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 June 30, 2021.

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)

Delaware	77-0312442
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

25587 Conifer Road, Suite 105-231, Conifer, CO 80433

(Address of Principal Executive Offices, including Zip Code)

(303) 640-3838

(Registrant’s Telephone Number, including Area Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	OBLG	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒  No ☐

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock as of August 10, 2021 was 30,616,048.

OBLONG, INC.

Index

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements		1
	Condensed Consolidated Balance Sheets at June 30, 2021 (unaudited) and December 31, 2020	1
	Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020	3
	Unaudited Condensed Consolidated Statement of Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020	4
	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020	6
	Notes to unaudited Condensed Consolidated Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 3. Quantitative and Qualitative Disclosures About Market Risk		30
Item 4. Controls and Procedures		30
PART II - OTHER INFORMATION
Item 1. Legal Proceedings		31
Item 1A. Risk Factors		31
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		31
Item 3. Defaults Upon Senior Securities		31
Item 4. Mine Safety Disclosures		31
Item 5. Other Information		31
Item 6. Exhibits		32
Signatures		33

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q (this “Report”) contains statements that are considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and its rules and regulations (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, and its rules and regulations (the “Exchange Act”). These forward-looking statements include, but are not limited to, statements about the plans, objectives, expectations and intentions of Oblong, Inc. (“Oblong” or “we” or “us” or the “Company”). All statements other than statements of current or historical fact contained in this Report, including statements regarding Oblong’s future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” and similar expressions, as they relate to Oblong, are intended to identify forward-looking statements. These statements are based on Oblong’s current plans, and Oblong’s actual future activities and results of operations may be materially different from those set forth in the forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. Any or all of the forward-looking statements in this Report may turn out to be inaccurate. Oblong has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and assumptions. There are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including our plans, objectives, expectations and intentions and other factors that are discussed under the section entitled “Part I. Item 1A. Risk Factors” and in our consolidated financial statements and the footnotes thereto for the fiscal year ended December 31, 2020, each included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the Securities and Exchange Commission (the “SEC”) on March 30, 2021, as well as under “Part II. Item 1A. Risk Factors” in this Report. Oblong undertakes no obligation to publicly revise these forward-looking statements to reflect events occurring after the date hereof. All subsequent written and oral forward-looking statements attributable to Oblong or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements contained in this Report. Forward-looking statements in this Report include, among other things: our ability to meet commercial commitments; our expectations and estimates relating to customer attrition, sales cycles, future revenues, expenses, capital expenditures and cash flows; evolution of our customer solutions and our service platforms; our ability to fund operations and continue as a going concern; expectations regarding adjustments to our cost of revenue and other operating expenses; our ability to finance investments in product development and sales and marketing; our ability to raise capital through sales of additional equity or debt securities and/or loans from financial institutions; our beliefs about employee relations; statements relating to market need, evolution of our solutions and our service platforms; our beliefs about the service offerings of our competitors and our ability to differentiate Oblong’s services; adequacy of our internal controls; statements regarding our information systems and our ability to protect and prevent security breaches; expectations relating to additional patent protection; and beliefs about the strength of our intellectual property, including patents. For additional information regarding known material factors that could cause our actual results to differ materially from our projected results, please see “Part II. Item 1A. Risk Factors” in this Report. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:

•the continued impact of the coronavirus pandemic on our business, including its impact on our customers and other business partners, our ability to conduct operations in the ordinary course, and our ability to obtain capital financing important to our ability to continue as a going concern;

•our ability to continue as a going concern;

•our ability to raise capital in one or more debt and/or equity offerings in order to fund operations or any growth initiatives;

•customer acceptance and demand for our video collaboration services and network applications;

•our ability to compete effectively in the video collaboration services and network services businesses;

•the quality and reliability of our services;

•the prices for our products and services;

•customer renewal rates;

•risks related to the concentration of our customers and the degree to which our sales, now or in the future, depend on certain large client relationships;

•customer acquisition costs;

