NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2021
(Unaudited)
Note 1 - Business Description and Significant Accounting Policies
Business Description
Oblong, Inc. (“Oblong” or “we” or “us” or the “Company”) was formed as a Delaware corporation in May 2000 and is a provider of patented multi-stream collaboration technologies and managed services for video collaboration and network applications. Prior to March 6, 2020, Oblong, Inc. was named Glowpoint, Inc. (“Glowpoint”). On March 6, 2020, Glowpoint changed its name to Oblong, Inc.
Basis of Presentation
The Company's fiscal year ends on December 31 of each calendar year. The accompanying interim condensed consolidated financial statements are unaudited and have been prepared on substantially the same basis as our annual consolidated financial statements for the fiscal year ended December 31, 2020. In the opinion of the Company's management, these interim condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of our financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.
The December 31, 2020 year-end condensed consolidated balance sheet data in this document was derived from audited consolidated financial statements. These condensed consolidated financial statements and notes included in this quarterly report on Form 10-Q do not include all disclosures required by U.S. generally accepted accounting principles and should be read in conjunction with the Company's audited consolidated financial statements as of and for the year ended December 31, 2020 and notes thereto included in the Company's fiscal 2020 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 30, 2021 (the “2020 10-K”).
The results of operations and cash flows for the interim periods included in these condensed consolidated financial statements are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Oblong and our 100%-owned subsidiaries, (i) GP Communications, LLC (“GP Communications”), whose business function is to provide interstate telecommunications services for regulatory purposes, (ii) Oblong Industries, and (iii) the following subsidiaries of Oblong Industries: Oblong Industries Europe, S.L. and Oblong Europe Limited. All inter-company balances and transactions have been eliminated in consolidation. The U.S. Dollar is the functional currency for all subsidiaries.
Segments
The Company currently operates in two segments: 1) the Oblong (formerly Glowpoint) business, which includes managed services for video collaboration and network applications, and 2) the Oblong Industries business, which includes products and services for visual collaboration technologies. See Note 11 - Segment Reporting for further discussion.
Use of Estimates
Preparation of the condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from the estimates made. We continually evaluate estimates used in the preparation of our financial statements for reasonableness. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. The significant areas of estimation include
determining the allowance for doubtful accounts, the estimated lives and recoverability of property and equipment, and intangible assets, the inputs used in the valuation of goodwill and intangible assets in connection with our impairment tests, and the inputs used in the fair value of equity based awards as well as the values ascribed to assets acquired and liabilities assumed in the business combination.
Significant Accounting Policies
The significant accounting policies used in preparation of these condensed consolidated financial statements are disclosed in our 2020 10-K, and there have been no changes to the Company’s significant accounting policies during the six months ended June 30, 2021.
Property and Equipment
Property and equipment are stated at cost and are depreciated over the estimated useful lives of the related assets, which range from three to ten years. Leasehold improvements are amortized over the shorter of either the asset’s useful life or the related lease term. Depreciation is computed on the straight-line method for financial reporting purposes. During the three and six months ended June 30, 2021, the Company recorded asset impairment charges on property and equipment of $17,000 and $48,000, respectively, for the discontinued use of, or disposal of, property and equipment. These charges are included in “Impairment Charges” on our condensed consolidated statement of operations.
Recently Issued Accounting Pronouncements
In June 2016 the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13 as amended, “Financial Instruments - Credit Losses (Topic 326).” Topic 326 introduces an impairment model that is based on expected credit losses, rather than incurred losses, to estimate credit losses on certain types of financial instruments (e.g. accounts receivable, loans and held-to-maturity securities), including certain off-balance sheet financial instruments (e.g., loan commitments). The expected credit losses should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. Financial instruments with similar risk characteristics may be grouped together when estimating expected credit losses. Topic 326 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact the new guidance will have on its consolidated financial statements.
In May 2021, the FASB issued ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The FASB is issuing this update to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity classified written call options (for example, warrants) that remain equity classified after modification or exchange. ASU 2021-04 is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or exchanges occurring after the effective date of the amendments. The Company does not expect this update to have a material effect on its consolidated financial statements.
Note 2 - Liquidity and Going Concern Uncertainty
As of June 30, 2021, we had $13,033,000 of unrestricted cash, obligations of $2,417,000 under the Paycheck Protection Program loan (the “PPP Loan”), and working capital of $13,999,000. In July 2021, the PPP Loan was entirely forgiven. For the six months ended June 30, 2021, we incurred a net loss of $5,679,000 and used $3,670,000 of net cash in operating activities. See further discussion of the PPP Loan in Note 6 - Debt.
On June 30, 2021, the Company closed on a concurrent public offering of 4,000,000 shares of the Company’s Common Stock, warrants to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $4.00 per share (the “Series A Warrants”), and private placement of warrants to purchase 3,000,000 shares of common stock at an exercise price of $4.40 per share (the “Series B Warrants”) for gross proceeds of $12,400,000. Issuance costs for this transaction were $896,000, resulting in net proceeds of $11,504,000.
Our capital requirements in the future will continue to depend on numerous factors, including the timing and amount of revenue for the Company, customer renewal rates and the timing of collection of outstanding accounts receivable, in each case particularly as it relates to the Company’s major customers, the expense to deliver services, expense for sales and marketing, expense for research and development, capital expenditures, and the cost involved in protecting intellectual property rights. While our acquisition of Oblong Industries provides additional revenues to the Company, the cost to further develop and commercialize Oblong Industries’ product offerings is expected to exceed its revenues for the foreseeable future. We expect to
continue to invest in product development and sales and marketing expenses with the goal of growing the Company’s revenue in the future. The Company believes that, based on the Company’s current projection of revenue, expenses, capital expenditures, and cash flows, it will not have sufficient resources to fund its operations for the next twelve months following the filing of this Report. We believe additional capital will be required to fund operations and provide growth capital including investments in technology, product development and sales and marketing. To access capital to fund operations or provide growth capital, we will need to raise capital in one or more debt and/or equity offerings. There can be no assurance that we will be successful in raising necessary capital or that any such offering will be on terms acceptable to the Company. If we are unable to raise additional capital that may be needed on terms acceptable to us, it could have a material adverse effect on the Company. 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.
See Note 12 - Commitments and Contingencies to our condensed consolidated financial statements for discussion regarding certain additional factors that could impact the Company’s liquidity in the future.
Note 3 - Goodwill
As of June 30, 2021 and December 31, 2020, goodwill was $7,367,000, comprised of amounts recorded in connection with the October 1, 2019 Acquisition of Oblong Industries.
