, 2021
Treasury stock, 113,283 shares of common stock at September 30, 2022 and December 31, 2021(181)(181)
Preferred stock Series F, convertible; $.0001 par value; $6,375,000 stated value; 42,000 shares authorized, 6,375 and zero shares issued and outstanding at June 30, 2023 and December 31, 2022, respectivelyPreferred stock Series F, convertible; $.0001 par value; $6,375,000 stated value; 42,000 shares authorized, 6,375 and zero shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively— — 
Common stock, $.0001 par value; 150,000,000 shares authorized; 2,736,481 shares issued and 2,728,928 outstanding at June 30, 2023 and 2,070,861 shares issued and 2,063,308 shares outstanding at December 31, 2022Common stock, $.0001 par value; 150,000,000 shares authorized; 2,736,481 shares issued and 2,728,928 outstanding at June 30, 2023 and 2,070,861 shares issued and 2,063,308 shares outstanding at December 31, 2022— — 
Treasury stock, 7,553 shares of common stockTreasury stock, 7,553 shares of common stock(181)(181)
Additional paid-in capitalAdditional paid-in capital227,611 227,581 Additional paid-in capital233,911 227,645 
Accumulated deficitAccumulated deficit(222,630)(201,906)Accumulated deficit(226,115)(223,847)
Total stockholders' equityTotal stockholders' equity4,803 25,497 Total stockholders' equity7,615 3,617 
Total liabilities and stockholders’ equityTotal liabilities and stockholders’ equity$7,364 $28,607 Total liabilities and stockholders’ equity$8,873 $5,661 
See accompanying notes to condensed consolidated financial statements.
-1-


OBLONG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months EndedNine Months EndedThree Months EndedSix Months Ended
September 30,September 30,June 30,June 30,
20222021202220212023202220232022
RevenueRevenue$1,185 $1,799 $4,050 $5,766 Revenue$956 $1,333 $1,994 $2,865 
Cost of revenue (exclusive of depreciation and amortization and casualty loss)Cost of revenue (exclusive of depreciation and amortization and casualty loss)841 1,228 2,800 3,767 Cost of revenue (exclusive of depreciation and amortization and casualty loss)834 926 1,596 1,959 
Gross profitGross profit344 571 1,250 1,999 Gross profit122 407 398 906 
Operating expenses:
Operating expenses (gains):Operating expenses (gains):
Research and developmentResearch and development232 693 1,634 1,984 Research and development398 11 1,402 
Sales and marketingSales and marketing282 438 1,161 1,537 Sales and marketing(58)317 160 879 
General and administrativeGeneral and administrative1,229 1,628 4,104 5,078 General and administrative1,577 1,185 2,746 2,875 
Impairment chargesImpairment charges5,169 254 12,715 302 Impairment charges6,408 7,546 
Casualty loss— — 533 — 
Casualty loss, net of insurance proceedsCasualty loss, net of insurance proceeds(400)533 (400)533 
Depreciation and amortizationDepreciation and amortization592 669 1,818 2,098 Depreciation and amortization87 599 173 1,226 
Total operating expensesTotal operating expenses7,504 3,682 21,965 10,999 Total operating expenses1,213 9,440 2,692 14,461 
Loss from operationsLoss from operations(7,160)(3,111)(20,715)(9,000)Loss from operations(1,091)(9,033)(2,294)(13,555)
Interest and other expense, netInterest and other expense, net— 11 
Other incomeOther income(48)— (75)— 
Interest and other expense (income), net(5)(2,449)(2,659)
Interest and other (income) expense, netInterest and other (income) expense, net(42)— (64)
Loss before income taxesLoss before income taxes(7,155)(662)(20,716)(6,341)Loss before income taxes(1,049)(9,033)(2,230)(13,561)
Income tax expense (benefit)(3)— — 
Income tax expenseIncome tax expense— — 38 11 
Net lossNet loss(7,152)(662)(20,724)(6,341)Net loss(1,049)(9,033)(2,268)(13,572)
Preferred stock dividendsPreferred stock dividends— — — Preferred stock dividends149 — 149 — 
Undeclared dividends— — — 366 
Induced conversion of Series A-2 Preferred Stock— — — 300 
Induced conversion of warrantsInduced conversion of warrants751 — 751 — 
Warrant ModificationWarrant Modification— — 25 — 
Net loss attributable to common stockholdersNet loss attributable to common stockholders$(7,152)$(662)$(20,724)$(7,008)Net loss attributable to common stockholders$(1,949)$(9,033)$(3,193)$(13,572)
Net loss attributable to common stockholders per share:Net loss attributable to common stockholders per share:Net loss attributable to common stockholders per share:
Basic and diluted net loss per shareBasic and diluted net loss per share$(0.23)$(0.02)$(0.67)$(0.28)Basic and diluted net loss per share$(0.78)$(4.37)$(1.40)$(6.57)
Weighted-average number of shares of common stock:Weighted-average number of shares of common stock:Weighted-average number of shares of common stock:
Basic and dilutedBasic and diluted30,816 30,739 30,816 25,121 Basic and diluted2,487 2,065 2,277 2,065 

See accompanying notes to condensed consolidated financial statements.
-2-


OBLONG, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
Three and NineSix Months Ended SeptemberJune 30, 20222023
(In thousands, except shares)
(Unaudited)


Common StockTreasury Stock
SharesAmountSharesAmountAdditional Paid-In CapitalAccumulated DeficitTotal
Balance at December 31, 202130,929,331 $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, 202230,929,331 113,283 (181)227,549 (206,445)20,926 
Net loss— — — — — (9,033)(9,033)
Stock-based compensation— — — — 31 — 31 
Balance at June 30, 202230,929,331 113,283 (181)227,580 (215,478)11,924 
Net loss— — — — — (7,152)(7,152)
Stock-based compensation— — — — 31 — 31 
Balance at September 30, 202230,929,331 $113,283 $(181)$227,611 $(222,630)$4,803 





Series F Preferred StockCommon StockTreasury Stock
SharesAmountSharesAmountSharesAmountAdditional Paid-In CapitalAccumulated DeficitTotal
Balance at December 31, 2022— $— 2,070,861 $— 7,553 $(181)$227,645 $(223,847)$3,617 
Net loss— — — — — — — (1,219)(1,219)
Stock-based compensation— — — — — — 31 — 31 
Proceeds from private placement, net of fees and amounts held in escrow6,550 — — — — — 1,473 — 1,473 
Balance at March 31, 20236,550 — 2,070,861 — 7,553 (181)229,149 (225,066)3,902 
Net loss— — — — — — — (1,049)(1,049)
Stock-based compensation— — 179,535 — — — 411 — 411 
Warrant exercise, net of fees— — 339,498 — — — 534 — 534 
Release of escrow from March 2023 private placement— — — — — — 4,000 — 4,000 
Fees associated with Series F Preferred Stock issuance— — — — — — (38)— (38)
Conversions of Series F Preferred Stock(175)— 146,587 — — — — 
Series F Preferred Stock dividends— — — — — — (149)— (149)
Balance at June 30, 20236,375 $— 2,736,481 $— 7,553 $(181)$233,911 $(226,115)$7,615 










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










OBLONG, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
Three and NineSix Months Ended SeptemberJune 30, 20212022
(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 $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)— — 
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— — — — — — 26,729,331 113,283 (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— — — — — — 30,729,331 113,283 (181)227,017 (198,534)28,305 
Net loss— — — — — — — — — — — (662)(662)
Stock-based compensation— — — — — — — — — — 502 — 502 
Issuance of stock on vested restricted stock units— — — — — — 200 — — — — — — 
Balance at September 30, 2021— $— — $— — $— 30,929,331 $113,283 $(181)$227,519 $(199,196)$28,145 
Common StockTreasury Stock
SharesAmountSharesAmountAdditional Paid-In CapitalAccumulated DeficitTotal
Balance at December 31, 20212,070,861 $— 7,553 $(181)$227,584 $(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, 20222,070,861 — 7,553 (181)227,552 (206,445)20,926 
Net loss— — — — — (9,033)(9,033)
Stock-based compensation— — — — 31 — 31 
Balance at June 30, 20222,070,861 $— 7,553 $(181)$227,583 $(215,478)$11,924 
See accompanying notes to condensed consolidated financial statements.
-4-


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




Nine Months Ended September 30,


Six Months Ended June 30,
2022202120232022
Cash flows from operating activities:Cash flows from operating activities:Cash flows from operating activities:
Net lossNet loss$(20,724)$(6,341)Net loss$(2,268)$(13,572)
Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to reconcile net loss to net cash used in operating activities:Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortizationDepreciation and amortization1,818 2,098 Depreciation and amortization173 1,226 
Bad debt expense114 280 
Bad debt (recovery) expenseBad debt (recovery) expense(32)125 
Non-cash lease expense from right-of-use assetNon-cash lease expense from right-of-use asset77 235 
Stock-based compensationStock-based compensation114 535 Stock-based compensation442 83 
Stock-based expense for services— 390 
Forfeiture of unvested stock optionsForfeiture of unvested stock options(84)— Forfeiture of unvested stock options— (84)
Gain on extinguishment of liabilities— (2,675)
Casualty loss on inventory533 — 
Casualty loss, net of insurance proceedsCasualty loss, net of insurance proceeds(400)533 
Impairment charges - property and equipmentImpairment charges - property and equipment37 98 Impairment charges - property and equipment— 
Impairment charges - intangible assets5,132 207 
Impairment charges - right of use assetImpairment charges - right of use asset179 — Impairment charges - right of use asset— 179 
Impairment charges - goodwillImpairment charges - goodwill7,367 — Impairment charges - goodwill— 7,367 
Changes in operating assets and liabilities:Changes in operating assets and liabilities:Changes in operating assets and liabilities:
Accounts receivableAccounts receivable378 1,610 Accounts receivable203 233 
InventoryInventory261 (936)Inventory321 210 
Prepaid expenses and other current assetsPrepaid expenses and other current assets213 (751)Prepaid expenses and other current assets213 (69)
Right of use asset290 372 
Other assetsOther assets56 15 Other assets18 87 
Accounts payableAccounts payable142 225 Accounts payable(48)66 
Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities129 11 Accrued expenses and other current liabilities(456)17 
Deferred revenueDeferred revenue(441)(355)Deferred revenue(259)(265)
Lease liabilitiesLease liabilities(390)(739)Lease liabilities(168)(282)
Net cash used in operating activitiesNet cash used in operating activities(4,876)(5,956)Net cash used in operating activities(2,182)(3,911)
Cash flows from investing activities:Cash flows from investing activities:Cash flows from investing activities:
Purchases of property and equipmentPurchases of property and equipment(11)(30)Purchases of property and equipment— (11)
Proceeds from sale of equipmentProceeds from sale of equipment30 — Proceeds from sale of equipment— 29 
Net cash provided by (used in) investing activities19 (30)
Net cash provided by investing activitiesNet cash provided by investing activities— 18 
Cash flows from financing activities:Cash flows from financing activities:Cash flows from financing activities:
Proceeds from stock issuance, net of issuance costs— 11,504 
Proceeds from private placement, net of issuance costsProceeds from private placement, net of issuance costs5,435 — 
Net proceeds from exercise of common stock warrantsNet proceeds from exercise of common stock warrants534 — 
Net cash provided by financing activitiesNet cash provided by financing activities— 11,504 Net cash provided by financing activities5,969 — 
(Decrease) increase in cash and restricted cash(4,857)5,518 
Cash and restricted cash at beginning of period9,000 5,277 
Cash and restricted cash at end of period$4,143 $10,795 
Increase (decrease) in cashIncrease (decrease) in cash3,787 (3,893)
Cash at beginning of periodCash at beginning of period3,085 9,000 
Cash at end of periodCash at end of period$6,872 $5,107 
Supplemental disclosures of cash flow information:Supplemental disclosures of cash flow information:Supplemental disclosures of cash flow information:
Reconciliation of cash and restricted cash
Cash$4,143 $10,734 
Restricted cash— 61 
Total cash and restricted cash$4,143 $10,795 
Cash paid during the period for interestCash paid during the period for interest$$Cash paid during the period for interest$$
Cash paid for income taxesCash paid for income taxes$31 $— 
Non-cash investing and financing activities:Non-cash investing and financing activities:Non-cash investing and financing activities:
Accrued preferred stock dividends$— $
Inducement to convert Series A-2 Preferred Stock to common$— $300 
Preferred stock dividendsPreferred stock dividends$149 $— 
Warrant modificationWarrant modification$25 $— 
Common stock issued for conversion of Preferred StockCommon stock issued for conversion of Preferred Stock$— $Common stock issued for conversion of Preferred Stock$$— 
Lease liability and right of use asset$11 $— 
Induced exercise of common stock warrantsInduced exercise of common stock warrants$751 $— 
See accompanying notes to condensed consolidated financial statements.
-5-



OBLONG, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SeptemberJune 30, 20222023
(Unaudited)

Note 1 - Business Description and Significant Accounting Policies

Business Description

Oblong, Inc. (“Oblong” or “we” or “us” or the “Company”) was formed as a Delaware corporation in May 2000 and is a provider of patented multi-stream collaboration technologies and managed services for video collaboration and network applications. Prior to March 6, 2020, Oblong, Inc. was named Glowpoint, Inc. (“Glowpoint”). On March 6, 2020, Glowpoint changed its name to Oblong, Inc.