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

•potential federal and state regulatory actions;

•our ability to innovate technologically, and, in particular, our ability to develop next generation Oblong technology;

•our ability to satisfy the standards for continued listing of our common stock on the Nasdaq Capital Market;

•changes in our capital structure and/or stockholder mix;

•the costs, disruption, and diversion of management’s attention associated with campaigns commenced by activist investors; and

•our management’s ability to execute its plans, strategies and objectives for future operations.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

OBLONG, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value, stated value, and shares)

	June 30, 2021		December 31, 2020
	(Unaudited)
ASSETS
Current assets:
Cash	$	13,033	$	5,058
Current portion of restricted cash	61		158
Accounts receivable, net	953		3,166
Inventory	2,125		920
Prepaid expenses and other current assets	1,393		691
Total current assets	17,565		9,993
Property and equipment, net	307		573
Goodwill	7,367		7,367
Intangibles, net	8,946		10,140
Operating lease - right of use asset, net	653		903
Other assets	99		167
Total assets	$	34,937	$	29,143
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	—	$	2,014
Accounts payable	518		313
Accrued expenses and other current liabilities	1,420		1,201
Current portion of deferred revenue	894		1,217
Current portion of operating lease liabilities	734		830
Total current liabilities	3,566		5,575
Long-term liabilities:
Long-term debt, net of current portion	2,417		403
Operating lease liabilities, net of current portion	249		602
Deferred revenue, net of current portion	400		506
Total long-term liabilities	3,066		1,511
Total liabilities	6,632		7,086
Commitments and contingencies (see Note 12)
Stockholders’ equity:
Preferred stock Series A-2, convertible; $.0001 par value; $7,500 stated value; 7,500 shares authorized, zero and 45 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively	—		—
Preferred stock Series D, convertible; $.0001 par value; $28.50 stated value; 1,750,000 shares authorized, zero and 1,697,958 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively	—		—
Preferred stock Series E, convertible; $.0001 par value; $28.50 stated value; 175,000 shares authorized, zero and 131,579 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively	—		—

See accompanying notes to condensed consolidated financial statements.

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Common stock, $.0001 par value; 150,000,000 shares authorized; 30,729,331 shares issued and 30,616,048 outstanding at June 30, 2021 and 7,861,912 shares issued and 7,748,629 outstanding at December 31, 2020	3		1
Treasury stock, 113,283 shares of common stock at June 30, 2021 and December 31, 2020	(181)		(181)
Additional paid-in capital	227,017		215,092
Accumulated deficit	(198,534)		(192,855)
Total stockholder's equity	28,305		22,057
Total liabilities and stockholders’ equity	$	34,937	$	29,143

See accompanying notes to condensed consolidated financial statements.

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OBLONG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2021		2020		2021		2020
Revenue	$	2,049	$	2,816	$	3,967	$	8,144
Cost of revenue (exclusive of depreciation and amortization)	1,249		1,683		2,539		4,072
Gross profit	800		1,133		1,428		4,072
Operating expenses:
Research and development	599		988		1,291		2,315
Sales and marketing	572		834		1,099		2,040
General and administrative	1,383		1,815		3,450		3,842
Impairment charges	17		—		48		550
Depreciation and amortization	707		796		1,429		1,612
Total operating expenses	3,278		4,433		7,317		10,359
Loss from operations	(2,478)		(3,300)		(5,889)		(6,287)
Interest and other expense, net	9		76		14		220
Other income	(227)		—		(227)		—
Foreign exchange loss (gain)	(14)		9		3		7
Interest and other (income) expense, net	(232)		85		(210)		227
Loss before income taxes	(2,246)		(3,385)		(5,679)		(6,514)
Income tax expense	—		—		—		—
Net loss	(2,246)		(3,385)		(5,679)		(6,514)
Preferred stock dividends	—		4		1		8
Undeclared dividends	—		—		366		—
Induced conversion of Series A-2 Preferred Stock	—		—		300		—
Net loss attributable to common stockholders	$	(2,246)	$	(3,389)	$	(6,346)	$	(6,522)
Net loss attributable to common stockholders per share:
Basic and diluted net loss per share	$	(0.08)	$	(0.65)	$	(0.29)	$	(1.25)
Weighted-average number of shares of common stock:
Basic and diluted	26,644		5,240		22,250		5,222

See accompanying notes to condensed consolidated financial statements.

