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Calculated by dividing (x) the sum of the dollar volume-weighted average price of the Company's Common Stock for each of the five lowest trading days during the sixteen trading days after the Reverse Split by (y) five.
Based on the original aggregate exercise price divided by the Make Whole Provision exercise price.
Calculation assumes conversion of the stated value, and accrued dividends, of the Series F Preferred Stock into Common Stock at the Floor Price of $11.17 as of September 30, 2024, and at the initial conversion price of $68.40 as of September 30, 2023.
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.
Original exercise price based on the March 30, 2023 initial exercise price.
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.
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 of $11.17 per share as of September 30, 2024 and at the initial conversion price of $68.40 as of September 30, 2023.
Adjusted by the Reverse Split.
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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 September 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 November 5, 2024 was 1,144,926.
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, 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 Common 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; |
| • |
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 shares, par value, and stated value)
| | | September 30, 2024 | | | December 31, 2023 | |
| | | (Unaudited) | | | | | |
| ASSETS | | | | | | | | |
| Current assets: | | | | | | | | |
| Cash and cash equivalents | | $ | 5,619 | | | $ | 5,990 | |
| Accounts receivable, net | | | 33 | | | | 424 | |
| Inventory, net | | | 50 | | | | 239 | |
| Prepaid expenses and other current assets | | | 283 | | | | 243 | |
| Total current assets | | | 5,985 | | | | 6,896 | |
| Operating lease - right of use asset, net | | | — | | | | 17 | |
| Other assets | | | 8 | | | | 12 | |
| Total assets | | $ | 5,993 | | | $ | 6,925 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 93 | | | $ | 211 | |
| Accrued expenses and other current liabilities | | | 1,175 | | | | 1,038 | |
| Current portion of deferred revenue | | | 52 | | | | 132 | |
| Operating lease liabilities | | | — | | | | 17 | |
| Total current liabilities | | | 1,320 | | | | 1,398 | |
| Long-term liabilities: | | | | | | | | |
| Deferred revenue, net of current portion | | | 2 | | | | 26 | |
| Total liabilities | | | 1,322 | | | | 1,424 | |
| Commitments and contingencies (see Note 9) | | | | | | | | |
| Stockholders’ equity: | | | | | | | | |
| Preferred stock Series F, convertible; $0.0001 par value; $560,884 stated value; 42,000 shares authorized, 545 and 1,930 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively | | | — | | | | — | |
| Common stock, $0.0001 par value; 150,000,000 shares authorized; 1,071,545 shares issued and 1,071,356 shares outstanding at September 30, 2024 and 573,644 shares issued and 573,455 outstanding at December 31, 2023 | | | — | | | | — | |
| Treasury Stock, 189 common shares | | | (181 | ) | | | (181 | ) |
| Additional paid-in capital | | | 236,242 | | | | 233,913 | |
| Accumulated deficit | | | (231,390 | ) | | | (228,231 | ) |
| Total stockholders' equity | | | 4,671 | | | | 5,501 | |
| Total liabilities and stockholders’ equity | | $ | 5,993 | | | $ | 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 | | | Nine Months Ended | |
| | | September 30, | | | September 30, | |
| | | 2024 | | | 2023 | | | 2024 | | | 2023 | |
| Revenue | | $ | 578 | | | $ | 872 | | | $ | 1,815 | | | $ | 2,866 | |
| Cost of revenue (exclusive of amortization) | | | 499 | | | | 648 | | | | 1,619 | | | | 2,244 | |
| Gross profit | | | 79 | | | | 224 | | | | 196 | | | | 622 | |
| | | | | | | | | | | | | | | | | |
| Operating expenses: | | | | | | | | | | | | | | | | |
| Research and development | | | 38 | | | | 5 | | | | 153 | | | | 16 | |
| Sales and marketing | | | 66 | | | | 81 | | | | 177 | | | | 241 | |