Basis of Presentation

The Company's fiscal year ends on December 31 of each calendar year. The accompanying interim condensed consolidated financial statementsCondensed Consolidated Financial Statements are unaudited and have been prepared on substantially the same basis as our annual consolidated financial statementsConsolidated Financial Statements for the fiscal year ended December 31, 2021.2022. In the opinion of the Company's management, these interim condensed consolidated financial statementsCondensed 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 statementsCondensed 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, 20212022 year-end condensed consolidated balance sheetCondensed Consolidated Balance Sheet data in this document was derived from audited consolidated financial statements. The condensed consolidated financial statementsCondensed Consolidated Financial Statements and notes included in this quarterly report on Form 10-Q do not include all disclosures required by U.S. generally accepted accounting principles and should be read in conjunction with the Company's audited consolidated financial statements as of and for the year ended December 31, 20212022 and notes thereto included in the Company's fiscal 20212022 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 29, 202221, 2023 (the “2021 10-K”“2022 Annual Report”).

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

On January 3, 2023, the Company effected a 1-for-15 reverse stock split of its Common Stock. All Common Stock share information (including treasury share information) in our Condensed Consolidated Financial Statements and has been adjusted for this stock split retrospectively for all periods represented herein.

Principles of Consolidation

The condensed consolidated financial statementsCondensed 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, and (ii) Oblong Industries, and (iii) Oblong Europe Limited, a subsidiary of Oblong Industries.Inc. All inter-company balances and transactions have been eliminated in consolidation. The U.S. Dollar is the functional currency for all subsidiaries.

Segments

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

Use of Estimates

Preparation of the consolidated financial statementsCondensed 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.

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We continually evaluate estimates used in the preparation of our consolidated financial statements for reasonableness. Appropriate

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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,test, 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 statementsCondensed Consolidated Financial Statements are disclosed in our 2021 10-K,2022 Annual Report, and there have been no changes to the Company’s significant accounting policies during the ninesix months ended SeptemberJune 30, 2022.2023.

Recently Issued Accounting Pronouncements

In June 2016 the Financial Accounting Standards Board (“FASB”)FASB issued ASU 2016-13, as amended, “Financial“Financial Instruments - Credit Losses (Topic 326),” which was subsequently amended in February 2020 by ASU 2020-02, “Financial Instruments - Credit Losses (Topic 326) and Leases (Topic 842).” Topic 326 introducesThe amendments introduce an impairment model that is based on expected credit losses, rather than incurred losses, to estimate credit losses on certain types of financial instruments (e.g., accounts receivable, loans and held-to-maturity securities), including certain off-balance sheet financial instruments (e.g., loan commitments). The expected credit losses should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. Financial instruments with similar risk characteristics may be grouped together when estimating expected credit losses. Topic 326 isThe update was effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company has evaluated the impactadopted the new guidance, will have on its consolidated financial statements and does not expect the impact to be material.

In May 2021, the FASB issued ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchangesas of Freestanding Equity-Classified Written Call Options. The FASB is issuing this update to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity classified written call options (for example, warrants) that remain equity classified after modification or exchange. ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring after the effective date of the amendments. The Company has adopted this standard, effective January 1, 2022,2023, and it did not have a material effectimpact on our financial statements.the Condensed Consolidated Financial Statements.

Casualty Loss

In June 2022, the Company discovered that $533,000 of inventory was stolen from the Company’s warehouse in City of Industry, California. This theft has beenCalifornia, and we recorded as a casualty loss of $533,000 duringin operating expenses. During the ninethree months ended SeptemberJune 30, 2022 on the Company’s condensed consolidated Statements2023, we recorded a recovery payment form one 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 willof $400,000 as an offset theto this casualty loss with the recognitionand in other current assets as 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.June 30, 2023. We received this recovery payment on July 21, 2023.

Note 2 - Liquidity and Going Concern Uncertainty

As of SeptemberJune 30, 2022,2023, we had $4,143,000$6,872,000 in cash and working capital of $4,029,000.$7,153,000. For the ninesix months ended SeptemberJune 30, 2022,2023, we incurred a net loss of $20,724,000$2,268,000 and used $4,876,000$2,182,000 of net cash in operating activities.

Future Capital RequirementsWe believe that our existing cash will be sufficient to fund our operations and Going Concern

Ourmeet our working capital requirements infor at least the future will continue to depend on numerous factors, includingnext 12 months from the timing and amountfiling date of revenue for the Company, customer renewal rates and the timing of collection of outstanding accounts receivable, in each case particularly as it relates to the Company’s major customers, the expense to deliver services, expense for sales and marketing, expense for research and development, and capital expenditures. We expect to continue to invest in product development and sales and marketing expensesthis Report with the goal of growing the Company’s revenue in the future. The Company believes that, based on its current projection of revenue, expenses, capital expenditures, and cash flows, it will not have sufficient resources to fund its operations for the next twelve months following the filing of this Report. We believe additional capital will be required to fund operations and provide growth capital including investments in technology, product development and sales and marketing. To access capital to fund operations or provide growth capital, we will need to raise capital in one or more debt and/or equity offerings. There can be no assurance that we will be successful in raising necessary capital or that any such offering will be on terms acceptable to the Company. If we are unable to raise additional capital that may be needed on terms acceptable to us, it

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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.SEC.

Note 3 - Intangible Assets and Goodwill

As of September 30, 2022 and December 31, 2021, goodwill was zero and $7,367,000, respectively, the goodwill was recorded in connection with the October 1, 2019 acquisition of Oblong Industries (our Collaboration Products reporting unit).
We tested goodwill for impairment on an annual basis on September 30 of each year, or more frequently if events occurred or circumstances changed indicating that the fair value of the goodwill may be below its carrying amount. To determine the fair value of the reporting unit for the goodwill impairment test, we used a weighted average of the discounted cash flow method and market-based method.

We considered the sustained decline in our stock price to be a triggering event for an interim goodwill impairment test, as of both March 31, 2022 and June 30, 2022, and we recorded impairment charges against the carrying value of Goodwill of $7,367,000 during the first half of 2022 as the carrying amount of the Collaboration Products reporting unit exceeded its fair value on the test dates. These charges are recognized as “Impairment Charges” on our condensed consolidated Statements of Operations. Following these impairment charges, our goodwill value was reduced to zero as of June 30, 2022.

Note 4 - Intangible Assets

The following table presents the components of net intangible assets for our Collaboration Products reporting segment (in thousands):
As of September 30, 2022As of December 31, 2021As of June 30, 2023As of December 31, 2022
Gross Carrying AmountAccumulated AmortizationImpairment ChargesNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Developed technologyDeveloped technology$10,060 $(6,049)$(3,525)$486 $10,060 $(4,537)$5,523 Developed technology$486 $(182)$304 $486 $(61)$425 
Trade namesTrade names2,410 (723)(1,483)204 2,410 (542)1,868 Trade names204 (76)128 204 (25)179 
Distributor relationships310 (186)(124)— 310 (139)171 
Total Total$12,780 $(6,958)$(5,132)$690 $12,780 $(5,218)$7,562  Total$690 $(258)$432 $690 $(86)$604 

At each reporting period, we determine if there was a triggering event that may result in an impairment of our intangible assets. During the three and nine months ended SeptemberJune 30, 2022,2023, management determined there was no triggering event. During the three months ended March 31, 2023, we considered the declines in revenue for the Collaboration Products reporting segment and the decline in the Company’s market capitalization to be a triggering eventsevent for an impairment test of intangible assets for this reporting unit. Based on the corresponding recoverability tests of the asset group for this reporting unit, it was determined that the carrying value exceeded the gross cash flows of the asset group. The recoverability test consisted of comparing the estimated undiscounted cash flows expected to be generated by those assets to the respective carrying amounts, and involves significant judgements and assumptions, related primarily to the future revenue and profitability of the assets.segment. Based on the fair value of the asset group, which

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was determined using a market approach, we recordedno impairment charges of $5,132,000were recorded for the three and nineor six months ended SeptemberJune 30, 2022. Additionally, we re-evaluated the remaining useful lives of our amortizing intangible assets and, based on our current plan, we adjusted its remaining useful life to 2 years. Intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the assets.2023.

Related amortization expense was $580,000, $1,740,000, $597,000, and $1,791,000 for the three and nine months ended SeptemberJune 30, 2023 and 2022 was $87,000 and 2021,$580,000, respectively. Related amortization expense for the six months ended June 30, 2023 and 2022 was $173,000 and $1,160,000, respectively.

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

Remainder of 2022$86 
2023345 
Remainder of 2023Remainder of 2023$174 
20242024259 2024258 
TotalTotal$690 Total$432 

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During 2022, goodwill was written down to zero with impairment charges of $6,229,000 and $7,367,000 during the three and six months ended June 30, 2022, respectively.

Note 54 - Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):
September 30,December 31,June 30,December 31,
2022202120232022
Accrued compensation costs$780 $551 
Accrued professional fees— 69 
Accrued taxes and regulatory fees80 92 
Compensation costsCompensation costs$201 $707 
Customer depositsCustomer deposits120 145 Customer deposits167 128 
Professional feesProfessional fees— 57 
Taxes and regulatory feesTaxes and regulatory fees41 59 
Other accrued expenses and liabilitiesOther accrued expenses and liabilities108 102 Other accrued expenses and liabilities15 14 
Rent expenseRent expense194 109 
Accrued preferred stock dividendsAccrued preferred stock dividends145 — 
Accrued expenses and other liabilitiesAccrued expenses and other liabilities$1,088 $959 Accrued expenses and other liabilities$763 $1,074 

Note 65 - Leases

We lease three facilities in Los Angeles, California and one facility in Austin, Texas, each providing office space. We also lease a facility in City of Industry, California, providing warehouse space, and a short-term residential propertyspace. This lease expires in Los Angeles, California. These leases expire throughFebruary 2024. We currently occupy the warehouse space in City of Industry, and the office facility in Austin, Texas, and we have a sublease in place for one of the Los Angeles, California office spaces. With the exception of these spaces described above, we currently operate out of remote employment sites with a remote office located at 25587 Conifer Road, Suite 105-231, Conifer, Colorado 80433.