We test goodwill for impairment on an annual basis on September 30 of each year, or more frequently if events occur or circumstances change indicating that the fair value of the goodwill may be below its carrying amount. The Company operates two reporting segments, Oblong (formerly Glowpoint) and Oblong Industries. In March 2020, we considered the novel Coronavirus (COVID-19) pandemic and resulting declines in certain of the Company’s revenue to be a triggering event for an interim goodwill impairment test for both reporting units. To determine the fair value of each reporting unit, as of March 31, 2020 for the goodwill impairment tests, we used a weighted average of the discounted cash flow method and a market-based method (comparing the Company’s equity and analyzing multiples of revenue for comparable companies). For the Oblong Industries reporting unit, the fair value of the reporting unit exceeded its carrying amount, therefore no impairment charge was recorded. For the Oblong (formerly Glowpoint) reporting unit, we recorded an impairment charge on goodwill of $541,000 for the three months ended March 31, 2020 as the carrying amount of the reporting unit exceeded its fair value on the test date. This charge is recognized as an impairment charge on our condensed consolidated statements of operations. There were no such triggering events during the three and six months ended June 30, 2021, therefore, no impairment charges were recorded.
The activity in goodwill during the six months ended June 30, 2021 and the year ended December 31, 2020 is shown in the following table (in thousands):
|
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|
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|
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|
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|
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|
|
|
|
|
|
|
|
|
Goodwill
|
Oblong (formerly Glowpoint)
|
|
Oblong Industries
|
|
Total
|
|
Balance December 31, 2019
|
$
|
541
|
|
|
$
|
7,367
|
|
|
$
|
7,908
|
|
|
Impairment charges
|
(541)
|
|
|
—
|
|
|
(541)
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2020
|
—
|
|
|
7,367
|
|
|
7,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance June 30, 2021
|
$
|
—
|
|
|
$
|
7,367
|
|
|
$
|
7,367
|
|
In the event we experience future declines in our revenue, cash flows and/or stock price, this may give rise to a triggering event that may require the Company to record additional impairment charges on goodwill in the future.
Note 4 - Intangible Assets
The following table presents the components of net intangible assets (in thousands):
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|
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|
|
|
|
|
|
|
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|
|
|
|
|
|
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As of June 30, 2021
|
|
As of December 31, 2020
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|
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Gross Carrying Amount
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|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Oblong (formerly Glowpoint)
|
|
|
|
|
|
|
|
|
|
|
|
|
Affiliate network
|
$
|
994
|
|
|
$
|
(769)
|
|
|
$
|
225
|
|
|
$
|
994
|
|
|
$
|
(735)
|
|
|
$
|
259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oblong Industries
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|
|
|
|
|
|
|
|
|
|
|
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Developed technology
|
$
|
10,060
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|
|
$
|
(3,528)
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|
|
$
|
6,532
|
|
|
$
|
10,060
|
|
|
$
|
(2,520)
|
|
|
$
|
7,540
|
|
|
Trade names
|
2,410
|
|
|
(422)
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|
|
1,988
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|
|
2,410
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|
|
(302)
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|
|
2,108
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|
|
Distributor relationships
|
310
|
|
|
(109)
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|
|
201
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|
|
310
|
|
|
(77)
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|
|
233
|
|
|
Subtotal
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12,780
|
|
|
(4,059)
|
|
|
8,721
|
|
|
12,780
|
|
|
(2,899)
|
|
|
9,881
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|
|
Total
|
$
|
13,774
|
|
|
$
|
(4,828)
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|
|
$
|
8,946
|
|
|
$
|
13,774
|
|
|
$
|
(3,634)
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|
|
$
|
10,140
|
|
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 months ended March 31, 2021, we considered the decline in revenue for Oblong Industries to be a triggering event for a recoverability test of intangible assets for this reporting unit. Based on the corresponding recoverability test of Oblong Industries’ intangible assets, we determined no impairment changes were required for the three months ended March 31, 2021. During the three months ended June 30, 2021, we did not identify a triggering event, therefore no impairment charges were required for the three months ended June 30, 2021. Intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the assets, which range from five years to twelve years in accordance with ASC Topic 350.
The weighted average economic lives for the components of intangible assets are as follows:
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|
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|
|
Oblong (formerly Glowpoint)
|
|
|
Affiliate network
|
12 years
|
|
|
|
|
|
|
|
Oblong Industries
|
|
|
Developed technology
|
5 years
|
|
Trade names
|
10 years
|
|
Distributor relationships
|
5 years
|
Related amortization expense was $597,000, $1,194,000, $613,000, and $1,224,000 for the three and six months ended June 30, 2021 and 2020, respectively.
Amortization expense for each of the next five succeeding years will be as follows (in thousands):
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|
|
|
|
|
|
|
Remainder of 2021
|
$
|
1,194
|
|
|
2022
|
2,385
|
|
|
2023
|
2,378
|
|
|
2024
|
1,844
|
|
|
2025
|
241
|
|
|
Thereafter
|
904
|
|
|
Total
|
$
|
8,946
|
|
Note 5 - Accrued Expenses and Other Current Liabilities
Accrued expenses and other liabilities consisted of the following (in thousands):
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
Accrued compensation costs
|
$
|
592
|
|
|
$
|
411
|
|
|
Accrued professional fees
|
359
|
|
|
236
|
|
|
Accrued taxes and regulatory fees
|
172
|
|
|
137
|
|
|
Customer deposits
|
136
|
|
|
127
|
|
|
Other accrued expenses and liabilities
|
161
|
|
|
286
|
|
|
|
|
|
|
|
Accrued dividends on Series A-2 Preferred Stock
|
—
|
|
|
4
|
|
|
Accrued expenses and other current liabilities
|
$
|
1,420
|
|
|
$
|
1,201
|
|
|
|
|
|
|
Note 6 - Debt
Debt consisted of the following (in thousands):
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|
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|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
|
2021
|
|
2020
|
|
PPP Loan Principal
|
|
$
|
2,417
|
|
|
$
|
2,417
|
|
|
Less: current maturities
|
|
—
|
|
|
2,014
|
|
|
Long-term obligations, net of current maturities
|
|
$
|
2,417
|
|
|
$
|
403
|
|
Paycheck Protection Program Loan
On April 10, 2020 (the “Origination Date”), the Company received $2,417,000 in aggregate loan proceeds (the “PPP Loan”) from MidFirst Bank (the “Lender”) pursuant to the Paycheck Protection Program (“PPP”) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The PPP Loan is evidenced by a Promissory Note (the “Note”), dated April 10, 2020, by and between the Company and the Lender. Subject to the terms of the Note, the PPP Loan bears interest at a fixed rate of one percent (1.0%) per annum. Payments of principal and interest are deferred for the first six months following the Origination Date. The PPP Loan is unsecured and guaranteed by the U.S. Small Business Administration (the “SBA”).
