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 September 30, 2022.

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 November 8, 2022 was 30,816,048.

OBLONG, INC.

Index

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements		1
	Condensed Consolidated Balance Sheets at September 30, 2022 (unaudited) and December 31, 2021	1
	Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021	2
	Unaudited Condensed Consolidated Statement of Stockholders’ Equity for the three and nine months ended September 30, 2022 and 2021	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021	5
	Notes to unaudited Condensed Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3. Quantitative and Qualitative Disclosures About Market Risk		25
Item 4. Controls and Procedures		25
PART II - OTHER INFORMATION
Item 1. Legal Proceedings		25
Item 1A. Risk Factors		25
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		26
Item 3. Defaults Upon Senior Securities		26
Item 4. Mine Safety Disclosures		26
Item 5. Other Information		26
Item 6. Exhibits		27
Signatures		28

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q (this “Report”) contains statements that are considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and its rules and regulations (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, and its rules and regulations (the “Exchange Act”). These forward-looking statements include, but are not limited to, statements about the plans, objectives, expectations and intentions of Oblong, Inc. (“Oblong” or “we” or “us” or the “Company”). All statements other than statements of current or historical fact contained in this Report, including statements regarding Oblong’s future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” and similar expressions, as they relate to Oblong, are intended to identify forward-looking statements. These statements are based on Oblong’s current plans, and Oblong’s actual future activities and results of operations may be materially different from those set forth in the forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. Any or all of the forward-looking statements in this Report may turn out to be inaccurate. Oblong has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. The forward-looking statements can be affected by inaccurate assumptions or by known or unknown risks, uncertainties and assumptions. There are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements, including our plans, objectives, expectations and intentions and other factors that are discussed under the section entitled “Part I. Item 1A. Risk Factors” and in our consolidated financial statements and the footnotes thereto for the fiscal year ended December 31, 2021, each included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2022, and in the section entitled “Part II. Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2022 filed with the SEC on August 10, 2022 (the “Q2 2022 Quarterly 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 expectations and estimates relating to customer attrition, sales cycles, future revenues, expenses, capital expenditures and cash flows; our ability to develop and launch new product offerings; evolution of our customer solutions and our service platforms; our ability to fund operations and continue as a going concern; expectations regarding adjustments to our cost of revenue and other operating expenses; our ability to finance investments in product development and sales and marketing; our ability to raise capital through sales of additional equity or debt securities and/or loans from financial institutions; statements relating to market need; our expected insurance coverage on our second quarter 2022 casualty loss; and effectiveness of our disclosure controls and procedures. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:

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

•our ability to continue as a going concern;

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

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

•our ability to launch new products and offerings and to sell our solutions;

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

•the ongoing performance and success of our Managed Services business;

•our ability to maintain and protect our proprietary rights;

•potential future impairment charges related to intangible assets;

•our ability to withstand industry consolidation;

•our ability to adapt to changes in industry structure and market conditions;

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

•the quality and reliability of our products and services;

•the prices for our products and services and changes to our pricing model;

•the success of our sales and marketing approach and efforts and our ability to grow revenue;

•customer renewal and retention rates;

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

•increases in material, labor or other manufacturing-related costs;

•changes in our go-to-market cost structure;

•inventory management and our reliance on our supply chain;

•our ability to attract and retain highly skilled personnel;

•our reliance on open-source software and technology;

•potential federal and state regulatory actions;