Lease expenses including common charges and net of sublet proceeds, for the three and nine months ended SeptemberJune 30, 2023 and 2022, were $36,000 and 2021$76,000, respectively. Lease expenses, including common charges and net of sublet proceeds, for the six months ended June 30, 2023 and 2022, were $92,000, $307,000, $175,000,$82,000 and $602,000,$215,000, respectively. Sublease proceeds for the three months ended June 30, 2023 and 2022, were $11,000 and $44,000, respectively. Sublease proceeds for the six months ended June 30, 2023 and 2022, were $27,000 and $110,000, respectively.

The following provides balance sheet information related to leases as of SeptemberJune 30, 20222023 and December 31, 20212022 (in thousands):
September 30, 2022December 31, 2021
Assets
Operating lease, right-of-use asset, net$201 $659 
Liabilities
Current portion of operating lease liabilities$306 $492 
Operating lease liabilities, net of current portion43 236 
Total operating lease liabilities$349 $728 

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June 30, 2023December 31, 2022
Assets
Operating lease, right-of-use asset, net$65 $142 
Liabilities
Current portion of operating lease liabilities$68 $219 
Operating lease liabilities, net of current portion— 17 
Total operating lease liabilities$68 $236 

During the three and nine months ended SeptemberJune 30, 20222023 and 2021,2022, payments of $110,000, $408,000, $189,000,$73,000 and $640,000$125,000 were made on leases, respectively. During the six months ended June 30, 2023 and 2022, payments of $173,000 and $298,000 were made on leases, respectively. The following table summarizes the future undiscounted cash payments reconciled to the lease liability (in thousands):
Remaining Lease Payments
2022$110 
2023225 
202417 
Total lease payments352 
Effect of discounting(3)
Total lease liability$349 

Remaining Lease Payments
2023$52 
202417 
Total lease payments69 
Effect of discounting(1)
Total lease liability$68 

During the three and nine months ended September 30, 2022, we entered into a six-month residential lease in Los Angeles, CA. During the nine months ended September 30, 2022, we exited our Boston, Massachusetts and our Dallas, Texas leases upon expiration, and we vacated two of the properties in Los Angeles, California. The properties we vacated in Los Angeles, California are under leases until May 2023 and management does not expect to be able to sublet the properties given the limited

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time remaining on the leases. Therefore, due to not utilizing the asset, management believes that the right-of-use assets attached to these leases have lost their value. An impairment charge of $179,000 was recorded for these assets in June 2022. During the year ended December 31, 2021, we entered into one new operating lease, modified one operating lease, and terminated two operating leases. The following table provides a reconciliation of activity for our right-of-use (“ROU”) assets and lease liabilities (in thousands):

Right-of-Use AssetOperating Lease Liabilities
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 
Additions11 11 
Amortization and Payments(290)(390)
Impairment Charges(179)— 
Balance at September 30, 2022$201 $349 
Right-of-Use AssetOperating Lease Liabilities
Balance at December 31, 2021$659 $728 
Additions11 11 
Non-cash lease expense and payments(349)(503)
Impairment charges(179)— 
Balance at December 31, 2022142 236 
Additions— — 
Terminations and modifications$— $— 
Non-cash lease expense and payments(77)(168)
Impairment charges— — 
Balance at June 30, 2023$65 $68 

The ROU assets and lease liabilities are recorded on the Company’s condensed consolidatedCondensed Consolidated Balance Sheets as of SeptemberJune 30, 20222023 and December 31, 2021.2022.

Note 76 - Capital Stock

Common Stock

The Company’s common stock, par value $0.0001 per share (the “Common Stock”), is listed on Thethe Nasdaq Capital Market (“Nasdaq”), under the ticker symbol “OBLG”. As of SeptemberJune 30, 2022,2023, we had 150,000,000 shares of our Common Stock authorized, with 30,929,3312,736,481 and 30,816,0482,728,928 shares issued and outstanding, respectively.
On April 18, 2023, the Company issued 339,498 shares of Common Stock in relation to certain warrant exercises discussed below, and 177,564 shares of Common Stock related to vested restricted stock units discussed in Note 8 - Stock Based Compensation.

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On May 28, 2023, in relation to the departure of certain directors, 42 restricted stock awards and 1,929 restricted stock units became fully vested and 1,971 shares of the Company’s common stock were issued. See Note 8 - Stock Based Compensation for further detail.
During the three and six months ended June 30, 2023, 175 shares of Series F Preferred Stock, plus accrued dividends of $3,665, were converted to 146,587 shares of the Company’s common stock. See Note 7 - Preferred Stock, for further detail.
On June 30, 2023, the Company entered into an exchange agreement (the “Exchange Agreement”) with entities affiliated with Foundry Group (the “Exchanging Stockholders”), pursuant to which the Company exchanged an aggregate of 406,776 shares of the Company’s common stock owned by the Exchanging Stockholders for pre-funded warrants (the “Exchange Warrants”) to purchase an aggregate of 406,776 shares of Common Stock (subject to adjustment in the event of stock splits, recapitalizations and other similar events affecting Common Stock), with an exercise price of $0.0001 per share. The Exchange Warrants will be exercisable at any time, except that the Exchange Warrants will not be exercisable by the Exchanging Stockholders if, upon giving effect or immediately prior thereto, the Exchanging Stockholders would beneficially own more than 4.99% of the total number of issued and outstanding Common Stock, which percentage may change at the holders’ election to any other number less than or equal to 19.99% upon 61 days’ notice to the Company. The holders of the Exchange Warrants will not have the right to vote on any matter except to the extent required by Delaware law. The shares were exchanged in July 2023, and therefore this Exchange Agreement transaction was not recorded in the three months ended June 30 ,2023, but will be recorded during the three months ended September 30 ,2023, and the returned shares will be added back to the authorized and unissued share balance of the Company.
The Company did not issue any shares of Common Stock during the three and ninesix months ended SeptemberJune 30, 2022.
Common Stock activity for the three months ended June 30, 2023 and the year ended December 31, 2022 is presented below.
Issued Shares as of December 31, 20212,070,861
Issued Shares as of December 31, 20222,070,861
Issuances from Preferred Stock conversions146,587 
Issuances related to warrant exercises339,498 
Issuances related to stock compensation179,535 
Issued Shares as of June 30, 20232,736,481 
Less Treasury Shares:7,553 
Outstanding Shares as of June 30, 20232,728,928 
Common Stock Warrants
On January 3, 2023, the Company and all the holders of the Series A Warrants agreed to amend the terms of the Series A Warrants, issued on June 28, 2021, to extend the termination date from January 4, 2023 to January 4, 2024. All other terms of the Series A Warrants remain in full force and effect. The modification resulted in an incremental value adjustment, and deemed dividend, of $25,000, which was recorded within additional paid-in capital during the three months ended March 31, 2023.
On March 30, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors (the “Investors”), pursuant to which we issued and sold, in a private placement (the “Private Placement”) (i) 6,550 shares of our newly designated Series F Preferred Stock, $0.0001 par value per share (the “Series F Preferred Stock”), (ii) preferred warrants (the “Preferred Warrants”) to acquire 32,750 shares of Series F Preferred Stock, and (iii) common warrants (“Common Warrants” and with the Preferred Warrants the “Investor Warrants”) to acquire up to 3,830,413 shares of Common Stock. Please refer to Note 7 - Preferred Stock for further discussion on the Series F Preferred Stock and Preferred Warrants.
In connection with the Private Placement, pursuant to an engagement letter dated March 30, 2023, between the Company and Dawson James Securities, Inc. (the “Placement Agent”), the Company agreed to (i) pay the Placement Agent a cash fee equal to 8% of the aggregate gross proceeds raised in the Private Placement, and (ii) grant to the Placement Agent warrants (the “Placement Agent Warrants”) to purchase 306,433 shares of Common Stock.

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On March 31, 2023, the Company issued the Common Warrants and the Placement Agent Warrants to purchase an aggregate of 4,136,846 shares of the Company’s Common Stock. The Common Warrants and Placement Agent Warrants have a term of 5 years, commencing six months and one day from the date of issuance, and are initially exercisable for $1.71 per share. The exercise price is subject to customary adjustments for stock splits, stock dividends, stock combination, recapitalization, or other similar transactions involving the Common Stock, and subject to price-based adjustment, on a full ratchet basis, in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable exercise price for the Common Warrants (subject to certain exceptions). The Common Warrants and Placement Agent Warrants are exercisable for cash, provided that if there is no effective registration statement available permitting the resale of the common shares, they may be exercised on a cashless basis. Exercise of the Common Warrants and Placement Agent Warrants is subject to certain limitations, including a 4.99% beneficial ownership limitation. The fair value of the warrants was recorded within additional paid-in capital during the three months ended March 31, 2023.

On April 18, 2023, the Company entered into warrant exercise inducement offer letters with certain holders of outstanding warrants to purchase shares of the Company’s common stock originally issued on October 21, 2020, December 6, 2020, and June 28, 2021, (such holders the “Exercising Holders” and such warrants the “Existing Warrants”) pursuant to which the Exercising Holders agreed to exercise, for cash, Existing Warrants to purchase, in the aggregate, 339,498 shares of the Company’s common stock (the “Existing Warrant Shares”), in exchange for the Company’s agreement to lower the exercise price of the Existing Warrants to $1.71. The Company received net proceeds of $534,000 from the exercise of the Existing Warrants in April 2023 (net of $46,000 of financing costs). The inducement resulted in an incremental value adjustment, and deemed dividend, of $751,000, which was recorded within additional paid-in capital during the three months ended June 30, 2023. Following this transaction, 667, 1,934, and 1,000 warrants remained outstanding of the warrants issued on October 21, 2020, December 6, 2020, and June 28, 2021, respectively.

On April 23, 2023, the 667 unexercised warrants issued on October 21, 2020 expired.

On June 7, 2023, the 1,934 unexercised warrants issued on December 6, 2020 expired.

Warrants outstanding as of SeptemberJune 30, 20222023 are as follows:
Issue DateWarrants IssuedExercise PriceExpiration Date
October 21, 2020521,500 $4.08 April 22, 2023
December 6, 2020625,000 5.49 June 7, 2023
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

Issue DateWarrants OutstandingExercise PriceExpiration Date
June 28, 2021250 $60.00 January 4, 2024
June 28, 2021750 66.00 December 31, 2024
March 31, 20234,136,846 $1.71 September 30, 2028
4,137,846 


Warrant activity for the six months ended June 30, 2023 and the year ended December 31, 20212022 is presented below. There was no warrant activity for the three or nine months ended September 30, 2022.

Outstanding
Number of Warrants (in thousands)Weighted Average Exercise Price
Warrants outstanding and exercisable, December 31, 20201,146,500 $4.85 
Granted4,000,000 4.30 
OutstandingExercisable
Number of WarrantsWeighted Average Exercise PriceNumber of WarrantsWeighted Average Exercise Price
Warrants outstanding and exercisable, December 31, 2021Warrants outstanding and exercisable, December 31, 20215,146,500 4.42 Warrants outstanding and exercisable, December 31, 2021343,099 $66.34 343,101 $66.34 
Warrants outstanding and exercisable, September 30, 20225,146,500 $4.42 
Warrants outstanding and exercisable, December 31, 2022Warrants outstanding and exercisable, December 31, 2022343,099 66.34 343,101 $66.34 
GrantedGranted4,136,846 1.71 — $— 
ExercisedExercised(339,498)1.71 (339,500)$1.71 
ExpiredExpired(2,601)76.93 (2,601)$76.93 
Warrants outstanding and exercisable, June 30, 2023Warrants outstanding and exercisable, June 30, 20234,137,846 $1.73 1,000 $64.50 





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Treasury Shares

The Company maintains treasury stock for the Common Stock shares bought back by the Company when withholding shares to cover taxes on transactions related to equity awards. There were no treasury stock transactions during the ninesix months ended SeptemberJune 30, 20222023 or the year ended December 31, 2021.2022.

Note 7 - Preferred Stock

Our Certificate of Incorporation authorizes the issuance of up to 5,000,000 shares of preferred stock. As of June 30, 2023, we had 1,983,250 designated shares of preferred stock and 6,375 shares of preferred stock issued and outstanding. As of December 31, 2022, we had no shares of preferred stock issued or outstanding.