The PPP provides for forgiveness of up to the full amount borrowed as long as the Company uses the loan proceeds during the 24-week period following disbursement for eligible purposes as described in the CARES Act and related guidance. In May 2021, the Company submitted an application to the Lender for full forgiveness of the PPP Loan and, as of June 30, 2021, the application was under review by the SBA. On July 28, 2021, the Company received notice that the PPP Loan had been forgiven in its entirety.
As of December 31, 2020, the Company accounted for payments that are due within 12 months of the balance sheet date as current liabilities and payments due thereafter as non-current liabilities. As of June 30, 2021, the remaining principal balance on the Note was $2,417,000 and $27,000 of interest has been accrued. As no payments will be made on the PPP Loan, due to the forgiveness notice received on July 28, 2021, we have classified the entire balance as long term as of June 30, 2021. Since the PPP Loan was forgiven in its entirety (including the principal balance and accrued interest), the Company will recognize other income as of the date of forgiveness, during the three months ended September 30, 2021, for the extinguishment of the PPP Loan.
Note 7 - Capital Stock
Common Stock
On February 1, 2021, the Company, acting pursuant to authorization from its Board of Directors, determined to voluntarily withdraw the listing of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), from the NYSE American Stock Exchange (the “NYSE American”) and transfer such listing to The Nasdaq Capital Market (“Nasdaq”). The Company’s listing and trading of its Common Stock on the NYSE American ended at market close on February 11, 2021, and
trading began on Nasdaq at market open on February 12, 2021, and is continuing to trade under the ticker symbol “OBLG”. As of June 30, 2021, we had 150,000,000 shares of our Common Stock authorized, with 30,729,331 and 30,616,048 shares of issued and outstanding, respectively.
During the six months ended June 30, 2021 and 2020, 18,846,411 and 50,000 shares of the Company’s Common stock were issued in relation to preferred stock conversions, respectively.
Issuance for Professional Service Fees
On December 10, 2020, the Company issued 50,000 shares of Common Stock as payment for services, with a fair value equal to $348,000, related to a financial advisory agreement entered into on December 1, 2020.
On January 21, 2021, the Company issued 21,008 shares of Common Stock as payment for services, with a fair value equal to $100,000, related to a financial advisory agreement entered into on January 15, 2021.
During the three and six months ended June 30, 2021, the Company expensed $116,000 and $390,000, respectfully, as professional service fees included as a component of general and administrative expense in the accompanying condensed consolidated statements of operations.
Issuance Pursuant to Prospectus dated January 15, 2021
On June 30, 2021, the Company closed on a concurrent public offering of 4,000,000 shares of Common Stock, Series A Warrants to purchase 1,000,000 shares of the Company’s Common Stock at an exercise price of $4.00 per share, and private placement of Series B Warrants to purchase 3,000,000 shares of common stock at an exercise price of $4.40 per share for gross proceeds of $12,400,000. Issuance costs for this transaction were $896,000, resulting in net proceeds of $11,504,000.
Warrants
On October 21, 2020, the Company issued warrants to purchase up to 521,500 shares of Common Stock pursuant to a securities purchase agreement with certain accredited investors. The Warrants have a term of 2 years, are initially exercisable at $4.08 per share and are subject to cashless exercise if, at the time of exercise, the Warrant Shares are not subject to an effective resale registration statement. The Warrants are also subject to adjustment in the event of (i) stock splits and dividends, (ii) subsequent rights offerings, (iii) pro-rata distributions, and (iv) certain fundamental transactions, including but not limited to the sale of the Company, business combinations, and reorganizations. The Warrants do not have any price protection or price reset provisions with respect to future issuances of securities. The fair value of the Warrants was recorded to additional paid-in capital during the year ended December 31, 2020. As of June 30, 2021, no warrants had been exercised.
On December 6, 2020, the Company issued warrants to purchase up to 625,000 shares of Common Stock pursuant to a securities purchase agreement with certain accredited investors. The Warrants have a term of 2 years, are initially exercisable at $5.49 per share and are subject to cashless exercise if, at the time of exercise, the Warrant Shares are not subject to an effective resale registration statement. The Warrants are also subject to adjustment in the event of (i) stock splits and dividends, (ii) subsequent rights offerings, (iii) pro-rata distributions, and (iv) certain fundamental transactions, including but not limited to the sale of the Company, business combinations, and reorganizations. The Warrants do not have any price protection or price reset provisions with respect to future issuances of securities. The fair value of the Warrants was recorded to additional paid-in capital during the year ended December 31, 2020. As of June 30, 2021, no warrants had been exercised.
On June 30, 2021, the Company issued Series A Warrants to purchase up to 1,000,000 shares of Common Stock, and Series B Warrants to purchase up to 3,000,000 shares of Common Stock, pursuant to a securities purchase agreement with certain accredited investors. The Series A Warrants have a term of 6 months and are initially exercisable at $4.00 per share. The Series B Warrants have a term of 3 years, commencing six months and one day from the date of issuance, and are initially exercisable at $4.40 per share. All of the warrants are subject to cashless exercise if, at the time of exercise, the Warrant Shares are not subject to an effective resale registration statement. The Warrants are also subject to adjustment in the event of (i) stock splits and dividends, (ii) subsequent rights offerings, (iii) pro-rata distributions, and (iv) certain fundamental transactions, including but not limited to the sale of the Company, business combinations, and reorganizations. The Warrants do not have any price protection or price reset provisions with respect to future issuances of securities. The fair value of the Series A and B Warrants was recorded to additional paid-in capital during the six months ended June 30, 2021. As of June 30, 2021, no warrants had been exercised.