| General and administrative | | | 1,047 | | | | 977 | | | | 3,140 | | | | 3,723 | |
| Amortization | | | — | | | | 86 | | | | — | | | | 259 | |
| Impairment charges | | | — | | | | — | | | | — | | | | 2 | |
| Casualty gain (insurance proceeds) | | | — | | | | — | | | | — | | | | (400 | ) |
| Total operating expenses | | | 1,151 | | | | 1,149 | | | | 3,470 | | | | 3,841 | |
| Operating loss | | | (1,072 | ) | | | (925 | ) | | | (3,274 | ) | | | (3,219 | ) |
| Interest income, net | | | (32 | ) | | | (30 | ) | | | (124 | ) | | | (94 | ) |
| Loss before income taxes | | | (1,040 | ) | | | (895 | ) | | | (3,150 | ) | | | (3,125 | ) |
| Income tax expense | | | — | | | | — | | | | 9 | | | | 38 | |
| Net loss | | | (1,040 | ) | | | (895 | ) | | | (3,159 | ) | | | (3,163 | ) |
| Preferred stock dividends | | | 12 | | | | 133 | | | | 76 | | | | 282 | |
| Deemed dividend | | | 8,974 | | | | — | | | | 8,974 | | | | — | |
| Warrant modification | | | — | | | | — | | | | — | | | | 25 | |
| Induced conversion of warrants | | | — | | | | — | | | | — | | | | 751 | |
| Net loss attributable to common stockholders | | $ | (10,026 | ) | | $ | (1,028 | ) | | $ | (12,209 | ) | | $ | (4,221 | ) |
| | | | | | | | | | | | | | | | | |
| Net loss attributable to common stockholders per share: | | | | | | | | | | | | | | | | |
| Basic and diluted net loss per share | | $ | (11.25 | ) | | $ | (4.22 | ) | | $ | (16.60 | ) | | $ | (18.34 | ) |
| Weighted-average number of shares of common stock: | | | | | | | | | | | | | | | | |
| Basic and diluted | | | 890,943 | | | | 243,378 | | | | 735,286 | | | | 230,214 | |
See accompanying notes to condensed consolidated financial statements.
OBLONG, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
Three and Nine Months Ended September 30, 2024
(In thousands, except shares data)
(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 | | | $ | — | | | | 573,644 | | | $ | — | | | | 189 | | | $ | (181 | ) | | $ | 233,913 | | | $ | (228,231 | ) | | $ | 5,501 | |
| Net loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1,136 | ) | | | (1,136 | ) |
| Stock-based compensation | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 31 | | | | — | | | | 31 | |
| Series F Preferred Stock conversions | | | (922 | ) | | | — | | | | 90,056 | | | | — | | | | — | | | | — | | | | 82 | | | | — | | | | 82 | |
| Series F Preferred Stock dividends | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (44 | ) | | | — | | | | (44 | ) |
| Balance at March 31, 2024 | | | 1,008 | | | | — | | | | 663,700 | | | | — | | | | 189 | | | | (181 | ) | | | 233,982 | | | | (229,367 | ) | | | 4,434 | |
| Net loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (983 | ) | | | (983 | ) |
| Stock-based compensation | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 31 | | | | — | | | | 31 | |
| Preferred warrant exercise, net of fees | | | 1,648 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,478 | | | | — | | | | 1,478 | |
| Series F Preferred Stock conversions | | | (2,111 | ) | | | — | | | | 198,912 | | | | — | | | | — | | | | — | | | | 112 | | | | — | | | | 112 | |
| Series F Preferred Stock dividends | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (20 | ) | | | — | | | | (20 | ) |
| Balance at June 30, 2024 | | | 545 | | | | — | | | | 862,612 | | | | — | | | | 189 | | | | (181 | ) | | | 235,583 | | | | (230,350 | ) | | | 5,052 | |
| Net loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1,040 | ) | | | (1,040 | ) |
| Common warrant exercise, net of fees | | | — | | | | — | | | | 208,933 | | | | — | | | | — | | | | — | | | | 671 | | | | — | | | | 671 | |
| Series F Preferred Stock dividends | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (12 | ) | | | — | | | | (12 | ) |
| Balance at September 30, 2024 | | | 545 | | | $ | — | | | | 1,071,545 | | | $ | — | | | | 189 | | | $ | (181 | ) | | $ | 236,242 | | | $ | (231,390 | ) | | $ | 4,671 | |
See accompanying notes to condensed consolidated financial statements.
