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Table of Contents

 

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, 2024.

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.)

 

110 16th Street, Suite 1400-1024, Denver, CO 80202

(Address of Principal Executive Offices, including Zip Code)

 

(213) 683-8863 ext. 5

(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 6, 2024 was 28,242,418.

 

 

 

OBLONG, INC.

Index

 

PART I - FINANCIAL INFORMATION

 
   

Item 1. Financial Statements

1

   

Condensed Consolidated Balance Sheets at June 30, 2024 (unaudited) and December 31, 2023

1

   

Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023

2

   

Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023

3

   

Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023

5

   

Notes to unaudited Condensed Consolidated Financial Statements

6

   

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

   

Item 3. Quantitative and Qualitative Disclosures About Market Risk

24

   

Item 4. Controls and Procedures

24

   
   

PART II - OTHER INFORMATION

 
   

Item 1. Legal Proceedings

24

   

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 Oblongs 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 Oblongs current plans, and Oblongs 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, 2023, each included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the Securities and Exchange Commission (the SEC) on March 19, 2024, 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: opportunities for and benefits of potential strategic alternatives; our expectations and estimates relating to customer attrition, demand for our product offerings, 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; our liquidity projection; expectations regarding adjustments to our cost of revenue and other operating expenses; our ability to finance investments in product development and sales and marketing; the future exercise of warrants; our ability to raise capital through sales of additional equity or debt securities and/or loans from financial institutions; our beliefs about the ongoing performance and success of our Managed Service business; statements relating to market need and evolution of the industry, our solutions and our service platforms; and the adequacy of our internal controls. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:

 

our ability to raise capital in one or more debt and/or equity offerings in order to fund operations or any growth initiatives and our ability to continue as a going concern;

the impact of the issuance of our Series F Preferred Stock in the March 2023 private placements, conversions of our Series F Preferred Stock, exercises of the Series F Preferred Stock warrants, and sales of the underlying conversion shares.

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;

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;

the continued impact from the aftermath of the coronavirus pandemic on our revenue and results of operations;

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 managements attention associated with campaigns commenced by activist investors; and

our managements 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 and stated value)

 

  

June 30, 2024

  

December 31, 2023

 
  

(Unaudited)

     

ASSETS

        

Current assets:

        

Cash and cash equivalents

 $5,858  $5,990 

Accounts receivable, net

  31   424 

Inventory, net

  88   239 

Prepaid expenses and other current assets

  317   243 

Total current assets

  6,294   6,896 

Operating lease - right of use asset, net

     17 

Other assets

  11   12 

Total assets

 $6,305  $6,925 

LIABILITIES AND STOCKHOLDERS’ EQUITY

        

Current liabilities:

        

Accounts payable

 $111  $211 

Accrued expenses and other current liabilities

  1,059   1,038 

Current portion of deferred revenue

  77   132 

Operating lease liabilities

     17 

Total current liabilities

  1,247   1,398 

Long-term liabilities:

        

Deferred revenue, net of current portion

  6   26 

Total liabilities

  1,253   1,424 

Commitments and contingencies (see Note 9)

          

Stockholders’ equity:

        

Preferred stock Series F, convertible; $0.0001 par value; $545,000 stated value; 42,000 shares authorized, 545 and 1,930 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively

      

Common stock, $0.0001 par value; 150,000,000 shares authorized; 28,249,971 shares issued and 28,242,418 shares outstanding at June 30, 2024 and 16,692,124 shares issued and 16,684,571 outstanding at December 31, 2023

  3   2 

Treasury Stock, 7,553 common shares

  (181)  (181)

Additional paid-in capital

  235,580   233,911 

Accumulated deficit

  (230,350)  (228,231)

Total stockholders' equity

  5,052   5,501 

Total liabilities and stockholders’ equity

 $6,305  $6,925 

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

 

OBLONG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

 

   

Three Months Ended

   

Six Months Ended

 
   

June 30,

   

June 30,

 
   