Series F Preferred Stock

On March 30, 2023, the Company entered into the Purchase Agreement with Investors, pursuant to which we issued and sold, in a Private Placement (i) 6,550 shares of our newly designated Series F Preferred Stock, (ii) Preferred Warrants to acquire 32,750 shares of Series F Preferred Stock, and (iii) Common Warrants to acquire up to 3,830,413 shares of Common Stock. Please refer to Note 6 - Capital Stock for further discussion on the Common Warrants. The terms of the Series F Preferred Stock are as set forward in the Certificate of Designations of Series F Preferred Stock of Oblong, Inc. (the “Certificate of Designations”), which was filed and became effective with the Secretary of State of the State of Delaware on March 31, 2023. The Private Placement closed on March 31, 2023, in exchange for gross and net proceeds of $6,386,000 and $5,435,000, respectively.

All of the Preferred Shares and Investor Warrants were issued at the Closing, but part of the purchase price equivalent to $4,000,000 was placed into an escrow account with American Stock Transfer & Trust Company (the “Escrow”), to be released upon our obtaining stockholder approval permitting the issuance of more than 19.99% of our outstanding shares of Common Stock at less than the Minimum Price (as defined under the Nasdaq Rules) in accordance with Nasdaq listing standards and as otherwise may be required (the “Stockholder Approval”). The Company received the Stockholder Approval via a Special Meeting of Stockholders held on May 18, 2023, and the funds were released from escrow. During the three and six months ended June 30, 2023, the Company recorded $3,962,000 and $5,435,000 in net proceeds, respectively. The financing fees associated with the Purchase Agreement, for the three and six months ended June 30, 2023, were $38,000 and $951,000, respectively.

The Series F Preferred Shares are convertible into fully paid and non-assessable shares of the Company’s Common Stock at the election of the holder at any time at an initial conversion price of $1.71 (the “Conversion Price”). The holders of the Series F Preferred Shares may also elect to convert their shares at an alternative conversion price equal to the lower of (i) 80% of the applicable Conversion Price as in effect on the date of the conversion, (ii) 80% of the closing price on the trading day immediately preceding the delivery of the conversion notice, and (iii) the greater of (a) the Floor Price (as defined in the Certificate of Designations) and (b) the quotient of (x) the sum of the five lowest Closing Bid Prices (as defined in the Certificate of Designations) for trading days in the 30 consecutive trading day period ending and including the trading day immediately preceding the delivery of the applicable Conversion Notice, divided by (y) five. The Conversion Price is subject to customary adjustments for stock splits, stock dividends, stock combination recapitalization, or other similar transactions involving the Common Stock, and subject to price-based adjustment, on a full ratchet basis, in the event of any issuances of our common stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable Conversion Price (subject to certain exceptions).

Under the Certificate of Designations, the Series F Preferred Shares have an initial stated value of $1,000 per share (the “Stated Value”). The holders of the Series F Preferred Shares are entitled to dividends of 9% per annum, which will be payable in arrears quarterly. Accrued dividends may be paid, at our option, in cash and if not paid, shall increase the stated value of the Series F Preferred Shares. Upon the occurrence and during the continuance of a Triggering Event (as defined in the Certificate of Designations), the Series F Preferred Shares will accrue dividends at the rate of 20% per annum (the “Default Rate”). The Series F Preferred Shares have no voting rights, other than with respect to certain matters affecting the rights of the Series F Preferred Shares. On matters with respect to which the holders of the Series F Preferred Shares have a right to vote, holders of the Preferred Shares will have voting rights on an as-converted basis.

Our ability to settle conversions is subject to certain limitations set forth in the Certificate of Designations. Further, the Certificate of Designations contains a certain beneficial ownership limitation after giving effect to the issuance of shares of common stock issuable upon conversion of the Series F Preferred Shares.


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The Certificate of Designations includes certain Triggering Events (as defined in the Certificate of Designations), including, among other things, (i) the failure to file and maintain an effective registration statement covering the sale of the holder’s securities registrable pursuant to the Registration Rights Agreement, (ii) the failure to pay any amounts due to the holders of the Series F Preferred Shares when due, and (iii) if Peter Holst ceases to be the chief executive officer of the Company other than because of his death, and a qualified replacement, reasonably acceptable to a majority of the holders of the Series F Preferred Shares, is not appointed within thirty (30) business days. In connection with a Triggering Event, the Default Rate is triggered. We are subject to certain affirmative and negative covenants regarding the incurrence of indebtedness, acquisition transactions, the existence of liens, the repayment of indebtedness, the payment of cash in respect of dividends (other than dividends pursuant to the Certificate of Designations), maintenance of properties and the transfer of assets, among other matters.

During the three months ended June 30, 2023, 175 shares of Series F Preferred Stock, and $4,000 in dividends, were converted to 146,587 shares of the Company’s common stock. There were 6,375 shares of Series F Preferred Stock outstanding and accrued dividends of $145,079 as of June 30, 2023.

Series F Preferred Stock Warrants

The Preferred Warrants are exercisable for Series F Preferred Shares at an exercise price of $975. The exercise price is subject to customary adjustments for stock splits, stock dividends, stock combination recapitalizations or other similar transactions involving the Common Stock. The Preferred Warrants expire three years from the date of issuance and are exercisable for cash. For each Preferred Warrant exercised, the Investors shall receive Common Warrants to purchase a number of shares of Common Stock equal to 100% of the number of shares of Common Stock the Investors would receive if the Series F Preferred Shares issuable upon exercise of such Warrant were converted at the applicable Conversion Price. The fair value of the Preferred Warrants was recorded within additional paid-in capital during the six months ended June 30, 2023.

Note 8 - Stock Based Compensation

2019 Equity Incentive Plan

On December 19, 2019, the Oblong, Inc. 2019 Equity Incentive Plan (the “2019 Plan”) was approved by the Company’s stockholders at the Company’s 2019 Annual Meeting of Stockholders. The 2019 Plan is an omnibus equity incentive plan pursuant to which the Company may grant equity and cash incentive awards to certain key service providers of the Company and its subsidiaries. As of September 30,December 31, 2022, the share pool available for new grants under the 2019 Plan is 2,663,500.was 177,567. On April 18, 2023, 177,564 restricted stock units were granted to certain members of the board, reducing the share pool available for new grants under the 2019 Plan to 3.

A summary of stock compensation expense by category, for the three and six months ended June 30, 2023 and 2022, is as follows:

Three Months Ended June 30,Six Months Ended June 30,
Stock Based Compensation2023202220232022
Options$31 $31 $62 $(1)
RSU$380 $— $380 $— 
Total$411 $31 $442 $(1)

A summary of stock compensation by department, for the three and six months ended June 30, 2023 and 2022 is as follows:

Three Months Ended June 30,Six Months Ended June 30,
Stock Based Compensation2023202220232022
Research and Development$— $— $— $(63)
General & Administrative$411 $31 $442 $62 
Total$411 $31 $442 $(1)



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Stock Options

ForDuring the ninesix months ended SeptemberJune 30, 2023, no stock options were granted, 3,336 stock options vested, and 6,668 vested stock options expired. During the six months ended June 30, 2022, no stock options were granted, 50,000 stock options vested, 7,500501 vested stock options expired, and 150,00010,000 unvested stock options were forfeited. In accordance with the 2019 Plan, these cancelled unvested options were added back into the share pool. For the nine months ended September 30, 2021, 300,000 stock options were granted.

A summary of stock options granted, expired, and forfeited under our plans, and options outstanding as of, and changes made during the ninesix months ended SeptemberJune 30, 20222023 and the year ended December 31, 20212022 is presented below:
OutstandingExercisable
Number of OptionsWeighted Average Exercise PriceNumber of OptionsWeighted Average Exercise Price
Options outstanding and exercisable, December 31, 202127,169 $113.63 7,169 $— 
Vested— 3,332 48.75
Expired(501)410.18(501)410.18
Forfeited(10,000)48.75— — 
Options outstanding and exercisable, December 31, 202216,668 143.63 10,000 206.85 
Vested— — 3,336 48.75 
Expired(6,668)285.89 (6,668)285.89 
Options outstanding and exercisable, June 30, 202310,000 $48.75 6,668 $48.75 

OutstandingExercisable
Number of OptionsWeighted Average Exercise PriceNumber of OptionsWeighted Average Exercise Price
Options outstanding and exercisable, December 31, 2020107,500 $19.64 107,500 $19.64 
Granted300,000 3.25 — — 
Options outstanding and exercisable, December 31, 2021407,500 7.57 107,500 19.64 
Vested— — 50,000 3.25 
Expired(7,500)27.40 (7,500)27.40 
Forfeited(150,000)3.25 — — 
Options outstanding and exercisable, September 30, 2022250,000 $9.57 150,000 $12.98 

Additional information as of SeptemberJune 30, 20222023 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 – $100.0010,000 8.00$48.75 6,668 $48.75 

 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 8.63$3.34 52,500 $1.20 
$10.01 – $20.0097,500 0.3119.32 97,500 19.32 
250,000 5.38$9.57 150,000 $12.98 

The intrinsic value of vested options,and unvested options and exercised options werewas not significant for all periods presented. NetStock compensation expense related to stock options for the three months ended June 30, 2023 and 2022 was $31,000. Stock compensation expense related to stock options for the six months ended June 30, 2023 was $62,000, and net stock compensation expense related to stock options for the ninesix months ended SeptemberJune 30, 2022 was $30,000a credit of $1,000, made up of $114,000$83,000 in expense offset by $84,000 related to forfeiture credits. Stock compensation expense, related to stock options,

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was $64,000 for the nine months ended September 30, 2021. The remaining unrecognized stock-based compensation expense for options as of SeptemberJune 30, 20222023 is $216,000,$123,000, which will be recognized over a weighted average period of 1.75 years.1.00 year.

Restricted Stock Awards

AsOn May 28, 2023, in relation to the departure of September 30, 2022 and 2021, there were 627 unvestedcertain directors, 42 restricted stock awards outstanding, with a weighted average grant date pricebecame fully vested and were delivered in shares of $15.80.the Company’s common stock. The awards were issued in 2014 and vestvested over the lesser of ten years, a change in control, or separation from the company. Due to the variability

As of the vesting, the expense was amortized over an average service period of five years, therefore,June 30, 2023, there were no unvested restricted stock awards outstanding and there is no unrecognized stock-based compensation expense for restricted stock awards. There was no stock compensation expense related to restricted stock awards as of Septemberduring the three and six months ended June 30, 2023 and 2022.





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Restricted Stock Units

As of September 30, 2022 and 2021, there were no unvestedOn April 18, 2023, 177,564 restricted stock units (“RSUs”) outstanding. Aswere granted to certain board members. These RSUs vested immediately upon issuance. The closing price per share of September 30, 2022, 28,904the Company’s common stock was $2.14 on the day prior to the grant date, resulting in a total fair value of $380,000 which was included in general and administrative expense, as stock-based compensation expense, upon issuance.
On May 28, 2023, in relation to the departure of certain directors, 1,929 fully vested RSUs remain outstanding aswere delivered in shares of the Company’s common stock, have not yet been delivered for these units in accordance with the terms of the RSUs.

As of June 30, 2023, there were no unvested RSUs outstanding and there was no remaining unrecognized stock-based compensation expense for RSUs. There was no stock compensation expense related to RSUs for the three and ninesix months ended SeptemberJune 30, 20222023 and there was $438,000 in stock compensation expense related to RSUs for the three and nine months ended September 30, 2021. There was no remaining unrecognized stock-based compensation expense for RSUs as of September 30, 2022.

Note 9 - Net Loss Per Share

On January 3, 2023, the Company effected a 1-for-15 reverse stock split for its Common Stock. All Common Stock share information in the following net loss per share discussion and tables are shown as adjusted for this stock split retrospectively for all periods represented herein.

Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. The weighted-average number of shares of common stock outstanding does not include any potentially dilutive securities or unvested restricted stock. Unvested restricted stock, although classified as issued and outstanding at SeptemberJune 30, 20222023 and 2021,2022, is considered contingently returnable until the restrictions lapse and will not be included in the basic net loss per share calculation until the shares are vested. Unvested restricted stock does not contain non-forfeitable rights to dividends and dividend equivalents. Unvested RSUs are not included in calculations of basic net loss per share, as they are not considered issued and outstanding at time of grant.

Diluted net loss per share is computed by giving effect to all potential shares of common stock, including stock options, preferred stock, RSUs, and unvested restricted stock, to the extent they are dilutive. For the three and ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, all such common stock equivalents have been excluded from diluted net loss per share as the effect to net loss per share would be anti-dilutive (due to the net loss).

The following table sets forth the computation of the Company’s basic and diluted net loss per share (in thousands, except per share data):
Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
20222021202220212023202220232022
Numerator:Numerator:Numerator:
Net lossNet loss$(7,152)$(662)$(20,724)$(6,341)Net loss$(1,049)$(9,033)$(2,268)$(13,572)
Less: preferred stock dividends— — — (1)
Less: undeclared dividends— — — (366)
Less: loss on induced conversion of Series A-2 Preferred Stock— — — (300)
Less: deemed dividendLess: deemed dividend(149)— (149)— 
Less: Induced conversion on warrantsLess: Induced conversion on warrants(751)— (751)— 
Less: warrant modificationLess: warrant modification$— $— $(25)$— 
Net loss attributable to common stockholdersNet loss attributable to common stockholders$(7,152)$(662)$(20,724)$(7,008)Net loss attributable to common stockholders$(1,949)$(9,033)$(3,193)$(13,572)
Denominator:Denominator:Denominator:
Weighted-average number of shares of common stock30,816 30,739 30,816 25,121 
Weighted-average number of shares of common stock for basic and diluted net loss per shareWeighted-average number of shares of common stock for basic and diluted net loss per share2,487 2,065 2,277 2,065 
Basic and diluted net loss per shareBasic and diluted net loss per share$(0.23)$(0.02)$(0.67)$(0.28)Basic and diluted net loss per share$(0.78)$(4.37)$(1.40)$(6.57)


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The following table represents the potential shares that were excluded from the computation of weighted-average number of shares of common stock in computing the diluted net loss per share for the periods presented because including them would have had an anti-dilutive effect (due to the net loss):
Three and Nine Months Ended September 30,
20222021
Unvested restricted stock awards627 627 
Outstanding stock options250,000 407,500 
Warrants5,146,500 5,146,500 

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As of June 30,
20232022
Unvested restricted stock awards— 42 
Outstanding stock options10,000 16,835 
Common stock issuable upon conversion of Series F Preferred Stock3,733,098 — 
Common stock issuable upon conversion of Series F Preferred Warrants19,152,047 — 
Common stock issuable upon conversion of Common Stock warrants4,137,846 343,101 

Note 10 - Segment Reporting

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

Certain information concerning the Company’s segments for the three and ninesix months ended SeptemberJune 30, 20222023 and 20212022 is presented in the following tables (in thousands):
Three Months Ended September 30, 2022
Managed ServicesCollaboration ProductsCorporateTotal
Revenue$797 $388 $— $1,185 
Cost of revenues552 289 — 841 
  Gross profit$245 $99 $— $344 
  Gross profit %31 %26 %29 %
Allocated operating expenses$— $6,275 $— $6,275 
Unallocated operating expenses— — 1,229 1,229 
  Total operating expenses$— $6,275 $1,229 $7,504 
Income (loss) from operations$245 $(6,176)$(1,229)$(7,160)
Interest and other expense (income), net(6)— (5)
Net income (loss) before tax246 (6,170)(1,229)(7,155)
Income tax benefit— (3)— (3)
Net income (loss)$246 $(6,167)$(1,229)$(7,152)

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Nine Months Ended September 30, 2022
Managed ServicesCollaboration ProductsCorporateTotal
Revenue$2,573 $1,477 $— $4,050 
Cost of revenues1,722 1,078 — 2,800 
Gross profit$851 $399 $— $1,250 
Gross profit %33 %27 %31 %
Allocated operating expenses$57 $17,804 $— $17,861 
Unallocated operating expenses— — 4,104 4,104 
Total operating expenses$57 $17,804 $4,104 $21,965 
Income (loss) from operations$794 $(17,405)$(4,104)$(20,715)
Interest and other expense (income), net(6)— 
Net income (loss) before tax787 (17,399)(4,104)(20,716)
Income tax expense— — 
Net income (loss)$779 $(17,399)$(4,104)$(20,724)

Three Months Ended September 30, 2021
Managed ServicesCollaboration ProductsCorporateTotal
Revenue$1,006 $793 $— $1,799 
Cost of revenues721 507 — 1,228 
Gross profit$285 $286 $— $571 
Gross profit %28 %36 %32 %
Allocated operating expenses$337 $1,717 $— $2,054 
Unallocated operating expenses— — 1,628 1,628 
Total operating expenses$337 $1,717 $1,628 $3,682 
Loss from operations$(52)$(1,431)$(1,628)$(3,111)
Interest and other expense (income), net(3)(2,448)(2,449)
Income (loss) before income taxes(54)(1,428)820 (662)
Income tax expense— — — — 
Net income (loss)$(54)$(1,428)$820 $(662)
Three Months Ended June 30, 2023
Managed ServicesCollaboration ProductsCorporateTotal
Revenue$640 $316 $— $956 
Cost of revenues430 404 — 834 
  Gross profit (loss)$210 $(88)$— $122 
  Gross profit (loss)%33 %(28)%13 %
Allocated operating expenses (gains)$$(376)$— $(373)
Unallocated operating expenses— — 1,586 1,586 
  Total operating expenses (gains)$$(376)$1,586 $1,213 
Income (loss) from operations$207 $288 $(1,586)$(1,091)
Interest and other income, net(37)(5)— (42)
Net income (loss) before tax244 293 (1,586)(1,049)
Income tax expense— — — — 
Net income (loss)$244 $293 $(1,586)$(1,049)


-14--16-


Nine Months Ended September 30, 2021Three Months Ended June 30, 2022
Managed ServicesCollaboration ProductsCorporateTotalManaged ServicesCollaboration ProductsCorporateTotal
RevenueRevenue$3,279 $2,487 $— $5,766 Revenue$810 $523 $— $1,333 
Cost of revenuesCost of revenues2,293 1,474 — 3,767 Cost of revenues525 401 — 926 
Gross profitGross profit$986 $1,013 $— $1,999 Gross profit$285 $122 $— $407 
Gross profit %Gross profit %30 %41 %35 %Gross profit %35 %23 %31 %
Allocated operating expensesAllocated operating expenses$527 $5,394 $— $5,921 Allocated operating expenses$$8,404 $— $8,405 
Unallocated operating expensesUnallocated operating expenses— — 5,078 5,078 Unallocated operating expenses— — 1,035 1,035 
Total operating expensesTotal operating expenses$527 $5,394 $5,078 $10,999 Total operating expenses$$8,404 $1,035 $9,440 
Income (loss) from operationsIncome (loss) from operations$459 $(4,381)$(5,078)$(9,000)Income (loss) from operations$284 $(8,282)$(1,035)$(9,033)
Interest and other expense (income), net16 (227)(2,448)(2,659)
Net income (loss) before tax443 (4,154)(2,630)(6,341)
Income tax expense— — — — 
Interest and other expense, netInterest and other expense, net— — — — 
Income (loss) before income taxesIncome (loss) before income taxes284 (8,282)(1,035)(9,033)
Income tax expense (benefit)Income tax expense (benefit)(1)— — 
Net income (loss)Net income (loss)$443 $(4,154)$(2,630)$(6,341)Net income (loss)$285 $(8,283)$(1,035)$(9,033)


Six Months Ended June 30, 2023
Managed ServicesCollaboration ProductsCorporateTotal
Revenue$1,330 $664 $— $1,994 
Cost of revenues890 706 — 1,596 
Gross profit (loss)$440 $(42)$— $398 
Gross profit (loss)%33 %(6)%20 %
Allocated operating expenses (gains)$$(90)$— $(87)
Unallocated operating expenses— — 2,779 2,779 
Total operating expenses (gains)$$(90)$2,779 $2,692 
Income (loss) from operations$437 $48 $(2,779)$(2,294)
Interest and other income, net(34)(30)— (64)
Net income (loss) before tax471 78 (2,779)(2,230)
Income tax expense31 — 38 
Net income (loss)$464 $47 $(2,779)$(2,268)


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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 $11,679 $— $11,736 
Unallocated operating expenses— — 2,725 2,725 
Total operating expenses$57 $11,679 $2,725 $14,461 
Income (loss) from operations$549 $(11,379)$(2,725)$(13,555)
Interest and other expense, net— — 
Net income (loss) before tax543 (11,379)(2,725)(13,561)
Income tax expense— 11 
Net income (loss)$535 $(11,382)$(2,725)$(13,572)

Unallocated operating expenses in Corporate include costs for the three and ninesix months ended SeptemberJune 30, 20222023 and 20212022 that are not specific to a particular segment but are general to the group; included are expenses incurred for administrative and accounting staff, general liability and other insurance, professional fees and other similar corporate expenses.

For the three months ended SeptemberJune 30, 2022, approximately2023, 10% of our revenue was attributable to customers in Singapore.Saudi Arabia. For the ninesix months ended SeptemberJune 30, 20222023, and the three and ninesix months ended SeptemberJune 30, 2021,2022, there was no material revenue attributable to any individual foreign country.

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

Three Months Ended September 30,Nine Months Ended September 30,Three Months Ended June 30,Six Months Ended June 30,
20222021202220212023202220232022
DomesticDomestic$575 $1,035 $2,120 $3,277 Domestic$437 $705 $1,000 $1,546 
ForeignForeign610 764 1,930 2,489 Foreign519 628 994 1,319 
$1,185 $1,799 $4,050 $5,766 $956 $1,333 $1,994 $2,865 

Disaggregated information for the Company’s revenue has been recognized in the accompanying condensed consolidatedCondensed Consolidated Statements of Operations and is presented below according to contract type (in thousands):


-15--18-


Three Months Ended September 30,Three Months Ended June 30,
2022% of Revenue2021% of Revenue2023% of Revenue2022% of Revenue
Revenue: Managed ServicesRevenue: Managed ServicesRevenue: Managed Services
Video collaboration servicesVideo collaboration services$69 %$179 10 %Video collaboration services$46 %$79 %
Network servicesNetwork services716 60 %813 45 %Network services583 61 %723 54 %
Professional and other servicesProfessional and other services12 %14 %Professional and other services11 %%
Total Managed Services revenue Total Managed Services revenue$797 67 %$1,006 56 % Total Managed Services revenue$640 67 %$810 61 %
Revenue: Collaboration ProductsRevenue: Collaboration ProductsRevenue: Collaboration Products
Visual collaboration product offeringsVisual collaboration product offerings$385 33 %$771 43 %Visual collaboration product offerings$316 33 %$520 39 %
LicensingLicensing— %22 %Licensing— — %— %
Total Collaboration Products revenue Total Collaboration Products revenue388 33 %793 44 % Total Collaboration Products revenue316 33 %523 39 %
Total revenueTotal revenue$1,185 100 %$1,799 100 %Total revenue$956 100 %$1,333 100 %

Nine Months Ended September 30,Six Months Ended June 30,
2022% of Revenue2021% of Revenue2023% of Revenue2022% of Revenue
Revenue: Managed ServicesRevenue: Managed ServicesRevenue: Managed Services
Video collaboration servicesVideo collaboration services$264 %$700 21 %Video collaboration services$110 %$195 %
Network servicesNetwork services2,260 56 %2,524 77 %Network services1,201 60 %1,544 54 %
Professional and other servicesProfessional and other services49 %55 %Professional and other services19 %37 %
Total Managed Services revenue Total Managed Services revenue$2,573 64 %$3,279 57 %Total Managed Services revenue$1,330 67 %$1,776 62 %
Revenue: Collaboration ProductsRevenue: Collaboration ProductsRevenue: Collaboration Products
Visual collaboration product offeringsVisual collaboration product offerings$1,467 36 %$2,406 42 %Visual collaboration product offerings$664 33 %$1,082 38 %
Professional servicesProfessional services— — %— — %
LicensingLicensing10 — %81 %Licensing— — %— %
Total Collaboration Products revenue Total Collaboration Products revenue1,477 36 %2,487 43 %Total Collaboration Products revenue664 33 %1,089 38 %
Total revenueTotal revenue$4,050 100 %$5,766 100 %Total revenue$1,994 100 %$2,865 100 %

The Company considers a significant customer to be one that comprises more than 10% of the Company’s consolidated revenues or accounts receivable. The loss of or a reduction in sales or anticipated sales to our most significant or several of our smaller customers could have a material adverse effect on our business, financial condition and results of operations.