OBLONG, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
Three and Nine Months Ended September 30, 2023
(In thousands, except shares data)
(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 | | | — | | | $ | — | | | | 208,018 | | | $ | — | | | | 189 | | | $ | (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 | | | | — | | | | 208,018 | | | | — | | | | 189 | | | | (181 | ) | | | 229,149 | | | | (225,066 | ) | | | 3,902 | |
| Net loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (1,049 | ) | | | (1,049 | ) |
| Stock-based compensation | | | — | | | | — | | | | 4,491 | | | | — | | | | — | | | | — | | | | 411 | | | | — | | | | 411 | |
| Common warrant exercise, net of fees | | | — | | | | — | | | | 8,516 | | | | — | | | | — | | | | — | | | | 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 | ) | | | — | | | | 3,669 | | | | — | | | | — | | | | — | | | | 4 | | | | — | | | | 4 | |
| Series F Preferred Stock dividends | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (149 | ) | | | — | | | | (149 | ) |
| Balance at June 30, 2023 | | | 6,375 | | | | — | | | | 224,694 | | | | — | | | | 189 | | | | (181 | ) | | | 233,911 | | | | (226,115 | ) | | | 7,615 | |
| Net loss | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (895 | ) | | | (895 | ) |
| Stock-based compensation | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 31 | | | | — | | | | 31 | |
| Foundry exchange | | | — | | | | — | | | | (10,170 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| Series F Preferred Stock conversions | | | (1,229 | ) | | | — | | | | 49,143 | | | | — | | | | — | | | | — | | | | 43 | | | | — | | | | 43 | |
| Series F Preferred Stock dividends | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (133 | ) | | | — | | | | (133 | ) |
| Balance at September 30, 2023 | | | 5,146 | | | $ | — | | | | 263,667 | | | $ | — | | | | 189 | | | $ | (181 | ) | | $ | 233,852 | | | $ | (227,010 | ) | | $ | 6,661 | |
See accompanying notes to condensed consolidated financial statements.
OBLONG, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| | | Nine Months Ended September 30, | |
| | | 2024 | | | 2023 | |
| Cash flows from operating activities: | | | | | | | | |
| Net loss | | $ | (3,159 | ) | | $ | (3,163 | ) |
| Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | |
| Amortization | | | — | | | | 259 | |
| Bad debt (recovery) expense | | | — | | | | (55 | ) |
| Non-cash lease expense from right-of-use asset | | | 17 | | | | 101 | |
| Stock-based compensation | | | 62 | | | | 473 | |
| Impairment charges - property and equipment | | | — | | | | 2 | |
| Changes in operating assets and liabilities: | | | | | | | | |
| Accounts receivable | | | 391 | | | | 313 | |
| Inventory | | | 189 | | | | 399 | |
| Prepaid expenses and other current assets | | | (40 | ) | | | 319 | |
| Other assets | | | 4 | | | | 24 | |
| Accounts payable | | | (118 | ) | | | (78 | ) |
| Accrued expenses and other current liabilities | | | 254 | | | | (335 | ) |
| Deferred revenue | | | (104 | ) | | | (354 | ) |
| Lease liabilities | | | (17 | ) | | | (193 | ) |
| Net cash used in operating activities | | | (2,521 | ) | | | (2,288 | ) |
| 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 | | | 671 | | | | 534 | |
| Net proceeds from exercise of preferred stock warrants | | | 1,478 | | | | — | |
| Net cash provided by financing activities | | | 2,149 | | | | 5,969 | |
| (Decrease) increase in cash | | | (372 | ) | | | 3,681 | |
| Cash and cash equivalents at beginning of period | | | 5,990 | | | | 3,085 | |
| Cash and cash equivalents at end of period | | $ | 5,618 | | | $ | 6,766 | |
| Supplemental disclosures of cash flow information: | | | | | | | | |
| | | | | | | | | |
| Reconciliation of cash and cash equivalents | | | | | | | | |
| Cash | | $ | 5,119 | | | $ | 6,266 | |
| Current certificates of deposit | | $ | 500 | | | $ | 500 | |
