Liquidity and Going Concern Uncertainty

9 Months Ended

Sep. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Liquidity and Going Concern Uncertainty

Note 2 - Liquidity and Going Concern Uncertainty

As of September 30, 2020, we had $2,670,000 of cash, $5,609,000 of total obligations under the Silicon Valley Bank (“SVB”) Loan Agreement, obligations of $2,417,000 under the Paycheck Protection Program loan, and a working capital deficit of $3,245,000. For the nine months ended September 30, 2020, we incurred a net loss of $8,598,000 and used $4,325,000 of net cash in operating activities.

During the nine months ended September 30, 2020, we received cash proceeds of $2,417,000 from a loan made to the Company by MidFirst Bank under the Paycheck Protection Program (PPP) contained within the Coronavirus Aid Relief, and Economic Security (CARES) Act (the “PPP Loan”). See further discussion of the PPP Loan in Note 8 - Debt.

As of September 30, 2020, the SVB Loan Agreement provided that interest-only payments were due through September 30, 2020, after which monthly principal payments of $291,500, plus interest, were payable in order to fully repay the loan by March 1, 2022. Subsequent to the period of this Report, in October 2020, the Company: (i) completed a private placement of common stock for gross proceeds of $2,973,000, and (ii) completed an agreement with SVB to satisfy all outstanding obligations of $5,609,000 under the SVB Loan Agreement in exchange for a one-time cash payment of $2,500,000. See further discussion of these transactions in Note 14 - Subsequent Events.

Our capital requirements in the future will continue to depend on numerous factors, including the timing and amount of revenue for the combined organization, customer renewal rates and the timing of collection of outstanding accounts receivable, in each case particularly as it relates to the combined organization’s major customers, the expense to deliver services, expense for sales and marketing, expense for research and development, capital expenditures, the cost involved in protecting intellectual property rights, the amount of forgiveness of the PPP Loan, if any, and any debt service obligations under the PPP Loan. While our Acquisition of Oblong Industries does provide additional revenues to the Company, the cost to further develop and commercialize its product offerings is expected to exceed its revenues for the foreseeable future. However, we have achieved certain cost synergies in connection with combining Glowpoint and Oblong Industries; we reduced the total of general and administrative, research and development, sales, and marketing expenses by $1,813,000, or 40%, from the first quarter of 2020 as compared to the third quarter of 2020 (or a total of $4,560,000 in the first quarter of 2020 as compared to $2,747,000 in the third quarter of 2020). We also 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 combined organization’s current projection of revenue, expenses, capital expenditures, debt service obligations, and cash flows, it will not have sufficient resources to fund its operations for the next twelve months following the filing of this Report. We believe additional capital will be required to fund operations and provide growth capital including investments in technology, product development and sales and marketing. To access capital to fund operations or provide growth capital, we will need to raise capital in one or more debt and/or equity offerings. There can be no assurance that we will be successful in raising necessary capital or that any such offering will be on terms acceptable to the Company. If we are unable to raise additional capital that may be needed on terms acceptable to us, it could have a material adverse effect on the Company. The factors discussed above raise substantial doubt as to our ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result from these uncertainties.

See Note 13 - 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.