Concentration of revenues was as follows:
Three Months Ended September 30,
20222021
Segment% of Revenue% of Revenue
Customer AManaged Services53 %37 %

Three Months Ended June 30,
20232022
Segment% of Revenue% of Revenue
Customer AManaged Services56 %48 %
Customer BCollaboration Products— %11 %

Nine Months Ended September 30,
20222021
Segment% of Revenue% of Revenue
Customer AManaged Services48 %35 %




Six Months Ended June 30,
20232022
Segment% of Revenue% of Revenue
Customer AManaged Services54 %46 %


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Concentration of accounts receivable was as follows:

As of September 30, 2022As of June 30, 2023
2022202120232022
Segment% of Accounts Receivable% of Accounts ReceivableSegment% of Accounts Receivable% of Accounts Receivable
Customer ACustomer AManaged Services52 %17 %Customer AManaged Services58 %42 %
Customer BCustomer BCollaboration Products12 %— %Customer BManaged Services11 %%
Customer CCustomer CCollaboration Products— %12 %Customer CCollaboration Products14 %— %
Customer DCustomer DCollaboration Products— %11 %Customer DCollaboration Products— %10 %


Note 11 - Commitments and Contingencies

From time to time, we are subject to various legal proceedings arising in the ordinary course of business, including proceedings for which we have insurance coverage. As of the date hereof, we are not party to any legal proceedings that we currently believe will have a material adverse effect on our business, financial position, results of operations or liquidity.

COVID-19

On March 11, 2020, the World Health Organization (“WHO”) 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 infectionIn May 2023, the WHO declared COVID-19 over as a global health emergency. Customers generally use our Mezzanine™ products in the United Statestraditional office and abroad,operating center environments such 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 andconference rooms or other presentation spaces. Revenue declines for our Collaboration Products business operations, temporary and permanent closures of businesses, hybrid operations of businesses and for workers, and quarantine and shelter-in-place orders. Some businesses have imposed vaccine mandates and many are experiencing labor shortages. These factors have also impacted the global supply chain, leading to significant delays and shortages. These measures, while intended to protect human life, have had serious adverse impacts on domestic and foreign economies. The severity and duration of such impacts are uncertain as new variants of the COVID-19 virus emerge and a resulting surge in diagnosed cases may be seen. The sweeping nature of the coronavirus pandemic makes it difficult to predict how the Company’s business and operations will be affected in the longer run. The COVID-19 pandemic has materially affected our revenue and results of operations for 2020, 2021, and the nine months ended September 30, 2022. The decreases in our revenue are primarily attributable to the effectsaftermath of the globalCOVID-19 pandemic on our channel partnersexisting and target customers as they continue to evaluate behavioral changes in how and when employees choose to work from traditional office environments. The Company’s results reflect the challenges due to long and unpredictable sales cycles, delaysenvironments, resulting in customer retrofit budgets, project starts, and supply delayed orders inbuying decisions for our distribution channels as a direct result of customer implementation schedules shifting due to the COVID-19 pandemic. The COVID-19 pandemic in particular has, and may continue to have, a significant economic and business impact on our Company. During 2020, 2021, and the nine months ended September 30, 2022, we have seen a continuing weakness in revenue as our customers across all sectors delayed decision making on diverse elements of communication and collaboration technologies, in reaction to the ongoing impactsCollaboration Products. Continuation of the COVID-19 pandemic, specifically related to how, when, and where employees work. We continue to monitor the impact of the COVID-19 pandemic on our customers, suppliers and logistics providers, and to evaluate governmental actions being taken to curtail and respond to the spread of the virus. The significance and duration of the ongoing impact on us is still uncertain. Material adverse effects of the COVID-19 pandemic, on market drivers, our customers, suppliers or logistics providers could significantly impact our operating results. We will continue to actively follow, assess and analyze the ongoing impact of the COVID-19 pandemic and adjust our organizational structure, strategies, plans and processes to respond. Because the situation continues to evolve, we cannot reasonably estimate the ultimate impact to our business, results of operations, cash flows and financial position that the COVID-19 pandemic may have. Continuation of the COVID-19 pandemic and government actions in response thereto could cause further disruptions to our operations and the operations of our customers, suppliers and logistics partners and could significantly adversely affect our near-term and long-term revenues, earnings, liquidity and cash flows.


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

Overview

We are a provider of patented multi-stream collaboration products and managed services for video collaboration and network solutions.

Mezzanine™ Product Offerings

Our flagship product is called Mezzanine™, a family of turn-key products that enable dynamic and immersive visual collaboration across multi-users, multi-screens, multi-devices, and multi-locations (see further description of .Mezzanine™ in Part I, Item 1). Mezzanine™ allows multiple people to share, control and arrange content simultaneously, from any location, enabling all participants to see the same content in its entirety at the same time in identical formats, resulting in dramatic enhancements to both in-room and virtual videoconference presentations. Applications include video telepresence, laptop and application sharing, whiteboard sharing and slides. Spatial input allows content to be spread across screens, spanning different walls, scalable to an arbitrary number of displays and interaction with our proprietary wand device. Mezzanine™ substantially enhances day-to-day virtual meetings with technology that accelerates decision making, improves communication, and increases productivity. Mezzanine™ scales up to support the most immersive and commanding innovation centers; across to link labs, conference spaces, and situation rooms; and down for the smallest work groups. Mezzanine’s digital collaboration platform can be sold as delivered systems in various configurations for small teams to total immersion experiences. The family includes the 200 Series (two display screen), 300 Series (three screen), and 600 Series (six screen). We also sell maintenance and support contracts related to Mezzanine™.

Historically, customers have used Mezzanine™ products in traditional office and operating center environments such as conference rooms or other presentation spaces. As discussed below, sales of our Mezzanine product have been adversely affected by commercial response to the COVID-19 pandemic. Like many technology companies in recent months, we will continue to monitor and manage our costs relative to demand with the goal of growing the Company’s revenue in the future. To the extent we believe new investments in product development, marketing, or sales are warranted as a result of changes in market demand, we believe additional capital will be required to fund those efforts and our ongoing operations.

Managed Services for Video Collaboration

We provide a range of managed services for video collaboration, from automated to orchestrated, to simplify the user experience in an effort to drive adoption of video collaboration throughout our customers’ enterprise. We deliver our services through a hybrid service platform or as a service layer on top of our customers’ video infrastructure. We provide our customers with i) managed videoconferencing, where we set up and manage customer videoconferences and ii) remote service management, where we provide 24/7 support and management of customer video environments.

Managed Services for Network

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

Oblong’s Results of Operations

Three Months Ended SeptemberJune 30, 20222023 (the 2022 Third2023 Second Quarter”) compared to the Three Months Ended SeptemberJune 30, 20212022 (the “2021 Third“2022 Second Quarter”)

Segment Reporting

The Company currently operates in two segments: (1) “Collaboration Products,” which represents the Oblong Industries business surrounding our Mezzanine™ product offerings, and (2) “Managed Services,” which represents the Oblong (formerly Glowpoint) business surrounding managed services for video collaboration and network solutions. Certain information concerning the Company’s segments for the three months ended SeptemberJune 30, 2023 and 2022 and is presented in the following tablebelow (in thousands):


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Three Months Ended September 30, 2022Three Months Ended June 30, 2023
Managed ServicesCollaboration ProductsCorporateTotalManaged ServicesCollaboration ProductsCorporateTotal
RevenueRevenue$797 $388 $— $1,185 Revenue$640 $316 $— $956 
Cost of revenuesCost of revenues552 289 — 841 Cost of revenues430 404 — 834 
Gross profit$245 $99 $— $344 
Gross profit %31 %26 %29 %
Gross profit (loss) Gross profit (loss)$210 $(88)$— $122 
Gross profit (loss)% Gross profit (loss)%33 %(28)%13 %
Allocated operating expenses$— $6,275 $— $6,275 
Allocated operating expenses (gains)Allocated operating expenses (gains)$$(376)$— $(373)
Unallocated operating expensesUnallocated operating expenses— — 1,229 1,229 Unallocated operating expenses— — 1,586 1,586 
Total operating expenses$— $6,275 $1,229 $7,504 
Total operating expenses (gains) Total operating expenses (gains)$$(376)$1,586 $1,213 
Income (loss) from operationsIncome (loss) from operations$245 $(6,176)$(1,229)$(7,160)Income (loss) from operations$207 $288 $(1,586)$(1,091)
Interest and other expense (income), net(6)— (5)
Interest and other income, netInterest and other income, net(37)(5)— (42)
Net income (loss) before taxNet income (loss) before tax246 (6,170)(1,229)(7,155)Net income (loss) before tax244 293 (1,586)(1,049)
Income tax benefit— (3)— (3)
Income tax expenseIncome tax expense— — — — 
Net income (loss)Net income (loss)$246 $(6,167)$(1,229)$(7,152)Net income (loss)$244 $293 $(1,586)$(1,049)

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$$8,404 $— $8,405 
Unallocated operating expenses— — 1,035 1,035 
Total operating expenses$$8,404 $1,035 $9,440 
Income (loss) from operations$284 $(8,282)$(1,035)$(9,033)
Interest and other expense, net— — — — 
Income (loss) before income taxes284 (8,282)(1,035)(9,033)
Income tax expense (benefit)(1)— — 
Net income (loss)$285 $(8,283)$(1,035)$(9,033)


Unallocated operating expenses in Corporate include costs during the 2023 and 2022 Third QuarterSecond Quarters that are not specific to a particular segment but are general to the group; included are expenses incurred for administrative and accounting staff, general liability and other insurance, professional fees and other similar corporate expenses.