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

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

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

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

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

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

OBLONG, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

	September 30, 2022		December 31, 2021
	(Unaudited)
ASSETS
Current assets:
Cash	$	4,143	$	8,939
Restricted cash	—		61
Accounts receivable, net	357		849
Inventory	1,027		1,821
Prepaid expenses and other current assets	868		1,081
Total current assets	6,395		12,751
Property and equipment, net	25		159
Goodwill	—		7,367
Intangibles, net	690		7,562
Operating lease - right of use asset, net	201		659
Other assets	53		109
Total assets	$	7,364	$	28,607
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	401	$	259
Accrued expenses and other current liabilities	1,088		959
Current portion of deferred revenue	571		783
Current portion of operating lease liabilities	306		492
Total current liabilities	2,366		2,493
Long-term liabilities:
Operating lease liabilities, net of current portion	43		236
Deferred revenue, net of current portion	152		381
Total long-term liabilities	195		617
Total liabilities	2,561		3,110
Commitments and contingencies (see Note 11)
Stockholders’ equity:
Common stock, $.0001 par value; 150,000,000 shares authorized; 30,929,331 shares issued and 30,816,048 outstanding at September 30, 2022 and December 31, 2021	3		3
Treasury stock, 113,283 shares of common stock at September 30, 2022 and December 31, 2021	(181)		(181)
Additional paid-in capital	227,611		227,581
Accumulated deficit	(222,630)		(201,906)
Total stockholders' equity	4,803		25,497
Total liabilities and stockholders’ equity	$	7,364	$	28,607

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				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Revenue	$	1,185	$	1,799	$	4,050	$	5,766
Cost of revenue (exclusive of depreciation and amortization and casualty loss)	841		1,228		2,800		3,767
Gross profit	344		571		1,250		1,999
Operating expenses:
Research and development	232		693		1,634		1,984
Sales and marketing	282		438		1,161		1,537
General and administrative	1,229		1,628		4,104		5,078
Impairment charges	5,169		254		12,715		302
Casualty loss	—		—		533		—
Depreciation and amortization	592		669		1,818		2,098
Total operating expenses	7,504		3,682		21,965		10,999
Loss from operations	(7,160)		(3,111)		(20,715)		(9,000)
Interest and other expense (income), net	(5)		(2,449)		1		(2,659)
Loss before income taxes	(7,155)		(662)		(20,716)		(6,341)
Income tax expense (benefit)	(3)		—		8		—
Net loss	(7,152)		(662)		(20,724)		(6,341)
Preferred stock dividends	—		—		—		1
Undeclared dividends	—		—		—		366
Induced conversion of Series A-2 Preferred Stock	—		—		—		300
Net loss attributable to common stockholders	$	(7,152)	$	(662)	$	(20,724)	$	(7,008)
Net loss attributable to common stockholders per share:
Basic and diluted net loss per share	$	(0.23)	$	(0.02)	$	(0.67)	$	(0.28)
Weighted-average number of shares of common stock:
Basic and diluted	30,816		30,739		30,816		25,121

See accompanying notes to condensed consolidated financial statements.

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OBLONG, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

Three and Nine Months Ended September 30, 2022

(In thousands, except shares)

(Unaudited)

	Common Stock			Treasury Stock
	Shares	Amount		Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Total
Balance at December 31, 2021	30,929,331	$	3	113,283	$	(181)	$	227,581	$	(201,906)	$	25,497
Net loss	—	—		—	—		—		(4,539)		(4,539)
Stock-based compensation	—	—		—	—		52		—		52
Forfeiture of unvested stock options	—	—		—	—		(84)		—		(84)
Balance at March 31, 2022	30,929,331	3		113,283	(181)		227,549		(206,445)		20,926
Net loss	—	—		—	—		—		(9,033)		(9,033)
Stock-based compensation	—	—		—	—		31		—		31
Balance at June 30, 2022	30,929,331	3		113,283	(181)		227,580		(215,478)		11,924
Net loss	—	—		—	—		—		(7,152)		(7,152)
Stock-based compensation	—	—		—	—		31		—		31
Balance at September 30, 2022	30,929,331	$	3	113,283	$	(181)	$	227,611	$	(222,630)	$	4,803

See accompanying notes to condensed consolidated financial statements.

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OBLONG, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

Three and Nine Months Ended September 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 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
Net loss	—	—		—	—		—	—		—	—		—	—		—		(662)		(662)
Stock-based compensation	—	—		—	—		—	—		—	—		—	—		502		—		502
Issuance of stock on vested restricted stock units	—	—		—	—		—	—		200	—		—	—		—		—		—
Balance at September 30, 2021	—	$	—	—	$	—	—	$	—	30,929,331	$	3	113,283	$	(181)	$	227,519	$	(199,196)	$	28,145

See accompanying notes to condensed consolidated financial statements.