2024

   

2023

   

2024

   

2023

 

Revenue

  $ 611     $ 956     $ 1,237     $ 1,994  

Cost of revenue (exclusive of amortization)

    491       834       1,120       1,596  

Gross profit

    120       122       117       398  
                                 

Operating expenses:

                               

Research and development

    65       5       115       11  

Sales and marketing

    57       (58 )     111       160  

General and administrative

    1,016       1,577       2,093       2,746  

Amortization

          87             173  

Impairment charges

          2             2  

Casualty gain (insurance proceeds)

          (400 )           (400 )

Total operating expenses

    1,138       1,213       2,319       2,692  

Operating loss

    (1,018 )     (1,091 )     (2,202 )     (2,294 )

Interest income, net

    (44 )     (42 )     (92 )     (64 )

Loss before income taxes

    (974 )     (1,049 )     (2,110 )     (2,230 )

Income tax expense

    9             9       38  

Net loss

    (983 )     (1,049 )     (2,119 )     (2,268 )

Preferred stock dividends

    20       149       64       149  

Warrant modification

                      25  

Induced conversion of warrants

          751             751  

Net loss attributable to common share holders

  $ (1,003 )   $ (1,949 )   $ (2,183 )   $ (3,193 )
                                 

Net loss attributable to common stockholders per share:

                               

Basic and diluted net loss per share

  $ (0.04 )   $ (0.78 )   $ (0.11 )   $ (1.40 )

Weighted-average number of shares of common stock:

                               

Basic and diluted

    22,882       2,487       20,003       2,277  

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

OBLONG, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

Three and Six Months Ended June 30, 2024

(In thousands, except shares of Series F Preferred Stock)

(Unaudited)

 

   

Series F Preferred Stock

   

Common Stock

   

Treasury Stock

                         
                                                   

Additional

   

Accumulated

         
   

Shares

   

Amount

   

Shares

   

Amount

   

Shares

   

Amount

   

Paid-In Capital

   

Deficit

   

Total

 

Balance at December 31, 2023

    1,930     $       16,692     $ 2       8     $ (181 )   $ 233,911     $ (228,231 )   $ 5,501  

Net loss

                                              (1,136 )     (1,136 )

Stock-based compensation

                                        31             31  

Series F Preferred Stock conversions

    (922 )           3,602                         82             82  

Series F Preferred Stock dividends

                                        (44 )           (44 )

Balance at March 31, 2024

    1,008             20,294       2       8       (181 )     233,980       (229,367 )     4,434  

Net loss

                                              (983 )     (983 )

Stock-based compensation

                                        31             31  

Warrant exercise, net of fees

    1,648                                     1,478             1,478  

Series F Preferred Stock conversions

    (2,111 )           7,956       1                   111             112  

Series F Preferred Stock dividends

                                        (20 )           (20 )

Balance at June 30, 2024

    545     $       28,250     $ 3       8     $ (181 )   $ 235,580     $ (230,350 )   $ 5,052  

 

See accompanying notes to condensed consolidated financial statements.

 

 

OBLONG, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

Three and Six Months Ended June 30, 2023

(In thousands, except shares of Series F Preferred Stock)

(Unaudited)

 

   

Series F Preferred Stock

   

Common Stock

   

Treasury Stock

                         
                                                   

Additional

   

Accumulated

         
   

Shares

   

Amount

   

Shares

   

Amount

   

Shares

   

Amount

   

Paid-In Capital

   

Deficit

   

Total

 

Balance at December 31, 2022

        $       2,071     $       8     $ (181 )   $ 227,645     $ (223,847 )   $ 3,617  

Net loss

                                              (1,219 )     (1,219 )

Stock-based compensation

                                        31             31  

Proceeds from private placement, net of fees and amounts held in escrow

    6,550                                     1,473             1,473  

Balance at March 31, 2023

    6,550             2,071             8       (181 )     229,149       (225,066 )     3,902  