| Total cash and cash equivalents | | $ | 5,619 | | | $ | 6,766 | |
| | | | | | | | | |
| Cash paid during the period for interest | | $ | — | | | $ | 18 | |
| Cash paid for income taxes | | $ | — | | | $ | 31 | |
| | | | | | | | | |
| Non-cash investing and financing activities: | | | | | | | | |
| Preferred stock dividends | | $ | 76 | | | $ | 282 | |
| Deemed dividend | | $ | 8,974 | | | $ | — | |
| Warrant modification | | $ | — | | | $ | 25 | |
| Common stock issued for conversion of Preferred Stock | | $ | 194 | | | $ | 47 | |
| Induced exercise of common stock warrants | | $ | — | | | $ | 751 | |
See accompanying notes to condensed consolidated financial statements.
OBLONG, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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”).
On August 23, 2024, the Company effected a 1-for-40 reverse stock split (the "Reverse Split") for its Common Stock. All Common Stock share and per share data throughout these Condensed Consolidated Financial Statements have been retroactively adjusted to reflect the Reverse Split.
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 September 30, 2024, our total cash balance of $5,619,000 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.
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 September 30, 2024 and December 31, 2023, we had no intangible assets. Amortization expense related to intangible assets for the three and nine months ended September 30, 2023 was $86,000 and $259,000, 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 September 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 September 30, 2024, the Company had no lease liability remaining. During the nine months ended September 30, 2024, we recorded $17,000 in lease expenses. During the three and nine months ended September 30, 2023, we recorded $70,000 and $123,000 in lease expenses, respectively. The 2023 expenses are net of common charges, and sublease proceeds. There were no sublease proceeds for the three months ended September 30, 2023 and $27,000 in sublease proceeds for the nine months ended September 30, 2023.
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 nine months ended September 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 September 30, 2024, we had $5,619,000 in cash and cash equivalents and working capital of $4,665,000. For the nine months ended September 30, 2024 we incurred a net loss of $3,159,000, financing activities provided $2,149,000 in net cash, and we used net cash of $2,521,000 in operating activities.
In September 2024, in order to reduce operating expenses and preserve capital, the Company reduced its workforce by nine employees. This resulted in severance costs of $106,000 which are recorded in operating expenses for the three and nine months ended September 30, 2024 and is included in accrued compensation as of September 30, 2024. The entirety of the severance costs were paid out in October 2024.
We believe that our existing cash and cash equivalents will be sufficient to fund our operations and meet our working capital requirements into mid-2026.
Note 3 - Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
| | | September 30, | | | December 31, | |
| | | 2024 | | | 2023 | |
| | | | | | | | | |
| Compensation costs | | $ | 856 | | | $ | 448 | |
| Customer deposits | | | 77 | | | | 118 | |
| Professional fees | | | 20 | | | | 104 | |
| Taxes and regulatory fees | | | 25 | | | | 21 | |
| Accrued rent | | | 170 | | | | 202 | |
| Accrued dividends on Series F Preferred Stock | | | 16 | | | | 136 | |
| Other accrued expenses and liabilities | | | 11 | | | | 9 | |
| Accrued expenses and other liabilities | | $ | 1,175 | | | $ | 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 September 30, 2024, we had 150,000,000 shares of our Common Stock authorized, with 1,071,545 and 1,071,356 shares issued and outstanding, respectively.