Warrant activity for the six months ended June 30, 2021 and the year ended December 31, 2020 is presented below.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
|
Number of Warrants (in thousands)
|
|
Weighted Average Exercise Price
|
|
Warrants outstanding and exercisable, December 31, 2019
|
|
72
|
|
|
0.01
|
|
|
Granted
|
|
1,147
|
|
|
4.85
|
|
|
Exercised
|
|
(72)
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants outstanding and exercisable, December 31, 2020
|
|
1,147
|
|
|
$
|
4.85
|
|
|
Granted
|
|
4,000
|
|
|
4.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants outstanding and exercisable, June 30, 2021
|
|
5,147
|
|
|
$
|
4.42
|
|
Treasury Shares
The Company maintains Treasury Stock for the Common Stock shares bought back by the Company when withholding shares to cover taxes on stock compensation transactions. The following table shows the activity for Treasury Stock during the year ended December 31, 2020 (in thousands). There were no treasury stock transactions during the six months ended June 30, 2021.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Value
|
|
Treasury Shares as of December 31, 2019
|
|
105
|
|
|
$
|
(165)
|
|
|
Purchases to cover stock compensation taxes
|
|
8
|
|
|
$
|
(16)
|
|
|
|
|
|
|
|
|
Treasury Shares as of December 31, 2020
|
|
113
|
|
|
$
|
(181)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasury Shares as of June 30, 2021
|
|
113
|
|
|
$
|
(181)
|
|
Note 8 - Preferred Stock
Our Certificate of Incorporation authorizes the issuance of up to 5,000,000 shares of preferred stock. As of June 30, 2021, we had 1,941,250 designated shares of preferred stock and no shares of preferred stock issued and outstanding. As of December 31, 2020, we had 1,829,582 shares of preferred stock outstanding.
Series A-2 Preferred Stock
As of December 31, 2020, there were 45 shares of Series A-2 Preferred Stock issued and outstanding. Each share of Series A-2 Preferred Stock had a stated value of $7,500 per share (the “A-2 Stated Value”), a liquidation preference equal to the Series A-2 Stated Value, and was convertible at the holder’s election into common stock at a conversion price per share of $16.11. Therefore, each share of Series A-2 Preferred Stock was convertible into 466 shares of common stock, for an aggregate of 20,954 shares of common stock.
The Series A-2 Preferred Stock was senior to all outstanding classes of the Company’s equity and was entitled to cumulative dividends at a rate of 5.0% per annum. As of December 31, 2020, the Company had recorded $4,000 in accrued dividends on the accompanying condensed consolidated Balance Sheets related to the Series A-2 Preferred Stock outstanding. During the six months ended June 30, 2021, an additional $1,000 dividend was recorded.
On January 28, 2021, the Company entered into an agreement with the holder of the Series A-2 Preferred Stock to convert the stated value of all outstanding shares of the Series A-2 Preferred Stock, 45 shares, into 84,292 shares of the Company’s common stock, at a negotiated conversion price of $4.00 per share, after taking into consideration accrued and unpaid dividends. The incremental cost of inducing the conversion was approximately $300,000 and was treated similar to a preferred dividend, increasing the net loss attributable to common stockholders.
Series D and E Preferred Stock
In connection with the Oblong Industries acquisition, on October 1, 2019 (the “Closing Date”), the Company issued an aggregate of 1,686,659 shares of Series D Preferred Stock and an aggregate of 49,967 restricted shares of Series D Preferred
Stock (“Restricted Series D Preferred Stock”), the latter of which were subject to vesting over a two-year period following the closing date of the acquisition.
Pursuant to the terms of the Series D Certificate of Designations, each share of Series D Preferred Stock was entitled to receive an annual dividend equal to 6.0% of its then-existing Accrued Value per annum, commencing on the first anniversary of the issuance of the Series D Preferred Stock (or October 1, 2020). Prior to the first anniversary of the issuance of the Series D Preferred Stock no dividends accrued on such stock. Dividends were cumulative and accrued daily in arrears. The accrued value of the Series D Preferred Stock was increased by the amount of such dividends from October 1, 2020 through the date of conversion as described below.
During the year ended December 31, 2020, 28,618 shares of Restricted Series D Preferred Stock were forfeited and 8,325 shares of Series D Preferred Stock were surrendered to cover the taxes on vesting shares. During the three and six months ended June 30, 2021, 81 shares of Restricted Series D Preferred Stock were forfeited and 855 shares of Series D Preferred Stock were surrendered to cover the taxes on vesting shares.
On October 1, 2019, Oblong entered into a Series E Preferred Stock Purchase Agreement relating to the offer and sale by the Company of up to 131,579 shares of its Series E Preferred Stock at a price of $28.50 per share. The Company sold a total of 131,579 shares of Series E Preferred Stock for net proceeds of approximately $3,750,000. The 131,579 shares of Series E Preferred Stock had an aggregate accrued value of $3,750,000 and upon their conversion would convert at a conversion price of $2.85 per share into 1,315,790 common shares.
Pursuant to the terms of the Series E Certificate of Designations, each share of Series E Preferred Stock was entitled to receive an annual dividend equal to 6.0% of its then-existing Accrued Value per annum, commencing on the first anniversary of the issuance of the Series E Preferred Stock (or October 1, 2019 or December 18, 2019, as applicable). Prior to the first anniversary of the issuance of the Series E Preferred Stock no dividends accrued on such stock. Dividends were cumulative and accrue daily in arrears. The accrued value of the Series E Preferred Stock was increased by the amount of such dividends from October 1, 2020 through the date of conversion as described below.
The terms of the Company’s Series D and Series E Preferred Stock provided that such shares were automatically convertible into a number of shares of the Company’s Common Stock equal to the accrued value of the preferred shares (initially $28.50), plus any accrued dividends thereon, divided by the conversion price (initially $2.85 per share, subject to specified adjustments) upon the completion of both (i) approval of such conversion by the Company’s stockholders entitled to vote thereon (which occurred on December 19, 2019); and (ii) the receipt of all required authorizations and approval of a new listing application for the Company following the Company’s October 2019 acquisition of Oblong Industries, Inc. from the NYSE American or any such other exchange upon which the Company’s securities are then listed for trading. The Company determined that this conversion condition was completed in its entirety, and the Series D and E Preferred Stock automatically converted to shares of Common Stock pursuant to their terms, effective upon the commencement of trading of the Company’s Common Stock on Nasdaq as described above, on February 12, 2021.
As of the date of conversion, the Company had 1,697,022 shares of Series D Preferred Stock and 131,579 shares of Series E Preferred Stock outstanding, respectively. The outstanding shares of Series D and Series E Preferred stock were converted into 17,416,939 and 1,345,180 shares of Common Stock, respectively, after taking into consideration all accrued and unpaid dividends.
Following the conversion of the Series A-2, Series D, and Series E Preferred Stock, the Company no longer has shares of Preferred Stock issued and outstanding.