Net loss

                                              (1,049 )     (1,049 )

Stock-based compensation

                180                         411             411  

Warrant exercise, net of fees

                339                         534             534  

Release of escrow from March 31, 2023 private placement

                                        4,000             4,000  

Fees associated with Series F Preferred Stock issuance

                                        (38 )           (38 )

Series F Preferred Stock conversions

    (175 )           147                         4             4  

Series F Preferred Stock dividends

                                        (149 )           (149 )

Balance at June 30, 2023

    6,375     $       2,737     $       8     $ (181 )   $ 233,911     $ (226,115 )   $ 7,615  

 

See accompanying notes to condensed consolidated financial statements.

 

 

 

OBLONG, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

   

Six Months Ended June 30,

 
   

2024

   

2023

 

Cash flows from operating activities:

               

Net loss

  $ (2,119 )   $ (2,268 )

Adjustments to reconcile net loss to net cash used in operating activities:

               

Amortization

          173  

Bad debt (recovery) expense

          (32 )

Non-cash lease expense from right-of-use asset

    17       77  

Stock-based compensation

    62       442  

Casualty gain (insurance proceeds)

          (400 )

Impairment charges - property and equipment

          2  

Changes in operating assets and liabilities:

               

Accounts receivable

    393       203  

Inventory

    151       321  

Prepaid expenses and other current assets

    (74 )     213  

Other assets

    1       18  

Accounts payable

    (100 )     (48 )

Accrued expenses and other current liabilities

    151       (456 )

Deferred revenue

    (75 )     (259 )

Lease liabilities

    (17 )     (168 )

Net cash used in operating activities

    (1,610 )     (2,182 )

Cash flows from financing activities:

               

Proceeds from private placement, net of issuance costs and amounts in escrow

          5,435  

Net proceeds from exercise of common stock warrants

          534  

Net proceeds from exercise of preferred stock warrants

    1,478        

Net cash provided by financing activities

    1,478       5,969  

(Decrease) increase in cash

    (132 )     3,787  

Cash and cash equivalents at beginning of period

    5,990       3,085  

Cash and cash equivalents at end of period

  $ 5,858     $ 6,872  

Supplemental disclosures of cash flow information:

               
                 

Reconciliation of cash and cash equivalents

               

Cash

  $ 5,358     $ 6,872  

Current certificates of deposit

  $ 500     $  

Total cash and cash equivalents

  $ 5,858     $ 6,872  
                 

Cash paid during the period for interest

  $ 5     $ 9  

Cash paid for income taxes

  $     $ 31  
                 

Non-cash investing and financing activities:

               

Preferred stock dividends

  $ 64     $ 149  

Common stock issued for conversion of Preferred Stock and accrued dividends

  $ 194     $ 4  

Warrant modification

  $     $ 25  

Induced exercise of common stock warrants

  $     $ 751  

 

See accompanying notes to condensed consolidated financial statements.

 

 

OBLONG, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(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.

 

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, 2023. 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, 2023 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, 2023 and notes thereto included in the Company's fiscal 2023 Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 19, 2024 (the “2023 Annual Report”).

 

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, and (ii) Oblong Industries, Inc. All inter-company balances and transactions have been eliminated in consolidation. The U.S. Dollar is the functional currency for all subsidiaries.

 

Cash and Cash Equivalents

 

As of June 30, 2024, our total cash balance of $5,858,000 is available. Of this balance $500,000 was held in short-term certificates of deposit with MidFirst Bank. As of December 31, 2023, our total cash balance of $5,990,000 was available with $500,000 held in short-term certificates of deposit with MidFirst Bank. The Company considers highly liquid investments with original maturities of three months or less to be cash equivalents.

 

Segments

 

The Company currently operates in two segments: (1) “Collaboration Products” which represents the business surrounding our Mezzanine™ product offerings, and (2) “Managed Services” which represents the business surrounding managed services for video collaboration and network solutions. See Note 8 - Segment Reporting for further discussion.