Revenue. Total revenue decreased 34%28% in the 2022 Third2023 Second Quarter compared to the 2021 Third2022 Second Quarter. The following table summarizes the changes in components of our revenue (in thousands), and the significant changes in revenue are discussed in more detail below.
Three Months Ended September 30,
2022% of Revenue2021% of Revenue
Revenue: Managed Services
Video collaboration services$69 %$179 10 %
Network services716 60 %813 45 %
Professional and other services12 %14%
      Total Managed Services revenue$797 67 %$1,006 56 %
Revenue: Collaboration Products
Visual collaboration product offerings$385 33 %$771 43 %
Licensing— %22 %
      Total Collaboration Products revenue388 33 %793 44 %
Total revenue$1,185 100 %$1,799 100 %

Managed Services

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

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


-19--22-


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

Collaboration Products
The decrease in revenue for our product offerings is primarily attributable to the effects of the COVID-19 pandemic on our existing and target customers as they continue to evaluate behavioral changes in how and when employees choose to work from traditional office environments. The Company’s results reflect the challenges of long and unpredictable sales cycles, delays in customer retrofit budgets for commercial real estate spaces, project delays, and prospective orders in our distribution channels as a direct result of partner and customer implementation schedules shifting due to the COVID-19 pandemic. The COVID-19 pandemic in particular has, and may continue to have, a significant economic and business impact on our Company. During 2020, 2021 and the nine months ended September 30, 2022, we saw continued weakness in revenue as our partners and customers across all sectors delayed potential orders in reaction to the ongoing impacts of the pandemic that caused our customers to suspend or postpone technology changes/upgrades due to budget and occupancy uncertainties. We continue to monitor the impact of the pandemic on our customers, suppliers and logistics providers, and evaluate governmental actions being taken to curtail and respond to the spread of the virus. The significance and duration of the ongoing impact on us is still uncertain. Material adverse effects of the COVID-19 pandemic on market drivers, our partners and customers, suppliers or logistics providers may be expected to continue to significantly impact our operating results. We will continue to actively follow, assess and analyze the ongoing impact of the pandemic and adjust our organizational structure, strategies, plans and processes to respond. Because the situation continues to evolve, we cannot reasonably estimate the ultimate impact to our business, results of operations, cash flows and financial position that the pandemic may have. Continuation of thepandemic and government actions in response thereto could cause further disruptions to our operations and the operations of our customers, suppliers and logistics partners and may be expected to continue to significantly adversely affect our near-term and long-term revenues, earnings, liquidity and cash flows.

Cost of Revenue (exclusive of depreciation and amortization and casualty loss). Cost of revenue, exclusive of depreciation and amortization and casualty loss, includes all internal and external costs related to the delivery of revenue. Cost of revenue also includes taxes which have been billed to customers. Cost of revenue by segment is presented in the following table (in thousands):
Three Months Ended September 30,
20222021
Cost of Revenue
Managed Services$552 $721 
Collaboration Products289 507 
Total cost of revenue$841 $1,228 

The decrease in cost of revenue is mainly attributable to lower costs associated with the decrease in revenue during the same period. The Company’s gross profit as a percentage of revenue was 29% in the 2022 Third Quarter compared to 32% in the 2021 Third Quarter.













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

Three Months Ended September 30,
20222021$ Change% Change
Operating expenses:
Research and development$232 $693 $(461)(67)%
Sales and marketing282 438 (156)(36)%
General and administrative1,229 1,628 (399)(25)%
Impairment charges5,169 254 4,915 1935 %
Depreciation and amortization592 669 (77)(12)%
Total operating expenses$7,504 $3,682 $3,822 104 %

Research and Development. Research and development expenses include internal and external costs related to developing new product offerings as well as features and enhancements to our existing product offerings. The decrease in research and development expenses for the 2022 Third Quarter compared to the 2021 Third Quarter is primarily attributable to lower personnel costs due to reduced headcount between these periods.

Sales and Marketing Expenses. The decrease in sales and marketing expenses for 2022 Third Quarter compared to the 2021 Third Quarter is mainly attributable to lower personnel costs due to reduced headcount between these periods.

General and Administrative Expenses. General and administrative expenses include direct corporate expenses and costs of personnel in the various corporate support categories, including executive, finance and accounting, legal, human resources and information technology. The decrease in general and administrative expenses for the 2022 Third Quarter compared to the 2021 Third Quarter is mainly attributable to a decrease in stock-based compensation expense.

Impairment Charges. The impairment charges of $5,169,000 in the 2022 Third Quarter were attributable to impairment of long-lived assets. In addition to the impairment charges of $5,132,000 related to intangible assets (see Note 4 - Intangible Assets) we also recorded impairment charges of $37,000 related to property and equipment in our Collaboration Products segment. The impairment in the 2021 Third Quarter was attributable to impairment charges on property and equipment and intangible assets no longer in service. Future declines of our revenue, cash flows and/or market capitalization may give rise to a triggering event that may require the Company to record impairment charges in the future related to our intangible assets and other long-lived assets.

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

Loss from Operations. The decrease in the Company’s loss from operations for the 2022 Third Quarter compared to the 2021 Third Quarter is mainly attributable to lower operating expenses as addressed above.


Nine Months Ended September 30, 2022 compared to the Nine Months Ended September 30, 2021

Segment Reporting

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


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Nine Months Ended September 30, 2022
Managed ServicesCollaboration ProductsCorporateTotal
Revenue$2,573 $1,477 $— $4,050 
Cost of revenues1,722 1,078 — 2,800 
Gross profit$851 $399 $— $1,250 
Gross profit %33 %27 %31 %
Allocated operating expenses$57 $17,804 $— $17,861 
Unallocated operating expenses— — 4,104 4,104 
Total operating expenses$57 $17,804 $4,104 $21,965 
Income (loss) from operations$794 $(17,405)$(4,104)$(20,715)
Interest and other expense (income), net(6)— 
Net income (loss) before tax787 (17,399)(4,104)(20,716)
Income tax expense— — 
Net income (loss)$779 $(17,399)$(4,104)$(20,724)

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

Revenue. Total revenue decreased 30% in the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. The following table summarizes the changes in components of our revenue (in thousands), and the significant changes in revenue are discussed in more detail below.
Nine Months Ended September 30,Three Months Ended June 30,
2022% of Revenue2021% of Revenue2023% of Revenue2022% of Revenue
Revenue: Managed ServicesRevenue: Managed ServicesRevenue: Managed Services
Video collaboration servicesVideo collaboration services$264 %$700 21 %Video collaboration services$46 %$79 %
Network servicesNetwork services2,260 56 %2,524 77 %Network services583 61 %723 54 %
Professional and other servicesProfessional and other services49 %55%Professional and other services11 %8%
Total Managed Services revenueTotal Managed Services revenue$2,573 64 %$3,279 57 % Total Managed Services revenue$640 67 %$810 61 %
Revenue: Collaboration ProductsRevenue: Collaboration ProductsRevenue: Collaboration Products
Visual collaboration product offeringsVisual collaboration product offerings$1,467 36 %$2,406 42 %Visual collaboration product offerings$316 33 %$520 39 %
LicensingLicensing10 — %81 %Licensing— — %— %
Total Collaboration Products revenueTotal Collaboration Products revenue1,477 36 %2,487 43 % Total Collaboration Products revenue316 33 %523 39 %
Total revenueTotal revenue$4,050 100 %$5,766 100 %Total revenue$956 100 %$1,333 100 %

Managed Services

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

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

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

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Collaboration Products
Customers generally use our Mezzanine™ products in traditional office and operating center environments such as conference rooms or other presentation spaces. The year over year decrease in revenue for our product offeringsCollaboration Products business is primarily attributable to the effectsaftermath of the COVID-19 pandemic on our existing and target customers as they continue to evaluate behavioral changes in how and when employees choose to work from traditional office environments, resulting in delayed buying decisions for our Collaboration Products. , as discussed above in - Oblong’s ResultsContinuation of Operations - Three Months Ended September 30, 2022 (the “2022 Third Quarter”) comparedthe ongoing effects of the COVID-19 pandemic, could cause further disruptions to our operations and the Three Months Ended September 30, 2021 (the “2021 Third Quarter”).operations of our customers, suppliers and logistics partners and could significantly adversely affect our near-term and long-term revenues, earnings, liquidity and cash flows.

Cost of Revenue (exclusive of depreciation and amortization and casualty loss)amortization). 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):
Nine Months Ended September 30,Three Months Ended June 30,
2022202120232022
Cost of RevenueCost of RevenueCost of Revenue
Managed ServicesManaged Services$1,722 $2,293 Managed Services$430 $525 
Collaboration ProductsCollaboration Products1,078 1,474 Collaboration Products404 401 
Total cost of revenueTotal cost of revenue$2,800 $3,767 Total cost of revenue$834 $926 

The decrease in our consolidated cost of revenue is mainly attributable to lower costs associated with the decrease in revenue during the same period. The Company’sOur consolidated gross profit as a percentage of revenue was 13% in the 2023 Second Quarter compared to 31% in the 2022 Second Quarter. The gross profit as a percentage of revenue for our Collaboration Products segment was (28)% in the nine months ended September 30,2023 Second Quarter compared to 23% in the 2022 Second Quarter. This decrease was mainly

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attributable to i) an increase in our inventory obsolescence reserve of $227,000 in the 2023 Second Quarter as compared to the 2022 Second Quarter, and 35% for the nine months ended September 30, 2021.ii) an increase in personnel costs as a percentage of revenue between these periods.

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

Nine months ended September 30,Three Months Ended June 30,
20222021$ Change% Change20232022$ Change% Change
Operating expenses:
Operating expenses (gains):Operating expenses (gains):
Research and developmentResearch and development$1,634 $1,984 $(350)(18)%Research and development$$398 $(393)(99)%
Sales and marketingSales and marketing1,161 1,537 (376)(24)%Sales and marketing(58)317 (375)(118)%
General and administrativeGeneral and administrative4,104 5,078 (974)(19)%General and administrative1,577 1,185 392 33 %
Impairment chargesImpairment charges12,715 302 12,413 4110 %Impairment charges6,408 (6,406)(100)%
Casualty loss533 — 533 100 %
Casualty loss, net of insurance proceedsCasualty loss, net of insurance proceeds(400)533 (933)(175)%
Depreciation and amortizationDepreciation and amortization1,818 2,098 (280)(13)%Depreciation and amortization87 599 (512)(85)%
Total operating expensesTotal operating expenses$21,965 $10,999 $10,966 100 %Total operating expenses$1,213 $9,440 $(8,227)(87)%

Research and Development. Research and development expenses include internal and external costs related to developing new product offerings as well as features and enhancements to our existing product offerings. The decrease in research and development expenses for the nine months ended September 30, 20222023 Second Quarter compared to the nine months ended September 30, 20212022 Second Quarter is primarily attributable to the ceasing of the majority of R&D activities during late 2022, which resulted in lower personnel costs due to reduced headcount, partially offset by a $372,000 increase in consulting, and outsourced labor costs between these periods.

Sales and Marketing Expenses. The decrease in sales and marketing expenses for the nine months ended September 30, 20222023 Second Quarter compared to the nine months2022 Second Quarter is primarily attributable to i) lower personnel costs due to reduced headcount and less sales as discussed above, including the reversal of approximately $294,000 in accrued compensation, ii) reduced marketing costs between these periods, and iii) reduced overhead between these periods due to the termination of an office lease that was not renewed.

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 increase in general and administrative expenses for the 2023 Second Quarter compared to the 2022 Second Quarter is primarily attributable to an increase in stock compensation expense of $380,000 related to an issuance of restricted stock units during the 2023 Second Quarter.

Impairment Charges. The Impairment charges for the 2023 Second Quarter were attributable to property and equipment related to our Managed Services segment. The impairment charges in the 2022 Second Quarter were attributable to i) goodwill and ii) the impairment of a right-of-use asset connected to a leased office space no longer being utilized. Future declines of our revenue, cash flows and/or market capitalization may give rise to a triggering event that may require the Company to record impairment charges in the future related to our intangible assets and other long-lived assets.

Casualty Loss. In June 2022, the Company discovered that $533,000 of inventory was stolen from the Company’s warehouse in City of Industry, California, and we recorded a casualty loss in operating expenses. During the 2023 Second Quarter, we recorded a recovery payment from one of our insurance policies of $400,000 as an offset to this casualty loss. We received this recovery payment on July 21, 2023.

Depreciation and Amortization. The decrease in depreciation and amortization expenses for the 2023 Second Quarter compared to the 2022 Second Quarter is mainly attributable to the disposition and impairment of certain assets during the year ended September 30, 20212022, as well as a decrease in depreciation as certain assets became fully depreciated.

Loss from Operations. The decrease in the Company’s loss from operations for the 2023 Second Quarter compared to the 2022 Second Quarter is mainly attributable to lower operating expenses as addressed above.