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OBLONG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net loss	$	(20,724)	$	(6,341)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,818		2,098
Bad debt expense	114		280
Stock-based compensation	114		535
Stock-based expense for services	—		390
Forfeiture of unvested stock options	(84)		—
Gain on extinguishment of liabilities	—		(2,675)
Casualty loss on inventory	533		—
Impairment charges - property and equipment	37		98
Impairment charges - intangible assets	5,132		207
Impairment charges - right of use asset	179		—
Impairment charges - goodwill	7,367		—
Changes in operating assets and liabilities:
Accounts receivable	378		1,610
Inventory	261		(936)
Prepaid expenses and other current assets	213		(751)
Right of use asset	290		372
Other assets	56		15
Accounts payable	142		225
Accrued expenses and other current liabilities	129		11
Deferred revenue	(441)		(355)
Lease liabilities	(390)		(739)
Net cash used in operating activities	(4,876)		(5,956)
Cash flows from investing activities:
Purchases of property and equipment	(11)		(30)
Proceeds from sale of equipment	30		—
Net cash provided by (used in) investing activities	19		(30)
Cash flows from financing activities:
Proceeds from stock issuance, net of issuance costs	—		11,504
Net cash provided by financing activities	—		11,504
(Decrease) increase in cash and restricted cash	(4,857)		5,518
Cash and restricted cash at beginning of period	9,000		5,277
Cash and restricted cash at end of period	$	4,143	$	10,795
Supplemental disclosures of cash flow information:
Reconciliation of cash and restricted cash
Cash	$	4,143	$	10,734
Restricted cash	—		61
Total cash and restricted cash	$	4,143	$	10,795
Cash paid during the period for interest	$	7	$	2
Non-cash investing and financing activities:
Accrued preferred stock dividends	$	—	$	1
Inducement to convert Series A-2 Preferred Stock to common	$	—	$	300
Common stock issued for conversion of Preferred Stock	$	—	$	3
Lease liability and right of use asset	$	11	$	—

See accompanying notes to condensed consolidated financial statements.

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OBLONG, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2022

(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, 2021. In the opinion of the Company's management, these interim condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of our financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.

The December 31, 2021 year-end condensed consolidated balance sheet data in this document was derived from audited consolidated financial statements. The 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, 2021 and notes thereto included in the Company's fiscal 2021 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 29, 2022 (the “2021 10-K”).

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

Principles of Consolidation

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

Segments

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

Use of Estimates

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

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

Significant Accounting Policies

The significant accounting policies used in preparation of these condensed consolidated financial statements are disclosed in our 2021 10-K, and there have been no changes to the Company’s significant accounting policies during the nine months ended September 30, 2022.

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 has evaluated the impact the new guidance will have on its consolidated financial statements and does not expect the impact to be material.

In May 2021, the FASB issued ASU 2021-04, Issuer’s Accounting for Certain Modifications or 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 has adopted this standard, effective January 1, 2022, and it did not have a material effect on our financial statements.

Casualty Loss

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

Note 2 - Liquidity and Going Concern Uncertainty

As of September 30, 2022, we had $4,143,000 in cash and working capital of $4,029,000. For the nine months ended September 30, 2022, we incurred a net loss of $20,724,000 and used $4,876,000 of net cash in operating activities.

Future Capital Requirements and Going Concern

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

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

Note 3 - Goodwill

As of September 30, 2022 and December 31, 2021, goodwill was zero and $7,367,000, respectively, the goodwill was recorded in connection with the October 1, 2019 acquisition of Oblong Industries (our Collaboration Products reporting unit).

We tested goodwill for impairment on an annual basis on September 30 of each year, or more frequently if events occurred or circumstances changed indicating that the fair value of the goodwill may be below its carrying amount. To determine the fair value of the reporting unit for the goodwill impairment test, we used a weighted average of the discounted cash flow method and market-based method.