On August 23, 2024, the Company effected the Reverse Stock Split. The Company's shares of Common Stock began trading on a split-adjusted basis at the commencement of trading on August 26, 2024. Upon effectiveness, every 40 shares of Common Stock were converted into 1 share of Common Stock. The number of authorized shares and the par value of each share remained unchanged. No fractional shares were issued as a result of the Reverse Split, and any fractional shares that would have otherwise resulted from the Reverse Split were rounded up to the nearest whole share.
During the nine months ended September 30, 2023, 8,516 shares of the Company's Common Stock were issued related to the exercise of 8,516 warrants granted at various dates between October 2020 and June 2021. During the three months ended September 30, 2024, 208,933 shares of the Company's Common Stock were issued related to the exercise of 208,933 Common Warrants. Details related to these exercises are below.
During the three and nine months ended September 30, 2023, 49,143 and 52,812 shares of the Company's Common Stock were issued related to the conversion of 1,229 and 1,404 shares of Series F Preferred Stock, plus accrued dividends, respectively. During the nine months ended September 30, 2024, 288,968 shares of the Company's Common Stock were issued related to the conversion of 3,033 shares of Series F Preferred Stock, plus accrued dividends. See Note 5 - Preferred Stock for further detail.
During the nine months ended September 30, 2023, 4,491 shares of the Company's Common Stock were issued related to stock compensation. See Note 6 - Stock Based Compensation for further detail.
Common Stock activity for the year ended December 31, 2023 and nine months ended September 30, 2024 is presented below.
| Issued Shares as of December 31, 2022 | | | 208,018 | |
| Issuances from Preferred Stock conversions | | | 352,624 | |
| Issuances related to warrant exercises | | | 18,681 | |
| Issuances related to stock compensation | | | 4,491 | |
| Common shares exchanged for prepaid warrants | | | (10,170 | ) |
| Issued Shares as of December 31, 2023 | | | 573,644 | |
| Issuances from Common Warrant Exercises | | | 208,933 | |
| Issuances from Preferred Stock conversions | | | 288,968 | |
| Issued Shares as of September 30, 2024 | | | 1,071,545 | |
| Less Treasury Shares: | | | (189 | ) |
| Outstanding Shares as of September 30, 2024 | | | 1,071,356 | |
Common Stock Warrants
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 95,764 shares of Common Stock. Please refer to Note 5 - Preferred Stock for further discussion on the Series F Preferred Stock and Preferred Warrants.
In connection with the Private Placement, pursuant to an engagement letter dated March 30, 2023 (the "Engagement Letter"), between the Company and Dawson James Securities, Inc. (the “Placement Agent”), the Company agreed to (i) pay the Placement Agent a cash fee equal to 8% of the aggregate gross proceeds raised in the Private Placement, and (ii) grant to the Placement Agent warrants (the “Placement Agent Warrants”) to purchase 7,663 shares of Common Stock.
On March 31, 2023, the Company issued the Common Warrants and the Placement Agent Warrants to purchase an aggregate of 103,427 shares of the Company’s Common Stock. The Common Warrants and Placement Agent Warrants have a term of 5 years, commencing six months and one day from the date of issuance, and were initially exercisable for $68.40 per share. The exercise 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 Common Stock, or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable exercise price for the Common Warrants (subject to certain exceptions). The Common Warrants and Placement Agent Warrants are exercisable for cash, provided that if there is no effective registration statement available permitting the resale of the common shares, they may be exercised on a cashless basis. Exercise of the Common Warrants and Placement Agent Warrants is subject to certain limitations, including a 4.99% beneficial ownership limitation.
On October 6, 2023, the Company and the 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 $11.168 (the "Waiver"). 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 $11.168 (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events). On September 13, 2024, the Company and the Investors agreed to delete Section 2 of the Waiver, removing the minimum price restriction on the exercise of Common Warrants.