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Interest and Other Income, Net. Interest and other income, net for the 2023 Second Quarter was primarily comprised of interest income related to our cash accounts, partially offset by interest expense. There was no interest or other income, net for the 2022 Second Quarter.

Six Months Ended June 30, 2023 compared to the Six Months Ended June 30, 2022

Certain information concerning the Company’s segments for the six months ended June 30, 2023 and 2022 and is presented below (in thousands):

Six Months Ended June 30, 2023
Managed ServicesCollaboration ProductsCorporateTotal
Revenue$1,330 $664 $— $1,994 
Cost of revenues890 706 — 1,596 
Gross profit (loss)$440 $(42)$— $398 
Gross profit (loss)%33 %(6)%20 %
Allocated operating expenses (gains)$$(90)$— $(87)
Unallocated operating expenses— — 2,779 2,779 
Total operating expenses (gains)$$(90)$2,779 $2,692 
Income (loss) from operations$437 $48 $(2,779)$(2,294)
Interest and other income, net(34)(30)— (64)
Net income (loss) before tax471 78 (2,779)(2,230)
Income tax expense31 — 38 
Net income (loss)$464 $47 $(2,779)$(2,268)

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 $11,679 $— $11,736 
Unallocated operating expenses— — 2,725 2,725 
Total operating expenses$57 $11,679 $2,725 $14,461 
Income (loss) from operations$549 $(11,379)$(2,725)$(13,555)
Interest and other expense, net— — 
Net income (loss) before tax543 (11,379)(2,725)(13,561)
Income tax expense— 11 
Net income (loss)$535 $(11,382)$(2,725)$(13,572)

Unallocated operating expenses in Corporate include costs during the six months ended June 30, 2023 and 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.

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Revenue. Total revenue decreased 30% in the six months ended June 30, 2023 compared to the six months ended June 30, 2022. 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,
2023% of Revenue2022% of Revenue
Revenue: Managed Services
Video collaboration services$110 %$195 %
Network services1,201 60 %1,544 54 %
Professional and other services19 %37%
Total Managed Services revenue$1,330 67 %$1,776 62 %
Revenue: Collaboration Products
Visual collaboration product offerings$664 33 %$1,082 38 %
Licensing— — %— %
Total Collaboration Products revenue664 33 %1,089 38 %
Total revenue$1,994 100 %$2,865 100 %

Managed Services

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

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

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

Collaboration Products
Customers generally use our Mezzanine™ products in traditional office and operating center environments such as conference rooms or other presentation spaces. The year over year decrease in revenue for our Collaboration Products business is primarily attributable to the aftermath of the COVID-19 pandemic on our existing and target customers as they continue to evaluate behavioral changes in how and when employees choose to work from traditional office environments, resulting in delayed buying decisions for our Collaboration Products. Continuation of the ongoing effects of the COVID-19 pandemic, could cause further disruptions to our operations and the operations of our customers, suppliers and logistics partners and could significantly adversely affect our near-term and long-term revenues, earnings, liquidity and cash flows.

Cost of Revenue (exclusive of depreciation and amortization). 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):


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Six Months Ended June 30,
20232022
Cost of Revenue
Managed Services$890 $1,170 
Collaboration Products706 789 
Total cost of revenue$1,596 $1,959 

The decrease in our consolidated cost of revenue is mainly attributable to lower costs associated with the decrease in revenue during the same period. Our consolidated gross profit as a percentage of revenue was 20% for the six months ended June 30, 2023 compared to 32% for the six months ended June 30, 2022. The gross profit as a percentage of revenue for our Collaboration Products segment was (6)% for the six months ended June 30, 2023 compared to 28% for the six months ended June 30, 2022. This decrease was mainly attributable to i) an increase in our inventory obsolescence reserve of $290,000 in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, ii) a one-time assessment for common area charges on warehouse space of $12,000, and iii) an increase in personnel costs as a percentage of revenue between these periods.

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

Six Months Ended June 30,
20232022$ Change% Change
Operating expenses (gains):
Research and development$11 $1,402 $(1,391)(99)%
Sales and marketing160 879 (719)(82)%
General and administrative2,746 2,875 (129)(4)%
Impairment charges7,546 (7,544)(100)%
Casualty loss, net of insurance proceeds(400)533 (933)(175)%
Depreciation and amortization173 1,226 (1,053)(86)%
Total operating expenses$2,692 $14,461 $(11,769)(81)%

Research and Development. Research and development expenses include internal and external costs related to developing new product offerings as well as features and enhancements to our existing product offerings. The decrease in research and development expenses for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 is primarily attributable to the ceasing of R&D activities during late 2022, which resulted in lower personnel costs due to fewer real estate leases.reduced headcount, consulting, and outsourced labor costs between these periods.

Sales and Marketing Expenses. The decrease in sales and marketing expenses for six months ended June 30, 2023 compared to the six months ended June 30, 2022 is primarily attributable to i) lower personnel costs due to reduced headcount and less sales as discussed above, including the reversal of approximately $294,000 in accrued compensation, ii) reduced marketing costs between these periods, and iii) reduced overhead between these periods due to the termination of an office lease that was not renewed.

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 ninesix months ended SeptemberJune 30, 20222023 compared to the ninesix months ended SeptemberJune 30, 20212022 is mainly attributable to decreases of $768,000 in stock-based expense

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and $167,000 in bad debt expense, and lower consulting and professional fees, partially offset by an increase in personnel expenses, primarily attributable to receiving an Employee Retention Credit (“ERC”) during the nine months ended September 30, 2021a decrease in office related expenses and not during the nine months ended September 30, 2022.bad debt expense.

Impairment Charges. The impairmentImpairment charges infor the ninesix months ended SeptemberJune 30, 2022 are2023 were attributable to impairment charges of $7,367,000 related to goodwill, $5,132,000 related to intangible assets, $37,000 related to property and equipment and $179,000 related to right-of-use assets associated with two of our Los Angeles, CA leases.Managed Services segment. The impairment charges infor the ninesix months ended SeptemberJune 30, 2021 were attributable2022 to i) goodwill and ii) the impairment charges on property and equipment and intangible assetsof a right-of-use asset connected to a leased office space no longer in service.being utilized. Future declines of our revenue, cash flows and/or market capitalization may give rise to a triggering event that may require the Company to record impairment charges in the future related to our intangible assets and other long-lived assets.

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Casualty Loss. During the second quarter ofIn June 2022, the Company discovered that $533,000 of inventory was stolen from the Company’s warehouse. This theft has beenwarehouse in City of Industry, California, and we recorded as a casualty loss of $533,000 duringin operating expenses. During the ninesix months ended SeptemberJune 30, 2022 on the Company’s condensed consolidated Statements2023, we recorded a recovery payment from one 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 willof $400,000 as an offset theto this 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. We received this recovery payment July 21, 2023.

Depreciation and Amortization. The decrease in depreciation and amortization expenses for the ninesix months ended SeptemberJune 30, 20222023 compared to the ninesix months ended SeptemberJune 30, 20212022 is mainly attributable to the disposition and impairment of certain assets during the second half of 2021 and the first nine months ofyear ended 2022, as well as a decrease in depreciation as certain assets became fully depreciated.

Loss from Operations. The increasedecrease in the Company’s loss from operations for the ninesix months ended SeptemberJune 30, 20222023 compared to the ninesix months ended SeptemberJune 30, 20212022 is mainly attributable to higherlower operating expenses and lower revenue and gross profit as addressed above.

Off-Balance Sheet Arrangements

As of SeptemberJune 30, 2022,2023, we had no off-balance sheet arrangements.

Inflation

Management does not believe inflation had a significant effect on the condensed consolidated financial statementsCondensed Consolidated Financial Statements for the periods presented.

Critical Accounting Policies

There have been no changes to our critical accounting policies during the ninesix months ended SeptemberJune 30, 2022.2023. Critical accounting policies and the significant estimates made in accordance with such policies are regularly discussed with our Audit Committee. Those policies are discussed under “Critical Accounting Policies” in “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as in our condensed consolidated financial statementsCondensed Consolidated Financial Statements and the footnotes thereto, each included in our 2022 Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 29, 2022 (the “2021 Annual Report”).Report.

Liquidity and Capital Resources

As of SeptemberJune 30, 2022,2023, we had $4,143,000$6,872,000 in cash and working capital of $4,029,000.$7,153,000. For the ninesix months ended SeptemberJune 30, 2022,2023, we incurred a net loss of $20,724,000$2,268,000 and used $4,876,000$2,182,000 of net cash in operating activities.

OurNet cash provided by financing activities for the six months ended June 30, 2023 was $5,969,000, attributable to net proceeds from an equity financing and net cash proceeds received from the exercise of warrants.The Company expects to use the net proceeds from the Private Placement and the proceeds, if any, from the exercise of outstanding warrants for general corporate purposes and potential strategic alternatives. We have not, nor has anyone on our behalf, initiated any substantive discussions directly or indirectly with any strategic alternatives partner. We believe that our existing cash and cash equivalents will be sufficient to fund our operations and meet our working capital requirements infor at least the future will continue to depend on numerous factors, includingnext 12 months from the timing and amountfiling date of revenue for the Company, customer renewal rates and the timing of collection of outstanding accounts receivable, in each case particularly as it relates to the Company’s major customers, the expense to deliver services, expense for sales and marketing, expense for research and development, and capital expenditures. We expect to continue to invest in product development and sales and marketing expensesthis Report with the goal of growing the Company’s revenue in the future. The Company believes that, based on its current projection of revenue, expenses, capital expenditures, and cash flows, it will not have sufficient resources to fundSEC.

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its operations for the next twelve months following the filing of this Report. We believe additional capital will be required, in the long-term, to fund operations and provide growth capital including investments in technology, product development and sales and marketing. To access capital to fund operations or provide growth capital, we will need to raise capital in one or more debt and/or equity offerings. There can be no assurance that we will be successful in raising necessary capital or that any such offering will be on terms acceptable to the Company. If we are unable to raise additional capital that may be needed on terms acceptable to us, it could have a material adverse effect on the Company. The factors discussed above raise substantial doubt as to our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from these uncertainties.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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






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ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of SeptemberJune 30, 2022.2023. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of SeptemberJune 30, 2022,2023, 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, 20222023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are subject to various legal proceedings arising in the ordinary course of business, including proceedings for which we have insurance coverage. As of the date hereof, we are not party to any legal proceedings that we currently believe will have a material adverse effect on our business, financial position, results of operations or liquidity.

ITEM 1A. RISK FACTORS

A description of the risks associated with our business, financial conditions and results of operations is set forth in “Part I. Item 1A. Risk Factors” of our 20212022 Annual Report, and in “Partas well as under “Part II. Item 1A. Risk Factors”in our Q1 2023 Quarterly Report on Form 10-Q, of our Q2 2022for the three months ended March 31, 2023, filed with the SEC on May 10, 2023 (the “Q1 2023 Quarterly Report. Report”).There have been no material changes to these risks during the ninethree months ended SeptemberJune 30, 2022.2023. The risks described in the 20212022 Annual Report and the Q2 2022Q1 2023 Quarterly 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.







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

Unregistered Sales of Equity Securities by the Company

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.




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ITEM 6. EXHIBITS

Exhibit
Number
Description
3.1
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
10.1
10.2
10.3
10.4
10.5
31.1*
31.2*
32.1**
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema
101.CALXBRL Taxonomy Extension Calculation Linkbase

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101.DEFXBRL Taxonomy Extension Definition Linkbase
101.LABXBRL Taxonomy Extension Label Linkbase
101.PREXBRL Taxonomy Extension Presentation Linkbase

* Filed herewith.
** Furnished herewith.




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SIGNATURES

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

OBLONG, INC.
NovemberAugust 10, 20222023By:/s/ Peter Holst
Peter Holst
Chief Executive Officer
(Principal Executive Officer)

NovemberAugust 10, 20222023By:/s/ David Clark
David Clark
Chief Financial Officer
(Principal Financial and Accounting Officer)

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