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

Note 4 - Intangible Assets

The following table presents the components of net intangible assets for our Collaboration Products reporting segment (in thousands):

	As of September 30, 2022								As of December 31, 2021
	Gross Carrying Amount		Accumulated Amortization		Impairment Charges		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Developed technology	$	10,060	$	(6,049)	$	(3,525)	$	486	$	10,060	$	(4,537)	$	5,523
Trade names	2,410		(723)		(1,483)		204		2,410		(542)		1,868
Distributor relationships	310		(186)		(124)		—		310		(139)		171
Total	$	12,780	$	(6,958)	$	(5,132)	$	690	$	12,780	$	(5,218)	$	7,562

At each reporting period, we determine if there was a triggering event that may result in an impairment of our intangible assets. During the three and nine months ended September 30, 2022, we considered the declines in revenue for the Collaboration Products reporting segment and the decline in the Company’s market capitalization to be triggering events for an impairment test of intangible assets for this reporting unit. Based on the corresponding recoverability tests of the asset group for this reporting unit, it was determined that the carrying value exceeded the gross cash flows of the asset group. The recoverability test consisted of comparing the estimated undiscounted cash flows expected to be generated by those assets to the respective carrying amounts, and involves significant judgements and assumptions, related primarily to the future revenue and profitability of the assets. Based on the fair value of the asset group, which was determined using a market approach, we recorded impairment charges of $5,132,000 for the three and nine months ended September 30, 2022. Additionally, we re-evaluated the remaining useful lives of our amortizing intangible assets and, based on our current plan, we adjusted its remaining useful life to 2 years. Intangible assets with finite lives are amortized using the straight-line method over the estimated economic lives of the assets.

Related amortization expense was $580,000, $1,740,000, $597,000, and $1,791,000 for the three and nine months ended September 30, 2022 and 2021, respectively.

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

Remainder of 2022	$	86
2023	345
2024	259
Total	$	690

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Note 5 - Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

	September 30,		December 31,
	2022		2021
Accrued compensation costs	$	780	$	551
Accrued professional fees	—		69
Accrued taxes and regulatory fees	80		92
Customer deposits	120		145
Other accrued expenses and liabilities	108		102
Accrued expenses and other liabilities	$	1,088	$	959

Note 6 - Leases

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

Lease expenses, including common charges and net of sublet proceeds, for the three and nine months ended September 30, 2022 and 2021 were $92,000, $307,000, $175,000, and $602,000, respectively.

The following provides balance sheet information related to leases as of September 30, 2022 and December 31, 2021 (in thousands):

		September 30, 2022		December 31, 2021
Assets
	Operating lease, right-of-use asset, net	$	201	$	659
Liabilities
	Current portion of operating lease liabilities	$	306	$	492
	Operating lease liabilities, net of current portion	43		236
	Total operating lease liabilities	$	349	$	728

During the three and nine months ended September 30, 2022 and 2021, payments of $110,000, $408,000, $189,000, and $640,000 were made on leases, respectively. The following table summarizes the future undiscounted cash payments reconciled to the lease liability (in thousands):

Remaining Lease Payments
2022	$	110
2023	225
2024	17
Total lease payments	352
Effect of discounting	(3)
Total lease liability	$	349

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

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

	Right-of-Use Asset		Operating Lease Liabilities
Balance at December 31, 2020	$	903	$	1,432
Additions	60		60
Terminations and Modifications	192		156
Amortization and Payments	(496)		(920)
Balance at December 31, 2021	$	659	$	728
Additions	11		11
Amortization and Payments	(290)		(390)
Impairment Charges	(179)		—
Balance at September 30, 2022	$	201	$	349

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

Note 7 - Capital Stock

Common Stock

The Company’s common stock, par value $0.0001 per share (the “Common Stock”), is listed on The Nasdaq Capital Market (“Nasdaq”), under the ticker symbol “OBLG”. As of September 30, 2022, we had 150,000,000 shares of our Common Stock authorized, with 30,929,331 and 30,816,048 shares issued and outstanding, respectively.

The Company did not issue any shares of Common Stock during the three and nine months ended September 30, 2022.