Note 9 - Stock Based Compensation
2019 Equity Incentive Plan
On December 19, 2019, the Oblong, Inc. 2019 Equity Incentive Plan (the “2019 Plan”) was approved by the Company’s stockholders at the Company’s 2019 Annual Meeting of Stockholders. The 2019 Plan is an omnibus equity incentive plan pursuant to which the Company may grant equity and cash incentive awards to certain key service providers of the Company and its subsidiaries. As of June 30, 2021, the share pool available for new grants under the 2019 Plan is 2,713,500.
Stock Options
On June 28, 2021, the Company granted 300,000 stock options to certain employees. These options have a term of 10 years, vest equally over 3 years, upon the anniversary of the grant date, and have an exercise price of $3.25 per share. Using the Black-Scholes option pricing model, the options were determined to have a fair value of $745,000 which will be expensed ratably over the vesting term. No stock options were granted during the year ended December 31, 2020. The fair value of each stock option granted was estimated using the following weighted average assumptions:
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2021
|
|
Risk free interest rate
|
0.47%
|
|
Expected maturity
|
3 years
|
|
Expected volatility
|
1.36
|
|
|
|
|
Expected dividend yields
|
—
|
|
Weighted average grant date market value per share
|
$3.25
|
A summary of stock options activity during the six months ended June 30, 2021 and the year ended December 31, 2020 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
Exercisable
|
|
|
Number of Options
|
|
Weighted Average Exercise Price
|
|
Number of Options
|
|
Weighted Average Exercise Price
|
|
Options outstanding, December 31, 2019
|
215,345
|
|
|
$
|
12.27
|
|
|
215,345
|
|
|
$
|
12.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
(107,845)
|
|
|
4.92
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, December 31, 2020
|
107,500
|
|
|
$
|
19.64
|
|
|
107,500
|
|
|
$
|
19.64
|
|
|
Granted
|
300,000
|
|
|
3.25
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding, June 30, 2021
|
407,500
|
|
|
$
|
7.57
|
|
|
107,500
|
|
|
$
|
19.64
|
|
Additional information as of June 30, 2021 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
Exercisable
|
|
Range of price
|
|
Number
of Options
|
|
Weighted
Average
Remaining
Contractual
Life (In Years)
|
|
Weighted
Average
Exercise
Price
|
|
Number
of Options
|
|
Weighted
Average
Exercise
Price
|
|
$0.00 – $10.00
|
|
302,500
|
|
|
9.93
|
|
$
|
3.30
|
|
|
2,500
|
|
|
$
|
9.00
|
|
|
$10.01 – $20.00
|
|
97,500
|
|
|
1.56
|
|
19.32
|
|
|
97,500
|
|
|
19.32
|
|
|
$20.01 – $30.00
|
|
2,500
|
|
|
0.94
|
|
21.80
|
|
|
2,500
|
|
|
21.80
|
|
|
$30.01 – $40.00
|
|
5,000
|
|
|
0.70
|
|
30.20
|
|
|
5,000
|
|
|
30.20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
407,500
|
|
|
7.76
|
|
$
|
7.57
|
|
|
107,500
|
|
|
$
|
19.64
|
|
The intrinsic value of vested options, unvested options and exercised options were not significant for all periods presented. There was no stock compensation expense related to stock options for the three and six months ended June 30, 2021 and 2020, and $745,000 remaining as unrecognized stock-based compensation expense for options as of June 30, 2021.
Restricted Stock Awards
As of June 30, 2021 and 2020, there were 627 unvested restricted stock awards outstanding, with a weighted average grant date price of $15.80. The awards were issued in 2014 and vest over the lesser of ten years, a change in control, or separation from the company. Due to the variability of the vesting, the expense was amortized over an average service period of five years; therefore, there is no stock-based compensation expense for restricted stock awards for the three and six months ended June 30, 2021 or 2020.
Restricted Stock Units
As of June 30, 2021 and 2020, there were no unvested restricted stock units (“RSUs”) outstanding and 28,904 vested RSUs remain outstanding as shares of common stock have not yet been delivered for these units in accordance with the terms of the RSUs.
There was no stock compensation expense for RSUs for the three and six months ended June 30, 2021, and there was zero and $6,000 stock compensation expense for RSUs for the three and six months ended June 30, 2020, respectively, which was included in general and administrative expense. There was no remaining unrecognized stock-based compensation expense for RSUs at June 30, 2021.
Restricted Series D Preferred Stock
In connection with the acquisition of Oblong Industries in 2019, all options to purchase shares of Oblong Industries’ common stock held by existing employees of Oblong Industries were canceled and exchanged for an aggregate of 49,967 shares of Restricted Series D Preferred Stock, which were subject to vesting over a two-year period following the closing date. This vesting period and compensation expense were accelerated, in February 2021, when the Restricted Series D shares were converted to shares of Common Stock. Refer to Note 8 - Preferred Stock for discussion on the conversion of the Series D Restricted Preferred Stock.
Stock-based compensation expense relating to Restricted Series D Preferred Stock is allocated as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Research and development
|
$
|
—
|
|
|
$
|
14
|
|
|
$
|
17
|
|
|
$
|
28
|
|
|
Sales, general and administrative
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
16
|
|
|
$
|
27
|
|
|
|
$
|
—
|
|
|
$
|
29
|
|
|
$
|
33
|
|
|
$
|
55
|
|
During the six months ended June 30, 2021 81 shares of Restricted Series D Preferred Stock were forfeited. During the three and six months ended June 30, 2020, 17,364 and 31,805 shares of Restricted Series D Preferred Stock were forfeited, respectively. As of June 30, 2021, zero shares of Restricted Series D Preferred Stock remain outstanding and there was no remaining unrecognized stock compensation expense.
Note 10 - Net Loss Per Share
Basic net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. The weighted-average number of shares of common stock outstanding does not include any potentially dilutive securities or unvested restricted stock. Unvested restricted stock, although classified as issued and outstanding at June 30, 2021 and 2020, is considered contingently returnable until the restrictions lapse and will not be included in the basic net loss per share calculation until the shares are vested. Unvested restricted stock does not contain non-forfeitable rights to dividends and dividend equivalents. Unvested RSUs are not included in calculations of basic net loss per share, as they are not considered issued and outstanding at time of grant.
Diluted net loss per share is computed by giving effect to all potential shares of common stock, including stock options, preferred stock, RSUs, and unvested restricted stock, to the extent they are dilutive. For the three and six months ended June 30, 2021 and 2020, all such common stock equivalents have been excluded from diluted net loss per share as the effect to net loss per share would be anti-dilutive (due to the net loss).