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OBLONG, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

Three and Six Months Ended June 30, 2021

(In thousands, except shares)

(Unaudited)

	Series A-2 Preferred Stock			Series D Preferred Stock			Series E Preferred Stock			Common Stock			Treasury Stock
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Total
Balance at December 31, 2020	45	$	—	1,697,958	$	—	131,579	$	—	7,861,912	$	1	113,283	$	(181)	$	215,092	$	(192,855)	$	22,057
Net loss	—	—		—	—		—	—		—	—		—	—		—		(3,433)		(3,433)
Stock-based compensation	—	—		—	—		—	—		—	—		—	—		33		—		33
Conversion of Series A-2 Preferred Stock, including dividend accrual	(45)	—		—	—		—	—		84,292	—		—	—		—		—		—
Conversion of Series D and E Preferred Stock	—	—		(1,697,022)	—		(131,579)	—		18,762,119	2		—	—		(2)		—		—
Issuance of stock for services	—	—		—	—		—	—		21,008	—		—	—		274		—		274
Forfeitures of restricted stock	—	—		(81)	—		—	—		—	—		—	—		—		—		—
Series D Preferred shares to pay withholding taxes	—	—		(855)	—		—	—		—	—		—	—		—		—		—
Balance at March 31, 2021	—	—		—	—		—	—		26,729,331	3		113,283	(181)		215,397		(196,288)		18,931
Net loss	—	—		—	—		—	—		—	—		—	—		—		(2,246)		(2,246)
Issuance of stock from financing, net of issuance costs	—	—		—	—		—	—		4,000,000	—		—	—		11,504		—		11,504
Issuance of stock for services	—	—		—	—		—	—		—	—		—	—		116		—		116
Balance at June 30, 2021	—	$	—	—	$	—	—	$	—	30,729,331	$	3	113,283	$	(181)	$	227,017	$	(198,534)	$	28,305

See accompanying notes to condensed consolidated financial statements.

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OBLONG, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

Three and Six Months Ended June 30, 2020

(In thousands, except shares)

(Unaudited)

	Series A-2 Preferred Stock			Series C Preferred Stock			Series D Preferred Stock			Series E Preferred Stock			Common Stock			Treasury Stock
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Total
Balance at December 31, 2019	32	$	—	475	$	—	1,734,901	$	—	131,579	$	—	5,266,828	$	1	105,285	$	(165)	$	207,383	$	(185,434)	$	21,785
Net loss	—	—		—	—		—	—		—	—		—	—		—	—		—		(3,129)		(3,129)
Stock-based compensation	—	—		—	—		—	—		—	—		—	—		—	—		32		—		32
Forfeitures of restricted stock	—	—		—	—		(14,441)	—		—	—		—	—		—	—		—		—		—
Preferred stock conversion	—	—		(150)	—		—	—		—	—		50,000	—		—	—		—		—		—
Issuance of preferred stock for accrued dividends	13	—		—	—		—	—		—	—		—	—		—	—		98		—		98
Preferred stock dividends	—	—		—	—		—	—		—	—		—	—		—	—		(4)		—		(4)
Purchase of treasury stock	—	—		—	—		—	—		—	—		—	—		—	(7)		—		—		(7)
Balance at March 31, 2020	45	—		325	—		1,720,460	—		131,579	—		5,316,828	1		105,285	(172)		207,509		(188,563)		18,775
Net loss	—	—		—	—		—	—		—	—		—	—		—	—		—		(3,385)		(3,385)
Stock-based compensation	—	—		—	—		—	—		—	—		—	—		—	—		29		—		29
Forfeitures of restricted stock	—	—		—	—		(17,364)	—		—	—		—	—		—	—		—		—		—
Issuance of stock on vested restricted stock units	—	—		—	—		—	—		—	—		23,334	—		—	—		—		—		—
Preferred stock dividends	—	—		—	—		—	—		—	—		—	—		—	—		(4)		—		(4)
Issuance of preferred stock for accrued dividends	—	—		—	—		—	—		—	—		—	—		—	—		1				1
Purchase of treasury stock	—	—		—	—		—	—		—	—		—	—		7,998	(9)		—		—		(9)
Balance at June 30, 2020	45	$	—	325	$	—	1,703,096	$	—	131,579	$	—	5,340,162	$	1	113,283	$	(181)	$	207,535	$	(191,948)	$	15,407