 

- 6-

 

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 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 adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. The significant areas of estimation include determining the allowances for inventory obsolescence and estimated credit losses and the inputs used in the fair value of equity-based awards.

 

Amortization Expense

 

As of June 30, 2024 and December 31, 2023, we had no intangible assets. Amortization expense related to intangible assets for the three and six months ended June 30, 2023 was $87,000 and $173,000, respectively.

 

Operating Lease Right-of-use-Assets and Liabilities

 

In February 2024, we exited our warehouse lease in City of Industry, California, and are no longer a party to any long-term operating leases. Right-of-use assets, net totaled $17,000 as of December 31, 2023, consisting of the warehouse lease discussed above. As of June 30, 2024, the Company had no right-of-use assets remaining. The remaining operating lease liability as of December 31, 2023 was $17,000, consisting of the warehouse lease discussed above. As of June 30, 2024, the Company had no lease liability remaining. During the six months ended June 30, 2024, we recorded $17,000 in lease expenses. During the three and six months ended June 30, 2023, we recorded $36,000 and $82,000 in lease expenses, respectively. These expenses are net of common charges, and sublease proceeds of $11,000 and $27,000, respectively.

 

Significant Accounting Policies

 

The significant accounting policies used in preparation of these Condensed Consolidated Financial Statements are disclosed in our 2023 Annual Report, and there have been no changes to the Company’s significant accounting policies during the six months ended June 30, 2024.

 

Recently Issued Accounting Pronouncements

 

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic280): Improvements to Reportable Segment Disclosures. The new guidance is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments are effective retrospectively for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company is in the process of evaluating the impact that the adoption of this ASU will have on the financial statements and related disclosures, which is not expected to be material.

 

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Tax Disclosures (Topic 740), to enhance the transparency and decision usefulness of income tax disclosures through changes to the rate reconciliation and income taxes paid information. This guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is evaluating the impact of adopting this new accounting guidance on its Consolidated Financial Statements.

 

 

Note 2 - Liquidity

 

As of June 30, 2024, we had $5,858,000 in cash and working capital of $5,047,000. For the six months ended June 30, 2024 we incurred a net loss of $2,119,000, financing activities provided $1,478,000 in net cash, and we used net cash of $1,610,000 in operating activities.

 

We believe that our existing cash and cash equivalents will be sufficient to fund our operations and meet our working capital requirements through 2025.

 

- 7-

 
 

Note 3 - Accrued Expenses and Other Current Liabilities

 

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

 

  

June 30,

  

December 31,

 
  

2024

  

2023

 
         

Compensation costs

 $675  $448 

Customer deposits

  86   118 

Professional fees

  93   104 

Taxes and regulatory fees

  20   22 

Accrued rent

  170   202 

Accrued dividends on Series F Preferred Stock

  4   136 

Other accrued expenses and liabilities

  11   8 

Accrued expenses and other liabilities

 $1,059  $1,038 

 

 

Note 4 - 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 June 30, 2024, we had 150,000,000 shares of our Common Stock authorized, with 28,250,000 and 28,242,000 shares issued and outstanding, respectively.

 

During the three months ended June 30, 2024, 2,111 shares of Series F Preferred Stock, plus $110,000 of accrued dividends, were converted to 7,955,743 shares of the Company’s Common Stock. During the six months ended June 30, 20243,033 shares of Series F Preferred Stock, plus $194,000 of accrued dividends, were converted into 11,558,000 shares of the Company's Common Stock. See Note 5 - Preferred Stock for further detail.

 

Common Stock activity for the year ended December 31, 2023 and six months ended June 30, 2024 is presented below (in thousands).