During the nine months ended September 30, 2024, 24,104 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 were exercisable at an initial exercise price of $68.40 and have a term of five years.
Pursuant to Sections 2(a) and 2(c) of the Common Warrants (the "Make Whole Provision"), as a result of the Reverse Split, the exercise price of the Common Warrants and Placement Agent Warrants were adjusted to $3.41438 per share, and the number of Common Warrant shares that may be purchased upon exercise of the Common Warrants and the Placement Agent Warrants were increased proportionately, so that after the exercise price adjustment the aggregate exercise price payable hereunder for the adjusted number of Common Warrant Shares was the same as the aggregate exercise price in effect immediately prior to the exercise price adjustment. These adjustments resulted in an aggregate of 2,401,047 Common Warrants and 153,470 Placement Agent Warrants remaining outstanding following the Reverse Split. The additional warrants created by the Make Whole Provision resulted in an aggregate deemed dividend of $8,974,000 which will reduce the net income available to common shareholders. Details of the Make Whole Provision transactions are presented below:
| Warrant Tranche | | Original Warrants Issued | | | Original Exercise Price (1) | | | Warrants Post Reverse Split (2) | | | Exercise Price Post Reverse Split (2) | | | Warrants Post Make Whole Provision (3) | | | Exercise Price Post Make Whole Provision (4) | | | Deemed Dividend | |
| Common Warrants issued in 2023 | | | 3,830,417 | | | $ | 1.71 | | | | 95,764 | | | $ | 68.40 | | | | 1,918,371 | | | $ | 3.41 | | | $ | 6,739,000 | |
| Common Warrants issued in 2024 | | | 963,745 | | | $ | 1.71 | | | | 24,104 | | | $ | 68.40 | | | | 482,676 | | | $ | 3.41 | | | $ | 1,696,000 | |
| Placement Agent Warrants | | | 306,433 | | | $ | 1.71 | | | | 7,663 | | | $ | 68.40 | | | | 153,470 | | | $ | 3.41 | | | $ | 539,000 | |
| Total | | | 5,100,595 | | | | | | | | 127,531 | | | | | | | | 2,554,517 | | | | | | | $ | 8,974,000 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Aggregate Exercise Price | | $ | 8,722,000 | | | | | | | $ | 8,722,000 | | | | | | | $ | 8,722,000 | | | | | | | | | |
| (1) Original exercise price based on the March 30, 2023 initial exercise price. |
| (2) Adjusted by the Reverse Split. |
| (3) Based on the original aggregate exercise price divided by the Make Whole Provision exercise price. |
| (4) Calculated by dividing (x) the sum of the dollar volume-weighted average price of the Company's Common Stock for each of the five lowest trading days during the sixteen trading days after the Reverse Split by (y) five. |
During the three months ended September 30, 2024, 208,933 Common Warrants were exercised, at a price of $3.41438 per share, for 208,933 shares of Common Stock. The Company received gross and net proceeds of $713,000 and $671,000, respectively. Subsequent to September 30, 2024, an additional 73,381 Common Warrants were exercised, at a price of $3.41438 per share, for 73,381 shares of Common Stock. The Company received gross and net proceeds of $251,000 and $231,000, 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 and pursuant to our Engagement Letter, SEG acted as placement agent in connection with our March 30, 2023 Purchase Agreement. During the three months ended September 30, 2024, pursuant to the terms of the Placement Agent Agreement, we paid SEG a cash fee equal to 8% of the aggregate gross proceeds raised from the exercise of the 208,933 Common Stock Warrants. The fee was $57,000. Mr. Schechter did not receive any of the fee paid.