The following table sets forth the computation of the Company’s basic and diluted net loss per share (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
(2,246)
|
|
|
$
|
(3,385)
|
|
|
$
|
(5,679)
|
|
|
$
|
(6,514)
|
|
|
Less: preferred stock dividends
|
—
|
|
|
(4)
|
|
|
(1)
|
|
|
(8)
|
|
|
Less: undeclared dividends
|
—
|
|
|
—
|
|
|
$
|
(366)
|
|
|
$
|
—
|
|
|
Less: loss on induced conversion of Series A-2 Preferred Stock
|
—
|
|
|
—
|
|
|
$
|
(300)
|
|
|
$
|
—
|
|
|
Net loss attributable to common stockholders
|
$
|
(2,246)
|
|
|
$
|
(3,389)
|
|
|
$
|
(6,346)
|
|
|
$
|
(6,522)
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted-average number of shares of common stock for diluted net loss per share
|
26,644
|
|
|
5,240
|
|
|
22,250
|
|
|
5,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share
|
$
|
(0.08)
|
|
|
$
|
(0.65)
|
|
|
$
|
(0.29)
|
|
|
$
|
(1.25)
|
|
|
|
|
|
|
|
|
|
|
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):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
June 30,
|
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding stock options
|
407,500
|
|
|
215,345
|
|
|
Unvested restricted stock awards
|
627
|
|
|
627
|
|
|
Shares of common stock issuable upon conversion of Series A-2 preferred stock
|
—
|
|
|
15,545
|
|
|
|
|
|
|
|
Shares of common stock issuable upon conversion of Series C preferred stock
|
—
|
|
|
108,333
|
|
|
Shares of common stock issuable upon conversion of Series D preferred stock
|
—
|
|
|
17,030,960
|
|
|
Shares of common stock issuable upon conversion of Series E preferred stock
|
—
|
|
|
1,315,790
|
|
|
Warrants
|
5,146,500
|
|
|
72,394
|
|
Note 11 - Segment Reporting
The Company currently operates in two segments: (1) the Oblong (formerly Glowpoint) business, which includes managed services for video collaboration and network applications; and (2) the Oblong Industries business, which includes products and services for visual collaboration technologies.
Certain information concerning the Company’s segments for the three and six months ended June 30, 2021 and 2020 is presented in the following tables (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2021
|
|
|
Oblong (formerly Glowpoint)
|
|
Oblong Industries
|
|
Corporate
|
|
Total
|
|
Revenue
|
$
|
1,078
|
|
|
$
|
971
|
|
|
$
|
—
|
|
|
$
|
2,049
|
|
|
Cost of revenues
|
739
|
|
|
510
|
|
|
—
|
|
|
1,249
|
|
|
Gross profit
|
$
|
339
|
|
|
$
|
461
|
|
|
$
|
—
|
|
|
$
|
800
|
|
|
Gross profit %
|
31
|
%
|
|
47
|
%
|
|
|
|
39
|
%
|
|
|
|
|
|
|
|
|
|
|
Allocated operating expenses
|
$
|
82
|
|
|
$
|
1,796
|
|
|
$
|
—
|
|
|
$
|
1,878
|
|
|
Unallocated operating expenses
|
$
|
—
|
|
|
$
|
—
|
|
|
1,400
|
|
|
1,400
|
|
|
Total operating expenses
|
$
|
82
|
|
|
$
|
1,796
|
|
|
$
|
1,400
|
|
|
$
|
3,278
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
$
|
257
|
|
|
$
|
(1,335)
|
|
|
$
|
(1,400)
|
|
|
$
|
(2,478)
|
|
|
Interest and other expense (income), net
|
9
|
|
|
(241)
|
|
|
—
|
|
|
(232)
|
|
|
Net income (loss) before tax
|
$
|
248
|
|
|
$
|
(1,094)
|
|
|
$
|
(1,400)
|
|
|
$
|
(2,246)
|
|
|
Income tax
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Net income (loss)
|
$
|
248
|
|
|
$
|
(1,094)
|
|
|
$
|
(1,400)
|
|
|
$
|
(2,246)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2021
|
|
|
Oblong (formerly Glowpoint)
|
|
Oblong Industries
|
|
Corporate
|
|
Total
|
|
Revenue
|
$
|
2,273
|
|
|
$
|
1,694
|
|
|
$
|
—
|
|
|
$
|
3,967
|
|
|
Cost of revenues
|
1,572
|
|
|
967
|
|
|
—
|
|
|
2,539
|
|
|
Gross profit
|
$
|
701
|
|
|
$
|
727
|
|
|
$
|
—
|
|
|
$
|
1,428
|
|
|
Gross profit %
|
31
|
%
|
|
43
|
%
|
|
|
|
36
|
%
|
|
|
|
|
|
|
|
|
|
|
Allocated operating expenses
|
$
|
193
|
|
|
$
|
3,626
|
|
|
$
|
—
|
|
|
$
|
3,819
|
|
|
Unallocated operating expenses
|
|
|
|
|
3,498
|
|
|
3,498
|
|
|
Total operating expenses
|
$
|
193
|
|
|
$
|
3,626
|
|
|
$
|
3,498
|
|
|
$
|
7,317
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
$
|
508
|
|
|
$
|
(2,899)
|
|
|
$
|
(3,498)
|
|
|
$
|
(5,889)
|
|
|
Interest and other expense (income), net
|
14
|
|
|
(224)
|
|
|
—
|
|
|
(210)
|
|
|
Net income (loss) before tax
|
$
|
494
|
|
|
$
|
(2,675)
|
|
|
$
|
(3,498)
|
|
|
$
|
(5,679)
|
|
|
Income tax
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Net income (loss)
|
$
|
494
|
|
|
$
|
(2,675)
|
|
|
$
|
(3,498)
|
|
|
$
|
(5,679)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2020
|
|
|
Oblong (formerly Glowpoint)
|
|
Oblong Industries
|
|
Corporate
|
|
Total
|
|
Revenue
|
$
|
1,373
|
|
|
$
|
1,443
|
|
|
$
|
—
|
|
|
$
|
2,816
|
|
|
Cost of revenues
|
898
|
|
|
785
|
|
|
—
|
|
|
1,683
|
|
|
Gross profit
|
$
|
475
|
|
|
$
|
658
|
|
|
$
|
—
|
|
|
$
|
1,133
|
|
|
Gross profit %
|
35
|
%
|
|
46
|
%
|
|
|
|
40
|
%
|
|
|
|
|
|
|
|
|
|
|
Allocated operating expenses
|
$
|
1,063
|
|
|
$
|
2,574
|
|
|
$
|
—
|
|
|
$
|
3,637
|
|
|
Unallocated operating expenses
|
—
|
|
|
—
|
|
|
796
|
|
|
796
|
|
|
Total operating expenses
|
$
|
1,063
|
|
|
$
|
2,574
|
|
|
$
|
796
|
|
|
$
|
4,433
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
$
|
(588)
|
|
|
$
|
(1,916)
|
|
|
$
|
(796)
|
|
|
$
|
(3,300)
|
|
|
Interest and other expense, net
|
7
|
|
|
78
|
|
|
—
|
|
|
85
|
|
|
Net loss before taxes
|
$
|
(595)
|
|
|
$
|
(1,994)
|
|
|
$
|
(796)
|
|
|
$
|
(3,385)
|
|
|
Income tax
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Net loss
|
$
|
(595)
|
|
|
$
|
(1,994)
|
|
|
$
|
(796)
|
|
|
$
|
(3,385)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2020
|
|
|
Oblong (formerly Glowpoint)
|
|
Oblong Industries
|
|
Corporate
|
|
Total
|
|
Revenue
|
$
|
3,417
|
|
|
$
|
4,727
|
|
|
$
|
—
|
|
|
$
|
8,144
|
|
|
Cost of revenues
|
2,055
|
|
|
2,017
|
|
|
—
|
|
|
4,072