 

Issued Shares as of December 31, 2022

  2,071 

Issuances from Preferred Stock conversions

  14,102 

Issuances related to warrant exercises

  746 

Issuances related to stock compensation

  180 

Common shares exchanged for prepaid warrants

  (407)

Issued Shares as of December 31, 2023

  16,692 

Issuances from Preferred Stock conversions

  11,558 

Issued Shares as of June 30, 2024

  28,250 

Less Treasury Shares:

  (8)

Outstanding Shares as of June 30, 2024

  28,242 

 

Common Stock Warrants

 

During the three and six months ended June 30, 2024, Common Warrants were issued in accordance with the exercise provisions of the Preferred Warrants. See Note 5 - Preferred Stock for additional detail on the exercises of the Preferred Warrants. These Common Warrants are exercisable on the six-month anniversary of issuance, at an initial exercise price of $1.71, and have a term of five years.

 

Common Warrants outstanding as of June 30, 2024 are as follows:

 

Issue Date

 

Warrants Outstanding

  

Exercise Price

 

Expiration Date

          
          

Q2 2021

  750  $66.00 

Q4 2024

Q1 2023

  4,136,850  $1.71 

Q3 2028

Q2 2024

  963,745  $1.71 

Q4 2029

   5,101,345      

 

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Common Warrant activity for the year ended December 31, 2023 and six months ended June 30, 2024 is presented below.

 

  

Outstanding

 
  

Number of Warrants

  

Weighted Average Exercise Price

 

Warrants outstanding as of December 31, 2022

  343,099  $ 

Granted

  4,543,626   1.56 

Exercised

  (746,027)  0.78 

Expired

  (2,848)  70.25 

Warrants outstanding as of December 31, 2023

  4,137,850   1.73 

Granted

  963,745   1.71 

Expired

  (250)  60.00 

Warrants outstanding as of June 30, 2024 (1)

  5,101,345  $1.71 
         

(1) Of the outstanding shares at June 30, 2024, 4,137,600 were exercisable.

        

 

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 six months ended June 30, 2024 or the year ended December 31, 2023.

 

 

Note 5 - Preferred Stock

 

Our Certificate of Incorporation authorizes the issuance of up to 5,000,000 shares of preferred stock. As of June 30, 2024, we had 1,983,250 designated shares of preferred stock and 545 shares of preferred stock issued and outstanding. As of December 31, 2023, we had 1,930 shares of preferred stock issued and outstanding.

 

Series F Preferred Stock

 

On March 30, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain accredited investors (the “Investors”), pursuant to which we issued and sold, in a private placement (the “Private Placement”) (i) 6,550 shares of our newly designated Series F Preferred Stock, $0.0001 par value per share (the “Series F Preferred Stock”), (ii) preferred warrants (the “Preferred Warrants”) to acquire 32,750 shares of Series F Preferred Stock, and (iii) common warrants (“Common Warrants” and with the Preferred Warrants the “Investor Warrants”) to acquire up to 3,830,417 shares of Common Stock. See Note 4 - Capital Stock for additional detail regarding the Common Warrants. The terms of the Series F Preferred Stock are as set forward in the Certificate of Designations of Series F Preferred Stock of Oblong, Inc. (the “Certificate of Designations”), which was filed and became effective with the Secretary of State of the State of Delaware on March 31, 2023. The Private Placement closed on March 31, 2023, in exchange for gross and net proceeds of $6,386,000 and $5,364,000, respectively. The financing fees associated with the Purchase Agreement were $1,022,000.

 

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

 

On October 6, 2023, the Company and Investors holding a majority of the outstanding shares of the Preferred Stock agreed to waive any and all provisions, terms, covenants and obligations in the Certificate of Designations or Common Warrants to the extent such provisions permit the conversion or exercise of the Preferred Stock and the Common Warrants, respectively, to occur at a price below $0.2792. Notwithstanding anything to the contrary in the Certificate of Designations, each of the “Alternate Conversion Price” and the “Floor Price” as set forth in the Certificate of Designations shall in no event be less than $0.2792 (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events).