Common Warrants outstanding as of September 30, 2024 are as follows:
| Issue Date | | Warrants Outstanding | | | Exercise Price | | Expiration Date |
| | | | | | | | | | |
| Q2 2021 | | | 19 | | | $ | 2,640.00 | | Q4 2024 |
| Q1 2023 | | | 1,872,908 | | | $ | 3.41 | | Q3 2028 |
| Q2 2024 | | | 472,676 | | | $ | 3.41 | | Q4 2029 |
| | | | 2,345,603 | | | | | | |
Common Warrant activity for the year ended December 31, 2023 and nine months ended September 30, 2024 is presented below.
| | | Outstanding and Exercisable | |
| | | Number of Warrants | | | Weighted Average Exercise Price | |
| Warrants outstanding and exercisable, December 31, 2022 | | | 8,609 | | | $ | 2,653.60 | |
| Granted | | | 113,597 | | | | 10.17 | |
| Exercised | | | (18,681 | ) | | | 31.18 | |
| Expired | | | (72 | ) | | | 2,853.75 | |
| Warrants outstanding and exercisable, December 31, 2023 | | | 103,453 | | | | 69.03 | |
| Granted | | | 24,104 | | | | 68.40 | |
| Make Whole Provision | | | 2,426,986 | | | | 3.41 | |
| Exercised | | | (208,933 | ) | | | 3.41 | |
| Expired | | | (7 | ) | | | 2,400.00 | |
| Warrants outstanding and exercisable, September 30, 2024 | | | 2,345,603 | | | $ | 3.44 | |
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, 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 September 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
The terms of the Series F Preferred Stock are as set forth 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 $68.40 (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 to the extent such provisions permit the conversion or exercise of the Preferred Stock to occur at a price below $11.168. 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 $11.168 (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events).
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 nine months ended September 30, 2024, 1,648 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.
During the three and nine months ended September 30, 2023, 1,229 and 1,404 shares of Series F Preferred Stock, plus accrued dividends of $43,000 and $47,000, were converted into 49,143 and 52,812 shares of the Company's Common Stock, respectively. During the nine months ended September 30, 2024, 3,033 shares of Series F Preferred Stock, plus accrued dividends of $194,000, were converted into 288,968 shares of the Company’s Common Stock. There were 545 shares of Series F Preferred Stock outstanding and accrued dividends of $16,000 as of September 30, 2024.
Series F Preferred Stock transactions are summarized in the table below:
| | | 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 | | | — | | | | 343,000 | | | | | | | | — | |
| 2023 Conversions | | | (4,620 | ) | | | (207,000 | ) | | $ | 13.60 | | | | 352,624 | |
| December 31, 2023 Balance | | | 1,930 | | | | 136,000 | | | | | | | | 352,624 | |
| 2024 Issuances | | | 1,648 | | | | — | | | | | | | | — | |
| 2024 Accrued Dividends | | | — | | | | 76,000 | | | | | | | | — | |
| 2024 Conversions | | | (3,033 | ) | | | (196,000 | ) | | $ | 11.20 | | | | 288,968 | |
| September 30, 2024 Balance | | | 545 | | | $ | 16,000 | | | $ | 11.17 | | | | 641,592 | |
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 nine months ended September 30, 2024, 1,648 Preferred Warrants were exercised at a price of $975 per share. The Company received gross and net proceeds of $1,607,000 and $1,478,000, respectively. In accordance with the exercise provisions of the Preferred Stock, 24,104 Common Warrants were issued during the nine months ended September 30, 2023. See Note 4 - Capital Stock for further discussion of the Common Warrants. As of September 30, 2024, 31,102 Preferred Warrants remained outstanding.
In accordance with the Engagement Letter discussed in Note - 4. Capital Stock, during the nine months ended September 30, 2024, 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. The fee was $129,000. Mr. Schechter did not receive any of the fee paid.
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 September 30, 2024, there were no remaining shares in the share pool available for new grants under the 2019 Plan.
Stock Options
A summary of stock option activity under our plans, and options outstanding as of, and changes made during the nine months ended September 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 | | | 417 | | | $ | 5,744.82 | | | | 250 | | | $ | 8,274.91 | |
| Vested | | | — | | | | — | | | | 83 | | | | 1,950.00 |