Warrants

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

Issue Date	Warrants Issued	Exercise Price		Expiration Date
October 21, 2020	521,500	$	4.08	April 22, 2023
December 6, 2020	625,000	5.49		June 7, 2023
June 30, 2021 - Series A(1)	1,000,000	4.00		January 4, 2023
June 30, 2021 - Series B	3,000,000	4.40		June 30, 2024
	5,146,500
(1) Series A Warrants shown as amended on December 31, 2021

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

	Outstanding
	Number of Warrants (in thousands)	Weighted Average Exercise Price
Warrants outstanding and exercisable, December 31, 2020	1,146,500	$	4.85
Granted	4,000,000	4.30
Warrants outstanding and exercisable, December 31, 2021	5,146,500	4.42
Warrants outstanding and exercisable, September 30, 2022	5,146,500	$	4.42

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Treasury Shares

The Company maintains treasury stock for the Common Stock shares bought back by the Company when withholding shares to cover taxes on transactions related to equity awards. There were no treasury stock transactions during the nine months ended September 30, 2022 or the year ended December 31, 2021.

Note 8 - Stock Based Compensation

2019 Equity Incentive Plan

On December 19, 2019, the Oblong, Inc. 2019 Equity Incentive Plan (the “2019 Plan”) was approved by the Company’s stockholders at the Company’s 2019 Annual Meeting of Stockholders. The 2019 Plan is an omnibus equity incentive plan pursuant to which the Company may grant equity and cash incentive awards to certain key service providers of the Company and its subsidiaries. As of September 30, 2022, the share pool available for new grants under the 2019 Plan is 2,663,500.

Stock Options

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

A summary of stock options granted, expired, and forfeited under our plans, and options outstanding as of, and changes made during the nine months ended September 30, 2022 and the year ended December 31, 2021 is presented below:

	Outstanding			Exercisable
	Number of Options	Weighted Average Exercise Price		Number of Options	Weighted Average Exercise Price
Options outstanding and exercisable, December 31, 2020	107,500	$	19.64	107,500	$	19.64
Granted	300,000	3.25		—	—
Options outstanding and exercisable, December 31, 2021	407,500	7.57		107,500	19.64
Vested	—	—		50,000	3.25
Expired	(7,500)	27.40		(7,500)	27.40
Forfeited	(150,000)	3.25		—	—
Options outstanding and exercisable, September 30, 2022	250,000	$	9.57	150,000	$	12.98

Additional information as of September 30, 2022 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	152,500	8.63	$	3.34	52,500	$	1.20
$10.01 – $20.00	97,500	0.31	19.32		97,500	19.32
	250,000	5.38	$	9.57	150,000	$	12.98

The intrinsic value of vested options, unvested options and exercised options were not significant for all periods presented. Net stock compensation expense, related to stock options, for the nine months ended September 30, 2022 was $30,000 made up of $114,000 in expense offset by $84,000 related to forfeiture credits. Stock compensation expense, related to stock options,

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was $64,000 for the nine months ended September 30, 2021. The remaining unrecognized stock-based compensation expense for options as of September 30, 2022 is $216,000, which will be recognized over a weighted average period of 1.75 years.

Restricted Stock Awards

As of September 30, 2022 and 2021, 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 unrecognized stock-based compensation expense for restricted stock awards as of September 30, 2022.

Restricted Stock Units

As of September 30, 2022 and 2021, there were no unvested restricted stock units (“RSUs”) outstanding. As of September 30, 2022, 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 related to RSUs for the three and nine months ended September 30, 2022 and there was $438,000 in stock compensation expense related to RSUs for the three and nine months ended September 30, 2021. There was no remaining unrecognized stock-based compensation expense for RSUs as of September 30, 2022.

Note 9 - Net Loss Per Share

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 September 30, 2022 and 2021, 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 nine months ended September 30, 2022 and 2021, all such common stock equivalents have been excluded from diluted net loss per share as the effect to net loss per share would be anti-dilutive (due to the net loss).

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Numerator:
Net loss	$	(7,152)	$	(662)	$	(20,724)	$	(6,341)
Less: preferred stock dividends	—		—		—		(1)
Less: undeclared dividends	—		—		—		(366)
Less: loss on induced conversion of Series A-2 Preferred Stock	—		—