See accompanying notes to condensed consolidated financial statements.

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OBLONG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(5,679)	$	(6,514)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,429		1,612
Bad debt expense	449		34
Amortization of debt discount	—		45
Amortization of right of use asset	250		595
Loss on disposal of equipment	—		15
Stock-based compensation	33		61
Common stock issued for services	390		—
Loss on foreign currency remeasurement	3		(12)
Gain on extinguishment of liability	(227)		—
Impairment charges - property and equipment	48		9
Impairment charges - goodwill	—		541
Changes in operating assets and liabilities:
Accounts receivable	1,764		1,149
Inventory	(1,205)		473
Prepaid expenses and other current assets	(702)		47
Other assets	7		(28)
Accounts payable	205		(3)
Accrued expenses and other current liabilities	408		(493)
Deferred revenue	(429)		238
Lease liabilities	(414)		(626)
Net cash used in operating activities	(3,670)		(2,857)
Cash flows from investing activities:
Purchases of property and equipment	(17)		(5)
Net cash used in investing activities	(17)		(5)
Cash flows from financing activities:
Proceeds from stock issuance, net of issuance costs	11,504		—
Proceeds from PPP Loan	—		2,417
Purchase of treasury stock	—		(16)
Net cash provided by in financing activities	11,504		2,401
Increase (decrease) in cash and restricted cash	7,817		(461)
Cash and restricted cash at beginning of period	5,277		4,602
Cash and restricted cash at end of period	$	13,094	$	4,141
Supplemental disclosures of cash flow information:
Reconciliation of cash and restricted cash
Cash	$	13,033	$	4,141
Restricted cash	$	61	$	—
Total cash and restricted cash	$	13,094	$	4,141
Cash paid during the period for interest	$	2	$	96
Non-cash investing and financing activities:
Issuance of preferred stock in exchange for accrued dividends	—		99
Accrued preferred stock dividends	1		8
Inducement to convert Series A-2 Preferred Stock to common	300		—
Common stock issued for conversion of Preferred Stock	3		—

See accompanying notes to condensed consolidated financial statements.

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OBLONG, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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determining the allowance for doubtful accounts, the estimated lives and recoverability of property and equipment, and intangible assets, the inputs used in the valuation of goodwill and intangible assets in connection with our impairment tests, and the inputs used in the fair value of equity based awards as well as the values ascribed to assets acquired and liabilities assumed in the business combination.

Significant Accounting Policies

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

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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):

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.

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Note 4 - Intangible Assets

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

	As of June 30, 2021						As of December 31, 2020
	Gross Carrying Amount		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
Developed technology	$	10,060	$	(3,528)	$	6,532	$	10,060	$	(2,520)	$	7,540
Trade names	2,410		(422)		1,988		2,410		(302)		2,108
Distributor relationships	310		(109)		201		310		(77)		233
Subtotal	12,780		(4,059)		8,721		12,780		(2,899)		9,881
Total	$	13,774	$	(4,828)	$	8,946	$	13,774	$	(3,634)	$	10,140

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

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):

Remainder of 2021	$	1,194
2022	2,385
2023	2,378
2024	1,844
2025	241
Thereafter	904
Total	$	8,946

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