|
|
|
Gross profit
|
$
|
1,362
|
|
|
$
|
2,710
|
|
|
$
|
—
|
|
|
$
|
4,072
|
|
|
Gross profit %
|
40
|
%
|
|
57
|
%
|
|
|
|
50
|
%
|
|
|
|
|
|
|
|
|
|
|
Allocated operating expenses
|
$
|
2,212
|
|
|
$
|
5,985
|
|
|
$
|
—
|
|
|
$
|
8,197
|
|
|
Unallocated operating expenses
|
—
|
|
|
—
|
|
|
2,162
|
|
|
2,162
|
|
|
Total operating expenses
|
$
|
2,212
|
|
|
$
|
5,985
|
|
|
$
|
2,162
|
|
|
$
|
10,359
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
$
|
(850)
|
|
|
$
|
(3,275)
|
|
|
$
|
(2,162)
|
|
|
$
|
(6,287)
|
|
|
Interest and other expense, net
|
7
|
|
|
220
|
|
|
—
|
|
|
227
|
|
|
Net loss before tax
|
$
|
(857)
|
|
|
$
|
(3,495)
|
|
|
$
|
(2,162)
|
|
|
$
|
(6,514)
|
|
|
Income tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net loss
|
(857)
|
|
|
(3,495)
|
|
|
$
|
(2,162)
|
|
|
$
|
(6,514)
|
|
Unallocated operating expenses include costs for the three and six months ended June 30, 2021 and 2020 that are not specific to a particular segment but are general to the group; included are expenses incurred for administrative and accounting staff, general liability and other insurance, professional fees and other similar corporate expenses.
For the three and six months ended June 30, 2021 and 2020, there was no material revenue attributable to any individual foreign country. Approximately 1% of foreign revenue is billed in foreign currency and foreign currency gains and losses are not material.
Revenue by geographic area is allocated as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Domestic
|
$
|
1,227
|
|
|
$
|
1,854
|
|
|
$
|
2,242
|
|
|
$
|
5,456
|
|
|
Foreign
|
822
|
|
|
962
|
|
|
1,725
|
|
|
2,688
|
|
|
|
$
|
2,049
|
|
|
$
|
2,816
|
|
|
$
|
3,967
|
|
|
$
|
8,144
|
|
|
|
|
|
|
|
|
|
|
Disaggregated information for the Company’s revenue has been recognized in the accompanying condensed consolidated statements of operations and is presented below according to contract type (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
2021
|
|
% of Revenue
|
|
2020
|
|
% of Revenue
|
|
Revenue: Oblong (formerly Glowpoint)
|
|
|
|
|
|
|
|
|
Video collaboration services
|
$
|
230
|
|
|
11
|
%
|
|
$
|
428
|
|
|
15
|
%
|
|
Network services
|
830
|
|
|
41
|
%
|
|
891
|
|
|
32
|
%
|
|
Professional and other services
|
18
|
|
|
1
|
%
|
|
54
|
|
|
2
|
%
|
|
Total Oblong revenue
|
$
|
1,078
|
|
|
53
|
%
|
|
$
|
1,373
|
|
|
49
|
%
|
|
|
|
|
|
|
|
|
|
|
Revenue: Oblong Industries
|
|
|
|
|
|
|
|
|
Visual collaboration product offerings
|
$
|
942
|
|
|
46
|
%
|
|
923
|
|
|
33
|
%
|
|
Professional services
|
—
|
|
|
—
|
%
|
|
228
|
|
|
8
|
%
|
|
Licensing
|
29
|
|
|
1
|
%
|
|
292
|
|
|
10
|
%
|
|
Total Oblong Industries revenue
|
$
|
971
|
|
|
47
|
%
|
|
1,443
|
|
|
51
|
%
|
|
Total revenue
|
$
|
2,049
|
|
|
100
|
%
|
|
$
|
2,816
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
2021
|
|
% of Revenue
|
|
2020
|
|
% of Revenue
|
|
Revenue: Oblong (formerly Glowpoint)
|
|
|
|
|
|
|
|
|
Video collaboration services
|
$
|
521
|
|
|
13
|
%
|
|
$
|
1,473
|
|
|
18
|
%
|
|
Network services
|
1,711
|
|
|
43
|
%
|
|
1,816
|
|
|
22
|
%
|
|
Professional and other services
|
41
|
|
|
1
|
%
|
|
128
|
|
|
2
|
%
|
|
Total Oblong revenue
|
$
|
2,273
|
|
|
57
|
%
|
|
$
|
3,417
|
|
|
42
|
%
|
|
|
|
|
|
|
|
|
|
|
Revenue: Oblong Industries
|
|
|
|
|
|
|
|
|
Visual collaboration product offerings
|
$
|
1,635
|
|
|
41
|
%
|
|
3,245
|
|
|
40
|
%
|
|
Professional services
|
—
|
|
|
—
|
%
|
|
898
|
|
|
11
|
%
|
|
Licensing
|
59
|
|
|
1
|
%
|
|
584
|
|
|
7
|
%
|
|
Total Oblong Industries revenue
|
$
|
1,694
|
|
|
42.71
|
%
|
|
4,727
|
|
|
58
|
%
|
|
Total revenue
|
$
|
3,967
|
|
|
100
|
%
|
|
$
|
8,144
|
|
|
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 June 30,
|
|
|
|
|
2021
|
|
2020
|
|
|
Segment
|
|
% of Revenue
|
|
% of Revenue
|
|
Customer A
|
Oblong (formerly Glowpoint)
|
|
32
|
%
|
|
23
|
%
|
|
Customer B
|
Oblong Industries
|
|
—
|
%
|
|
20
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
|
2021
|
|
2020
|
|
|
Segment
|
|
% of Revenue
|
|
% of Revenue
|
|
Customer A
|
Oblong (formerly Glowpoint)
|
|
34
|
%
|
|
15
|
%
|
|
Customer B
|
Oblong Industries
|
|
—
|
%
|
|
21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concentration of accounts receivable was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30,
|
|
|
|
|
2021
|
|
2020
|
|
|
Segment
|
|
% of Accounts Receivable
|
|
% of Accounts Receivable
|
|
Customer A
|
Oblong (formerly Glowpoint)
|
|
22
|
%
|
|
32
|
%
|
|
Customer B
|
Oblong (formerly Glowpoint)
|
|
13
|
%
|
|
10
|
%
|
|
Customer C
|
Oblong Industries
|
|
—
|
%
|
|
12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 12 - Commitments and Contingencies
Operating Leases
We currently lease three facilities in Los Angeles, California, one facility in Boston, Massachusetts, and one facility in Dallas, Texas, all providing office space. We also lease space in City of Industry, California, providing warehouse space. These leases expire between 2022 and 2023. During 2020, we exited leases in Herndon, Virginia; Atlanta, Georgia; Houston, Texas; London, England, and a warehouse space in Los Angeles, California. In February 2021, we exited an office space lease in Los Altos, California, when the Company elected to not renew the lease. In June 2021, we entered into a settlement agreement with the landlord of our Munich, Germany office space, to exit the lease early in exchange for €125,000. At the time of the settlement, the remaining liability was €316,000, resulting in a gain of €191,000 ($227,000), which is recorded as other income on the condensed consolidated statement of operations. We currently occupy two of the facilities in Los Angeles and the warehouse space in City of Industry; we have subleases in place for the third Los Angeles property, the Dallas property, and the Boston property. Lease expenses, net of common charges and sublet proceeds, for the three and six months ended June 30, 2021 and 2020 were $92,000, $167,000, $301,000, and $647,000, respectively.