 

- 9-

 

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

 

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

 

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

 

During the three and six months ended June 30, 20242,111 and 3,033shares of Series F Preferred Stock, plus accrued dividends, were converted to 7,955,743 and 11,558,000 shares of the Company’s common stock, respectively. There were 545 shares of Series F Preferred Stock outstanding and accrued dividends of $4,000 as of June 30, 2024.

 

During the three and six months ended June 30, 20241,648 Series F Preferred Shares were issued upon exercise of 1,648 Preferred Warrants. The Company received gross and net proceeds of $1,607,000 and $1,478,000, respectively. 

 

One of our directors, Jonathan Schechter, is currently a partner at The Special Equities Group ("SEG"), a division of Dawson James Securities, Inc. In March 2023, prior to Mr. Schechter's appointment to our board in May 2023, SEG acted as placement agent in connection with our March 31, 2023 Purchase Agreement. During the three and six months ended June 30, 2024, pursuant to the terms of our engagement later with Dawson James Securities, Inc., we paid SEG a cash fee equal to 8% of the aggregate gross proceeds raised from the exercise of the 1,648 Series F Preferred Warrants.  This fee was approximately $129,000. Mr. Schechter did not receive any of the fees paid.

 

Series F Preferred Stock transactions are summarized in the table below (in thousands except for shares of Series F Preferred Stock:

 

  

Series F Preferred Stock Shares

  

Preferred Stock Dividends

  

Weighted Average Conversion Price

  

Common Shares Issued from Conversions

 

March 31, 2023 Issuance

  6,550  $        

2023 Accrued Dividends

     345,000        

2023 Conversions

  (4,620)  (209,000) $0.34   14,102,000 

December 31, 2023 Balance

  1,930   136,000       14,102,000 

2024 Issuances

  1,648           

2024 Accrued Dividends

     63,000        

2024 Conversions

  (3,033)  (195,000) $0.28   11,558,000 

June 30, 2024 Balance

  545  $4,000  $0.33   25,660,000 

 

Series F Preferred Stock Warrants

 

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

 

During the three and six months ended June 30, 20241,648 Preferred Warrants were exercised for gross and net proceeds of $1,607,000 and $1,478,000, respectively. In accordance with the exercise provisions of the Preferred Stock, 963,745 Common Warrants were issued during the three and six months ended June 30, 2024See Note 4 - Capital Stock for further discussion of the Common Warrants. As of June 30, 2024, 31,102 Preferred Warrants remained outstanding.

 

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Note 6 - 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  December 31, 2023 and June 30, 2024, the share pool available for new grants under the 2019 Plan was 3.

 

Stock Options

 

A summary of stock option activity under our plans, and options outstanding as of, and changes made during the six months ended June 30, 2024 and year ended December 31, 2023 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, 2022

  16,668  $143.62   10,000  $239.38 

Vested

        3,336   48.75 

Expired

  (6,668)  285.89   (6,668)  285.89 

Options outstanding and exercisable, December 31, 2023

  10,000   48.75   6,668   48.75 

Vested

         3,332   48.75 

Options outstanding and exercisable, June 30, 2024

  10,000  $48.75   10,000  $48.75 

 

The intrinsic value of vested and unvested options was not significant for all periods presented. Stock compensation expense related to stock options for the three months ended June 30, 2024 and 2023 was $31,000 and stock compensation for the six months ended June 30, 2024 and 2023 was $62,000, which was included as a general and administrative expense on our Condensed Consolidated Statements of Operations. As of June 30, 2024 there is no remaining unamortized stock compensation expense.

 

Restricted Stock

 

As of June 30, 2024 and December 31, 2023, there were no outstanding restricted stock awards ("RSAs") or restricted stock units (“RSUs,” collectively "Restricted Stock"). There was no Restricted Stock activity or expense for the three and six months ended June 30, 2024. During the three and six months ended June 30, 2023, 42 RSAs became fully vested and were delivered in shares of the Company's common stock. These RSAs were issued in 2014 and had been fully expensed, so there was no stock compensation expense related to RSAs for the three and six months ended June 30, 2023. During the three and six months ended June 30, 2023177,564 RSUs were granted to certain board members. These RSU's vested immediately upon issuance and the stock compensation related to RSUs for the three and six months ended June 30, 2023 was $380,000, which was included in general and administrative expense on our Condensed Consolidated Statements of Operations. The following table shows a summary of Restricted Stock activity for the six months ended June 30, 2024 and the year ended December 31, 2023.

 

  

Restricted Stock Awards

  

Restricted Stock Units

 
  

Shares

  

Weighted Average Grant Price

  

Shares

  

Weighted Average Grant Price

 

Unvested shares, December 31, 2022

  42  $235.87     $ 

Granted

        177,564   2.14 

Vested

  (42)  235.87   (177,564)  2.14 

Unvested Shares, December 31, 2023

            

Unvested Shares, June 30, 2024

    $     $ 

 

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Note 7 - 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. 

 

Diluted net loss per share is computed by giving effect to all potential shares of common stock, including stock options, preferred stock, warrants, and unvested Restricted Stock, to the extent they are dilutive. For the three and six months ended June 30, 2024 and 2023, 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,

 
  

2024

  

2023

  

2024

  

2023

 

Numerator:

                

Net loss

 $(983) $(1,049) $(2,119) $(2,268)

Less: preferred stock dividends

  20   149   64   149 

Less: inducement of warrant exercise

     751      751 

Less: warrant modification

           25 

Net loss attributable to common stockholders

 $(1,003) $(1,949) $(2,183) $(3,193)

Denominator:

                

Weighted-average number of shares of common stock for basic and diluted net loss per share

  22,882   2,487   20,003   2,277 

Basic and diluted net loss per share

 $(0.04) $(0.78) $(0.11) $(1.40)

 

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):

 

  

As of June 30,

 
  

2024

  

2023

 

Outstanding stock options

  10,000   10,000 

Common stock issuable upon conversion of Series F Preferred Stock (1)

  1,964,986   3,728,070 

Common stock issuable upon conversion of Series F Preferred Warrants (2)

  111,396,848   19,152,047 

Common stock issuable upon conversion of Common Stock warrants

  5,101,345   4,139,784 

 

 

(1)

Calculation assumes conversion of the stated value, and accrued dividends, of the Series F Preferred Stock into Common Stock at the Floor Price as of June 30, 2024, and at the initial conversion price of $1.71 as of June 30, 2023.

  

 

 

(2)

Calculation assumes exercise of the Series F Preferred Warrants for cash into Series F Preferred Stock and subsequent conversion of the Series F Preferred Stock into Common Stock at the Floor Price as of June 30, 2024 and at the initial conversion price of $1.71 as of  June 30, 2023.

  

 

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Note 8 - Segment Reporting

 

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

 

Certain information concerning the Company’s segments for the three and six months ended June 30, 2024 and 2023 is presented in the following tables (in thousands):

 

  

Three Months Ended June 30, 2024

 
  

Managed Services

  

Collaboration Products

  

Corporate

  

Total

 

Revenue

 $508  $103  $  $611 

Cost of revenues

  331   160      491 

Gross profit

 $177  $(57) $  $120 

Gross profit %

  35%  (55)%     20%
                 

Allocated operating expenses

 $31  $122  $  $153 

Unallocated operating expenses

        985   985 

Total operating expenses

 $31  $122  $985  $1,138 
                 

Operating income (loss)

 $146  $(179) $(985) $(1,018)

Interest income, net

  (35)  (9)     (44)

Income (loss) before income taxes

  181   (170)  (985)  (974)

Income tax expense

  6   3      9 

Net income (loss)

 $175  $(173) $(985) $(983)

 

  

Three Months Ended June 30, 2023

 
  

Managed Services

  

Collaboration Products

  

Corporate

  

Total

 

Revenue

 $640  $316  $  $956 

Cost of revenues

  430   404      834 

Gross profit

 $210