The Company primarily leases facilities for office and data center space under non-cancellable operating leases for its U.S. and international locations that expire at various dates through 2023. For leases with a term greater than 12 months, the Company recognizes a right-of-use asset and a lease liability based on the present value of lease payments over the lease term. Variable lease payments are not included in the lease payments to measure the lease liability and are expensed as incurred. The Company’s leases have remaining terms of one to three years and some of the leases include a Company option to extend the lease term for less than twelve months to five years, or more, which if reasonably certain to exercise, the Company includes in the determination of lease payments. The lease agreements do not contain any material residual value guarantees or material restrictive covenants.
As the Company's leases do not provide a readily determinable implicit rate, the Company uses the incremental borrowing rate at lease commencement, which was determined using a portfolio approach, based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. Operating lease expense is recognized on a straight-line basis over the lease term.
Leases with an initial term of 12 months or less are not recognized on the balance sheet and the expense for these short-term leases is recognized on a straight-line basis over the lease term. Common area maintenance fees (or CAMs) and other charges related to these leases continue to be expensed as incurred.
The following provides balance sheet information related to leases as of June 30, 2021 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
Assets
|
|
|
|
|
Operating lease, right-of-use asset, net
|
|
$
|
653
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Current portion of operating lease liabilities
|
|
$
|
734
|
|
|
|
Operating lease liabilities, net of current portion
|
|
249
|
|
|
|
Total operating lease liabilities
|
|
$
|
983
|
|
The following table summarizes the future undiscounted cash payments reconciled to the lease liability (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Remaining Lease Payments
|
|
|
|
|
|
|
|
Remainder of 2021
|
|
$
|
442
|
|
|
2022
|
|
508
|
|
|
2023
|
|
116
|
|
|
Total lease payments
|
|
$
|
1,066
|
|
|
Effect of discounting
|
|
(83)
|
|
|
Total lease liability
|
|
$
|
983
|
|
COVID-19
On March 11, 2020, the World Health Organization announced that infections of the novel Coronavirus (COVID-19) had become pandemic, and on March 13 2020, the U.S. President announced a National Emergency relating to the disease. There is a possibility of continued widespread infection in the United States and abroad, with the potential for catastrophic impact. National, state and local authorities have required or recommended social distancing and imposed or are considering quarantine and isolation measures on large portions of the population, including mandatory business closures. These measures, while intended to protect human life, are expected to have serious adverse impacts on domestic and foreign economies of uncertain severity and duration. Some economists are predicting the United States may soon enter a recession. The sweeping nature of the coronavirus pandemic makes it extremely difficult to predict how the Company’s business and operations will be affected in the longer run. The COVID-19 pandemic has materially affected our revenue and results of operations for the three and six months ended June 30, 2021, as we experienced delayed orders in our distribution channels as a direct result of customer implementation schedules shifting due to the ongoing COVID-19 pandemic. The extent to which the coronavirus impacts our future results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. Moreover, the coronavirus outbreak has begun to have indeterminable adverse effects on general commercial activity and the world economy, and our business and results of operations could be adversely affected to the extent that this coronavirus or any other epidemic harms the global economy generally and/or the markets in which we operate specifically. Any of the foregoing factors, or other cascading effects of the coronavirus pandemic that are not currently foreseeable, could materially increase our costs, negatively impact our revenues and damage the Company’s results of operations and its liquidity position, possibly to a significant degree. The duration of any such impacts cannot be predicted. Uncertainties resulting from COVID-19 may result in additional customers delaying budget expenditures or re-allocating resources, which would result in a decrease in orders from these customers. Any such decrease in orders from these customers could cause a material adverse effect on our revenues and financial results and our ability to generate positive cash flows.
NOTE 13 - Subsequent Events
On July 28, 2021, the Company received notice from the Lender of our PPP Loan (discussed in Note 6 - Debt), that the PPP Loan had been forgiven in its entirety on July 26, 2021. In accordance with ASC 470, since the PPP Loan was forgiven, the Company will recognize other income as of the date of forgiveness, during the three months ended September 30, 2021, for the extinguishment of the debt and accrued interest.